RNS Number : 9888C
KBC Advanced Technologies plc
09 September 2008
9 September 2008
Embargoed until 0700
KBC Advanced Technologies plc
("KBC" or "the Group")
Half year results for the six months ended 30 June 2008
KBC Advanced Technologies plc, a leading consultant to the energy industry, today announces its half year results to 30 June 2008.
6 months to 6 months to Change 12 months to 31
30 June 30 June December 2007
2008 2007
Revenue �24.45m �18.38m +33% �38.12m
Profit before tax �2.85m �1.38m +107% �2.90m
Basic earnings per share 3.31p 1.61p +106% 3.52p
Dividend per share 0.35p 0.25p +40% 0.75p
* Strong first half performance
* Pretax profit and earnings per share doubled
* Twin market approach of CapX and OpX services proving effective
* Demand for our services increasing
* Contract awards increased by 39% and workload backlog by 17%
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said
"Although the oil market has been subject to unprecedented volatility recently, we believe that the case for a long term increase in
refining capacity remains clear. This provides a very robust business environment for KBC's services, now and in the future.
We remain confident that our increasing portfolio of services and products, addressing both the CapX and OpX elements of our clients'
requirements augmented by our proprietary software tools, will continue to deliver strong growth during the remainder of 2008 and beyond."
-Ends-
KBC Advanced Technologies plc
George Bright, Chief Executive On 9 September: 020 7067 0700
Nicholas Stone, Operations and Finance thereafter: 01932 236314
Director
Weber Shandwick Financial
Nick Oborne/Rachel Martin/Hannah Marwood 020 7067 0700
Arbuthnot Securities
James Steel/Antonio Bossi 020 7012 2000
An analysts' 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, Japan and Korea. For more information, visit www.kbcat.com.
KBC Advanced Technologies plc
("KBC" or "the Group")
Half year results for the six months ended 30 June 2008
Chairman's Statement
We are pleased to report that the business has performed very strongly in the first half of 2008. Revenues of �24.4m increased by 33%
over the same period last year (2007: �18.4m) and profit before tax doubled to �2.8m (2007: �1.4m) demonstrating the benefits of delivering
a broader range of services and products through our existing global office network.
Demand for our services was strong throughout the period and across all three operating regions. This has underpinned the significant
growth in sales during the period, with new contract awards increasing by 39% to �27m (2007: �19m). The resulting workload backlog has
increased by 17% to �35m at 30 June 2008 (31 December 2007: �30m).
OPERATING REVIEW
Refining industry margins have remained strong during 2008 in most parts of Europe, the Middle East and Asia, with North America seeing
a decline from the high margin levels of 2007. Although continued high oil prices are having an impact in certain markets, overall demand
for oil products is still expected to increase further in 2008. During these volatile market conditions, demand for our services has
remained robust. In the Middle East and Asia we continue to execute work driven primarily by "CapX" (capital projects) services, while in
North America the key demand driver has been for "OpX" services, which relate to operational effectiveness of existing assets.
We have worked on a variety of CapX projects ranging from individual asset evaluation through to design studies for new refinery
projects. We have continued to be successful in subcontracting detailed engineering work to engineering contractor partners in Asia and
elsewhere, which gives us an important increase in capacity and enhances our breadth of capability. The economic analyses and forecasts
produced by KBC Market Services for the oil and refined product markets have continued to be an important offering in the market. In
addition, heightened interest in the oil markets has enabled KBC to raise its profile with appearances on television and radio, as well as
references in the trade and mainstream press.
Demand for our OpX services has remained at high levels, particularly in the US. The entire suite of services including energy
optimisation, profit improvement and human performance improvement ("HPI") has played its part in delivering a strong performance. The need
for US refiners to meet ever stricter regulatory requirements and manage the issues of an ageing workforce has been a particular driver of
the very strong growth of HPI services in that region. Our broad suite of services is designed to meet the industry's current and future
requirements, both in the US and globally, and we have been investing in training to ensure that we can roll this service out worldwide.
As previously announced, a notable contract award during the period was from a US refiner for our participation in a "Learning and
Development" programme. This type of work is a combination of the services brought to KBC through the acquisition of TTS Performance Systems
Inc in 2006 and KBC's existing consultancy services, and we are pleased to see the anticipated growth in jointly developed services being
delivered so successfully.
The increasing cost of energy has helped to drive the strong demand for our Energy Services business for clients in a variety of energy
intensive process industries in addition to the refining market. We have also been successful in rapidly bringing to market a new software
tool, CarbonManagerTM, to help clients manage carbon emissions. This market is in the early stages of development, but it could in time
offer a good revenue stream for KBC.
KBC's traditional profit improvement work still plays a significant part in our portfolio of services outside North America but interest
in this service is growing again in this region.
