TIDMKBC
RNS Number : 5972H
KBC Advanced Technologies plc
17 March 2015
Embargoed until 0700 hrs 17 March 2015
KBC Advanced Technologies plc ("KBC", "the Company" or "the
Group")
Preliminary results for the year ended 31 December 2014
KBC Advanced Technologies plc, a leading consultancy and
software provider to the global hydrocarbon processing industry,
today announces its preliminary results for the year to 31 December
2014.
Highlights
-- Another year of good strategic, operational and financial performance
-- Revenues up 17% to GBP76.0m (2013: GBP65.1m)
-- Adjusted profit before tax(1) up 13% to GBP9.5m (2013: GBP8.4m);
-- Reported profit before tax of GBP6.7m (2013: GBP7.1m)
-- Recommended final dividend up 10% to 1.1p per share (2013: 1.0p)
-- Equity fund raising of GBP23.1m, net of expenses, to fund
acquisitions and provide working capital for larger contracts
-- Acquisition and integration of FEESA Limited, improving KBC's
product and service offerings across the full breadth of the
hydrocarbon processing industry
-- Consulting revenue increased by 17%, with strong performance
in South America, further growth in Asia and the Middle East, and
continued improvement in Consulting operating margin
-- Another record year for Technology, with revenues up 17% and
key contract awards in Asia, South America, the Middle East and
Europe
-- Strong year end pipeline of contracted work, up by 13% to a
record GBP88.0m (2013: GBP78.2m)
-- Strengthened executive leadership, with appointment of a new CEO
-- KBC's medium and long term market prospects continue to offer
encouraging international growth opportunities
(1) Adjusted for development costs carried forward, amortisation
of development costs carried forward, amortisation of acquisition
intangibles, share based payment charges and other items which do
not reflect underlying operations (see note 3b)
Ian Godden, Chairman of KBC, commented:
"2014 was another good year for KBC, with strong financial
performance and continued progress across the Group in all aspects
of our strategy: to grow our Technology business, expand our
upstream offering, improve Consulting margins and invest for
success in growth regions.
We enter 2015 with a record pipeline of contracted work and a
healthy balance sheet to support the Group and its continued
growth. At the same time we are not complacent in the face of
continuing uncertainty in the oil and gas markets, and we are
taking sensible action to reshape and reposition our business in
response to these conditions and to drive profit and quality of
earnings. Together these give the Board confidence for 2015."
-Ends-
KBC Advanced Technologies plc +44 (0)1932 236314
Ian Godden, Chairman
Andrew Howell, Chief Executive Officer
Cenkos Securities plc
Bobbie Hilliam/Harry Pardoe +44 (0)20 7397 8900
Weber Shandwick Financial
Nick Oborne/Tom Jenkins +44 (0)20 7067 0000
Notes to Editors:
KBC is a leading consultancy and software provider to the global
hydrocarbon processing industry. With over 30 years of experience,
KBC combines industry-leading technology with experienced engineers
and operations personnel using robust methodologies to create
personalised, sustainable solutions for its clients. For more
information, visit www.kbcat.com. To contact any of KBC's offices,
please visit http://www.kbcat.com/locations.
CHAIRMAN'S STATEMENT
Summary
2014 was another good year for KBC. The Group performed in line
with expectations, raised equity for acquisitions and working
capital and completed an important strategic acquisition. The
Company also implemented a successful executive succession,
appointing a new Chief Executive Officer from within the Group and
appointing a new independent non-executive director to the
Board.
Following a strong finish to 2014, KBC has started 2015 well
and, although there are many new industry challenges, we remain
well positioned to continue our long term strategy of increasing
and strengthening the Technology business, improving the margins of
the Consulting business and continuing our long term expansion in
the upstream oil and gas industry, together with growth in hotspots
such as the Middle East, Southeast Asia and South America.
Results
Group revenue for the year increased by 17% to GBP76.0m (2013:
GBP65.1m). Profit before tax calculated on an adjusted basis, as
detailed in note 5b, was 13% higher than the previous year at
GBP9.5m (2013: GBP8.4m). This reflected an adjusted profit margin
of 13%. Adjusted profit after tax increased by 20% from GBP5.5m to
GBP6.6m.
