RNS Number:1537J
KBC Advanced Technologies plc
01 March 2005
Embargoed until 07.00 Tuesday, 1 March 2005
KBC Advanced Technologies plc
("KBC")
Preliminary results for the year ended 31 December 2004
12 months to 12 months to
31 December 31 December
2004 2003
Turnover #29.3m #32.3m
Operating (loss)/profit* (#1.1m) #0.7m
Loss before tax (#0.5m) (#2.0m)
Basic loss per share (1.76p) (3.19p)
* before goodwill amortisation and exceptional item
Highlights
*Successful resolution of software litigation
*Launch of new service offerings and software products
*Positive economic environment for our customers
*Final dividend payment prudently withheld
*Positioned for growth in 2005
Commenting on the results, Christopher Powell-Smith, Chairman of KBC said: "In
the current market environment, and with the software difficulties behind us,
KBC is looking forward to a period of growth and increasing profitability. It
will always be the case, however, that the timing of major projects will have a
material impact on our performance. In many parts of the world forecasting the
timing of these projects may continue to be difficult.
Turning to the immediate prospects for 2005, we expect to grow our revenues in
the first half of the year such that we will return to profitability in the
second quarter and move towards a break even position overall at the operating
level for the first half year. The continuation of this growth in the second
half of the year should enable us to deliver an operating profit for the year in
line with current market expectations. We already have contracted revenues for
close to half of this target and, although sales have yet to be confirmed for
the balance, we are confident that sufficient opportunities exist in the current
climate."
- Ends -
For further information, please contact:
KBC Advanced Technologies plc www.kbcat.com
Peter Close, Chief Executive On 1 March: 020 7067 0700; thereafter: 01932 236314
Nick Stone, Finance Director
Weber Shandwick Square Mile
Mike Kirk/Rachel Taylor/Yvonne Alexander 020 7067 0700
Notes to Editors: KBC Advanced Technologies plc is the leading independent
process engineering group delivering improved profitability through consulting
services and practical solutions to owners and operators of oil refineries and
other clients in the process industries worldwide. KBC analyses plant operations
and management systems, recommends changes that deliver material and measurable
improvements in profitability and provides implementation services to assist
clients in realising measurable financial improvements. KBC also forecasts crude
and petroleum products prices, and offers economic and pricing studies focused
on the future outlook for the oil industry. KBC works with its clients both to
implement its recommendations and to realise and monitor the resulting
improvements in profits on a continuing basis. In carrying out this work its
consultants make extensive use of the process simulation software tools which
KBC has developed.
Embargoed until 07.00 Tuesday, 1 March 2005
KBC Advanced Technologies plc
("KBC", "the Group" or "the Company")
Preliminary results for the year ended 31 December 2004
2004 was a year of transition for KBC. Our focus has been on building a stable
platform for the resumption of revenue growth and profitability in 2005. As we
said in our trading statement in October 2004, two key events were required in
order for this to happen: firstly, the resolution of the software litigation
and, secondly, the launch of our new service offerings and software products. I
am pleased that we succeeded in achieving both of these goals during the second
half of 2004 and we review these in more detail later.
Given the long lead times in our sales process, there was always going to be a
lag effect on our trading performance in 2004 as we focused on achieving these
goals which were essential to re-position the business for growth in 2005 and
beyond. As we move into 2005, we are now well-placed to concentrate on ensuring
that the goals of revenue and profit growth are achieved.
The economic environment for our customers has improved over the year with high
demand for oil products leading to high refining margins throughout the world.
The refining sector of the oil industry is traditionally cautious on committing
to new spending plans, and in many cases this has had to await approval as part
of the 2005 budget cycle. However, we are now seeing real demand from refiners
who are committing to increased spending in 2005 in the confidence that the
economic environment will be sustained in the medium term, thereby justifying
investment.
Results
Turnover was down year on year by 9% from #32.3m to #29.3m. Prior to exceptional
operating income and charges, and goodwill amortisation, the operating loss of
#1.1m compares with a profit of #0.7m in 2003, a fall of #1.8m. These results
have been materially impacted by the decrease in the sterling value of US dollar
revenues which accounted for 71% of KBC's overall revenues (2003: 84%). At
constant exchange rates, the reduction in revenues would have been 4%.
After exceptional operating income, goodwill amortisation and interest earnings
the Group realised a loss before tax of #0.5m (2003: #2.0m). Basic loss per
share was 1.76p (2003: 3.19p), with loss per share before exceptional operating
income and goodwill falling from earnings of 1.37p in 2003 to a loss of 2.08p in
2004.
