RNS Number:6019R
KBC Advanced Technologies plc
22 September 2005
Thursday 22 September 2005
KBC Advanced Technologies plc
("KBC")
INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2005 DEMONSTRATE CONTINUED
IMPROVEMENT IN UNDERLYING BUSINESS PERFORMANCE
KBC Advanced Technologies plc, a leading consultant to the oil industry,
announces its results for the six months ended 30 June 2005.
Financial Summary
*Six months *Six months
ended ended
30 June 2005 30 June 2004
Revenue #13.6 million #15.9 million
Trading (loss)/profit (#1.7 million) #0.3 million
Loss before tax (#1.7 million) (#0.1 million)
Basic loss per share (3.67p) (0.15p)
* Reported for the first time under IFRS
Highlights
* Strong committed order book over 20% ahead of previous year-end
* Several large contracts under final negotiation
* Excellent growth in Asia with first half sales equal to 2004 full year sales
* New refinery-wide simulation software Petro-SIM(TM) delivering good initial
sales
* Increase in energy conservation projects
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said:
"Significant progress has been made over the last six months. Although in some
cases the timing of sales awards has shifted to the second half, our committed
order book has grown strongly in the period. Asia offers several major
opportunities at the moment and the operations there have produced our strongest
performance ever in this region. We expect the trend in the order book to
continue in the second half and remain confident of a return to trading
profitability by the end of the year."
- Ends-
For further information, please contact:
KBC Advanced Technologies plc www.kbcat.com
---------------
Peter Close, Chief Executive ) On 22 September: 020 7067 0700
Nicholas Stone, Finance Director ) Thereafter: 01932 236314
Weber Shandwick Square Mile 020 7067 0700
James Chandler
Rachel Taylor
Yvonne Alexander
A briefing for analysts will be held at 0915 for 0930 today at the offices of
Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS
Notes to Editors: KBC Advanced Technologies plc, a leading independent process
engineering consultancy, delivers improved profitability through consulting
services and practical solutions to owners and operators in the oil refining,
petrochemical and other process industries worldwide. KBC provides process
consulting, strategic planning advice, petroleum and chemical price forecasting,
economic studies and capital project reviews to help clients find the most
cost-effective way to achieve their short- and long-term objectives. KBC
analyses plant operations and management systems, recommends changes for
material and measurable improvements in profitability, and provides
implementation services to assist clients in realising these improvements. In
carrying out this work, KBC makes extensive use of its proprietary refinery-wide
simulation and process modelling technology. Formed in 1979, KBC has principal
offices in the UK, USA, Singapore, Japan, Russia and the Netherlands. For more
information, visit www.kbcat.com
KBC Advanced Technologies plc
("KBC" or the "Group")
INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2005 DEMONSTRATE CONTINUED
IMPROVEMENT IN UNDERLYING BUSINESS PERFORMANCE
Chairman's statement
During the first half of 2005 there have been encouraging improvements in sales
awards and strong growth in the sales pipeline. The committed order book is now
more than 20% ahead of the comparable position at the end of 2004. There has
been strong growth in Asia, with sales awards in that region during the first
half being almost the same as in the whole of 2004. There has also been good
progress in the sales of Petro-SIM(TM), KBC's refinery-wide simulation software,
which has delivered sales awards totalling #2.3 million to date since its launch
at the end of last year. Our energy conservation services activities have also
increased and are performing well.
As a result of the positive background in the oil and gas industry, KBC is
seeing a change in the mix of its clients' priorities towards longer-term
investment opportunities. We are rebalancing our service portfolio to ensure
that we can maximise the opportunity that this substantial new market provides.
Whilst there has been a reduction in the demand for non-investment profit
improvement services, we have still been able to deliver quarter on quarter
revenue growth in the first half, with revenues ahead of the second half of
2004.
