RNS Number:5388D
KBC Advanced Technologies plc
10 September 2007
10 September 2007 Embargoed until 0700
KBC Advanced Technologies plc
("KBC" or "the Group")
Interim results for the six months ended 30 June 2007
KBC Advanced Technologies plc, a leading consultant to the energy industry,
today announces its interim results to 30 June 2007.
6 months to 6 months to
30 June 30 June
2007 2006
Revenue #18.4m #17.3m
Profit before tax #1.38m #0.38m
Basic earnings per share 1.61p 0.46p
Dividend per share 0.25p 0.00p
*Business has continued to perform strongly in the first half
*Profit before tax increased by 260% to #1.4m (2006: #0.4m)
*Interim dividend of 0.25p per share reflecting confidence in sustained
business turnaround
*Contract awards increased by 60% to #19m (2006: #12m)
*Order book backlog 24% higher at #28m (2006: #22m)
*Strong refining margins set to continue for the foreseeable future
*Recruitment programme has increased consulting capacity by more than 10%
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said:
"With a growing order backlog, anticipated increases in Petro-SIM TM sales and a
stable refining industry outlook, the Board is confident that the current strong
trading position will continue through the second half of this financial year
and into 2008."
-Ends-
KBC Advanced Technologies plc
George Bright, Chief Executive On 10 September: 020 7067 0700
Nicholas Stone, Operations and Finance Director thereafter: 01932 236314
Weber Shandwick Financial
Richard Hews/Hannah Marwood 020 7067 0700
An analyst's presentation will be held at 9.30am at Weber Shandwick Financial's
offices, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS. Copies of the
presentation will be available on the Company's website:
www.kbcat.com
Notes to Editors:
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, 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. The KBC human performance improvement division provides organisational
effectiveness services, training programmes, operations manuals, and personnel
development services. 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 SIM models and Petro-SIM for process optimisation, and 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 2007
Chairman's Statement
We are pleased to report that the business has continued to perform strongly in
the first half of 2007. Revenues of #18.4m showed an increase of 6% over the
same period last year (2006: #17.3m) and, with a strong focus on cost control,
profit before tax increased by 260% to #1.4m (2006: #0.4m).
Continued focus on sales growth led to contract awards for the period increasing
by 60% to #19m (2006: #12m). The resulting order book backlog is 24% higher at
#28m as at 30 June 2007 (2006: #22m).
With crude prices remaining near nominal all time highs, strong refining margins
are set to continue for the foreseeable future. This environment provides KBC
with the opportunity to continue to grow its Operational Excellence (OpX) and
Capital Excellence (CapX) programmes amongst its refining clients. Demand for
Human Performance Improvement (HPI) and Energy optimization services continues
to be very strong, particularly in North America. CapX activity is high in
Europe and the Middle East as a result of both asset transaction activity and
planned expansion projects.
OPERATING REVIEW
With our clients in the oil refining sector generating record margins, we have
continued to enhance our service and product offerings to meet the market's
changing requirements. An example of this is the expansion of multi-year
technical services agreements to provide clients with a flexible resource to
meet increasing demands for engineering input. Significant clients for these
services include:
*PETRONAS
*Nerefco
*Irving Oil
*Valero
*Marathon Petroleum
*Rompetrol
*HOVENSA
*Cepsa
The traditional KBC profit improvement business remains strong in certain
regions with ongoing work for Sinopec in China and other clients in the Middle
East, and emerging opportunities in Eastern Europe.
Our activities in project design optimisation and due diligence related to
refining asset disposals continue to develop across all three operating regions.
We are securing contracts at the feasibility and design stages of new expansion
and greenfield investment projects in the refining sector in spite of, and
sometimes because of, the schedule delays and cost escalation that are impacting
many of these projects.
We have further developed our partnerships with engineering contractors. This
route to market has enabled us to accelerate the growth in CapX services by
leveraging the relationships and market penetration of our partners. In Europe,
for example, we are working with Fluor on feasibility and configuration studies
for the new POAS refinery in Turkey. In Asia we are jointly executing a similar
study for Essar with Worley Parsons. The framework agreements that we have with
these companies are proving to be an excellent model that delivers benefits to
both parties and to our joint clients.
