RNS Number:2502A
KBC Advanced Technologies plc
23 March 2006
Embargoed until 07.00 23 March 2006
KBC Advanced Technologies plc
("KBC" or "the Group")
Preliminary results for the year ended 31 December 2005
KBC Advanced Technologies plc, provider of systems and services to optimise
refining assets, today announces its preliminary results to 31 December 2005.
12 months to 12 months to
31 December 31 December
2005 2004
Turnover #28.5m #29.3m
Trading loss (#2.0m) (#1.3m)
Loss before tax (#2.0m) (#0.3m)
Basic loss per share (4.23p) (1.12p)
Highlights
* Profitable trading in fourth quarter
* Successful acquisition of TTS which is performing well
* Board changes - Chief Executive, Peter Close, announces retirement
* Increase of over 80% in forward order book to #19m (2005: #10m)
* Total order book now #26m over four year period
* Strong first year Petro-SIM software sales of #3m
* Favourable refining market conditions
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said:
"2005 was a year of significant progress for KBC. As we go into 2006 we are
confident that the industry's strong market dynamics will provide the Group with
the opportunities to drive the business forward and continue the excellent
progress that we have made during 2005."
For further information, please contact:
KBC Advanced Technologies plc
Chris Powell-Smith, Chairman (
Peter Close, Chief Executive ( On 23 March: 020 7067 0700; thereafter: 01932 236314
Nicholas Stone, Finance Director (
Weber Shandwick Square Mile
James Chandler/Lana Pugh 020 7067 0700
Notes to Editors: KBC Advanced Technologies plc, a leading independent
consulting and process engineering group, delivers improved operating
performance to the oil refining, petrochemical, and other process industries
worldwide. KBC provides process consulting, strategic planning advice, energy
price forecasting and market analysis, economic studies, and capital project
services to help clients achieve their business objectives and improve their
competitive position. KBC analyses plant operations and management systems,
recommends changes for material and measurable improvements in profitability,
and provides implementation services and solutions to assist clients in
realising these improvements. In carrying out this work KBC makes extensive use
of Petro-SIM, its proprietary refinery-wide simulation and process modelling
technology. Formed in 1979, KBC has offices in the UK, USA, Singapore, the
Netherlands, Russia, China, and Japan. For more information, visit www.kbcat.com
.
KBC Advanced Technologies plc
("KBC" or "the Group")
Preliminary results for the year ended 31 December 2005
CHAIRMAN'S STATEMENT
2005 was a year of significant progress for KBC. Following the resolution of the
software litigation and the launch of our new service offerings and software
products in 2004, the next key step in the recovery process was to build the
sales pipeline and forward order book.
We have firmly taken this step, and I am very pleased to report that sales
awards have increased by more than 90% compared to 2004. As a result KBC has
ended the year with a confirmed forward order book of #18.6m (2004: #10.3m), an
increase of more than 80%. As expected, KBC is reporting an overall loss for the
full year but it is very encouraging that profitable trading was achieved in the
last quarter of 2005, providing a sound platform for the ultimate goal of
sustained profitable trading.
The economic environment for our customers is currently strong, with continuing
increased demand for oil products leading to high refining margins throughout
the world. It is expected that these conditions will continue in the medium term
whilst new refining capacity is developed, providing an additional window of
opportunity for KBC. Although the refining sector is traditionally cautious in
committing to new capital investment, in 2005 there were numerous feasibility
studies, for both new refineries and for increased capacity at existing sites.
As we go into 2006 this planned expenditure, and the continued focus on running
refineries efficiently and safely, will provide the Group with the opportunities
to drive the business forward and continue the excellent progress we have made
during 2005.