Despite the real improvement we have seen, financial performance within any
period is sensitive to the timing of sales awards and as a consequence a trading
loss of #1.7m was recorded in the first half. During the third quarter we have
made progress on significant new contract opportunities and we expect continued
improvement during the second half resulting in trading profitability in the
fourth quarter, an improved overall operating performance for the second half
and a return to profitability in 2006. The market prospects remain strong and
the Board continues to explore opportunities to ensure that KBC is positioned to
exploit them.
Operational review
During the period the value of contract awards has been evenly balanced between
our three geographic regions, the Americas, Asia and Europe/Middle East/Africa,
representing a significant growth in Asia in line with the strong economic
indicators in that area. First half awards for the Asia region almost matched
full year 2004 performance in that region, and the sales pipeline is up by more
than 60% on the same period in 2004. To meet this demand, operational resources
have been strengthened in our Singapore office and we anticipate that this trend
will continue.
As we reported in our trading statement on 30 June 2005, we have seen an
increase in energy conservation driven projects during this period, with
engagements with bp and Chevron in the US, and Total and two other major
refiners in Europe. Refiners in the developing world are now also starting to
focus on energy conservation. With crude prices in excess of US$60 per barrel,
we believe that this will remain a priority with many companies for the
foreseeable future.
Sales of Petro-SIM, KBC's refinery-wide simulation software, have a long lead
time and as a result it was six months after its launch before we recorded our
first awards. However, they have picked up strongly since the first quarter of
the year. During the second quarter several clients licensed Petro-SIM,
including OMV, MOL and Tamoil. This has continued into the third quarter, with
further sales in Europe and two large contracts with Fuji Oil Company in Japan
and SK Corporation in Korea. Revenue from Petro-SIM is expected to be around
#850k in 2005. Interest in the product continues to grow and there is a strong
sales pipeline with several other clients at an advanced stage of evaluation and
contract negotiation.
The contribution, before overhead, from the work we have won remains healthy,
albeit on a lower volume of work than in previous years. The global industry
that KBC serves requires a significant level of overhead and sales costs that
lead to high operational gearing at KBC. The Board is focused on building scale
both to fill gaps in the range of services required by our clients and to ensure
a return to sustainable profitability.
Consolidation within the oil industry is continuing and refiners are facing many
new challenges over safety, reliability, crude quality and capacity constraints.
We believe that there will be an increase in demand for assistance to address
these challenges. With its broad range of products and services, and global
reach, KBC is well positioned to meet this demand. We have identified several
prospects for growth which will enhance our ability to build and sustain
relationships with clients, and improve our operating gearing. The Board regards
the progression of these opportunities as a matter of priority.
Results
Revenue of #13.6m in the first half of 2005 shows an increase compared to 2004
second half revenue of #13.3m. Encouragingly, revenue during the second
quarter of 2005 showed an increase of 16% over the first quarter. Although,
compared to the prior year period, revenue decreased in the first half of 2005
by around 14% from #15.9m, there is no seasonality in this business, making the
second half of 2005 a more informed comparative. Operating costs before
exceptional items decreased by 2%, despite the increase in staff costs relating
to the recruitment of the Petro-SIM development team in the autumn of 2004. This
resulted in a trading loss for the first half of 2005 of #1.7m compared with a
profit during the same period in 2004 of #0.3m before exceptional charges.
There were no operating exceptional charges in this period although the
comparative figures for 2004 contain a charge of #0.5m relating to the costs of
the legal proceedings with AEA Technology PLC and Aspen Technology Inc which
were settled in October 2004. Net funds were #2.0m at 30 June 2005, an increase
of #0.3m during the period. This was the result of a strong working capital
improvement, collection of the final settlement instalment from Aspen Technology
Inc and the share placing that was concluded in April 2005.
