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Anpario plc (ANP)

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Thursday 26 April, 2012

Anpario plc

Final Results

Final Results

Anpario plc

Anpario plc (AIM: ANP)

Anpario plc (formerly Kiotech International plc), the international supplier of natural high performance feed additives to enhance growth, health and sustainability in agriculture and aquaculture, is pleased to announce its results for the year ended 31 December 2011.

Financial Highlights

  • 10% increase in underlying profit before tax and exceptional items1 to £2.1m (2010: £1.9m)
  • 23% increase in underlying earnings per share2 to 8.94p (2010: 7.27p)
  • 2 percentage point increase in gross margin to 30% (2010: 28%)
  • Cash balance of £4.4m at 31 December 2011 (2010: £3.5m)
  • 20% increase in the proposed final dividend to 2.4 pence per share (2010: 2.0 pence)

Operational highlights

  • Re-structured higher margin strategic focus for UK Agriculture increases profitability
  • Optivite integration completed with benefits coming through
  • Third production line at Manton Wood completed mid-year, more than doubling production capacity of specialty feed additives
  • Efficiency improvements reducing operational costs
  • Chinese subsidiary begins to make profit enabling future growth opportunities to be self-financing
  • Acquisition of Meriden Animal Health Limited completed post year end in March 2012

1 Underlying profit before tax and exceptional items comprises profit before tax of £1.8m (2010: £1.5m) adjusted for closure and restructuring costs of £0.1m (2010: £0.3m) and share-based payment expense of £0.2m (2010: £0.1m).

2 Underlying earnings per share represents profit for the year before exceptional items and prior year tax adjustments divided by the weighted average number of shares in issue.

Chairman’s statement

I am pleased to report another successful and most encouraging year for the Group, which has delivered an excellent set of results for the year ended 31 December 2011. This performance is driven by two key factors: firstly the success of our strategy to reposition the UK business to focus on higher margin products; and secondly achieving the synergy benefits from the Optivite acquisition.

The results have demonstrated the strength of the Group’s broad geographic spread, which has enabled it to offset local issues in Middle Eastern and Southern European markets with strong performances in other territories. In addition we work closely with our national distributors, to minimise credit risk in those countries where there is financial or political concern.

In November 2011 the Group changed its name to Anpario plc from Kiotech International plc. This reflects the significant changes undergone by the Group following the acquisition of Agil in 2006 and Optivite in 2009. The new name will give greater clarity to our corporate structure while allowing each of our trading businesses to maintain its individual identity.

Financial Review

Total underlying profit before tax and exceptional items1 increased to £2.1m (2010: £1.9m) from total revenues of £19.2m (2010: £21.6m).

Whilst overall gross profit was slightly lower at £5.8m (2010: £5.9m) gross margin percentage was significantly higher, rising from 28% to 30%. Administrative expenses have fallen by 8%, benefiting from acquisition synergies and initiatives.

Profit before tax of £1.8m (2010: £1.5m) includes exceptional costs relating to the write down of our Aldermaston property of £0.1m and in 2010 costs of £0.3m were included in respect of the closure of this and other sites.

Underlying earnings per share 2 increased 23% to 8.94 pence per share (2010: 7.27 pence per share) and diluted underlying earnings per share rose 23% to 8.87 pence per share (2010: 7.20 pence per share).

The balance sheet remains strong and debt free with a year-end cash balance of £4.4m (2010: £3.5m). It is expected that some of these funds will be applied to invest in the expansion of the business through acquisitions. £3m was utilised in March 2012 to fund the acquisition of Meriden Animal Health Limited.

The Board is pleased to declare a final dividend of 2.4 pence per share, an increase of 20% over the previous year of 2.0 pence. Shareholder approval will be sought at the Annual General Meeting, to be held on 26 June 2012, to pay the final dividend on 27 July 2012 to shareholders on the register on 6 July 2012.

Acquisition after year end

On 29 March 2012 the Company acquired 100% of the share capital of Meriden Animal Health Limited for a total consideration of up to £4.1m before costs.

Meriden, based in Bedfordshire in the United Kingdom, supplies the global agriculture and aquaculture markets with natural animal feed additive products. Meriden’s Orego-Stim range of products, using essential oils, is the leading brand in its field and is marketed across 60 countries worldwide, with the majority of sales being outside the United Kingdom.

Meriden's sales for the 12 months to December 2011 were £5.3m and adjusted profit before interest and tax was £0.7m. Net assets acquired will be at least £1.6m, the majority being working capital, including cash in excess of £0.4m. The acquisition is expected to be immediately earnings enhancing to the Group as a whole.

Meriden has a close and important partnership in China with sales accounting for 26% of Meriden’s total sales during 2011. The Chinese business has been growing well and Anpario intends to give further support to this relationship to capitalise on the vast potential of China’s agriculture and aquaculture markets.

Production and administration

We have made further investment in our feed additive manufacturing plant at Manton Wood, which has resulted in improved efficiency. The installation of valve sack packing equipment and new conveyor belts has increased throughput volume significantly and eliminated wastage with a positive impact on our cost base.

These advances have enabled management to re-structure shift patterns. This has resulted in a more economical plant and enables us to increase production capacity without significantly higher incremental costs.

During the year the Agil export and administrative functions were transferred to Manton Wood from Aldermaston. The integration went very smoothly and was a credit to the teams at both locations. The Aldermaston office, which we own, has now closed and is being marketed for sale or rent.

Operations – UK Agriculture

As expected, the re-structuring of the division with its strategic focus on higher margin products and markets has led to lower sales, continuing the trend of the first half, however gross margins and overall profitability have risen. With this transition now complete, certain strategic alliances have been formed with some significant UK agribusinesses providing the Group with the opportunity to accelerate market penetration of its specialty feed additive range. Our partners have substantial sales resources and the benefit to them is that Anpario’s broad range of technical products will add value to their product offering.

Vitrition, our organic feed brand, had another solid year delivering growth in profits. This performance is particularly commendable as the challenges of the economic climate increased during the year as consumers switched to purchasing lower priced meat and traditional meat protein products. This trend led to a decline in the overall size of the organic market.

The EU legislation to raise the proportion of organic raw materials in finished feed from 95% to 100% has not yet been implemented and we are now well beyond the target date of January 2012. This delay is creating considerable uncertainty in the industry. Vitrition is one of only two dedicated organic feed plants in the UK and the implementation of this legislation should be positive for our business, as competitors will question their commitment to being solely organic.

As previously reported, the re-positioning of the UK agriculture business continued to shift away from the high volume, low margin commodity products towards the differentiated, added value products within our portfolio, where we have a commanding competitive advantage. The change in volume movements as a result of this has enabled the Group to outsource its haulage function, thereby converting this fixed cost to a variable cost which more aptly meets the needs of the business and reduces costs.