We stated in our 2004 interim statement that we would be relating dividend
payments more closely to the underlying earnings of the business. In the light
of the financial performance of the Group over the period, the Board is not
proposing to recommend a final dividend for 2004. The total dividend for the
year will therefore amount to 0.2p per share, which was paid as an interim
dividend in October 2004. The Board is looking forward to resuming dividends in
2005 as the expected recovery in earnings and cash resources is delivered.
Software dispute
During 2004 we made substantial progress in our software business. Through the
arbitration process we obtained the source code for HYSYS.Refinery in May 2004,
with costs awarded in KBC's favour.
In October 2004 we announced the settlement with Aspen Technology Inc ("Aspen")
of all legal disputes. As part of the settlement Aspen recognised KBC's right to
develop, market and license HYSYS.Refinery, and KBC recognised Aspen's right to
develop, market and license Aspen RefSYS. In addition, Aspen has licensed to KBC
the Aspen HYSYS(TM), Aspen PIMS(TM) and Aspen Orion(TM) software for use as part of
its consulting services business. KBC has also been paid $3.75 million in
respect of costs incurred in the dispute.
Since gaining the rights to HYSYS.Refinery we have rebranded the product as
Petro-SIM(TM) and the first release was in November 2004. It has been well
received by the market and a team of developers continues to work on the
product. We anticipate being able to announce the first commercial licenses in
early 2005.
Board changes
There have been several Board changes during 2004, starting at the time of the
2003 results announcement with the appointment of Christopher Powell-Smith as
Chairman and the appointment of George Bright as a new Executive Director. We
were delighted to welcome to the Board in October 2004 Ian Miller and Michael
Kirk as new Non-Executive Directors and look forward to the benefit of their
skills and experience. In December 2004 Stephen Pettit stood down from the Board
after six years of service in order to concentrate on his other commitments.
Finally, we also announced during the year that Peter Plant will stand down at
the AGM in 2005 after more than 11 years' service. I would like to thank both
Stephen and Peter for their valuable contributions to KBC during their time as
Directors. In particular Peter's long experience of KBC's business has been of
great value during the recent trading difficulties. We shall miss the
participation of both of them at Board discussions.
REVIEW OF OPERATIONS
Business repositioning
The Group continues to pursue its strategy of building long-term client
relationships and diversifying its range of consultancy services. With the
release of Petro-SIM in November KBC was once again at the forefront of the
provision of simulation software for refinery-wide optimisation. Petro-SIM is
the platform on which we are building the ProfitManager(TM) suite of applications.
These applications enable KBC to provide clients with the work processes to
ensure that best practice can deliver improvements in refining operating
margins. With our new Strategic and Commercial Advisory Service we have secured
consulting assignments for asset evaluation and due diligence work through
clients in the banking and investment communities. In turn, this has created
additional opportunities for our process technical and profit improvement
business. Long-term relationships with our clients continue to be the
cornerstone of our business and we are seeing the success of this in both
Reliability & Maintenance and Operations Planning Services. Account management
has been emphasised and strengthened as the key aspect of building the breadth
and depth of our client relationships.
Consulting activities
Although the order book for our traditional Process Consulting activity remained
under pressure throughout 2004, business prospects strengthened during the final
quarter. We expect that the revitalised approach to providing our skill and
expertise through ProfitManager and through long term service contracts rather
than one-off consulting projects will ensure that Process Consulting remains the
core of KBC's business. We are seeing a heightened level of interest in all
regions as a result of the tight supply position of refined petroleum products
which resulted in a shortage of refining capacity for much of 2004. However, it
was most noticeable in Asia, driven by the strong economic growth in both India
and China which led to increased demand for refined products. KBC has increased
its resources in Asia with the expansion of our Singapore office to support the
growth potential as we see an increasing proportion of future revenues being
generated from this region.
With the change in economic conditions we are seeing a sharp increase in design
projects for refinery upgrades and expansions in order to increase refining
capacity and processing flexibility. This has started to provide additional
business for us and we have entered into joint projects with established
engineering contractors. KBC's Profit Improvement Program (PIP) has focused in
the past on generating efficiency improvement without major capital expenditure.
This new emphasis by KBC on capital projects is an exciting realignment of our
services, which helps us respond to the broader demands of our clients.
Crude oil prices (Brent) continue to trade in the range of 40-50 US dollars per
barrel, significantly increasing energy costs, thereby placing an increased
emphasis on energy conservation. At the same time, environmental pressure on
emissions reduction continues to increase the importance of energy efficiency in
the refining process and we have been able to focus KBC's Energy Services
products in this area. Significant energy conservation projects have been
secured in the US, Singapore and China, and as we enter 2005 we are now seeing
increased interest in Europe.