The company raised GBP23.1m net of expenses from an equity
placing in June 2014. GBP10m of the placing monies was used to fund
the acquisition of FEESA Limited ("FEESA") in July 2014 and a
further GBP4m was used for working capital, particularly for large
projects in South America and the Middle East.
Despite an improved performance, the net result of this fund
raising, coupled with prior period one-off tax credits, meant that
basic earnings per share reduced to 5.7p (2013: 9.5p) and earnings
per share calculated on an adjusted basis remained broadly steady
at 9.3p per share in 2014, from 9.5p in 2013. Diluted earnings per
share was 5.5p in 2014, compared to 9.2p in 2013.
Dividend
The Board proposes to pay a final dividend for the 2014
financial year of 1.1p per share (2013: 1.0p). The total cost of
the proposed dividend amounts to GBP0.9m for the 2014 full year
(2013 full year: GBP0.8m).
Board and management
During 2014 we strengthened the Board and executive leadership
of KBC with major external hires and internal promotions. In
November we announced the appointment of a new Chief Executive
Officer effective 1 January 2015, a succession we committed to when
I took over the executive leadership of KBC. Andrew Howell was
appointed to drive the next phase of KBC's strategy, with
particular emphasis on developing its position in the upstream oil
and gas industry and the Technology business. Andrew was previously
the Managing Director of KBC's Technology business and had gained
wide oil and gas experience with BP, Hyprotech and Schlumberger
before joining KBC in 2011. I remain Chairman of the Company. We
also strengthened the composition of the Board with the addition in
February 2014 of a new independent non-executive director, Paul
McCloskey, and with the appointment of Andrew Howell and Kevin
Smith to the Board in April 2014.
A new and effective executive team was established at the end of
the year in order to deliver clear leadership across all aspects of
our business. Kevin Smith was promoted to Chief Commercial Officer
(CCO), a new client-facing position which spans both Consulting and
Technology, to drive the commercial performance of KBC. Mike Aylott
has been promoted to Chief Technology Officer (CTO) from his role
of managing all the engineering software development. The CTO
position has been created to drive the realisation of the strategic
direction of the Group towards commercial technology platforms
underpinning all KBC's activities. This includes expanding the
range of our engineering software as well as delivering the full
range of KBC knowledge and intellectual property through
technology. Ramon Loureiro, our most senior Partner, remains a key
member of the executive team, ensuring the tradition and success of
KBC's profit improvement programmes is captured and further
developed within the Group's strategy. In addition, the business
development resources of the Group have been strengthened with a
number of external recruits as part of a sales transformation
strategy to improve commercial performance.
Current trading and outlook
During the second half of 2014 the oil and gas industry
experienced a major upheaval, with a significant increase in
production in North America and Iraq, an unexpected slowdown in
growth regions such as China and a subsequent oil price fall as a
result of OPEC choosing not to control the market price. The longer
term implications for the market are still not fully clear, but KBC
is assuming a scenario of low oil prices for at least 18 months and
some further belt-tightening by our clients. KBC is not affected
directly by the US domestic oil exploration downturn since a large
proportion of its business is in the downstream part of that market
which will be less adversely affected.
Despite this backdrop, KBC achieved solid results in 2014 and so
far in 2015 the market for KBC's services, while shifting, has
remained steady. It is difficult to predict the full effect of the
oil price on KBC's performance in 2015. Some aspects are positive:
more clients need to optimise their existing assets; Operational
Excellence practices are in high demand; KBC's Technology solutions
are helping clients optimise production rates at lower energy
costs; there is strategic rechecking of the economic viability of
large capital expenditure projects; as oil companies reduce their
work forces, they will need consultants to fill the gaps;
downstream refining profitability is now returning to higher
margins than have been seen for several years; and upstream
operators are looking to drive more efficient production.
At the same time there are potential challenges for KBC: pricing
pressure from a general focus on the oil and gas supply chain; cash
collection and conversion; revenue from upstream oil exports
sometimes being needed by national oil companies ("NOCs") in order
to fund downstream modernisation projects; and upstream capital
projects delayed and postponed. Therefore, KBC is not being
complacent and is taking action to reshape and refocus its business
and organisation and has additional contingency plans should the
market for our services deteriorate.