In the Americas we were recently awarded a contract with an Alon USA refinery in
California to evaluate options for managing greenhouse gas emissions under a
variety of expansion scenarios. Our strong expertise in energy management
provides us with an excellent platform to undertake this type of work, given the
close relationship between energy consumption and emissions. With increased
political and consumer emphasis on managing and reducing carbon emissions, we
expect this type of project activity to grow and progress for many years.
In order to execute our increasing backlog and drive growth, we have been
actively recruiting, adding an additional 26 employees during this period, which
has increased our consulting capacity by more than 10%. Utilisation has remained
consistently high and is expected to increase further in the second half as our
new employees gain experience. Consulting revenue in the period increased to
#15.8m from #15.0m in the first half of 2006. Margins before overhead
allocations have improved from an average of 33% during 2006 to 37%, driving the
increased profitability of the business.
Sales of Petro-SIM, our flagship refinery simulator, continue to develop.
Petro-SIM is now installed in over 60 sites and we expect that the pace of
installation will increase in the second half. Software revenue was up on the
same period last year by 10% at #2.6m from #2.3m and the contribution continues
to be very strong with a 62% margin. The most recent sale of Petro-SIM was a
full refinery model to the Coryton Refinery in the south of England, recently
acquired by Petroplus from BP.
RESULTS
Reported revenue for the first half of 2007 is #18.4m, up by 6% from the #17.3m
reported for the same period last year. Direct costs are down by 27% in this
period due to lower use of sub-contractors, while other costs have increased
broadly in line with revenue. As a result, operating profit has increased by
276% to #1.5m from #0.4m in the first half of 2006. Note 3 to this statement
shows the measure of underlying profit that excludes the impact of the carry
forward of software development costs and the amortisation of acquired
intangible assets which is not materially different from the reported measure.
Profit before tax after finance revenue and charges is #1.4m up from #0.4m for
the same period in 2006. After the tax charge of #0.5m, or 37%, profit for the
period was #0.9m (2006: #0.2m). Basic earnings per share is 1.61p up from 0.46p
in the first half of 2006. The effective tax rate of 37% is slightly improved
from 38% in the same period last year but nevertheless still higher than an
ongoing natural rate for the business. This is due to the availability of prior
year tax losses which means that certain of the withholding tax suffered is not
recoverable and is written-off.
Net bank overdraft at 30 June 2007 was #1.4m from a net cash position of #1.2m
at 31 December 2006. This increase is a result of an increase in debtors and
work in progress from long term projects, in particular in China where the
invoicing is milestone driven. It also reflects the dividend paid in respect of
last year, an increase in capital expenditure to update IT infrastructure and
deferred consideration paid for last year's acquisition of TTS Performance
Systems Inc. Although this represents a significant reduction in cash resources,
it is not expected to be permanent and is comfortably within the facilities
available to the Group.
DIVIDEND
An interim dividend of 0.25p per share will be paid on 10 October 2007 to
shareholders on the register on 28 September 2007. This reflects the Board's
confidence in the sustained turnaround in business performance.
A dividend of 0.5p per share was paid during the period as a final and only
dividend for the year to 31 December 2006.
OUTLOOK
Refining industry margins have been strong throughout 2007 and have reached
exceptional highs in some areas at times of unplanned shut downs. Although
margins have reduced in the last two months, this has been due primarily to
reductions in product stock levels and is unlikely to be sustained. Refining
capacity, especially for conversion of lower quality crude, is tight and
expected to get tighter as demand for more highly refined, cleaner fuels
increases. We therefore expect refinery margins to remain strong through to the
end of 2008 with occasional periods of very high margins when unexpected
disruptions occur.