KBC relaunched its services to the Petrochemicals industry during 2004, after
developing commercial and techno-economic databases, with a new core offering
tying together all KBC's profit improvement capabilities. Significant new
clients were added, with major projects in Hungary and Thailand executed in
2004. Both of these assignments led to continuing business and expanding
relationships. Other material work for petrochemical clients was undertaken in
Europe, Asia and the Americas. It is expected that there will be further growth
in this area and accelerated development of new simulation tools within
Petro-SIM is already underway for this market.
KBC's Reliability, Availability & Maintenance (RAM) services continued to
develop in 2004 through extension of existing client relationships combined with
engagements in new markets. The shortage of refining capacity accentuates the
need for reliable operations and is fuelling the market for RAM consulting
services. The continuing needs of existing clients, and the potential for
securing additional business outside the refining industry, will be crucial to
the expected revenue growth in this area in 2005 and beyond.
In Planning Services the scope of our project work is demonstrated by
three significant multi-disciplinary projects that we performed in 2004 :
completion of a Strategic Investment Study, the continuation of work as a primary
services provider for a North American oil company, and the continuation of
Linear Program work at multiple refineries for two Latin American national oil
companies. KBC's Planning Services group advises clients on planning and
scheduling work processes and building or upgrading the models which act as
decision support tools.
During 2004 efforts were directed at establishing and securing commercial
consulting studies with financial institutions in Europe and in the US through
the new Strategic and Commercial Advisory Services team. This is a new revenue
stream for KBC, with due diligence engagements in both Europe and Asia. The
acquisition of Petroleum Economics in 2002 has enabled KBC to enter this market
and we expect to see this revenue growing as KBC becomes a recognised provider
of these services.
Software services
The dispute with AEA Technology Plc and Aspen having been successfully resolved,
the development and initial release of KBC's refinery wide simulation product,
Petro-SIM, went ahead in November. Interest in this product from our clients has
been extremely high. Orders for the new product were received in 2004 (which was
earlier than expected) and licences should be executed in early 2005. Our
consultants are already using Petro-SIM to support their work with good results.
In 2004 KBC also released new versions of most of its Profimatics reactor models,
in both their standalone form and within Petro-SIM. These models are market
leaders in the refining industry and new sales in 2004 helped our software
revenues to grow by 7%. The release of Petro-SIM should see further
revenue growth in software in 2005. Moreover, it is also an enabler to our
consulting services: already in 2005 two North American refiners have entered
into advisory service arrangements with KBC which include the provision of
Petro-SIM for the duration of the service contract.
Sales and marketing
Despite record margins in the refining sector the order book remained weak
throughout the year and it was not until November that the market for high value
jobs started to improve. Delays in project start dates also negatively impacted
2004 revenues.
The North American market proved particularly difficult, although there has been
some success in establishing and maintaining longer term, services based
contracts in this region. Sales in Central and Latin America were lower than had
been expected in 2004.
Year-on-year sales performance in the Europe, Middle East and Africa regions
strengthened, although contract size was significantly lower than our historical
average. During the first quarter of 2004 we opened a representative office in
Moscow to help secure contracts in the Former Soviet Union.
Asia remains a key growth market for KBC and saw sustained performance
throughout the period. Significant projects covering the full range of KBC
services were started in Japan, Korea, China, India and Taiwan. In order to
service this region better, sales and marketing efforts for Asia are now driven
from our Singapore and Japanese offices.
Throughout the year we have been reinforcing our sales efforts through the
consultant/client relationship. This system of account management is key to
establishing recurring, rateable revenue derived from a services driven business
model, rather than KBC's traditional project approach. This transition will
continue throughout 2005.
Outlook for the future
The refining industry faces significant challenges to maintain an adequately
skilled workforce, which impacts all segments of the industry, including the
large multinational oil companies. This is driving the oil industry to continue
to re-assess its core competencies and to look for alternative ways of sourcing
the services which KBC can provide.
With many oil companies planning refinery expansions and upgrading projects to
meet more stringent fuel specifications and tighter environmental compliance,
there are significant opportunities for KBC to work with both refinery owners
and contracting companies to develop projects which both minimise risk and
provide high return on capital for refinery operators. The use of Petro-SIM as
an integral part of capital project evaluation enables KBC to play a more
substantial role in the development and execution of these projects. License
revenues from software and related services look set to increase. Provision of
related services and consultancy with the software leads to greater
stability and continuity of client relationships, further improves our ability
to maximise staff utilisation and provides a stable base of recurring revenues.