We enter 2015 with a healthy pipeline of contracted work of
GBP88.0m (2013: GBP78.2m), a record for the Group. Together with a
number of key Consulting contract wins in the first two months of
2015, this leaves KBC well positioned to meet its objectives for
the coming year. As always, the exact timing of contract awards
will continue to affect results within any year. However, the
strength of the pipeline of contracted work, an enhanced range of
products and services and major internal progress in 2014 give the
Board confidence for 2015.
Ian Godden
Chairman
BUSINESS REVIEW
Delivering on our strategy
2014 saw significant strategic contract wins for KBC in both our
targeted upstream market and our core downstream business.
Consulting continued to deliver successfully in South America,
winning a $48.6 million contract extension with a South American
oil and gas company. This was complemented by strong Consulting
performance in the Middle East as well as further growth in Asia
and Europe. Our Technology offering in upstream oil and gas
continued to grow and we were particularly pleased to see the
products from our newest acquisition (FEESA) having an immediate
impact when bundled with our existing offerings. The contract award
from a European oil field services company in the fourth quarter of
2014 followed a number of other Technology contract awards of note
in the United States, the Middle East, China, Thailand and Vietnam.
It is very encouraging to see the strong demand for KBC's
Technology products supporting KBC's focus as a key software player
in the hydrocarbon industry.
2014 was another good year for KBC on several fronts and it was
particularly pleasing to see the measures put into place by the
management team over recent years resulting in improved performance
and growth by the Company. The Partner organisation in Consulting
has driven personal ambition and a focus on commercial targets for
margin realisation and quality of work delivered. The continued
expansion of Technology sales through the Consulting business and
newly expanded direct sales channels led to a record level of
revenue . Consulting and Technology, working closely together, each
delivered 17% growth in top line revenue for the year. KBC further
penetrated the upstream oil and gas market, assisted by the
important acquisition of FEESA which enables the Group to offer
software and consulting in the production flow assurance area,
anchoring wells and pipelines to KBC's established business in gas
processing, refining and petrochemicals. KBC is now very well
positioned to offer technical engineering and people performance
solutions across the full breadth of the hydrocarbon processing
industry and is able to move quickly in this chain to support the
developing segments.
Innovation and information
During 2014 KBC embarked on an ambitious project to align all
our software releases to a common release schedule with shared
infrastructure and integration. Version 6 of Petro-SIM(TM) (process
facility simulator), the SIM(TM) models (refinery reactors),
Maximus(TM) (wellbore and pipeline hydraulics simulator),
Multiflash(TM) (reservoir PVT chemistry) and Energy-SIM(TM) (energy
optimisation) have all now been aligned, with significant advances
in the interoperability of our technology. Clients will now benefit
from the full integration of well, pipeline, offshore platform, gas
plants, refineries and petrochemicals models with the ability to
execute time-based scenarios including use of their own workflows
and plug-ins to increase production and reduce costs. 2014 also saw
the expansion of KBC's alliances with the addition of Flaretot(TM),
a third party process plant flare safety simulator, to the KBC
software suite and the announcement of a plug-in to Petro--SIM for
transient pipeline modelling from BPT, a Norway--based technology
company. KBC will continue to expand the "ecosystem" in which
hydrocarbon process industry clients can embed technology that
furthers the value of our platforms and provides another high
quality revenue stream and will seek further alliances with oil
field services and industrial automation players.
In line with our corporate strategy, we have continued to
productise parts of our Consulting knowledge, experience and
information into our software and digital technologies to enhance
Technology revenue, allow for intellectual property charges in
Consulting fees and support the scale and leverage of the
Consulting organisation around technology platforms. The
appointment of a Chief Technology Officer for KBC will drive this
technology strategy throughout the Group and our alliance
partners.
Our people
The KBC team includes a diverse set of consulting and software
experts in more than 11 countries, delivering high quality project
work and software technology. In 2014 the enhancement of both
Consulting and software resources as well as corporate shared
services has driven results for KBC. KBC began a reorganisation in
the last quarter of 2014 to promote the new company strategy with a
defined commercial sales group covering sales, business analysis,
product management and marketing, all targeted at achieving high
quality, recurring revenue. A new delivery organisation has been
built that concentrates on delivering all aspects of quality in
client projects to achieve target margins. KBC's focus on software
technology platforms and productising Consulting knowledge, to
drive higher margin sales and increased scale in Consulting, has
been further enhanced by the establishment of a Chief Technology
Officer role with a remit to expand technology development and
adoption by KBC. The Company has been reorganised into a clear
structure that provides focus on commercial, operational,
innovation and back office disciplines appropriate for a technology
based consulting firm.