Results
Revenue in 2005 was down year on year by 3% from #29.3m to #28.5m. As indicated
in our half year results announcement in September, there was a trading loss of
#2.0m, which compares with a trading loss of #1.3m in 2004 prior to exceptional
operating income and charges. The first half year delivered revenues of #13.6m
with a stronger performance in the second half year when revenues increased by
9% to #14.9m. This enabled the Group to return to profitability in the last
quarter and reduce the loss from #1.7m in the first half year to #0.3m in the
second half. Sterling/US dollar exchange rate movements have not had a material
impact on the results.
After net interest the Group realised a loss before tax of #2.0m (2004: #0.3m).
Basic loss per share was 4.23p (2004: 1.12p). We stated in our 2004 annual
report that we would in future be linking dividend payments more closely to the
underlying earnings of the business. In the light of the financial performance
of the Group over the period, and a desire to focus funds on growing the
business, the Board is not proposing a dividend for 2005. Given our move into
profitability, the Board is looking forward to resuming a progressive dividend
policy and the resumption of dividend payments at the appropriate point in the
expected recovery in earnings and cash resources.
Acquisition of TTS
In January 2006 we announced the acquisition of TTS for an aggregate
consideration of #3.4m. Funding for the initial consideration was provided
through the placing of 2,403,320 new ordinary shares in KBC with institutional
investors and the issue of a further 1,121,849 new ordinary shares to the
vendors.
TTS is a private company operating in process industry management consulting,
training, and organisational development. Whilst clearly there is no
contribution from TTS to the 2005 results, this acquisition has added a further
#8.8m to the Group's order book, spread over four years, making a total for the
combined Group of #25.9m at the end of February 2006.
The acquisition will substantially expand KBC's range of services. Human
performance is often a limiting factor in process plant optimisation and our
combined offering will provide the services to meet the needs of the process
industries. We are delighted with the rapid progress made in integrating TTS,
which is performing in line with our expectations, and KBC is already engaged in
three refinery projects with TTS.
This acquisition marks an important step in a strategy to increase the breadth
and depth of services that KBC is able to provide. This will allow a
strengthening of relationships with our customers and an increase in scale of
operations that will take advantage of our global industry presence. A number of
opportunities have been identified to continue this process and work continues
to assess their suitability.
Board changes
Having helped to guide the business through its recovery programme, Peter Close
feels that it is the right time for him to announce his retirement which will be
effective from 30 September 2006. Peter, who is 60, was a founder of KBC and
rejoined the Board in September 2003 for a period of up to three years to help
to reshape the business. As the preliminary results for 2005 demonstrate,
significant progress has been made in rebuilding the business and Peter has
played a material part in this together with George Bright, Nick Stone and other
senior managers. The Board would like to thank Peter for his input over the last
three years.
We have a strong and committed team to take the business forward and the Board
is actively reviewing all options in appointing a replacement for Peter. An
announcement will be made in due course. In the meantime the team will continue
to push forward actively with our growth plans to build on the turnaround
achieved in 2005.
Move to AIM
It is our intention to continue with an acquisition program to build KBC into a
stronger and more robust business and included within our AGM resolutions will
be a proposal to move onto AIM (the Alternative Investment Market of the London
Stock Exchange). This is a step that we are recommending to shareholders in
order to better facilitate our intended acquisition program as a result of the
simpler administrative requirements and more flexible regulatory regime of AIM.
In essence, it is a growth market suitable for our current ambitions and the
Board is confident that it will help us achieve our strategic goals without
compromising the standards of reporting and governance that we have always
maintained. Subject to approval by shareholders, the move to AIM will become
effective shortly after the AGM.
Outlook
Given the favourable market in which we operate and our ability to deliver world
class consultancy, technology and advice, we remain confident of the Group's
prospects for 2006 and our ability to build upon the profitability achieved in
the last quarter of 2005. We will continue to focus our activities on capital
project support, operational excellence, and investment planning, building on
KBC's high reputation within the oil refining industry, and capitalising on our
global reach. As part of the drive for growth, the Group will continue to look
at value-enhancing acquisition opportunities.