On a wider scale, the continued fragility of the global economy also led to an escalation in the volatility of raw material markets, requiring strong purchasing and price management in order to successfully protect gross margins.

Operations – International Agriculture

The division continues to trade through its two complementary brands, Kiotechagil and Optivite, covering in excess of 60 countries. This linked approach helps smooth out some of the trading peaks and troughs which are inevitable in a global business. 2011 was particularly volatile as we faced a number of local and regional issues including:

  • political unrest in the Middle East;
  • the application of sanctions, which disrupted our status quo in some countries, such as Iran;
  • the financial instability of certain Southern European countries where we have significant sales volumes.

Our reaction to these challenges has been to take a cautious view when offering credit and we have worked closely with our distributors, to mitigate the exposure to vulnerable companies along the supply chain. In addition, we have comprehensive credit insurance for most of our customers. We did experience a drop in volumes during the autumn months, but volumes recovered with a strong performance at the end of 2011.

The regional performances within the two trading brands of the division reflect both the challenges and the opportunities in 2011 as well as what lies ahead in 2012, with Latin America leading the way in growth followed by Asia Pacific. The strong performance in these regions highlights a wider trend in both meat consumption and production, which we anticipate will continue as the world population grows and average GDP per capita increases at faster rates in developing countries. Anpario is well positioned to capitalise on these trends and we are investing in additional resource to focus on these regions.

Whilst we are cautious in relation to Europe and the Middle East owing to the continuing turmoil, the division is confident and focused on capturing opportunities in the higher growth regions, especially China and Brazil where the agricultural markets are vast. We are also endeavouring to launch a number of new products to our distributors, which we believe have strong differentiation compared to the competition. By pooling the resources of Optivite and Kiotechagil we have strengthened and centralised the technical team which has accelerated our R&D efforts.

Significant progress was achieved in China with our wholly owned subsidiary beginning to generate profit within eighteen months of being established, enabling future growth initiatives to be self-financing. The subsidiary continued to successfully gain national registration approvals for key products such as Neutox, a high performance, broad spectrum toxin binder for animal feed and Prefect, a gut conditioner and microbial optimiser for young pigs, particularly in high stress environments. These have received a positive reception in the market and will be key drivers of future growth for the subsidiary.

Operations – Aquaculture

We continue to take positive steps in developing the Aquatice® product from our research base in Thailand and are encouraged by progress in the Philippines, where trial results have been good and a significant aquaculture business has recognised Aquatice®’s effect in stimulating fish which are reluctant to feed whether due to stress, cold weather, or medication. Immediate visual feedback in stimulating feeding convinces farmers of the merits of Aquatice® more readily than an extended trial measuring feed conversion.

We are also working with a number of other multi-national and local companies in the Asia Pacific region to agree distribution arrangements. Innovative technology like Aquatice® takes time to become established in conservative industries such as aquaculture and we believe we are making good progress in developing the product as a useful tool in fish farming for the future.

People

Over the last two years we have implemented many changes affecting individual roles and working practices. Our management and staff have responded very positively and have worked extremely hard to address the challenges presented. Their support is very much appreciated and, on behalf of the Board, I would like to thank each and every one of them for their contribution to the business.

Outlook

The Group has a made a good start to the current year. Management focus is to drive organic growth by aggressively pursuing market share now that we have a scalable production plant. Despite some significant loss of business due to the on-going turbulence in the Middle East and Europe we continue to generate opportunities to grow sales of our speciality feed additive range both in the UK and overseas as well as the launch of a number of new products. Latin America and Asia Pacific will continue to be targeted as priorities, capitalising on the burgeoning development within both regions.

Our strong balance sheet and cash flow allow management to continue to seek acquisition opportunities that offer strategic and commercial benefits to the Group through the broadening of our product portfolio and geographic spread. The acquisition of Meriden brings another strong trading brand to the Anpario Group and increases Anpario's global market share in the feed additive sector.

 
Richard S Rose
Chairman
26 April 2012
 
Consolidated income statement              
for the year ended 31st December 2011
 
2011 2010
Notes £000 £000
       
Revenue 3 19,198 21,565
Cost of sales   (13,443) (15,618)
Gross profit 5,755 5,947
Administrative expenses (3,880) (4,225)
Closure and restructuring costs 5 (88) (261)
Operating profit 1,787 1,461
Finance income 8 39 56
Profit before income tax 1,826 1,517
Income tax expense 11 (150) (229)
Profit for the year from continuing operations 1,676 1,288
Profit for the year attributable to:
Owners of the parent 1,667 1,282
Non-controlling interests   9 6
Profit for the year   1,676 1,288
 
 
The Consolidated income statement has been prepared on the basis that all operations are continuing operations.
 
 
Basic earnings per share (pence) 9 9.22p 7.01p
Diluted earnings per share (pence) 9

9.15p

6.94p
 
 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Parent Company Income Statement and Statement of Comprehensive Income. The profit for the Parent Company for the year was £1,596,000 (2010: £1,334,000).

 
Consolidated statement of comprehensive income
for the year ended 31st December 2011
2011 2010
£000 £000
       
Profit for the year 1,676 1,288
Exchange difference on translating foreign operations   (42) 5
Total comprehensive income for the year   1,634 1,293
 
Attributable to the owners of the parent:

1,635

1,287
Non-controlling interests  

(1)

6
Total comprehensive income for the year   1,634 1,293
 
Consolidated and parent company balance sheet              
as at 31st December 2011      
 
Group Company
 
2011 2010 2011 2010
Notes £000 £000 £000 £000
 
Intangible assets 12 7,161 7,007 7,161 7,007
Property, plant and equipment 13 2,840 2,619 2,837 2,609
Investments in subsidiaries 14 - - 233 233
Deferred tax assets 20 318 289 318 289
Non-current assets   10,319 9,915 10,549 10,138
 
Inventories 15 1,088 1,200 971 1,042
Trade and other receivables 16 4,439 5,284 4,466 5,297
Cash and cash equivalents 17 4,357 3,531 4,185 3,357
Current assets   9,884 10,015 9,622 9,696
Total assets   20,203 19,930 20,171 19,834
 
 
Called up share capital 24 4,555 4,209 4,555 4,209
Share premium 3,828 2,957 3,828 2,957
Other reserves 26 (695) 5,054 (669) 5,048
Retained earnings 25 8,264 2,517 8,378 2,602
Non-controlling interest   50 51 - -
Total equity   16,002 14,788 16,092 14,816
 
Borrowings 19 - 3 - 3
Deferred tax liabilities 20 994 944 994 944
Non-current liabilities   994 947 994 947
 
Trade and other payables 18 3,207 3,907 3,085 3,789
Current income tax liabilities   - 288 - 282
Current liabilities   3,207 4,195 3,085 4,071
Total liabilities   4,201 5,142 4,079 5,018
Total equity and liabilities   20,203 19,930 20,171 19,834
 