KBC's Market
For the five years to 2014 high energy prices drove strong
capital investment and strong profit margins throughout the oil
industry. Those same economics also encouraged technical
innovations that led to a rapid oil production increase and an
increasingly oversupplied energy market. The oil market responded
rapidly to the decision by OPEC at the end of November 2014 to
renounce its traditional market-balancing role, with oil prices
plunging more than 50%. These lower prices turned the industry on
its head and for oil companies the key to both survival and success
is to control their positions in the market, rather than being
controlled by it. To achieve this, KBC believes that the operators
will need access to many of KBC's products and services to enhance
their performance.
In the near term, companies in our industry need to focus on
revenue generation and capital investment to safeguard their
balance sheets, generate cash flow and service debt. In the medium
term, success requires companies to focus on sound operational
fundamentals and ongoing evaluation of their market position to
ensure performance is optimised against a changing market
environment. In the long term, companies will be best served by
revisiting and revalidating their investments against the market
potential and their own corporate strategy. KBC can assist in all
these areas and has a strong reputation for delivering value on all
these horizons.
Consulting
Consulting revenue in 2014 increased by 17% to GBP55.0m (2013:
GBP47.2m) with an operating margin of 4% (2013: 3%). Out of the
Consulting pipeline of work of GBP57.3m (2013: GBP52.7m), GBP31.2m
(2013: GBP30.6m) is expected to convert into revenue in 2015.
Through our focus on high quality Consulting revenue, our target is
to deliver Consulting margins of 9%-10% over the next two
years.
Major consulting achievements in 2014 included:
-- Continued quality execution of the South American business transformation project
-- A large (US$48M) extension to the same South American project
-- First profit improvement and strategy project in Kuwait in many years
-- Repeat business for a second gas plant optimisation project in Saudi Arabia
-- An award for the establishment of an Operational Excellence Academy in Malaysia
-- A significant sustainable profit improvement programme in Thailand
-- A major technical capability development project award in Saudi Arabia
Many other promising developments in the Middle East and North
Africa have resulted from a focused investment in the region that
will add further value for KBC.
2014 saw a return to growth for Consulting solutions in the
North America market, strong growth in Southeast Asia and good
growth in Russia.
The large South American business transformation project
continues to deliver on time and on budget, with clear recognition
by the client of KBC's quality consulting, methodologies, project
management and technology in delivering value in many aspects of
the refinery transformation.
The focus on the Consulting partner model with its sales,
solution, execution and mentoring accountability has continued to
prove valuable in the quest to raise Consulting margins and build
strength in KBC's key geographical markets. Senior leadership has
been strengthened and the Group is in a good position to take
advantage of growth areas in the South America, Middle East and
South East Asia markets.
The Consulting business functions have been grouped into four
key areas for delivery of services to clients - Production
Optimisation, Operations Management, Strategic Business
Transformation and Human Performance Improvement. These are the
core value areas of KBC's Consulting offering and are being
re-packaged to achieve bigger contract engagements with clients to
improve leverage, utilisation and margins for KBC.
Technology
2014 was a record year for KBC's Technology business, reflecting
the focus and determination of the organisation to be a key
engineering software provider to the industry. Revenue for the year
was up 17% on 2013 at GBP21.0m (2013: GBP17.9m), representing good
year on year progress.