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Market outlook
In 2005 the demand for refined oil products led global refinery utilisation to
an unprecedented 90% of capacity. With a typical annual downtime of 4% for
statutory maintenance shutdowns, there is essentially no margin for unforeseen
production stoppages. As a result, refiners have shifted their priority to
improving plant reliability and availability as part of their efforts to
increase refining capacity. After a slow start most oil companies are now making
plans to respond to the universally recognised shortage of refining capacity,
with regular announcements of new projects to increase crude capacity coming
almost daily.
Both refining margins and the price differential between sweet (low sulphur) and
sour (high sulphur) crudes are at unprecedented levels. The cheaper sour crudes
are harder to process, but tend to make up the majority of new marginal crude
production capacity. This leads to a strong drive to increase upgrading capacity
to process sour crudes and take advantage of the increased margins available.
Most of the refined product demand growth comes from China and India, where
growth rates are very high, albeit from a low base, together with the US, which
has a lower rate of increase but from a substantially higher base. Consensus
estimates indicate that total oil demand will grow from 83m bpd currently to 91m
bpd by 2010, and to 96m bpd by 2015. New production to meet this increased
demand is generally of heavier sour crudes. Despite the increasing volumes of
condensate available as new gas fields are brought on line, the average quality
of refining feedstocks continues to deteriorate. This will be compounded in the
US by new synthetic refinery feeds from Canadian tar sands and plans for
increased production from Venezuelan and Mexican heavy hydrocarbon deposits.
Even if currently announced projects come onstream as planned, it will be 2009/
10 before the gap closes to relieve the pressure on global refining capacity.
The opportunities presented to KBC in this economic climate are many. The design
and optimisation of new sites and new capacity must maximise the ability to
process sour crudes. Energy and emission levels must be managed in an
increasingly environmentally conscious world. Maintenance schedules and planning
must be improved to minimise shut-down time. Day to day plant operations must be
conducted in a safe and well-managed manner. Crude feedstock and choice of
production scheduling must be optimised to meet the increasing product demand.
In all of these areas KBC has the experience, technology and tools to help our
clients meet these challenges and we are already working alongside major oil
corporates and refiners in advising on process optimisation solutions.
Sales and order book
2005 was characterised by a significant strengthening of contract awards and
sales versus the prior year. Total awards for 2005 were just over #32.2m versus
2004 total awards of #16.6m. The forward order book for 2006 is #18.6m versus
the 2005 order book at the same time of year of #10.3m. This puts us in a strong
position to capitalise on the very strong economic fundamentals in the
downstream oil industry. The strongest region was in Asia where our Singapore
office increased its awards total by more than 200% over the previous year.
Progress was also made in Europe where it was pleasing to see a successful
re-engagement of the major oil companies in the region. In addition, our 2006
acquisition of TTS has strengthened our forward order book to #25.9m, adding
both additional backlog and, importantly, longer term visibility.
Consulting activities
The most significant award in 2005 was the refinery Profit Improvement Program
with Sinopec in China. This prestigious US$11m contract is due to run for 36
months. We have also announced a further Sinopec contract for the provision of
KBC's "deep cut" vacuum distillation technology and a new technical service
support contract for Nerefco (Europoort) to provide consulting in technical
operations reliability and maintenance functions, as well as an operational
excellence program at Sasol Synfuels (South Africa) where we are providing best
practice in production planning and scheduling.
With the refining industry enjoying a period of unprecedented margins, a growing
backlog of project orientated work is being established. In particular,
engineering consulting in new refinery projects and acquisition of existing
plants is now a significant part of our core engineering workload. At the end of
2005 KBC was involved in such studies on every continent, and we anticipate that
this source of revenue will continue into the foreseeable future. In order to
ensure that KBC is correctly positioned in the market, we have entered into a
non-exclusive alliance with AMEC Group Ltd ("AMEC"), with whom we won an
engineering consultancy project to redesign and upgrade Belgium Refining
Company's crude oil vacuum unit. The relationship with AMEC has allowed us to
provide a "one-stop shop" approach to the design and engineering phase of large
refinery projects.