International Financial Reporting Standards ("IFRS")
This is the first set of results to be reported under IFRS and therefore all
figures are stated according to its principles. This involves a restatement of
the 2004 comparatives, and reconciliation to UK GAAP for both periods is
included within the notes. Also published today on our website (www.kbcat.com)
is a restatement of the results for the year ended 31 December 2004 under IFRS,
the accounting policies that have been adopted by KBC as a result of this change
and an explanation of the changes that were required. Details of how to obtain
copies of this restatement are also included in the notes to this statement.
Dividend
In line with the dividend policy indicated in the 2003 Annual Report, dividend
payments are now related more closely to the underlying earnings of the
business. Whilst the outlook for the business is positive, the Board has
decided that it would not be appropriate to pay an interim dividend this year.
Outlook
It is very encouraging that sales awards totalled close to #15.0m during the
first half of 2005, representing a doubling of the total achieved in the second
half of 2004. This led to growth in the committed order book of more than 20% at
the end of the first half year.
In our trading statement of 30 June 2005 we referred to the timing of certain
sales awards being crucial to delivering the expected profit for the second half
of the year. We still expect to see good progress during the remainder of the
year, with second half revenues expected to be around 10% ahead of that
delivered in the first half and a substantial improvement in profitability.
Notwithstanding the expected growth in revenues and sales awards, it is now
clear that delays to some contracts mean that the revenue to be recognised this
year is less than previously anticipated. Therefore, it is expected that the
result for the second half of 2005 will be significantly better than the first
half, leading to an operating loss for the year as a whole of around #2.0m.
Sales prospects have also grown during the period and the trend of an increasing
order book and revenue is expected to continue during the second half of 2005.
Several large contracts are under negotiation including a large multi-year
Profit Improvement Program(TM) at two sites in Asia which incorporates our largest
Petro-SIM sale to date. Technical and commercial terms have been agreed and work
has commenced in anticipation of imminent contract execution. We therefore
anticipate closing the year with an order book around twice the size of that at
the beginning of the year and as a consequence we are confident of a return to
profitability in 2006.
Unaudited Group income statement
for the six months ended 30 June 2005
2005 2004
#000 #000
Revenue 13,601 15,907
Direct costs (2,555) (2,639)
Staff & associate costs (9,302) (9,326)
Other operating charges (3,417) (3,621)
--------- ---------
Trading (loss)/profit (1,673) 321
Software litigation costs - (496)
--------- ---------
Loss before tax and financing (1,673) (175)
Interest receivable 20 26
Interest payable (32) -
--------- ---------
Loss before tax (1,685) (149)
Taxation (77) 79
--------- ---------
Attributable loss (1,762) (70)
========= =========
Attributable to shareholders of the parent (1,762) (70)
========= =========
Loss per share
Basic (3.67)p (0.15)p
Diluted (3.67)p (0.15)p
Unaudited Group balance sheet
At 30 June 2005
2005 2004
#000 #000
Assets
Non-current assets
Property, plant and equipment 1,696 1,910
Goodwill 3,951 3,951
Intellectual property rights 635 735
Investments 2 2
Deferred tax asset 1,411 1,389
--------- ---------
7,695 7,987
Current assets
Trade and other receivables 10,581 11,717
Investments - 300
Income tax asset 459 567
Cash and bank 1,986 3,454
--------- ---------
13,026 16,038
--------- ---------
Total assets 20,721 24,025
========= =========
Liabilities
Non-current liabilities
Provisions due after one year - (343)
Deferred tax liabilities - (744)
--------- ---------
- (1,087)
--------- ---------
Current liabilities
Trade and other payables (4,182) (4,999)
Provisions due within one year (161) (45)
--------- ---------
(4,343) (5,044)
--------- ---------
Total liabilities (4,343) (6,131)
--------- ---------
--------- ---------
Net assets 16,378 17,894
========= =========
Equity
Called up share capital (1,262) (1,202)
Share premium account (6,741) (6,038)
Other reserves (209) (180)
Own shares 2,136 2,136
Profit and loss account (10,302) (12,610)
--------- ---------
Total equity (16,378) (17,894)
========= =========