Our consultants have been extremely busy during this period and utilisation has run at an average of 80%. We aim to reduce this to
around the optimal level of 78% to allow sufficient time for research and development activities and maintaining the sales pipeline. Our
recruitment programme has been successful in adding a further 11% to our consulting capacity during the period. The use of associate
consultants has also increased to 16% of billable hours from 9% last year, enabling us to maintain resource flexibility.
Software revenue has grown by 15% over the same period in 2007 and continues to be a significant contributor to our business success.
Petro-SIM* software is now installed at 82 sites. The annual maintenance, support and upgrade revenues generated by these licences are
particularly important in providing recurring revenue. Development activities have focused on the next version of Petro-SIM, due for launch
in 2009. Version 4 will incorporate numerous enhancements to maintain Petro-SIM as the leading refinery simulation tool.
RESULTS
Revenue for the first half of 2008 was �24.4m, up by 33% from the �18.4m reported for the same period last year. Direct costs have
increased by 26% and staff and associate costs by 39%, while other costs have not increased by any significant amount. This increase in
staff and associate costs relates mainly to the hiring of new employees and associate consultants, and to a lesser extent to an increase in
the year on year accrual for the profit related bonus scheme in which all Group employees participate. Overall, costs have increased by 28%
and, as a result, operating profit has increased by 95% to �2.9m from �1.5m in the first half of 2007. As disclosed in Note 3 to these
statements, the underlying operating profit measure that excludes the impact of acquisition intangibles and research and development costs
carried forward has increased by 106% to �3.1m.
Profit before tax after finance revenue and charges has doubled to �2.8m from �1.4m for the same period in 2007. After the tax charge of
�1.0m, or 35%, profit for the period more than doubled to �1.9m (2007: �0.9m). Basic earnings per share were 3.31p, up by 106% from 1.61p in
the first half of 2007. The effective tax rate of 35% has improved from 37% in the same period last year, but is nevertheless higher than
the long-run rate for the business. This is being actively managed, but in the short-term the availability of prior year tax losses leads to
certain withholding taxes being unrecoverable and therefore written-off, increasing the effective rate.
Net cash at 30 June 2008 was �1.2m from a net cash position of �1.3m at 31 December 2007 and a net overdraft position of �1.4m at 30
June 2007. Close attention to working capital management has limited the investment required in working capital to an 11% increase in trade
receivables from June 2007, compared to a 33% increase in revenue. Other cash movements include the dividend paid in respect of last year,
deferred consideration paid for the acquisition of TTS Performance Systems Inc in 2006 and the staff performance bonus for 2007. As in 2007
we expect cash resources to strengthen during the second half of the year.
DIVIDEND
An interim dividend of 0.35p per share will be paid on 8 October 2008 to shareholders on the register at 19 September 2008, an increase
of 40% over the prior year's interim dividend of 0.25p per share interim dividend last year. This reflects the improved results and the
Board's confidence in the outlook for the business.
A dividend of 0.5p per share was paid during the first half as the final dividend for the year to 31 December 2007, making a total of
0.75p for the year ended 31 December 2007.
BOARD CHANGES
After eleven years on the Board of KBC I have decided to stand down and Ian Miller, who joined the Board as a non-executive director in
2004, will take over as Chairman and lead the Group in the next stage of its development. This change will take place with immediate effect
and I will retire as a director from the end of September. Following the appointment of Ian Godden as a new independent non-executive
director in July and my retirement, KBC will have two independent non-executive directors in addition to Mr Miller as Chairman.
KBC has achieved its principal objective from the time I was appointed Chairman, some four years ago, and is now strongly profitable. It
has been a privilege to work with the members of the board and the executive management of KBC and to witness the transformation of the
Group's financial and trading position. I have every confidence that, under their guidance, this progress will continue.
OUTLOOK
Although the oil market has been subject to unprecedented volatility recently, we believe that the case for a long term increase in
refining capacity remains clear. This provides a very robust business environment for KBC's services, now and in the future.
The management changes implemented over the past few years have helped to make KBC a much more responsive and flexible organisation,
better able to meet our clients' needs. Alongside our desire to expand through suitable acquisitions, we continue to seek opportunities to
accelerate the delivery of sustained organic growth.
We remain confident that our increasing portfolio of services and products, addressing both the CapX and OpX elements of our clients'
requirements augmented by our proprietary software tools, will continue to deliver strong growth during the remainder of 2008 and beyond.