With high oil prices, conservation of energy has become a major performance
issue for most refiners. This is exacerbated by the requirements of the Kyoto
Protocol to reduce emissions. In both of these areas clients can call on the
capabilities of Linnhoff March, which was acquired by KBC in 2002. During 2005
we conducted strategic energy reviews in North America, China, and Western
Europe which helped clients to develop long range energy management and
emissions strategies for their manufacturing processes and future capital
projects.
Software services
During 2005 licenses for KBC's proprietary Petro-SIM and SIM models were awarded
at Cosmo Oil's four refineries, Sinopec Corporation's Yansan and Zhenhai
refineries, OMV, MOL and Tamoil. At year end 23 refineries had licensed
Petro-SIM and the total value of sales had reached #3.1m. This was the first
year of sales for Petro-SIM and we are delighted to have met our revenue targets
and sales performance expectations from a standing start. We are confident that
this strong momentum will continue.
Petro-SIM enables refineries and petrochemical plants to analyse the performance
of each of their process units in order to model the entire site. This enables
changes in unit operating conditions to be evaluated and implemented so as to
improve the profit of the site as a whole. An example of the use of Petro-SIM is
KBC's engagement throughout 2005 with SK Corporation, the South Korean
integrated oil refining and petrochemical company with one of the largest oil
refineries in the world. In addition to purchasing a site-wide license for
Petro-SIM, SK also employed our consulting services to train them in its use, to
help them understand and interpret their plant results, and to advise them on
opportunities to improve operating profitability.
Strategic commercial services
KBC has established itself as a provider of strategic commercial services,
providing market and engineering expertise to both the purchasers and sellers of
refining assets, and to advisers in the investment community handling these
transactions. Increased exposure to the financial community from assignments in
this area is a growing source of business for KBC. A significant factor in our
ability to attract and successfully deliver on these assignments is the
contribution by our Petroleum Economics market analysis and price forecasting
division, PEL. PEL's reputation and quality of service has been a key factor in
winning these engagements and securing repeat business, adding to its provision
of continuing services to our global retainer client base. In March 2006 we were
awarded a prestigious contract by the Inter-American Development Bank to study
the integration and expansion of refining capacity in Latin America. The
contract is worth more than US$1m and is to be executed during the first half of
2006. We see significant opportunity for growth in this aspect of our consulting
work in 2006.
International Financial Reporting Standards ("IFRS")
This is the first set of full year results to be reported under IFRS and
therefore all figures are stated according to its principles. This involved a
restatement of the 2004 comparatives, and reconciliation to UK GAAP. This was
published on our website (www.kbcat.com) in September 2005 at the time of the
publication of our 2005 half-year results, together with the accounting policies
that have been adopted by KBC as a result of this change and an explanation of
the changes that were required. This information will be published again as part
of the full year annual report
Group income statement
Year ended 31 December 2005
Notes Total Total
2005 2004
#000 #000
Revenue 2 28,493 29,252
Direct costs (5,272) (5,306)
Staff & associate costs (18,326) (18,157)
Depreciation and amortisation (738) (806)
Other operating charges (6,194) (6,256)
-----------------------
Trading loss (2,037) (1,273)
Software litigation costs - (1,111)
Software litigation proceeds - 2,083
-----------------------
Operating loss (2,037) (301)
Finance revenue 32 46
Finance cost (29) -
-----------------------
Loss before tax (2,034) (255)
Tax expense 3 (15) (268)
-----------------------
Loss for the year (2,049) (523)
-----------------------
-----------------------
Attributable to equity holders of the parent (2,049) (523)
=======================
Loss per share (total and continuing)
Basic and diluted (4.23)p (1.12)p
Group balance sheet
At 31 December 2005
