RNS Number:6075I
KBC Advanced Technologies plc
07 September 2006
Embargoed until 07.00 7 September 2006
KBC Advanced Technologies plc
("KBC" or "the Group")
Interim results for the six months ended 30 June 2006
KBC Advanced Technologies plc, a leading consultant to the oil industry, today
announces its interim results to 30 June 2006.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
Revenue #17.3m #13.6m #28.5m
Profit/(loss) before tax #0.4m #(1.7)m #(2.0)m
Basic profit/(loss) per share 0.46p (3.67)p (4.23)p
Total equity #17.7m #16.4m #16.2m
Highlights
* Significant turnaround in business - return to profitability
* Revenues of #17.3m up 27% from prior year
* Strong current trading and contract awards
* Acquisition of TTS Performance Systems brings greater order visibility
* Board changes - George Bright appointed as Chief Executive and Nick
Stone became Operations and Finance Director
* Growth in revenues and earnings expected in second half
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said:
"The positive market environment, coupled with the turnaround in performance,
provides the Board with confidence in the longer term outlook for the business."
- Ends -
For further information, please contact:
KBC Advanced Technologies plc
George Bright, Chief Executive On 7 September: 020 7067 0700
Nicholas Stone, Operations and Finance Director thereafter: 01932 236314
Weber Shandwick | Square Mile
Rachel Taylor/Lana Pugh 020 7067 0700
About KBC:
KBC Advanced Technologies plc, a leading independent consulting, process
engineering and software group, delivers improved operating performance to the
oil refining, petrochemical, and other process industries worldwide. We provide
process consulting, strategic planning advice, organisational effectiveness
services, energy price forecasting and market analysis, economic studies,
capital project services, and training to help clients achieve their business
objectives and improve their competitive position. KBC analyses plant operations
and management systems and our consultants recommend changes for material and
measurable improvements in profitability. To assist clients in realising such
improvements KBC provides implementation services and software solutions,
including the KBC Profimatics TM SIM models and Petro SIM TM software for process
optimisation, and the Linnhoff March TM energy optimisation software packages.
Formed in 1979, KBC has offices in the UK, USA, Canada, Singapore, the
Netherlands, Russia, China, and Japan. For more information, visit
www.kbcat.com.
KBC Advanced Technologies plc
("KBC" or "the Group")
Interim results for the six months ended 30 June 2006
Chairman's Statement
We are pleased to report a significant turnaround in the business in the first
half of 2006. The profit before tax of #0.4m represents a step change and is the
first reported profit since 2003. The business is performing strongly and we are
confident that this will continue into 2007.
The strong growth first seen in the fourth quarter of 2005 has been maintained,
with revenues of #17.3m in the first half of 2006 representing a 27% increase
over the prior year period, and a 16% increase over the second half of 2005.
Like for like revenues in the first half of 2006 increased by 21% over the prior
year period demonstrating strong organic growth.
The Group is seeking to increase the proportion of larger, longer-term contracts
that provide better forward visibility of revenues and profitability, although
the timing of contract awards remains a significant factor. Whilst orders signed
in the period showed a 26% reduction on the same period last year, this position
has been corrected by large contract awards in July and August 2006.
In February 2006 we completed the acquisition of TTS Performance Systems Inc
("TTS"), a consultancy based in Denver, Colorado, specialising in human
performance improvement in the process industries. The integration process is
now complete and the business is meeting our expectations. TTS works with major
oil companies in North America which value their expertise in the area of human
performance improvement, especially at a time of increasing shortage of
experienced engineering personnel.
On 26 June 2006 KBC's shares moved from the Official List of the UK Listing
Authority to AIM, the London Stock Exchange's international market for smaller
growing companies. AIM has simpler administrative requirements and a more
flexible regulatory regime which is more appropriate for KBC's intention to
increase the scale of the business both organically and through acquisitions.
Management changes
During the period we have also seen the successful transition to the new
management team under the leadership of George Bright and Nick Stone. George
Bright became Chief Executive at the time of the AGM in May 2006, having
previously been Chief Operating Officer. At the same time Nick Stone took on the
additional responsibility of Operations, becoming Operations and Finance
Director. Changes to roles below Board level have also been made to provide
additional support to the new management structure.
Peter Close, who had led the business since September 2003, announced his
planned retirement from the business at the AGM when he stepped down from the
position of Chief Executive. He will retire from the Board on 30 September 2006.
The Board would like to take this opportunity to thank Peter for his
contribution in helping to rebuild the business over the last three years.
The focus on improved profitability has started to deliver results. New
procedures have been introduced to enhance the efficiency of contract execution
and strengthen operating margins. In addition, plans are being implemented to
increase the proportion of revenues derived from software sales. An integral
part of this strategy is the establishment of a substantial installed base of
Petro-SIM TM and the SIM series refinery simulation models.
Operating review
During the first half year contract awards were evenly split across KBC's three
operating regions: Americas, Europe Middle East and Africa (EMEA), and Asia.