Consolidated and parent company statements of changes in equity
for the year ended 31 December 2011
                       
 
Group

Called up share
capital

Share premium Other reserves

Retained
earnings

Non-
controlling
interest

Total equity

£000 £000 £000 £000 £000 £000
Balance at 1st January 2010 4,209 2,957 4,949 1,445 45 13,605
Profit for the year - - - 1,282 6 1,288
Currency translation differences - - 5 - - 5
Total comprehensive income for the year - - 5 1,282 6 1,293
Share-based payment adjustments - - 100 - - 100
Dividends relating to 2009 - - - (210) - (210)
Transactions with owners - - 100 (210) - (110)
Balance at 31st December 2010 4,209 2,957 5,054 2,517 51 14,788
Profit for the year - - - 1,667 9 1,676
Currency translation differences - - (32) - (10) (42)
Total comprehensive income for the year - - (32) 1,667 (1) 1,634
Issue of share capital 346 871 - - - 1,217
Purchase of treasury shares - - (166) - - (166)
Joint share ownership plan - - (1,210) - - (1,210)
Share-based payment adjustments - - 100 - - 100
Release of special reserve to retained earnings - - (4,441) 4,441 - -
Dividends relating to 2010 - - - (361) - (361)
Transactions with owners 346 871 (5,717) 4,080 - (420)
Balance at 31st December 2011 4,555 3,828 (695) 8,264 50 16,002
 
 
Company

Called up share
capital

Share premium

Other reserves

Retained
earnings

Total equity
£000 £000 £000 £000 £000
Balance at 1st January 2010 4,209 2,957 4,948 1,478 13,592
Profit for the year - - - 1,334 1,334
Total comprehensive income for the year - - - 1,334 1,334
Share-based payment adjustments - - 100 - 100
Dividends relating to 2009 - - - (210) (210)
Transactions with owners - - 100 (210) (110)
Balance at 31st December 2010 4,209 2,957 5,048 2,602 14,816
Profit for the year - - - 1,696 1,696
Total comprehensive income for the year - - - 1,696 1,696
Issue of share capital 346 871 - - 1,217
Purchase of treasury shares - - (166) - (166)
Joint share ownership plan - - (1,210) - (1,210)
Share-based payment adjustments - - 100 - 100
Release of special reserve to retained earnings - - (4,441) 4,441 -
Dividends relating to 2010

-

-

-

(361) (361)
Transactions with owners 346 871 (5,717) 4,080 (420)
Balance at 31st December 2011 4,555 3,828 (669) 8,378 16,092
 
Consolidated and parent company statements of cash flows    
for the year ended 31st December 2011            
 
Group Company
2011 2010 2011 2010
  £000 £000 £000 £000
Cash generated from/(used by) operating activities 2,451 1,211 2,418 (1,236)
Income tax paid (436) (197) (431) (203)
Net cash generated from/(used by) operating activities 2,015 1,014 1,987 (1,439)
Purchases of property, plant and equipment (474) (2,071) (474) (2,069)
Proceeds from disposal of property, plant and equipment 11 10 11 10
Payments to acquire intangible fixed assets (212) (256) (212) (256)
Interest received 39 56 39 56
Dividends received - - - 2,391
Net cash generated from/(used by) in investing activities (636) (2,261) (636) 132
Purchase of treasury shares (166) - (166) -
Acquisition of shares by JSOP (1,210) - (1,210) -
Proceeds from issuance of shares 1,217 - 1,217 -
Dividend paid to company's shareholders (361) (210) (361) (210)
Repayment of borrowings (3) (27) (3) (27)
Net cash used in financing activities (523) (237) (523) (237)
Net increase/(decrease) in cash & cash equivalents 856 (1,484) 828 (1,544)
Effect of exchange rate changes (30) - - -
Cash and cash equivalents at the beginning of the year 3,531 5,015 3,357 4,901
Cash and cash equivalents at the end of the year 4,357 3,531 4,185 3,357
 
 
Group Company
2011 2010 2011 2010

£000

£000

£000

£000

Cash generated from/(used by) operating activities        
Profit before income tax 1,826 1,517 1,842 1,556
Net finance income (39) (56) (39) (2,447)
Depreciation, amortisation and impairment 301 137 294 134
Profit on disposal of property, plant and equipment (1) (10) (1) (10)
Share-based payments 100 100 100 100
Provision against investment in subsidiaries - - - 2,391
Changes in working capital:
Inventories 98 91 71 188
Trade and other receivables 788 (373) 754 (450)
Trade and other payables (622) (195) (603) (2,698)
Cash generated from/(used by) operating activities 2,451 1,211 2,418 (1,236)
 

Notes to the financial statements

For the year ended 31 December 2011

1 General information

Anpario plc (“the Company”) and its subsidiaries (together “the Group”) manufacture and supply products to enhance health, growth and sustainability in agriculture and aquaculture.

The Company is traded on the London Stock Exchange AIM market and is incorporated and domiciled in the UK. The address of its registered office is Manton Wood Enterprise Park, Worksop, Nottinghamshire, S80 2RS.

2 Summary of significant accounting policies

2.1 Basis of preparation

The Group has presented its financial statements in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are prepared on a going concern basis under the historical cost convention.

The financial information set out below does not constitute the Group's statutory accounts for the year ending 31 December 2011 or 31 December 2010. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the annual general meeting. The auditors have reported on those accounts. Their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in a period of the revision and future periods if the revision affects both current and future periods.

The principal accounting policies of the Group are set out below, and have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements.

2.2 Basis of consolidation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 December 2011.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured, as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value the difference is recognised directly in the income statement.

Acquisition costs are accounted for as an expense as incurred in the income statement.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

2.3 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue on despatch of goods to the customer.

2.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

2.5 Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are included in the profit or loss for the period.

(a) Functional and presentational currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘functional currency’). The consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional and presentational currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised as part of the fair value gain or loss.

(c) Group companies

The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

- assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;

- income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction); and

- all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recognised in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

2.6 Intangible assets

(a) Patents, trademarks and registrations

Separately acquired patents, trademarks and registrations are shown at historical cost. Patents, trademarks and registrations have finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of patents, trademarks and registrations over their estimated useful lives of 5 to 20 years.

(b) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets acquired. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to the appropriate cash-generating unit for the purpose of impairment testing. Any impairment is recognised immediately through the income statement and is not subsequently reversed.

(c) Development costs

Development costs are recognised if it is probable that there will be future economic benefits attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. The assets are amortised when available for use on a straight-line basis over the period over which the Group expects to benefit from these assets. Research expenditure is written off to the Income statement in the year in which it is incurred.