In the current market environment, and with the software difficulties behind us,
KBC is looking forward to a period of growth and increasing profitability. It
will always be the case, however, that the timing of major projects will have a
material impact on our performance. In many parts of the world forecasting the
timing of these projects may continue to be difficult.
Turning to the immediate prospects for 2005, we expect to grow our revenues in
the first half of the year such that we will return to profitability in the
second quarter and move towards a break even position overall at the operating
level for the first half year. The continuation of this growth in the second
half of the year should enable us to deliver an operating profit for the year in
line with current market expectations. We already have contracted revenues for
close to half of this target and, although sales have yet to be confirmed for
the balance, we are confident that sufficient opportunities exist in the current
climate.
- Ends -
For further information, please contact:
KBC Advanced Technologies plc www.kbcat.com
Peter Close, Chief Executive On 1 March: 020 7067 0700; thereafter: 01932 236314
Nick Stone, Finance Director
Weber Shandwick Square Mile
Mike Kirk/Rachel Taylor/Yvonne Alexander 020 7067 0700
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2004
Before
exceptional
income/
(charges) and Exceptional
goodwill Income/ Goodwill Total Total
amortisation (charges) amortisation 2004 2003
Notes #000 #000 #000 #000 #000
________________________________________________________________________________
Turnover 29,252 - - 29,252 32,274
________________________________________________________________________________
Other operating
income - 2,083 - 2,083 -
Staff costs (15,746) - - (15,746) (17,491)
Depreciation and
amortisation (806) - (491) (1,297) (1,437)
Other operating
charges (13,775) (1,111) - (14,886) (15,529)
________________________________________________________________________________
Operating loss 2 (1,075) 972 (491) (594) (2,183)
________________________________________________________________________________
Interest receivable 46 - - 46 200
________________________________________________________________________________
Loss on ordinary
activities before
taxation (1,029) 972 (491) (548) (1,983)
Taxation on
loss on
ordinary activities 3 62 (330) - (268) 499
________________________________________________________________________________
Loss on ordinary
activities after
taxation (967) 642 (491) (816) (1,484)
Dividends - equity
interests (93) (1,906)
________________________________________________________________________________
Retained loss for
the period (909) (3,390)
________________________________________________________________________________
Loss per share
(pence) - basic 4 (1.76) (3.19)
Basic (loss)/earnings
per share (pence)
before exceptional
items and goodwill
amortisation 4 (2.08) 1.37
________________________________________________________________________________
Group statement of total recognised gains and losses
for the year ended 31 December 2004
Notes 2004 2003
#000 #000
________________________________________________________________________________
Loss attributable to shareholders of the Group (816) (1,484)
Exchange difference on retranslation of net assets of
subsidiary undertakings (383) (594)
________________________________________________________________________________
Total recognised losses for the year (1,199) (2,078)
Prior year adjustment 5 1,451 -
________________
252 (2,078)
________________
The cumulative impact of implementing UITF 38 is to reduce shareholders' funds
by #685,000 as at 1 January 2003.
GROUP BALANCE SHEET
at 31 December 2004
Restated (Note 2)
2004 2003
__________________ ________________
#000 #000 #000 #000
________________________________________________________________________________
Fixed assets
Intangible assets 4,094 4,770
Tangible assets 1,809 1,999
Investments 2 302
________________________________________________________________________________
5,905 7,071
Current assets
Debtors 13,215 12,664
Investments 300 300
Cash and short term deposits 1,696 4,275
________________________________________________________________________________
15,211 17,239
Creditors: amounts falling due
within one year (4,120) (4,932)
________________________________________________________________________________
Net current assets 11,091 12,307
________________________________________________________________________________
Total assets less current liabilities 16,996 19,378
Creditors: amounts falling due after
one year - (300)
Provision for liabilities and charges (390) (1,180)
________________________________________________________________________________
16,606 17,898
________________________________________________________________________________
Capital and reserves
Called-up share capital 1,202 1,202
Share premium account 6,038 6,038
Capital redemption reserve 79 79
Merger reserve 147 147
Reserve for own shares (2,136) (2,136)
Profit and loss account 11,276 12,568
________________________________________________________________________________
Shareholders' funds: equity interests 16,606 17,898
________________________________________________________________________________
GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 2004
2004 2003
#000 #000
______________________________________________________________________________
Net cash outflow from operating activities (138) (1,571)
______________________________________________________________________________
Returns on investments and servicing of finance
Interest received 46 200
______________________________________________________________________________
Taxation (593) 769