Unaudited Group statement of changes in equity
for the six months ended 30 June 2005
2005 2004
#000 #000
Restated opening equity as at 1 January 17,092 19,343
Attributable loss for the period (1,762) (70)
Exchange adjustments 193 (102)
Share based expense recognised in the income statement 92 25
Dividends paid - (1,302)
Issue of shares 763 -
--------- ---------
Closing equity 16,378 17,894
========= =========
Unaudited Group cash flow statement
for the six months ended 30 June 2005
2005 2004
#000 #000
Cash flows from operating activities
Loss before tax and financing (1,673) (175)
Depreciation and amortisation 269 425
Share based payment expense 92 25
Movement in working capital 1,689 686
--------- ---------
Cash generated from operations 377 961
Interest received 20 26
Interest paid (32) -
Income taxes paid (705) (214)
--------- ---------
Net cash flows from operating activities (340) 773
--------- ---------
Cash flows from investing activities
Capital expenditure (137) (259)
Movement in short term investments 300 300
--------- ---------
Net cash flows from investing activities 163 41
--------- ---------
Cash flows from financing activities
Dividends paid - (1,302)
Issue of shares 763 -
Payment of loan notes (300) (300)
--------- ---------
Net cash flows from financing activities 463 (1,602)
--------- ---------
Net increase/(decrease) in cash and cash equivalents 286 (788)
Cash and cash equivalents at beginning of period 1,696 4,275
Exchange adjustments 4 (33)
--------- ---------
Cash and cash equivalents at end of period 1,986 3,454
========= =========
Notes to the 2005 half year results
1 Basis of preparation
KBC Advanced Technologies plc (the "Group") has previously prepared its primary
nancial statements under UK generally accepted accounting principles ("UK
GAAP"). From 2005 the Group is required to prepare its consolidated nancial
statements in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU"). For the purposes of this
document the term IFRS includes International Accounting Standards.
The results for the six months to 30 June 2005 represent the first interim
nancial statements the Group has prepared in accordance with its accounting
policies under IFRS. The rst annual report under IFRS will be for the year ended
31 December 2005. A description of how the Group's reported performance and
nancial position are affected by this change, including reconciliations from UK
GAAP to IFRS for prior year results and the revised summary of signicant
accounting policies under IFRS, is published in the Investor Relations section
of the corporate website at www.kbcat.com. Copies of the IFRS Restatement
document and further copies of this Interim report may be obtained from the
Company Secretary, KBC Advanced Technologies plc, KBC House, 42-50 Hersham Road,
Walton on Thames, Surrey, KT12 1RZ.
The Group is required to apply all relevant standards in force at the rst
reporting date: for the Group this is at 31 December 2005. As a consequence,
these results have been prepared on the basis that all IFRSs and International
Financial Reporting Interpretation Committee ("IFRIC") interpretations, will be
adopted by the EU. The failure of the EU to adopt these amended standards in
time for full year nancial reporting in 2005, the issue of further
interpretations by IFRIC in advance of the reporting date, or the development of
other accepted practice, could result in the need to change the basis of
accounting or presentation of certain nancial information from that presented in
this document.
Appendix A reconciles attributable prot for the six month period to 30 June
2004, as previously reported under UK GAAP to IFRS. Appendix B reconciles the
balance sheet and equity as at 30 June 2004 as previously reported under UK GAAP
to IFRS.
The nancial information contained in this document does not constitute statutory
accounts as dened in section 240 of the Companies Act 1985. The auditors have
issued an unqualied opinion on the Group's statutory nancial statements under UK
GAAP for the year ended 31 December 2004, which have been led with the Registrar
of Companies.
2 Reconciliation to UK GAAP
The main items impacting this result when compared to UK GAAP are as follows:
Trading loss Loss before tax
#000 #000
Reported under IFRS (1,673) (1,685)
Employee benefits 83 83
Unrealised foreign currency gains and losses 58 58
Goodwill amortization - (245)
_____ _____
Reported under UK GAAP (1,532) (1,789)
Trading loss is reported before items identified by the Directors as being of
both a material and non-recurring nature.