(d) Brands

Brand names acquired in a business combination are recognised at fair value based on an expected royalty value at the acquisition date. Brand names are deemed to have an indefinite useful life and are not amortised. However, they are allocated to appropriate cash-generating units and subject to impairment testing on an annual basis. Any impairment is recognised immediately through the income statement and is not subsequently reversed.

(e) Customer relationships

Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Customer relationships are deemed to have a finite useful life and are carried at fair value less amortisation. Amortisation is calculated using the straight-line method over the expected useful life of 10 years.

2.7 Impairment of non-financial assets

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount is the higher of its fair value less costs to sell and its value in use. For intangible assets that are not yet available for use, goodwill or other intangible assets with an indefinite useful life, an impairment test is performed at each balance sheet date.

In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years. For goodwill, a recognised impairment loss is not reversed.

2.8 Investments

Investments in subsidiaries are stated at cost less provision for diminution in value.

2.9 Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Land is not depreciated. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

  Buildings           50 years or period of lease if shorter
Plant and machinery 3-10 years
Fixtures, fittings and equipment 3-6 years

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment and an impairment loss is recognised in the income statement where appropriate.

2.10 Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business.

2.11 Trade receivables

Trade receivables are recognised and carried at original invoice amounts less an allowance for any amount estimated to be uncollectable.

2.12 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

2.13 Derivative financial instruments

The group uses derivative financial instruments to manage certain exposures to fluctuations in foreign currency exchange rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value and gains or losses recognised in the income statement.

2.14 Leasing and hire purchase

The Group has entered into hire purchase contracts and leases certain property, plant and equipment.

Assets obtained under finance leases and hire purchase contracts, where the Group has substantially all the risks and rewards of ownership are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in borrowings net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the income statement so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

2.15 Taxation

Current tax, including UK corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred income tax is recognised, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the consolidated financial statements. Deferred income tax is determined using tax rates and laws that have been enacted, or substantially enacted, by the balance sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

2.16 Employee benefits

(a) Share-based payments

The group issues equity-settled share-based payments and shares under the Joint Share Ownership Plan (“JSOP”) to certain employees. These are measured at fair value and along with associated expenses are recognised as an expense in the income statement with a corresponding increase in equity. The fair values of these payments are measured at the dates of grant using appropriate option pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value is recognised over the period during which employees become unconditionally entitled to the awards subject to the Group’s estimate of the number of awards which will lapse, either due to employees leaving the Group prior to vesting or due to non-market based performance conditions not being met. Proceeds received on the exercise of share options are credited to share capital and share premium.

(b) Pension obligations

The Group operates a defined contribution pension scheme and contributes a percentage of salary to individual employee schemes. The pension expense represents contributions payable in the year.

2.17 Equity

Share capital is determined using the nominal value of ordinary shares that have been issued.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issue of shares are deducted from the share premium account, net of any related income tax benefits.

The premium arising on the issue of consideration shares to acquire a business is credited to the merger reserve.

Amounts arising on the restructuring of equity and reserves to protect creditor interests are credited to the special reserve.

Exchange differences arising on the consolidation of foreign operations are taken to the Translation reserve.

Share based payment reserve are credited with amounts charged to the income statement in respect of the movements in the fair value of equity-settled share-based payments and shares issued under the JSOP.

The JSOP shares reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by The Kiotech International plc Employees’ Share Trust. The interests of the Trust are consolidated into the Group’s financial statements and the relevant amount treated as a reduction in equity.

2.18 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.19 Financial risk management

The Group is exposed to a number of financial risks, including credit risk, liquidity risk, exchange rate risk and capital risk.

(a) Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and deposits with financial institutions. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has an established credit policy under which each new customer is analysed for creditworthiness before the Group’s payment and delivery terms and conditions are offered. Where possible, risk is minimised through settlement via letters of credit and purchase of credit insurance. The Group’s investment policy restricts the investment of surplus cash to interest bearing deposits with banks and building societies with high credit ratings.

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or damage to the Group’s reputation.

(d) Exchange rate risk

The Group’s principal functional currency is Pounds Sterling. However, during the year the Group had exposure to Euros and US Dollars. The Group’s policy is to maintain natural hedges, where possible, by matching revenue and receipts with expenditure and put in place forward contracts as considered appropriate.

(e) Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

2.20 Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:

(a) Estimated impairment value of intangible assets

The Group tests annually whether intangible assets have suffered any impairment. Impairment provisions are recorded as applicable based on directors’ estimates of recoverable values.

(b) Income taxes

The Group is subject to income taxes predominately in the United Kingdom but also in other jurisdictions. Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated queries by the tax authorities based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different for the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

2.21 Impact of accounting standards and interpretations

At the date of authorisation of these financial statements, the following standards and interpretations to existing standards are mandatory for the first time for the accounting period ended 31 December 2011:

            Effective from
IAS 32 (amended 2009)     ‘Classification of Rights Issue’     1 February 2010
IFRIC 19 (issued 2009) ‘Extinguishing Financial Liabilities with Equity Instruments’ 1 July 2010
IFRS 1 (amended 2010)

‘Limited Exemption from Comparative IFRS Disclosures
for first time Adopters’

1 July 2010
IFRIC 14 (amended 2009) ‘Prepayments of a Minimum Funding Requirement’ 1 January 2011

IAS 24 (revised 2009)

‘Related Party Disclosures’

January 2011

             

The adoption of these standards and interpretations has not had a significant impact on the Group.

At the date of the authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective:

            Effective from
IFRS 1 (amended 2010)    

‘Severe Hyperinflation and Removal of Fixed Dates for
First-time Adopters’

   

1 July 2011

IFRS 7 (amended 2010) ‘Financial Instruments: Disclosures’ 1 July 2011
IAS 12 (amended 2010) ‘Deferred Tax: Recovery of Underlying Assets’ 1 January 2012
IFRS 9 (issued 2009) ‘Financial Instruments’ 1 January 2013
IFRS 10 (issued 2011) ‘Consolidated Financial Statements’ 1 January 2013
IFRS 11 (issued 2011) ‘Joint arrangements’ 1 January 2013
IFRS 12 (issued 2011) ‘Disclosure of Interests in Other Entities’ 1 January 2013
IFRS 13 (issued 2011) ‘Fair Value Measurement’ 1 January 2013
IAS 1 (issued 2011) ‘Presentation of other items of Comprehensive Income’ 1 July 2012
IAS 19 (issued 2011)     ‘Employee Benefits (Revised)’     1 January 2013
 

A review of the impact of these standards, amendments and interpretations continues. At this stage the directors do not believe that they will give rise to any significant financial impact.

In 2011, the Group did not early adopt any new or amended standards and does not plan to early adopt any of the standards issued but not yet effective.

3   Segment information    
 
All revenues from external customers are derived from the sale of goods in the ordinary course of business to the agricultural and aquacultural markets and are measured in a manner consistent with that in the income statement.
 
Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographic perspective.
 
Management considers adjusted EBITDA to assess the performance of the operating segments, which comprises profit before interest, tax, depreciation and amortisation adjusted for share-based payments and exceptional items.
 
Inter-segment revenue is charged at prevailing market prices.
 
UK and Eire International Total
£000 £000 £000
 
Year ended 31 December 2011
Total segmental revenue 6,704 12,871 19,575
Inter-segment revenue - (377) (377)
Revenue from external customers 6,704 12,494 19,198
 
Adjusted EBITDA 340

1,901

2,241

Depreciation, amortisation and impairment charges (55) (246) (301)
Income tax expense (22) (128) (150)
     
Total assets 7,311 12,892 20,203
Total liabilities (1,415) (2,786) (4,201)
 
Year ended 31 December 2010
Total segmental revenue 9,300 12,686 21,986
Inter-segment revenue - (421) (421)
Revenue from external customers 9,300 12,265 21,565
 
Adjusted EBITDA 243 1,716 1,959
Depreciation and amortisation (99) (38) (137)
Income tax expense (68) (161) (229)
     
Total assets 8,624 11,306 19,930
Total liabilities (1,614) (3,528) (5,142)
 
A reconciliation of adjusted EBITDA to profit before tax is provided as follows:
 
2011 2010
£000 £000
 
Adjusted EBITDA for reportable segments

2,241

1,959

Depreciation and amortisation

(213)

(137)
Share-based payment charges (153) (100)
Finance income

39

56
Closure and restructuring costs (88) (261)
Profit before tax 1,826 1,517
 
The entity is domiciled in the UK.
 
The total of non-current assets other than financial instruments and deferred tax assets (there are no employment benefit assets and rights arising under insurance contracts) located in the UK is £9,998,000 (2010: £9,616,000) and the total of these assets located in other countries is £3,000 (2010: £10,000)
 
Share-based payment charges of £153,000 includes £53,000 of professional fees that have been expensed during 2011.
4   Expenses by nature      
2011 2010
£000 £000
 
Changes in inventories of finished goods

(65)

(72)
Raw materials and consumables used

10,798

13,337
Employee expenses (note 7) 2,828 3,349
Research and development expenditure 46 51
Transportation expenses 1,359 1,194
Other operating expenses 1,848 1,867
Operating lease payments 52 297
Depreciation, amortisation and impairment charges 301 137
Share-based payment charges 153 100
Acquisition costs 50 -
Loss/(Profit) on foreign exchange transactions 41 (156)
   
Total cost of sales, distribution and administrative expenses 17,411 20,104
 
Share-based payment charges of £153,000 includes £53,000 of professional fees that have been expensed during 2011.
 
5 Closure and restructuring costs
 

Following the completion of the restructuring exercise in the prior year, the group has identified an impairment provision of £88,000 against the value of a long leasehold property which is no longer required in the normal course of business. During 2010 the Group closed a number of administrative and production sites which resulted in costs associated with staff redundancies, removal costs, early termination costs and asset disposals.

 
6

Auditors' remuneration

 

During the year the Group obtained the following services from the Company's auditors:

 
2011 2010
£000 £000
Group

Fees payable to the Company's auditors for the audit of Parent Company and Consolidated financial statements

31 23

Fees payable to the Company's auditors for other services:

Tax services 13 26
44 49
 
 
7 Employees
 
Number of employees
The average monthly number of employees including directors during the year was:
2011 2010
Number Number
Group
Production 30 28
Administration 21 21
Sales and Technical 23 23
Total average headcount 74 72
 
Company
Production 30 28
Administration 20 20
Sales and Technical 16 17
Total average headcount 66 65
 
Employment costs
2011 2010
£000 £000
Group
Wages and salaries 2,485 2,910
Social security costs 233 297
Other pension costs 110 142
Share-based payment charges 153 100
2,981 3,449
 
 
8 Finance income
2011 2010
£000 £000
Interest receivable on short-term bank deposits 39 56
 
 
 
9 Earnings per share
2011 2010
Weighted average number of shares in issue (000's)

18,085

18,300
Adjusted for effects of dilutive potential ordinary shares (000's)

139

173
Weighted average number for diluted earnings per share (000's)

18,224

18,473
 
Profit attributable to equity holders of the company (£000's) 1,667 1,282
 
Basic earnings per share (pence) 9.22 7.01
Diluted earnings per share (pence)

9.15

6.94
 
2011

2010

£000 £000
Underlying profit attributable to equity owners:
Profit attributable to equity owners

1,667

1,282
Closure and restructuring costs (net of tax) 88 187
Prior year tax adjustments

(138)

(138)
Underlying profit

1,617

1,331
 
Underlying earnings per share (pence)

8.94

7.27
Diluted underlying earnings per share (pence)

8.87

7.20
 
 
10 Dividend payable
2011 2010
£000 £000
2009 final dividend paid: 1.15p per 23p share - 210
2010 final dividend paid: 2.0p per 23p share 361 -
361 210
 

A dividend in respect of the year ended 31 December 2011 of 2.4 pence per share, amounting to a total dividend of £452,000 is to be proposed at the annual general meeting on 26 June 2012. These financial statements do not reflect this dividend payable.

 
11 Income tax expense
2011 2010
£000 £000
Current tax
Current tax on profits for the year 247 288
Adjustment for prior years

(118)

(221)
Total current tax

129

67
 
Deferred tax
Origination and reversal of temporary differences 41 79
Adjustment for prior years

(20)

83
Total deferred tax (note 20)

21

162
Income tax expense 150 229
 
 
2011 2010
£000 £000
Factors affecting the tax charge for the year
Profit before tax 1,826 1,517
 
 
Tax at domestic rates applicable to profits in the respective countries 484 425
 
Tax effects of:
 
Non deductible expenses 104 27
Capital allowances (41) 2
Research and development tax credits (266) (119)
Prior year tax adjustments (138) (138)
Other tax adjustments 7 32
Tax charge 150 229
 
12   Intangible assets
             
Goodwill Brands Customer relationships Patents, trademarks and registrations Development costs Total
 
£000 £000 £000 £000 £000 £000
 
Group and Company
Cost
As at 1 January 2010 4,144 1,501 176 46 1,037 6,904
Additions -   -   -   13   243   256
As at 31 December 2010 4,144 1,501 176 59 1,280 7,160
Additions -   -   -   5   207   212
As at 31 December 2011 4,144   1,501   176   64   1,487   7,372
Accumulated amortisation/impairment
As at 1 January 2010 - - - 5 126 131
Charge for the year -   -   18   4   -   22
As at 31 December 2010 - - 18 9 126 153
Charge for the year - - 18 7 - 25
Impairment provision -   -   -   -   33   33
As at 31 December 2011 -   -   36   16   159   211
Net book value
As at 31 December 2011 4,144   1,501   140   48   1,328   7,161
As at 31 December 2010 4,144   1,501   158   50   1,154   7,007
As at 1 January 2010 4,144   1,501   176   40   911   6,772
 
Goodwill is allocated to the Group’s cash-generating units (CGU’s) identified according to trading brand. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond a five-year period are extrapolated using estimated growth rates of 1.5% per annum (2010: 1%).
The discount rate used of 12% (2010: 12%) is pre-tax and reflects specific risks relating to the operating segments.
 