Christopher B Powell-Smith
Chairman
9 September 2008
Group income statement
for the six months
ended 30 June 2008
Notes Unaudited Unaudited Audited
6 months 6 months 12
to to months
30 June 30 June to
2008 2007 31
�000 �000 December
2007
�000
Revenue 24,449 18,379 38,115
Direct costs (3,348) (2,663) (5,619)
Staff and associate costs (13,725) (9,909) (21,171)
Depreciation and amortisation (377) (349) (762)
Other operating charges (4,069) (3,956) (7,422)
Operating profit 2,930 1,502 3,141
10 22 35
Finance revenue
Finance cost (93) (149) (279)
Profit before tax 2,847 1,375 2,897
Tax expense (996) (509) (988)
Profit attributable to equity holders 1,851 866 1,909
of the parent
Earnings per share
Basic 2 3.31p 1.61p 3.52p
Diluted 2 3.25p 1.55p 3.49p
Group balance sheet
at 30 June 2008
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2008 2007 2007
�000 �000 �000
Non-current assets
Property, plant and equipment 1,475 1,292 1,456
Goodwill 6,628 6,620 6,628
Intangible assets 1,439 1,667 1,604
Deferred tax asset 2,316 2,603 2,600
11,858 12,182 12,288
Current assets
Trade and other receivables 18,794 16,910 16,257
Income tax asset - 61 -
Cash and short-term deposits 1,193 618 1,349
Other financial assets - 63 -
19,987 17,652 17,606
Total assets 31,845 29,834 29,894
Non-current liabilities
Trade and other payables (251) (733) (753)
Provisions (280) (433) (356)
Deferred tax liabilities (543) (868) (543)
(1,074) (2,034) (1,652)
Current liabilities
Trade and other payables (7,725) (6,206) (7,012)
Income tax payable (479) - (455)
Bank overdraft - (2,025) -
Provisions (153) (153) (153)
Other financial liabilities (34) - (35)
(8,391) (8,384) (7,655)
Total liabilities (9,465) (10,418) (9,307)
Net assets 22,380 19,416 20,587
Equity attributable to equity
holders of the parent
Issued capital 1,427 1,397 1,420
Share premium 8,038 7,824 8,013
Other reserves 984 984 984
Own shares (1,017) (2,136) (2,136)
Retained earnings 12,948 11,347 12,306
Total equity 22,380 19,416 20,587
Total equity and liabilities 31,845 29,834 29,894
Group cash flow statement
for the six months ended
30 June 2008
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2008 2007
�000 �000
Net cash inflow from operating activities
Profit before tax 2,847 1,375
Finance revenue (10) (22)
Finance costs 93 149
Operating profit 2,930 1,502
Depreciation and amortisation 377 348
Share based payment expense 149 120
Movements in working capital:
- trade and other receivables (2,537) (3,488)
- trade and other payables 636 349
- exchange differences (2) 119
- financial assets and liabilities (1) (7)
Cash generated from operations 1,552 (1,057)
Finance revenue received 10 22
Finance costs paid (93) (121)
Income taxes paid (689) (250)
Net cash flow from operating activities 780 (1,406)
Cash flow from investing activities
Purchase of tangible non-current assets (188) (179)
Purchase of intangible non-current assets (34) (154)
Acquisition deferred consideration paid (502) (643)
Net cash flow from investing activities (724) (976)
Cash flow from financing activities
Dividends paid to equity holders of the parent (279) (271)
Issue of shares 44 70
Net cash flow used in financing (235) (201)
Net decrease in cash and cash equivalents (179) (2,583)
Cash and cash equivalents at 1 January 1,349 1,178
Exchange adjustments 23 (2)
Cash and cash equivalents at 30 June 1,193 (1,407)
Group statement of recognised income and expenditure
for the six months ended 30 June 2008
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2008 2007
�000 �000
Attributable profit for the period 1,851 866
29
Foreign currency translation 19
Total recognised income and expenditure for the 1,880 885
period
NOTES TO THE 2008 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
presented here have been prepared using accounting policies that will be applied to the Group's 2008 statutory accounts. For the purposes of
this document the term IFRS includes International Accounting Standards.
This Half Year 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 Half Year 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 comparatives for the full year ended 31 December 2007 are not the Group's full statutory accounts for that year. A copy of the
statutory accounts for that year 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 section 237(2)-(3) of the Companies Act 1985.
2 EARNINGS PER SHARE
The calculation of basic earnings per share is based upon earnings of �1.85m (Jun 2007: �0.87m, Dec 2007: �1.91m) and on 55,869,056 (Jun
2007: 53,621,682, Dec 2007: 54,182,528) 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 2008 June 2007
�000 �000
Operating profit 2,930 1,502
Amortisation of acquisition intangibles 103 77
Research and development costs carried forward (33) (154)
Amortisation of research and development costs carried 97 76
forward
Underlying operating profit 3,097 1,501
4 SEGMENTAL INFORMATION
Income statement Consultancy Software Unallocated Group
for the six months ended 30 �000 �000 �000 �000
June 2008
External sales 21,508 2,941 24,449
Direct project expenses (13,129) (1,510) (14,639)
Depreciation and amortisation (125) (252) (377)
Sales and marketing (1,885) (1,885)
Facilities and communications (2,212) (2,212)
Management and support services (2,406) (2,406)
Trading profit (segment result) 8,379 1,306 (6,755) 2,930
Finance revenue 10 10
Finance cost (93) (93)
Profit before tax 2,847
Tax expense (996)
Profit for the period 1,851
Income statement Consultancy Software Unallocated Group
for the six months ended 30 �000 �000 �000 �000
June 2007
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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