2005 2004
#000 #000
Non-current assets
Property, plant and equipment 1,591 1,809
Goodwill 3,952 3,952
Intangible assets - intellectual property rights 417 633
Investments - 2
Deferred tax asset 1,947 1,623
-----------------------
7,907 8,019
-----------------------
Current assets
Trade and other receivables 10,657 11,263
Income tax asset 149 271
Cash and short term deposits 1,802 1,696
Other financial assets - 402
-----------------------
12,608 13,632
-----------------------
Total assets 20,515 21,651
=======================
Non-current liabilities
Provisions (113) (137)
Deferred tax liabilities (59) (208)
-----------------------
(172) (345)
Current liabilities
Trade and other payables (3,951) (3,725)
Income tax payable (84) (444)
Provisions (24) (45)
Other financial liabilities (51) -
-----------------------
(4,110) (4,214)
-----------------------
Total liabilities (4,282) (4,559)
-----------------------
Net assets 16,233 17,092
=======================
Equity attributable to equity holders of parent
Issued capital 1,262 1,202
Share premium 6,740 6,038
Other reserves 202 202
Own shares (2,136) (2,136)
Retained earnings 10,165 11,786
-----------------------
Total equity 16,233 17,092
-----------------------
Total equity and liabilities 20,515 21,651
=======================
Group cash flow statement
Year ended 31 December 2005
2005 2004
#000 #000
Net cash flow from operating activities
Operating loss before tax and financing (2,037) (301)
Depreciation and amortisation 738 806
Share based payment expense 144 50
Movement in working capital
Trade and other receivables 606 (156)
Trade and other payables 481 (120)
Exchange differences 229 (316)
Financial assets and liabilities 153 (102)
-----------------------
Cash generated from operations 314 (139)
Finance revenue 32 46
Finance costs (29) -
Income taxes paid (726) (592)
-----------------------
Net cash flow from operating activities (409) (685)
-----------------------
Cash flow from investing activities
Capital expenditure (270) (457)
Repayment of deposits 300 300
-----------------------
Net cash flow from investing activities 30 (157)
-----------------------
Cash flow from financing activities
Dividends paid to equity holders of parent - (1,395)
Payment of loan notes (300) (300)
Issue of shares 762 -
-----------------------
Net cash flow used in financing activities 462 (1,695)
-----------------------
Net increase/(decrease) in cash and cash equivalents 83 (2,537)
Cash and cash equivalents at 1 January 1,696 4,275
Exchange adjustments 23 (42)
-----------------------
Cash and cash equivalents at 31 December 1,802 1,696
=======================
Group statement of changes in equity
Year ended 31 December 2005
2005 2004
#000 #000
Opening equity at 1 January 17,092 19,343
Attributable loss for the period (2,049) (523)
Foreign currency translation 284 (383)
Share based expense recognised in the income statement 144 50
Issue of share capital 762 -
Equity dividends paid - (1,395)
-----------------------
Closing equity 16,233 17,092
=======================
Notes to the financial information
1 Basis of preparation
The above financial information does not constitute statutory financial
statements as defined by section 240 of the Companies Act 1985. The results for
the year ended 31 December 2005 and the balance sheet at that date are extracted
from the statutory financial statements (on which the auditors have given an
unqualified opinion) which will be filed with the Registrar of Companies. The
comparative financial information is extracted from the statutory accounts for
the year ended 31 December 2004 (on which the auditors gave an unqualified
opinion).
This is the first year in which the group has prepared its financial statements
under IFRSs and the comparatives have been restated from UK Generally Accepted
Accounting Practice (UK GAAP) to comply with IFRSs. The reconciliations to IFRSs
from the previously published UK GAAP financial statements were published with
the Groups' 2005 interim announcement and are available on the KBC website
(www.kbcat.com).
The financial statements are prepared under the historical cost convention,
except for certain financial instruments which are measured at fair value.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
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 the Directors' best knowledge of current events and
actions, actual results ultimately may differ from those estimates.