Goodwill is allocated as follows:
 
At 31 December 2010 and 2011 £000
Acquisition of Kiotechagil operations 3,552
Acquisition of Optivite operations 592
Total goodwill 4,144
 

Brands relate to the fair value of the Optivite brands acquired in the year ended 31 December 2009. These are deemed to have an indefinite useful life due to the inherent intellectual property contained in the products, the longevity of the product lives and global market opportunities. Brands are assessed for impairment with goodwill in the annual impairment review as described above.

Amortisation of customer relationships and patents, trademarks and registrations totalling £25,000 (2010: £22,000) is included in administrative expenses.
The carrying amount of development costs of a range of products has been reduced to its recoverable amount through recognition of an impairment provision during the year of £33,000 due to uncertainty regarding future marketability. This provision, included within administrative expenses, was based on management forecasts of the remaining development costs and expected future economic benefits arising to the Group.
 
13   Property, plant and equipment
  Land and buildings   Plant and machinery   Fixtures, fittings and equipment   Total
£000 £000 £000 £000
Group
Cost
As at 1st January 2010 330 291 157 778
Additions 1,532   223   316   2,071
As at 1st January 2011 1,862 514 473 2,849
Reclassification 98 78 (176) -
Additions 47 369 58 474
Disposals -   (21)   -   (21)
As at 31 December 2011 2,007   940   355   3,302
Depreciation
As at 1 January 2010 8 72 35 115
Charge for the year 1   48   66   115
As at 1st January 2011 9 120 101 230
Reclassification 11 27 (38) -
Charge for the year 28 94 33 155
Disposals - (11) - (11)
Impairment provision 88   -   -   88
As at 31 December 2011 136   230   96   462
Net book value
As at 31 December 2011 1,871 710 259 2,840
As at 31 December 2010 1,853 394 372 2,619
As at 1 January 2010 322 219 122 663
 
Held within land and buildings is an amount of £700,000 (2010: £700,000) in respect of non-depreciable land.
 
Plant and machinery includes the following amounts held under finance lease.
 
2011 2010
£000 £000
Cost-capitalised hire purchase contracts - 11
Accumulated depreciation -   (3)
Net book value -   8
 
 
 
Land and buildings Plant and machinery Fixtures, fittings and equipment Total
£000 £000 £000 £000
Company
Cost
As at 1st January 2010 330 229 139 698
Reclassification - (17) 17 -
Additions 1,532   223   314   2,069
As at 1st January 2011 1,862 435 470 2,767
Reclassification 98 78 (176) -
Additions 47 369 58 474
Disposals -   (18)   -   (18)
As at 31 December 2011 2,007   864   352   3,223
Depreciation
As at 1 January 2010 8 17 21 46
Reclassification - (3) 3 -
Charge for the year 1   46   65   112
As at 1st January 2011 9 60 89 158
Reclassification 11 27 (38) -
Charge for the year 28 87 33 148
Disposals - (8) - (8)
Impairment provision 88   -   -   88
As at 31 December 2011 136   166   84   386
Net book value
As at 31 December 2011 1,871 698 268 2,837
As at 31 December 2010 1,853 375 381 2,609
As at 1 January 2010 322 212 118 652
 
Held within land and buildings is an amount of £700,000 (2010: £700,000) in respect of non-depreciable land.
 
During 2011 an exercise was undertaken to reclassify certain assets between categories.
 

As descibed in note 5, a provision for impairment of £88,000 was made against the value of a long leasehold property which is no longer required in the normal course of business. The property remains in property, plant and equipment as current market conditions mean it is uncertain as to whether the property will be sold or rented.

 
 
14 Investment in subsidiaries
Unlisted Investments
£000
Company
Cost  
As at 1 January 2010, at 31 December 2010 and at 31 December 2011 2,625
Provisions for diminution in value
As at 1 January 2010 1
Charge for the year 2,391
As at 31 December 2010 2,392
Charge for the year -
As at 31 December 2011 2,392
Net book value
As at 31 December 2011 233
As at 31 December 2010 233
As at 1 January 2010 2,624
 
Holdings of more than 20 per cent
               
The Company holds more than 20 percent of the share capital of the following companies:
 
Company Country of registration or incorporation Principal activity percentage held Shares held Class
Subsidiary undertakings

Anpario UK Limited

England and Wales Dormant 100 Ordinary
Kiotech Limited England and Wales Dormant 100 Ordinary
Aquatice Limited England and Wales Dormant 100 Ordinary
Agil Limited England and Wales Dormant 100 Ordinary
Kiotechagil Limited England and Wales Dormant 100 Ordinary
Optivite Limited England and Wales Dormant 100 Ordinary
Optivite International Limited England and Wales Dormant 100 Ordinary
Kiotechagil (Shanghai) Agriculture
Science and Technology Limited China Technology services 100 Ordinary
Optivite Animal Nutrition Private Limited India Technology services 100 Ordinary
Optivite Latinoamericana SA de CV Mexico Technology services 98 Ordinary
Optivite SA (Proprietary) Limited South Africa Technology services 60 Ordinary
 

Anpario UK Limited was incorporated on 29 June 2011 with one subscriber share of £1.

 
15   Inventories      
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Raw materials and consumables 752 799 752 799
Finished goods and goods for resale 336 401 219 243
1,088 1,200 971 1,042
 
 

The cost of inventories recognised as expense and included in 'cost of sales' amounted to £10,798,000 (2010: £13,265,000) for the Group and £10,165,000 (2010: £12,793,000) for the Company.