The increase in Technology revenue reflects our drive and
determination to raise the proportion of Technology revenue in the
long term with Technology representing 28% of 2014 revenue (2013:
27%). Recurring revenue for 2014 was a record GBP9.0m (2013:
GBP7.8m). Out of the total Technology contracted pipeline of work
of GBP30.7m (2013: GBP25.5m), GBP9.3m (2013: GBP6.7m) is expected
to convert into revenue in 2015. FEESA and Infochem technology
revenue has exceeded our initial expectations with both
acquisitions being accretive in 2014 and enabling the pull-through
of Petro-SIM into the upstream market space. The Technology margin
decreased from 34% in 2013 to 24% in 2014 due to much higher
amortisation from the recent acquisitions and a focused investment
in sales and marketing for Technology
As part of the successful equity placing in June 2014,
undertaken primarily to raise funds for acquiring technology
assets, Norway's Kongsberg Gruppen ASA acquired a 5% stake in KBC
and has since engaged in an upstream technology and services
alliance to add higher value solutions to their oil company clients
and accelerate KBC's penetration into this market. This alliance is
seen as giving KBC an accelerated critical mass in upstream to
position, sell and deliver significant expansion in upstream
technology revenue.
FEESA was acquired in July 2014 and has been successfully
integrated, with the two founders of that company now holding
senior executive positions on KBC's Operating Committee. Work
continues, as planned, to ensure that the acquired company
standardises on KBC's product lifecycle management processes and
quality assurance.
Significant Technology achievements in 2014 included:
-- Two major South American software contracts with greater than
US$5m total contract value each
-- A GBP3.3m contract with a European oil field services company
-- Large software licence expansion projects in Thailand, Vietnam and China
-- Large renewals and licence expansions in the Middle East
-- New upstream licence agreements in Australasia
-- Agreement signed with Flaretot Limited of London, UK, early
in 2014 to market its flare system design and rating tool,
integrated with Petro-SIM
Of particular importance in the year was the seven-year contract
with a major oil field services company for the licensing of KBC's
upstream full simulation portfolio including Multiflash, Maximus
and Petro-SIM. This is the first significant sale combining the
technology of our two recent upstream technology acquisitions with
KBC's heritage software and demonstrates the value of KBC's
integrated upstream technology strategy.
KBC's traditional refining technology business continued to
strengthen in 2014 with key contract awards in Asia, South America
and the Middle East. Our Japanese market saw a marked reduction in
Technology revenue in 2014 due to one unusually high contract award
in 2013. The refinery reactor and process simulation technology,
supported by energy simulation, forms a high value, rigorous
picture of refinery wide profitability and, when delivered with
KBC's consulting services, is a world class solution.
KBC continues to look for value-adding acquisitions that will
expand the Technology portfolio and contribute to revenue and
profit growth.
OUR BUSINESS MODEL AND STRATEGY
In late 2014 KBC launched a revised strategy, building on the
success of the 2011 to 2014 period, to grow revenues, further
improve the Group's profitability and drive shareholder value. It
is clear, bold, aggressive and will transform KBC into a technology
company supported by expert consulting. All our activity supports
or underpins the technology drive of the Group, with all Consulting
offerings to be delivered on a technology platform, either our own
or licensed from third parties and customised for resale.
Productising Consulting knowledge will also enable KBC to improve
both leverage from resources and increase the lower grade to higher
grade ratio of employees, which in turn will contribute to the
scalability and focus on delivered profit margin for the Consulting
business. The Group also has a strong focus on working with
selective alliance partners in the industry to deliver our
technology and services deeper into our markets.
The KBC's growth strategy comprises six simple areas of
focus:
-- Be a technology leader for engineering and operations
software, increasing the high quality software revenue mix and
anchoring all Consulting solutions to a technology platform
-- Position in our market sectors with differentiated advanced technology
-- Secure revenue, profit and cash flow from Consulting activity
and the move into upstream Profit Improvement Programmes with key
industry alliances that reduce client costs and increase their
production
-- Modernise KBC's own systems; be operationally excellent ourselves with efficiency and scale
-- Ensure KBC is a great place to work that develops leaders, with robust succession plans
-- Ensure a high quality image and brand that commands premium
prices and repeat business throughout the market
Progress was made on all six fronts in 2014 with a step up in
the strategy execution planned for the current year.