With our clients in the oil refining sector generating record margins, we are
developing our service and product offerings to meet the market's changing
requirements. The number of multi-year technical services agreements continues
to grow worldwide. Contract awards are increasing in project design optimisation
and in due diligence activities associated with refining asset mergers and
acquisitions. As a result our client base outside our traditional refinery
operator core is strengthening, with an increasing number of contracts being
awarded by financial services businesses.
In the Americas we executed a study on behalf of the Inter-American Development
Bank to plan the expansion of refining capacity in Central America. We expect to
continue our assistance in this project as it moves into the funding phase. In
August we won a landmark US$6.3m project for Pemex Refinacion in Mexico
involving clean fuels studies, refinery reconfiguration projects and the
licensing of Petro-SIM for five sites.
Petro-SIM, KBC's proprietary refinery-wide process simulation software, is now
established in 32 sites with sales contracts totalling #4.9m to date. In June a
simplified version of the product, Petro-SIM Express, was released to provide an
entry level platform. This has received a good market response and the first
sale has recently been confirmed in Europe. Petro-SIM Version 3 will be launched
in the third quarter of this year. This new release will contain significant
enhancements, both for our internal consulting work and to benefit licensees as
a simulation tool.
The number of capital construction projects in the industry worldwide has risen
significantly in the last two years as plans have been developed to provide the
additional refining and processing capacity needed to meet growing demand. This
has enabled KBC to broaden its reach significantly by working collaboratively
with established Engineering, Construction and Procurement (EPC) companies.
During the first half of 2006 KBC was engaged to assist in the optimisation of
both new and major revamp project designs by EPC companies, including Amec and
Fluor. This provides KBC with growing exposure to this buoyant worldwide market.
The strength of the refining industry is leading to a growing shortage of
experienced engineering personnel in North America and Europe. Whilst this
provides opportunities for KBC, it also creates pressure on our employee costs,
although the recent changes to KBC's remuneration structure have helped to
ameliorate this. With the economies of both China and India continuing to grow
rapidly, and given our expectation of continued growth in contracts in this
region, we have increased the resources in our Singapore office to manage this
expected growth in a cost effective manner. In May this year we opened an office
in Beijing to support our ongoing operations in China.
To serve its global client base effectively, KBC requires a worldwide presence
with an associated level of overhead and sales costs resulting in high
operational gearing. The half year results demonstrate the positive effect of
this gearing when additional sales are achieved with the same cost base. To
ensure a return to consistent profitability, however, the Board is focused on
increasing the scale of the business. The first steps have been taken towards
achieving this goal.
Results
Revenue of #17.3m in the first half of 2006 shows an increase of 27% over the
#13.6m in the 2005 first half year and an increase of 16% over the #14.9m in the
second half of 2005. The TTS acquisition contributed #0.9m of this first half
total. Operating costs increased by 11% year on year, mainly as a result of
subcontractor costs incurred. This resulted in a profit before tax for the first
half of 2006 of #0.4m compared with a loss during the same period in 2005 of
#1.7m.
There were no operating exceptional charges in this period. Net cash was #0.4m
at 30 June 2006, a reduction of #1.4m during the period. This was caused by
increases in the level of debtors and work in progress on the balance sheet as a
result of the increase in turnover and the milestone-driven invoicing schedule
on the Chinese projects. It should be noted that, as the proportion of software
licence sales increases, there will be an increasing impact on the level of
debtors as the licence element of revenue is recognised on successful
implementation of the software, although payment terms may be over a longer
period.
In order to fund the initial consideration for the acquisition of TTS in January
2006, 2,403,320 new ordinary shares were placed with institutional investors and
a further 1,121,849 new ordinary shares were issued to the vendors.
Dividend
After a sustained period of continuing to distribute significant dividends to
shareholders despite a deteriorating financial performance, the Board decided in
2004 that dividend payments should be related closely to the underlying earnings
of the business, with the result that dividend payments ceased in 2004. Whilst
the outlook for the business is positive, the Board does not believe that it is
appropriate to resume dividend payments at this time, so no interim dividend has
been declared.
Outlook
The level of contract awards is on a rising trend and the Board expects this to
continue. The principal markets in which KBC operates remain strong and the
opportunities for major contracts continue to be positive, as evidenced by the
recent award by Pemex of the contract for $6.3m. The bulk of this project is to
be delivered in 2006, underpinning the Board's expectations for the full year.
This positive market environment, coupled with the turnaround in performance,
provides the Board with confidence in the longer term outlook for the business.