 
16 Trade and other receivables
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Trade receivables 4,207 5,224

3,815

4,820
Less: provision for impairment of trade receivables (55) (244) (51) (230)
Trade receivables - net 4,152 4,980 3,764 4,590
Receivables from subsidiary undertakings - - 454 487
Taxes 106 165 88 99
Prepayments and accrued income 181 139 160 121
4,439 5,284 4,466 5,297
 
 
The ageing analysis of net trade receivables is as follows:
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Up to 3 months 3,327 3,500 2,865 3,139
3 to 6 months 799 1,317 725 1,295
Over 6 months 26 163 174 156
Trade receivables - net 4,152 4,980 3,764 4,590
 
As of 31 December 2011 trade receivables of £880,000 (2010: £1,049,000) for the Group and £854,000 (2010: £1,042,000 ) for the Company were past due but not impaired. These relate to longstanding customers for who there are no recent history of default. The ageing analysis of these receivables is as follows:
 
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Up to 3 months 710 244 698 244
3 to 6 months 157 711 150 711
Over 6 months 13 94 6 87
880 1,049 854 1,042
 
As of 31 December 2011 trade receivables of £55,000 (2010: £244,000) for the group and £51,000 (2010: £230,000) for the Company were impaired and fully provided for. The individually impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of credit insurance and letters of credit to remit amounts due. The aging of these trade receivables is as follows:
 
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
3 to 6 months - 18 - 18
Over 6 months 55 226 51 212
55 244 51 230
 
Movement on the group provision for impairment of trade receivables is as follows:
Group Company
£000 £000 £000 £000
At 1 January 2011 244 252 230 252
Provisions for receivables created 12 56 8 42
Amounts written off as unrecoverable

(155)

- (155) -
Amounts recovered during the year

(46)

(64) (32) (64)
At 31 December 2011 55 244 51 230
 
The carrying amounts of trade and other receivables are denominated in the following currencies:
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Pounds sterling 2,415 2,775 2,415 2,776
Euros 669 1,183 669 1,183
US Dollar 697 651 680 631
Other currencies 371 371 - -
4,152 4,980 3,764 4,590
 

The other classes within trade and other receivables do not contain impaired assets.

 
17 Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits held by Group companies. The carrying amount of these assets approximates to their fair value.
 
18 Trade and other payables
Group Company
2011 2010 2011 2010
£000 £000 £000 £000
Trade payables 2,469 2,724 2,305 2,538
Amounts due to subsidiary undertakings - - 89 114
Taxes and social security costs 139 80 139 80
Accruals and deferred income 599 1,103 552 1,057
3,207 3,907 3,085 3,789
 
19   Borrowings                
 
The total amount due within one year at 31 December 2011 under hire purchase agreements is as follows:
 
Group and Company
2011 2010
£000 £000
Due within one year - 3
- 3
 
20 Deferred income tax
2011 2010
Group £000 £000
At 1 January 655 493
Income statement charge (note 11) 21 162
At 31 December 676 655
 

During the year, as a result of the change in the UK corporation tax rate from 26% to 25% that was substantively enacted on 5 July 2011 and planned to be effective from 1 April 2012, the relevant deferred tax balances at 31 December 2011 have been re-measured at 25% (2010: 27%).

Further reductions to the UK tax rate have been announced. The changes reduce the rate to 24% from 1 April 2012 and by 1% per annum thereafter to 22% by 1 April 2014. The changes had not been substantively enacted at the reporting date and, therefore, are not recognised in these financial statements. The effects of these changes are not expected to have any material impact on the financial statements.

 
Deferred tax liabilities/ (assets)
Accelerated tax allowances Fair value gains Losses Total
£000 £000 £000 £000
At 1 January 2010 23 470 - 493
Income statement charge (note 11) 473 (22) (289) 162
At 31 December 2010 496 448 (289) 655
Income statement charge (note 11) 71 (21) (29) 21
At 31 December 2011 567 427 (318) 676
Classified as:
Deferred income tax asset 318
Deferred income tax liability 994
 
2011 2010
Company £000 £000
At 1 January 655 493
Income statement charge 21 162
At 31 December 676 655
 
 
 
Deferred tax liabilities/ (assets)
Accelerated tax allowances Fair value gains Losses Total
£000 £000 £000 £000
At 1 January 2010 23 470 - 493
Income statement charge (note 11) 473 (22) (289) 162
At 31 December 2010 496 448 (289) 655
Income statement charge 71 (21) (29) 21
At 31 December 2011 567 427 (318) 676
Classified as:
Deferred income tax asset 318
Deferred income tax liability 994
 
Losses
In addition to the losses noted above the Group and Company have not recognised deferred tax assets of £428,000 (2010: £530,000) in respect of unutilised tax losses totalling £1,712,000 (2010: £1,963,000).
 
21 Contingent liabilities
On the acquisition of Agil, part of the consideration was deferred pending receipt of trade receivables outstanding at November 2006. In the event that these receivables are collected then these balances will be due to the vendor of the business, ECO Animal Health Group plc. Management is of the opinion that the remaining uncollected trade receivables £155,000 (2010: £157,000) will not prove to be recoverable, this was provided for in 2010 and has been written off in 2011.
 
22 Financial commitments
 
At 31 December 2011 the Group has future aggregate minimum lease payments under non-cancellable operating leases as follows:
 
Vehicles, plant and equipment Land and buildings
2011 2010 2011 2010
£000 £000 £000 £000
Less than one year 37 73 - 14
Between one and five years 39 67 - -
 
 
The Group leased properties under non-cancellable operating lease agreements until October 2010, when a long underlease was acquired from the landlord and future obligations ceased.
 
The lease expenditure charged to the income statement during the year is disclosed in note 4.
 
 
23 Capital commitments
 
There were no capital commitments as at 31 December 2011 £nil (2010: £187,000 in respect of property, plant and equipment).
 
24 Called up share capital
2011 2010
£000 £000
Authorised
86,956,521 Ordinary shares of 23p each 20,000 20,000
1,859,672 'A' shares of 99p each 1,841   1,841
21,841 21,841
Allotted, called up and fully paid
18,299,952 Ordinary shares of 23p each 4,209 4,209
Issue of Ordinary shares of 23p each to JSOP 341 -
Options exercised Ordinary shares of 23p each 5   -
4,555   4,209
 
On 27 September 2011 and 12 December 2011 the Company respectively issued 587,742 and 896,138 ordinary shares of 23p at market price to the Trustees of The Kiotech International plc Employees' Share Trust. On 28 October 2011 21,739 ordinary shares of 23 pence each were issued pursuant to the exercise of employee share options.
 
 
25 Retained earnings

Group

Company
£000 £000
At 1 January 2010 1,445 1,478
Profit for the year 1,282 1,334
Dividends relating to 2009 (210) (210)
At 31 December 2010 2,517 2,602
Profit for the year 1,667 1,696
Dividends relating to 2010 (361) (361)
Transfer from special reserve 4,441 4,441
At 31 December 2011 8,264 8,378
 
A Special reserve of £4,441,000 was established following a reduction in capital and Court order on 21 July 2008. Following the satisfaction of the provisions of the Court order this amount has now been released to retained earnings and as such forms part of the Company’s distributable reserves.
 