In 2015 KBC is focused on market penetration to increase our
Technology footprint in second tier independent refiners, on the
conversion of more national oil company refiners and on supporting
Engineering, Procurement, Construction and Management ("EPCM")
companies as key strategic partners. In the upstream sector, the
new combination of Maximus, Multiflash and Petro-SIM enables our
continued expansion into oil field services companies. We will also
launch upstream operational excellence and Profit Improvement
Programmes, bringing KBC's downstream margin capture experience
into the upstream area. We will continue to invest in the growth
markets of South America, Southeast Asia and the Middle East as
hotspots for technology platform sales and business transformation
projects. Our overall drive is to accelerate technology revenues,
increase consulting margins, drive cash conversion and productise
Consulting intellectual property as a foundation for KBC's
transformation to a technology-led group. This will involve
establishing key alliances in the hydrocarbon industry with new
technology and consulting channels to market. During the
transformation to a technology company KBC will ensure strong
financial discipline, tight cost control and cost reduction
programmes matching current oil market dynamics, as well as seeking
to pay a progressive dividend from increased profit and cash
flows.
FINANCIAL REVIEW
Results
Group revenue increased by 17% in 2014 to GBP76.0m (2013:
GBP65.1m). Consulting revenue was up by 17% to GBP55.0m (2013:
GBP47.2m). Technology revenue was also up 17% to GBP21.0m (2013:
GBP17.9m) and included GBP9.0m of royalty, maintenance, support and
upgrade revenue (2013: GBP7.8m).
Direct costs increased by 41% (GBP3.8m) to GBP13.1m in 2014
(2013: GBP9.3m), mainly due to an increase in subcontractor costs
(GBP2.0m) and the provision of one-off software for a South
American Consulting project. The use of sub-contractors is
dependent on the types of contract we work on during the year and
can therefore fluctuate year on year. The 11% increase in staff and
associate costs to GBP35.9m (2013: GBP32.4m) was proportionally
less than the increase in revenue, reflecting average headcount 9%
higher than 2013 and an increase in short term employee costs
relating wholly to medical insurance and claims. Indirect operating
costs increased by 22% to GBP14.1m (2013: GBP11.6m) reflecting
increased investment in IT systems, people and sales training. In
addition the costs incurred in acquiring FEESA of GBP0.4m (2013:
nil) are included here. Depreciation and amortisation charges were
significantly higher at GBP5.7m (2013: GBP4.4m) due to increased
amortisation relating to the acquisition of FEESA in mid 2014, the
Group's continuing investment in intellectual property and contract
based intangibles.
Profit before tax, adjusted for items which do not reflect
underlying operations, rose by 13% to GBP9.5m (2013: GBP8.4m). This
measure adjusts for development costs carried forward of GBP1.6m
(2013: GBP1.3m), amortisation of development costs carried forward
of GBP1.3m (2013: GBP1.1m), amortisation of acquisition intangibles
of GBP2.1m (2013: GBP1.4m), share based payment charge of GBP0.7m
(2013: GBP0.5m) and other items which do not reflect underlying
operations.
Profit before tax was GBP6.7m (2013: GBP7.1m), a 6% reduction on
2013.
Tax
The tax charge of GBP2.6m (2013: GBP1.6m) is made up of a
current tax expense of GBP3.1m and a deferred tax credit of
GBP0.5m.
The current tax expense includes GBP2.5m (2013: GBP2.5m) of tax
payable on overseas operations and GBP1.6m (2013: GBP1.0m) of
withholding tax. GBP0.6m of the withholding tax is expected to be
recovered against overseas tax payable by way of double tax relief.
As in prior periods, the balance is not expected to be fully
recoverable as a result of there being no creditable tax liability
in the UK.
The 2014 tax charge is higher than last year, with an increase
in the overall effective tax rate from 22% to 39%. Following
revision of the Group's transfer pricing framework last year, the
2013 effective tax rate benefited significantly from a one-off tax
credit. The 2013 effective tax rate before the prior period tax
credit was 42% which would correspond to an overall reduction in
the comparable group effective tax rate over the period.
The group effective tax rate continues to benefit from enhanced
tax deductions for qualifying research and development expenditure.
The Group is continuing to review the location of its assets and
resources globally to further reduce its effective tax rate in
subsequent periods.
Earnings and dividends
The profit after tax for 2014 of GBP4.1m (2013: GBP5.5m) equates
to basic earnings per share of 5.7p (2013: 9.5p) and diluted
earnings per share of 5.5p in 2014 (2013: 9.2p). The decrease in
basic earnings per share is a result of the share placing in June
2014 and the prior period one-off tax credits.
The earnings per share calculated on the adjusted measure was
9.3p (2013: 9.5p). See note 5 for more details.