Christopher B Powell-Smith
Unaudited Group Income Statement
for the six months ended 30 June 2006
2006 2005
#000 #000
----------- -----------
Revenue 17,288 13,601
Direct costs (3,646) (2,555)
Staff & associate costs (9,210) (9,302)
Depreciation and amortisation (367) (269)
Other operating charges (3,666) (3,148)
------------------------------ ----------- -----------
Operating profit/(loss) 399 (1,673)
Finance revenue 15 20
Finance cost (33) (32)
------------------------------ ----------- -----------
Profit/(loss) before tax 381 (1,685)
Tax expense (142) (77)
------------------------------ ----------- -----------
Profit/(loss) for the period 239 (1,762)
------------------------------ ----------- -----------
Attributable to equity holders of the parent 239 (1,762)
------------------------------ ----------- -----------
Earnings/(loss) per share
Basic 0.46p (3.67)p
Diluted 0.44p (3.67)p
------------------------------ ----------- -----------
Unaudited Group Balance Sheet
at 30 June 2006
2006 2005
#000 #000
----------- -----------
Non-current assets
Property, plant and equipment 1,466 1,696
Goodwill 6,478 3,951
Intangible assets - intellectual property rights 777 635
Investments - 2
Deferred tax asset 2,168 1,411
------------------------------ ----------- -----------
10,889 7,695
----------- -----------
Current assets
Trade and other receivables 11,926 10,581
Income tax asset 71 459
Cash and short term deposits 723 1,986
Other financial assets 47 -
------------------------------ ----------- -----------
12,767 13,026
----------- -----------
Total assets 23,656 20,721
------------------------------ ----------- -----------
Non-current liabilities
Provisions (105) -
------------------------------ ----------- -----------
(105) -
----------- -----------
Current liabilities
Trade and other payables (5,605) (4,180)
Bank overdraft (284) -
Provisions (16) (161)
Other financial liabilities - (2)
------------------------------ ----------- -----------
(5,905) (4,343)
----------- -----------
Total liabilities (6,010) (4,343)
------------------------------ ----------- -----------
Net assets 17,646 16,378
------------------------------ ----------- -----------
Equity attributable to equity holders of parent
Issued capital (1,350) (1,262)
Share premium (8,319) (6,741)
Other reserves (226) (209)
Own shares 2,136 2,136
Retained earnings (9,887) (10,302)
------------------------------ ----------- -----------
Total equity (17,646) (16,378)
------------------------------ ----------- -----------
Total equity and liabilities (23,656) (20,721)
------------------------------ ----------- -----------
Unaudited Group Cash Flow Statement
for the six months ended 30 June 2006
2006 2005
#000 #000
---------- ----------
Net cash flow from operating activities
Operating profit/(loss) before tax and financing 399 (1,673)
Depreciation and amortisation 367 269
Share based payment expense 90 92
Movements in working capital
- trade and other receivables (1,611) 1,280
- trade and other payables 22 309
- financial assets and liabilities (98) 100
------------------------------- ---------- ----------
Cash generated from operations (831) 377
Finance revenue 15 20
Finance costs (33) (32)
Income taxes paid (427) (705)
------------------------------- ---------- ----------
Net cash flow from operating activities (1,276) (340)
------------------------------- ---------- ----------
Cash flow from investing activities
Capital expenditure (83) (137)
Purchase of subsidiary undertaking including costs (1,122) -
Net funds acquired with subsidiary undertaking 5 -
Repayment of deposits - 300
------------------------------- ---------- ----------
Net cash flow from investing activities (1,200) 163
------------------------------- ---------- ----------
Cash flow from financing activities
Payment of loan notes - (300)
Issue of shares 1,126 763
------------------------------- ---------- ----------
Net cash flow used in financing activities 1,126 463
------------------------------- ---------- ----------
Net (decrease)/increase in cash and cash equivalents (1,350) 286
Cash and cash equivalents at 1 January 1,802 1,696
Exchange adjustments (13) 4
------------------------------- ---------- ----------
Cash and cash equivalents at 30 June 439 1,986
------------------------------- ---------- ----------
Unaudited Group Statement of Changes in Equity
for the six months ended 30 June 2006
2006 2005
#000 #000
---------- -----------
Opening equity at 1 January 16,233 17,092
Attributable profit/(loss) for the period 239 (1,762)
Foreign currency translation (582) 193
Share based expense recognised in the income statement 90 92
Issue of share capital 1,666 763
------------------------------- ---------- -----------
Closing equity 17,646 16,378
------------------------------- ---------- -----------
Notes
1 Basis of preparation
The Group prepares its consolidated financial statements in accordance with IFRS
as adopted by the European Union, and the statements have been prepared using
the accounting policies set out in the Group's 2005 statutory accounts. For the
purposes of this document the term IFRS includes International Accounting
Standards.
This Interim Report will be sent to shareholders and published on the Investor
Relations section of the corporate website at www.kbcat.com. 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 financial information contained in this document does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The auditors have
issued an unqualified opinion on the Group's statutory financial statements under
International GAAP for the year ended 31 December 2005, which have been filed with
the Registrar of Companies.
2 Earnings per share
The calculation of earnings per share is based upon earnings of #0.24m (2005:
loss #1.76m) and on 51,735,771 (2005: 48,053,725) 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.
3 Acquisitions
On 1 February 2006 the Company acquired the share capital of TTS Performance
Systems Inc. and its sister company, Center for Process Plant Management LLC.
The consideration was comprised of cash and shares totalling US$6m.
Intangible assets will be written off over six years. Goodwill is calculated as
follows:
$000
Consideration 6,000
Intangible assets (926)
Expenses 80
Fair value of net assets acquired (476)
-------
Goodwill 4,678
-------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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