There is no sign of a slowdown in global oil product demand growth despite the
higher prices and environmental pressures. It is widely anticipated that only a
small proportion of this demand will be satisfied by alternative fuels. We
therefore see the refining industry remaining positive for the foreseeable
future. In the longer term, the lower quality of crude oils from new production
capacity will increase demand for projects to expand the conversion capacity of
refineries. This is a particular expertise of KBC and we expect this to help
drive growth.
A consequence of the challenges facing the refining industry is the continuing
shortage of experienced engineering personnel in North America and Europe.
Recruitment was a key component of our 2007 business plan and we are pleased to
report that we have been able to attract well qualified personnel into the
Group. We will continue to invest in our people to ensure adequate depth and
breadth of consulting experience and to grow our capacity further.
Since the acquisition of Veritech Inc in November 2006, which has now been
successfully integrated, we have been focusing on larger acquisition
opportunities to provide a step change in the scale and scope of the business.
We have investigated a number of opportunities although we have not concluded
any to date. It is crucial that we continue to build scale and extend our
service offering to improve our profit margin through increased operational
leverage of the existing global infrastructure. There remains a large number of
opportunities in the markets that we are reviewing but only those that make
strategic sense and enhance shareholder value will be pursued.
With a growing order backlog, anticipated increases in Petro-SIM sales and a
stable refining industry outlook, the Board is confident that the current strong
trading position will continue through the second half of this financial year
and into 2008.
Christopher B. Powell Smith
Group income statement
for the period ended 30 June 2007
Notes Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2007 2006 2006
#000 #000 #000
Revenue 18,379 17,288 35,378
Direct costs (2,663) (3,646) (6,342)
Staff and associate costs (9,909) (9,210) (18,698)
Depreciation and amortisation (349) (367) (742)
Other operating charges (3,956) (3,666) (7,702)
--------- --------- ---------
Operating profit 1,502 399 1,894
Finance revenue 22 15 28
Finance cost (149) (33) (185)
--------- --------- ---------
Profit before tax 1,375 381 1,737
Tax expense (509) (142) (663)
--------- --------- ---------
Profit for the period 866 239 1,074
--------- --------- ---------
Attributable to equity holders of the parent 866 239 1,074
--------- --------- ---------
Earnings per share
Basic 2 1.61p 0.46p 2.10p
Diluted 2 1.55p 0.44p 2.00p
--------- --------- ---------
Group balance sheet
at 30 June 2007
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2007 2006 2006
#000 #000 #000
Non-current assets
Property, plant and equipment 1,292 1,466 1,314
Goodwill 6,620 6,478 6,714
Intangible assets 1,667 777 1,665
Deferred tax asset 2,603 2,168 2.603
--------- --------- ---------
12,182 10,889 12,296
--------- --------- ---------
Current assets
Trade and other receivables 16,910 11,926 13,423
Income tax asset 61 71 326
Cash and short-term deposits 618 723 1,178
Other financial assets 63 47 56
--------- --------- ---------
17,652 12,767 14,983
--------- --------- ---------
Total assets 29,834 23,656 27,279
--------- --------- ---------
Non-current liabilities
Trade and other payables (733) - (1,376)
Provisions (433) (105) -
Deferred tax liabilities (868) - (868)
--------- --------- ---------
(2,034) (105) (2,244)
--------- --------- ---------
Current liabilities
Trade and other payables (6,206) (5,605) (5,752)
Income tax payable - - (6)
Bank overdraft (2,025) (284) -
Provisions (153) (16) (663)
--------- --------- ---------
(8,384) (5,905) (6,421)
--------- --------- ---------
Total liabilities (10,418) (6,010) (8,665)
--------- --------- ---------
Net assets 19,416 17,646 18,614
--------- --------- ---------
Equity attributable to equity holders of
the parent
Issued capital 1,397 1,350 1,370
Share premium 7,824 8,319 7,782
Other reserves 984 226 984
Own shares (2,136) (2,136) (2,136)
Retained earnings 11,347 9,887 10,614
--------- --------- ---------
Total equity 19,416 17,646 18,614
--------- --------- ---------