The Board has decided to continue the payment of dividends with
a proposal to pay a dividend in respect of the 2014 financial year.
Assuming it is approved by shareholders at the annual general
meeting, the dividend will be paid on 22 July 2015 to shareholders
on the register at close of business on 10 July 2015.
Carry forward of software development costs
During 2014 the Group incurred research and development costs of
GBP3.7m (2013: GBP2.7m). This increase largely reflects additional
research and development costs of Infochem and FEESA following the
acquisition. Of this amount GBP1.6m (2013: GBP1.3m) related to
development expenditure for the Group's software suite and has been
carried forward as an intangible asset to be amortised against
expected future sales. The balance was charged directly to staff
and associate costs and direct costs in the Income statement. The
amortisation of previously capitalised software development costs
amounted to GBP1.3m (2013: GBP1.1m).
Net cash and working capital
Net cash at 31 December 2014 was GBP11.0m (2013: GBP6.9m). The
increase is due to the addition of the net placing funds
(GBP23.1m), offset by the acquisition of FEESA (GBP10.0m) and an
increase in working capital requirements. At the year end the Group
had no outstanding bank loans (2013: GBP3.0m).
Trade and other receivables increased during the year from
GBP23.2m to GBP42.3m. The increase in trade receivables of GBP5.3m
to GBP15.0m reflects a timing difference on the receipt of cash.
This had substantially reduced by the end of January 2015, when
trade receivables had fallen to GBP9.2m and net cash had increased
to GBP15.0m. Amounts recoverable under contracts increased by
GBP13.8m, reflecting higher Technology accrued revenue of GBP6.1m
and higher Consulting amounts recoverable of GBP7.7m. This is
expected to be billed in the first half of 2015. Trade and other
payables also increased during the year from GBP12.2m to GBP17.5m
due largely to a significant multi-year contract.
Going concern
The Group's financial statements are prepared on a going concern
basis. The Directors are satisfied that the Group has sufficient
resources and borrowing facilities to meet its requirements for a
period of at least 12 months from the date of this statement.
Andrew Howell Andrew Hebb
Chief Executive Officer Interim Chief Financial Officer
Group income statement
For the year ended 31 December 2014
2014 2013
Note GBP000 GBP000
--------------------------------------- ------ ---------- ----------
Revenue 75,954 65,080
Direct costs (13,113) (9,254)
Staff and associate costs (35,855) (32,383)
Depreciation and amortisation 3 (5,691) (4,414)
Other operating charges (14,132) (11,640)
--------------------------------------- ------ ---------- ----------
Operating profit 3 7,163 7,389
Finance revenue 86 208
Finance cost (578) (476)
--------------------------------------- ------ ---------- ----------
Profit before tax 6,671 7,121
Tax expense 4 (2,592) (1,584)
--------------------------------------- ------ ---------- ----------
Profit for the year 4,079 5,537
--------------------------------------- ------ ---------- ----------
Earnings per share attributable
to the ordinary equity shareholders
of the parent company
Basic 5 5.7p 9.5p
Diluted 5 5.5p 9.2p
--------------------------------------- ------ ---------- ----------
Group statement of comprehensive income
For the year ended 31 December 2014
2014 2013
GBP000 GBP000
------------------------------------------------------- --------- ---------
Profit for the year 4,079 5,537
Other comprehensive income/(loss):
* exchange differences on translation of foreign
operations recognised directly in equity 1,595 (856)
------------------------------------------------------- --------- ---------
Total comprehensive income recognised in
the year 5,674 4,681
------------------------------------------------------- --------- ---------
Group statement of changes in equity
For the year ended 31 December 2014
Capital Share- Foreign
Issued Share redemption Merger Own based exchange Retained
capital premium reserve reserve shares payments reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
At 1 January
2013 1,470 9,370 113 929 (172) 2,180 2,166 15,311 31,367
Profit for the
year - - - - - - - 5,537 5,537
Other
comprehensive
loss - - - - - - (856) - (856)
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
Total
comprehensive
(loss)/ income - - - - - - (856) 5,537 4,681
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
Share-based
payments - - - - - 530 - - 530