______________________________________________________________________________
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (457) (257)
______________________________________________________________________________
Acquisitions
Payment of acquisition loan notes (300) (710)
Cash returned from deposit in respect of acquisition
loan notes 300 300
______________________________________________________________________________
Net cash outflow from acquisitions - (410)
______________________________________________________________________________
Equity dividends paid (1,395) (1,906)
______________________________________________________________________________
Management of liquid resources
Decrease in short-term deposits 2,567 2,806
______________________________________________________________________________
Increase / (decrease) in cash in the period 30 (369)
______________________________________________________________________________
Reconciliation of net cash flows to movements in net funds
Increase / (decrease) in cash in the period 30 (369)
Decrease in short-term deposits (2,567) (2,806)
______________________________________________________________________________
Change in net funds resulting from cash flow (2,537) (3,175)
Loan notes 300 710
Cash returned from deposit in respect of acquisition
loan notes (300) (300)
Translation difference (42) (173)
______________________________________________________________________________
Movement in net funds in the period (2,579) (2,938)
Net funds at start of the period 4,275 7,213
______________________________________________________________________________
Net funds at end of the period 1,696 4,275
______________________________________________________________________________
KBC Advanced Technologies plc
Notes
1 Basis of preparation
The above financial information does not constitute statutory accounts as
defined by section 240 of the Companies Act 1985. The results for the year ended
31 December 2004 and the balance sheet at that date are extracted from the
statutory accounts (on which the auditors have given an unqualified opinion)
which will be filed with the Registrar of Companies. The accounts have been
prepared in accordance with UK generally accepted accounting principles on a
basis which is consistent with those applied in previous periods. The
comparative financial information is extracted from the statutory accounts for
the year ended 31 December 2003 (on which the auditors gave an unqualified
opinion).
2 Exceptional items
Other operating income
During the year a settlement was reached in respect of the previously ongoing
arbitration process and legal proceedings initiated by the Company in the United
States. The settlement is more fully covered in the text of the press release.
KBC has received #2.1m in lieu of costs incurred in the dispute. This income
increased profit after tax by #1.4m, with a cash inflow during the year of
#1.4m.
Other operating charges
Legal costs of #1.1m (2003: #1.3m) have been incurred in respect of the now
settled arbitration process and legal proceedings initiated by the Company in
the United States. The settlement is more fully covered in the text of the press
release. These costs decreased profit after tax by #0.7m (2003: #0.9m), with a
cash outflow of #1.2m (2003: #1.1m).
3 Tax on loss on ordinary activities
The Group's effective rate of current tax is influenced by the continued
recognition of a deferred tax asset of #1.2m in respect of carry forward trading
losses within the UK subsidiary. The Directors believe that it is more likely
than not that the UK subsidiary will earn sufficient taxable profits within the
next two years to realise this deferred tax asset.
4 Loss per share
The calculation of basic loss per share is based upon a loss of #816,000 (2003:
loss of #1,484,000) and on 46,491,000 (2003: 46,491,000) Ordinary shares, being
the weighted average number of Ordinary shares in issue during the period after
excluding shares owned by the KBC Advanced Technologies plc Employee Trust.
The calculation of basic loss per share before exceptional items and goodwill
amortization is based upon earnings of #967,000 (2003: #637,000) and on
46,491,000 (2003: 46,491,000) Ordinary shares, being the weighted average number
of Ordinary shares in issue during the period after excluding shares owned by
the KBC Advanced Technologies plc Employee Trust.
5 Prior year adjustment - Accounting for ESOP trusts
UITF 38 Accounting for ESOP trusts was issued on 15 December 2003 and is
mandatory for accounting periods ending on or after 22 June 2004. The UITF 38
abstract states that until such time as the Company's own shares held by the
ESOP trust vest unconditionally in employees, the consideration paid for shares
should be deducted in arriving at shareholders' funds. The Company has adopted
this abstract as at 31 December 2004 and therefore a prior year adjustment has
been included within this financial information. Comparative amounts have been
restated accordingly.
This change in accounting policy has had the effect of reducing investments by
#685,000. There is no effect on the profit and loss account of the Company or
Group in either the current or the prior year. Retained earnings at 1 January
2003 have been increased to restate the previously recognized impairment of
#1,451,000 charged to the profit and loss account in 2002.
6 Copies of the Annual Report will be sent to shareholders. Further copies may
be obtained from the Company Secretary, KBC Advanced Technologies plc, KBC
House, 42-50 Hersham Road, Walton on Thames, Surrey, KT12 1RZ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TPMMTMMJTTMA
Kbc Adv.Tech. (LSE:KBC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kbc Adv.Tech. (LSE:KBC)
Historical Stock Chart
From Jul 2023 to Jul 2024