26 Other reserves

Group

Company

Other reserves comprise:

2011

2010

2011

2010

£000

£000

£000

£000

Treasury shares (166) -

(166)

-

Joint share ownership plan

(1,210)

-

(1,210)

-

Special reserve

-

4,441

-

4,441

Merger reserve 228 228

228

228

Share-based payment reserve 479 379

479

379

Translation reserve (26) 6

-

-

(695) 5,054

(669)

5,048

 

On 26 January 2011 the Company purchased in the market 235,000 of its own ordinary shares of 23p each for 70p each, these shares are held in treasury. Details of the Joint share ownership plan (JSOP) established in the year are set out in note 27.

 
27   Share-based payments              
 
Movements in the number of share options outstanding are as follows:
 
 
Weighted average Shares Weighted average Shares
exercise price 2011 exercise price 2010
(p) 000 (p) 000
Outstanding at 1 January 76 1,826 76 1,619
Granted during the year 82 60 82 392
Modified by awards under JSOP 67 (896) - -
Excerised during the year 32 (22) - -
Forfeited or cancelled during the year 86 (22) 95 (185)
Outstanding at 31 December 81 946 76 1,826
Exercisable at 31 December   340   479
 
Share options outstanding at the end of the year have the following expiry dates and weighted average exercise prices:
 

 

Weighted average Shares Weighted average Shares
exercise price 2011 exercise price 2010
Expiry date   (p) 000 (p) 000
2015 165 44 165 44
2016 99 223 86 397
2017 104 65 104 65
2018 32 96 32 163
2019 68 262 69 765
2020 79 196 82 392
2021 76 60 - -
946 1,826
 
On 30 June 2011, 21,739 options were forfeited following a redundancy and on 28 October 2011 21,739 options were exercised. On 5 October 2011 options totalling 60,000 were awarded under the Company's Enterprise Management Incentive Scheme (EMIS).
 

Under the terms of the Company’s newly established Joint share ownership plan (JSOP) on 27 September 2011 the Company issued 587,742 ordinary shares of 23p to the Executive Directors at a price of 85.5p per share; and on 12 December 2011 a further 896,138 ordinary shares of 23p were issued to the Executive Directors at a price of 79p per share as a modification to existing benefits under the Company’s Enterprise Management Incentive Scheme (EMIS) and Unapproved Share Scheme.

 

The fair value of services received in return for share options granted and the shares which have been issued into the joint beneficial ownership of the participating Executive Directors and the Trustee of The Kiotech International plc Employees' Share Trust is calculated based on appropriate valuation models.

 
The expense is apportioned over the vesting period and is based on the number of financial instruments which are expected to vest and the fair value of those financial instruments at the date of grant. The charge for the year in respect of share options granted and associated expenses amounts to £153,000 (2010: £100,000) of which £53,000 (2010: £nil) is related to professional fees that have been expensed during year.
 

The weighted average fair value of options granted during the year was determined based on the following assumptions using the Black-Scholes and Monte Carlo pricing models:

Plan EMIS JSOP JSOP
Grant date 5-Oct 27-Sep 12-Dec
Number of options granted (000) 60 588 896
Grant price (p) 75.5 85.5 79
Exercise price (p) 75.5 N/A N/A
Carrying cost (per annum) N/A 4.50% 4.50%
Vesting period (years) 2 3 3
Option expiry (years) 10 10 10
Expected volatility of the share price 37% 37% 37%
Dividends expected on the shares 3.05% 2.30% 1.31%
Risk-free rate 1.38% 2.00% 2.42%
Fair value (p) 19.27 19.79 0.43
Pricing model Black-Scholes Black-Scholes

Black-Scholes/
Monte Carlo

 
28   Related party transcations    
 
Group and Company
 
The following transactions were carried out with related parties:
 
P A Lawrence, Chairman of ECO Animal Health Group plc, is a non-executive director of the Company and £26,000 (2010: £26,000) was paid to ECO Animal Health Group plc in respect of his services and expenses;
 
ECO Animal Health Group plc had an accounting management agreement with the Group until April 2010 and for which it received £Nil (2010:£10,000).
 
Work done by certain employees of ECO Animal Health Group plc in connection with the research and development of aquaculture technology totalled £Nil (2010: £111,000);
 
On 31 December 2010 ECO Animal Health Group plc held 362,000 23p ordinary shares amounting to 2.01% of the ordinary Share Capital. These shares were disposed of during 2011.
 

Electro Switch Limited, a company controlled by close family members of the Chairman, R S Rose, received the sum of £20,000 (2010: £18,000).

 

Amounts due to related parties at 31 December 2011 were, ECO Animal Health Group plc £7,800 (2010: £Nil), Electro Switch Limited £2,000 (2010: £Nil).

 
Key management comprises the directors of Anpario plc and their emoluments are as follows:
 
2011 2010
£000 £000
Salaries and other short-term employment benefits 411 647
Post employment benefits 25 54
Payments made to third parties 46 134
Share-based payments 80 78
Total 562 913
 
Company
 
The following transactions were carried out with related parties:
2011 2010
£000 £000
Sales of goods:
- Subsidiaries 377 421
Sales of services:
- Subsidiaries - 29
 
Purchases of goods:
- Subsidiaries - -
Purchases of services:
- Subsidiaries 8 23
 
Dividends received
- Subsidiaries - 2,391
 
 
Year-end balances with related parties
2011 2010
£000 £000
Receivables from related parties (note 16)
- Subsidiaries 454 487
 
Payables to related parties (note 18)
- Subsidiaries 89 114
 

29. Post balance sheet event

Group and Company

On 29 March 2012 the Company acquired 100% of the share capital of Meriden Animal Health Limited ('Meriden') for a total consideration of up to £4.125 million before costs. Costs of £50,000 have been written off to the Income statement in 2011.

An initial payment of £3.0 million in cash on completion has been made from existing cash resources. The remaining £1.125 million is payable over the next two years, dependent on Meriden achieving certain performance criteria, and of this, £125,000 is to be satisfied by the issue of ordinary shares of Anpario plc to Meriden’s shareholders.

The acquisition of Meriden brings another strong trading brand to the Anpario Group, broadening its product technology and increasing Anpario's global market share in the feed additive sector.

The acquisition was made after the balance sheet date but before the financial statements were finalised. The accounting for the business combination is not yet complete, consequently certain disclosures have not been made including:

  • details relating to the calculation and factors making up goodwill;
  • acquisition date fair value of each major class of consideration and an aggregate total;
  • identifiable assets, liabilities and contingent liabilities;
  • details of transactions with the acquiree that do not form part of the business combination;
  • fair value of the Group’s interest in the acquiree prior to the combination and information about minority interests remaining after the combination;
  • post-acquisition activities.

Contacts

Anpario plc      
David Bullen, Chief Executive Officer +44 (0)791 955 2040
Karen Prior, Group Finance Director +44 (0)1909 537 380
 
FinnCap
Matthew Robinson / Henrik Persson - Corporate Finance
Stephen Norcross - Corporate Broking +44 (0)20 7600 1658