3 Loss per share
The calculation of loss per share is based upon a loss of #1,762,000 (2004:
restated loss of #70,000) and on 48,053,725 (2004: 46,490,913) 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.
APPENDIX A - Reconciliation of attributable profit
For the six months ended 30 June 2004
As reported Reported
under UK under
GAAP* Accounting policy changes under IFRS IFRS
Foreign Share Intangible
currency Employee based asset
exchange benefits payments amortisation
#000 #000 #000 #000 #000 #000
Revenue 15,907 - - - - 15,907
Direct costs (2,639) - - - - (2,639)
Staff & associate
costs (9,221) - (80) (25) - (9,326)
Other operating
charges (3,560) (61) - - - (3,621)
--------------------------------------------------------------------------
Trading (loss)/
profit 487 (61) (80) (25) - 321
Software
litigation (496) - - - - (496)
Amortisation of
acquisition
intangibles (245) - - - 245 -
--------------------------------------------------------------------------
(Loss)/ profit
before tax and
financing (254) (61) (80) (25) 245 (175)
Interest receivable 26 - - - - 26
(Loss)/ profit
before tax (228) (61) (80) (25) 245 (149)
Taxation 79 - - - - 79
--------------------------------------------------------------------------
Attributable (loss)
/ profit (149) (61) (80) (25) 245 (70)
--------------------------------------------------------------------------
* The order and description of items presented as "reported under UK GAAP" has
been adjusted to ease the direct comparison with IFRS presentation
APPENDIX B - Reconciliation of balance sheet and equity as at 30 June 2004
As reported Reported
under UK under
GAAP* Accounting policy changes under IFRS IFRS
Foreign Share Intangible
currency Employee based asset Dividend
exchange benefits payments amortisation accrual
#000 #000 #000 #000 #000 #000 #000
Assets
Non-current assets
Property, plant
and equipment 1,910 - - - - - 1,910
Goodwill 3,706 - - - 245 - 3,951
Intellectual
property rights 735 - - - - - 735
Investments 2 - - - - - 2
Deferred tax asset 1,389 - - - - - 1,389
--------------------------------------------------------------------------------
7,742 - - - 245 - 7,987
Current assets
Trade and other
receivables 11,666 51 - - - - 11,717
Investments 300 - - - - - 300
Income tax asset 567 - - - - - 567
Cash and bank 3,454 - - - - - 3,454
--------------------------------------------------------------------------------
15,987 51 - - - - 16,038
--------------------------------------------------------------------------------
Total assets 23,729 51 - - 245 - 24,025
================================================================================
Liabilities
Non-current liabilities
Provisions due
after one year (343) - - - - - (343)
Deferred tax
liabilities (744) - - - - - (744)
--------------------------------------------------------------------------------
(1,087) - - - - - (1,087)
Current liabilities
Trade and
other payables (5,043) - (80) 31 - 93 (4,999)
Provisions due
within one year (45) - - - - - (45)
--------------------------------------------------------------------------------
(5,088) - (80) 31 - - (5,044)
--------------------------------------------------------------------------------
Total liabilities (6,175) - (80) 31 - 93 (6,131)
--------------------------------------------------------------------------------
Equity
Called up
share capital (1,202) - - - - - (1,202)
Share premium
account (6,038) - - - - - (6,038)
Other reserves (124) - - (56) - - (180)
Own shares 2,136 - - - - - 2,136
Profit and loss
account (12,326) (51) 80 25 (245) (93) (12,610)
--------------------------------------------------------------------------------
Total equity (17,554) (51) 80 (31) (245) (93) (17,894)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total equity and
liabilities (23,729) (51) - - (245) - (24,025)
================================================================================
This information is provided by RNS
The company news service from the London Stock Exchange
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