2 Segmental information
The primary segment reporting format is determined to be business segments as
the Group's risks and rates of return are affected predominantly by differences
in the products and services provided. Secondary segment information is reported
geographically by client location. The operating businesses are organised and
managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets.
The consultancy segment delivers improved operational efficiency and financial
performance through consulting services to owners and operators of oil
refineries and process industries worldwide.
The software segment produces and maintains process modelling and refinery wide
simulation technology to the oil industry.
Primary Segment is strategic business unit.
2005 Consultancy Software Unallocated Group
Income statement #000 #000 #000 #000
External sales 23,479 5,014 - 28,493
Depreciation and amortisation (200) (538) (738)
Sales and marketing (3,454) (3,454)
Facilities and communications (2,961) (2,961)
Management and support services (3,085) (3,085)
Trading (loss)/profit (segment result) 5,971 2,030 (10,038) (2,037)
Finance revenue 32 32
Finance cost (29) (29)
-------
Loss before tax (2,034)
Tax expense (15) (15)
-------
Loss for the year (2,049)
-------
Balance sheet
Operating assets 417 18,147 18,564
Financial and tax assets 1,951 1,951
Operating liabilities (4,088) (4,088)
Financial and tax liabilities (194) (194)
Capital expenditure 293 293
2004 Consultancy Software Unallocated Group
Income statement #000 #000 #000 #000
External sales 25,018 4,234 - 29,252
Depreciation and amortisation (200) (606) (806)
Sales and marketing (3,264) (3,264)
Facilities and communications (2,880) (2,880)
Management and support services (2,764) (2,764)
Trading (loss)/profit (segment result) 6,316 1,925 (9,514) (1,273)
Software litigation costs (1,111) (1,111)
Software litigation proceeds 2,083 2,083
-------
Operating loss (301)
Finance revenue 46 46
-------
Loss before tax (255)
Tax expense (268)
-------
Loss for the year (523)
-------
Balance sheet
Operating assets 633 18,649 19,282
Financial and tax assets 2,369 2,369
Operating liabilities (3,907) (3,907)
Financial and tax liabilities (652) (652)
Capital expenditure 466 466
Secondary segment Income Statement is geographical area by client location.
Europe, Africa Americas Asia Group
& Middle East
#000 #000 #000 #000
2005
External sales 10,475 8,273 9,745 28,493
2004
External sales 9,981 10,529 8,742 29,252
3 Taxation
Tax on profit charged in the Income Statement
2005 2005 2005
#000 #000 #000
UK Foreign Total
Current income tax
Current income tax charge - 767 767
Adjustment in respect of prior periods - (284) (284)
Double taxation relief on tax on income for the year - - -
Double taxation relief in respect of prior periods - - -
--------------------------------
Total Group current tax - 483 483
--------------------------------
Deferred income tax
Origination and reversal of other temporary differences - (164) (164)
Unrelieved tax losses carried forward against profits
of future years (193) - (193)
Asset amortisation temporary differences (93) (18) (111)
--------------------------------
Total Group deferred tax (286) (182) (468)
--------------------------------
--------------------------------
Income tax expense reported in Group income statement (286) 301 15
--------------------------------
2004 2004 2004
#000 #000 #000
UK Foreign Total
Current income tax
Current income tax charge - 1,223 1,223
Adjustment in respect of prior periods - (155) (155)
Double taxation relief on tax on income for the year (43) - (43)
Double taxation relief in respect of prior periods 15 - 15
--------------------------------
Total Group current tax (28) 1,068 1,040
--------------------------------
Deferred income tax
Origination and reversal of other temporary differences - (506) (506)
Unrelieved tax losses carried forward against profits
of future years (135) - (135)
Asset amortisation temporary differences (111) (20) (131)
--------------------------------
Total Group deferred tax (246) (526) (772)
--------------------------------
--------------------------------
Income tax expense reported in Group income statement (274) 542 268
--------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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