Total equity and liabilities 29,834 23,656 27,279
--------- --------- ---------
Group statement of recognised income and expenditure
for the period ended 30 June 2007
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2007 2006
#000 #000
Attributable profit for the period 866 239
Foreign currency translation 19 (582)
--------- ---------
Total recognised income and expenditure
for the period 885 (343)
--------- ---------
Group cash flow statement
for the period ended 30 June 2007
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2007 2006
#000 #000
Net cash inflow from operating activities
Profit before tax and after financing 1,375 381
Finance revenue (22) (15)
Finance costs 149 33
--------- ---------
Operating profit 1,502 399
Depreciation and amortisation 348 367
Share based payment expense 120 90
Movements in working capital:
- trade and other receivables (3,488) (1,611)
- trade and other payables 349 22
- exchange differences 119 (98)
- financial assets and liabilities (7) -
--------- ---------
Cash generated from operations (1,057) (831)
Finance revenue received 22 15
Finance costs paid (121) (33)
Income taxes paid (250) (427)
--------- ---------
Net cash flow from operating activities (1,406) (1,276)
--------- ---------
Cash flow from investing activities
Purchase of tangible non-current assets (179) (83)
Purchase of intangible non-current assets (154) -
Purchase of subsidiary undertaking including
costs - (1,122)
Net funds acquired with subsidiary undertakings - 5
Acquisition deferred consideration paid (643) -
--------- ---------
Net cash flow from investing activities (976) (1,200)
Cash flow from financing activities
Dividends paid to equity holders of the parent(271) -
Issue of shares 70 1,126
--------- ---------
Net cash flow used in financing (201) 1,126
--------- ---------
Net decrease in cash and cash equivalents (2,583) (1,350)
Cash and cash equivalents at 1 January 1,178 1,802
Exchange adjustments (2) (13)
--------- ---------
Cash and cash equivalents at 30 June (1,407) 439
--------- ---------
NOTES TO THE 2007 HALF YEAR RESULTS
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 2006 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. A copy
of the statutory accounts for the year ended 31 December 2006 has been delivered
to the Registrar of Companies. The auditors' report on those accounts was
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain a statement under Sections 237(2)-237(3) of the Companies Act 1985.
2 EARNINGS PER SHARE
The calculation of basic earnings per share is based upon earnings of #0.87m
(Jun 2006: #0.24m, Dec 2006: #1.07m) and on 53,621,682 (Jun 2006: 51,735,771,
Dec 2006: 52,250,519) 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 UNDERLYING OPERATING PROFIT
June 2007 June 2006
#000 #000
Operating profit 1,502 399
Amortisation of acquisition intangibles 77 142
Research and development costs carried forward (154) -
Amortisation of research and development costs
carried forward 76 -
--------- ---------
Underlying operating profit 1,501 541
--------- ---------
4 SEGMENTAL INFORMATION
Income statement Consultancy Software Unallocated Group
for the period ended 30 June 2007 #000 #000 #000 #000
External sales 15,820 2,559 - 18,379
Direct project expenses (9,906) (850) - (10,756)
Depreciation and amortisation (105) (244) (349)
Sales and marketing (1,499) (1,499)
Facilities and communications (2,155) (2,155)
Management and support services (2,118) (2,118)
--------- --------- --------- ---------
Trading profit(segment result) 5,914 1,604 (6,016) 1,502
Finance revenue 22 22
Finance cost (149) (149)
---------
Profit before tax 1,375
Tax expense (509)
---------
Profit for the period 866
---------
Income statement Consultancy Software Unallocated Group
for the period ended 30 June 2006 #000 #000 #000 #000
External sales 14,965 2,323 - 17,288
Direct project expenses (10,293) (1,176) - (11,469)
Depreciation and amortisation (100) (267) (367)
Sales and marketing (1,661) (1,661)
Facilities and communications (1,789) (1,789)
Management and support services (1,603) (1,603)
--------- --------- --------- ---------
Trading profit (segment result) 4,672 1,047 (5,320) 399
Finance revenue 15 15
Finance cost (33) (33)
---------
Profit before tax 381
Tax expense (142)
---------
Profit for the period 239
---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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