Shares issued 9 67 - - (1) - - - 75
Purchase of
non-controlling
interest - - - - - - - (137) (137)
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
At 1 January
2014 1,479 9,437 113 929 (173) 2,710 1,310 20,711 36,516
Profit for the
year - - - - - - - 4,079 4,079
Other
comprehensive
profit - - - - - - 1,595 - 1,595
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
Total
comprehensive
income - - - - - - 1,595 4,079 5,674
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
Share-based
payments - - - - - 700 - - 700
Shares issued
for cash, net
of transaction
costs 540 22,607 - - - - - - 23,147
Shares issued
in business
combination 25 - - 1,205 - - - - 1,230
Share buyback - - - - (196) - - - (196)
Movement in
own shares - - - - (149) - - 149 -
Dividends - - - - - - - (802) (802)
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
At 31 December
2014 2,044 32,044 113 2,134 (518) 3,410 2,905 24,137 66,269
------------------ --------- --------- ------------ --------- -------- ---------- ---------- ---------- --------
Group balance sheet
As at 31 December 2014
2014 2013
GBP000 GBP000
----------------------------------------- ---------- ----------
Non--current assets
Property, plant and equipment 1,026 851
Goodwill 15,401 10,200
Other intangible assets 18,336 12,011
Deferred tax assets 786 447
------------------------------------------ ---------- ----------
35,549 23,509
----------------------------------------- ---------- ----------
Current assets
Trade and other receivables 42,312 23,178
Current tax receivable 2,438 1,647
Cash and cash equivalents 11,883 11,960
56,633 36,785
----------------------------------------- ---------- ----------
Total assets 92,182 60,294
------------------------------------------ ---------- ----------
Non--current liabilities
Long-term borrowings - (600)
Deferred tax liabilities (2,866) (1,476)
Provisions (53) (69)
------------------------------------------ ---------- ----------
(2,919) (2,145)
----------------------------------------- ---------- ----------
Current liabilities
Trade and other payables (17,539) (12,201)
Short-term borrowings (860) (4,429)
Current tax payable (4,441) (4,745)
Provisions (154) (258)
(22,994) (21,633)
----------------------------------------- ---------- ----------
Total liabilities (25,913) (23,778)
------------------------------------------ ---------- ----------
Net assets 66,269 36,516
------------------------------------------ ---------- ----------
Equity attributable to ordinary equity
shareholders of the parent company
Share capital 2,044 1,479
Share premium 32,044 9,437
Other reserves 2,247 1,042
Own shares (518) (173)
Retained earnings 30,452 24,731
------------------------------------------ ---------- ----------
Total equity 66,269 36,516
------------------------------------------ ---------- ----------
Total equity and liabilities 92,182 60,294
------------------------------------------ ---------- ----------
Group cash flow statement
For the year ended 31 December 2014
2014 2013
GBP000 GBP000
-------------------------------------------- ---------- ---------
Net cash inflow from operating
activities
Profit before tax 6,671 7,121
Adjustments for:
Depreciation and amortisation 5,691 4,414
Foreign exchange losses/(gains) 647 (439)
Finance revenue (86) (208)
Finance cost 578 476
Share-based payment expense 700 530
--------------------------------------------- ---------- ---------
14,201 11,894
Increase in trade and other receivables (19,233) (4,285)
Increase/(decrease) in trade and
other payables 2,370 (7,960)
Cash used in operations (2,662) (351)
Income taxes paid (3,369) (1,917)
--------------------------------------------- ---------- ---------
Net cash used in operating activities (6,031) (2,268)
--------------------------------------------- ---------- ---------
Investing activities
Acquisition of subsidiary, net (9,885) -
of cash acquired
Payment of deferred consideration - (1,900)
Purchase of tangible non-current
assets (669) (195)
Purchase of intangible non-current
assets (1,552) (1,334)
Decrease in advance contract payments - 12,287
Finance revenue received 86 208
Net cash (used in)/generated from
investing activities (12,020) 9,066
--------------------------------------------- ---------- ---------
Financing activities
Issue of Ordinary shares 24,014 75
Issue cost of Ordinary shares (867) -
Payments to acquire treasury shares (196) -
Purchase of non-controlling interest - (137)
Repayment of bank borrowings (3,000) (2,400)
Finance costs paid (578) (476)
Dividends paid to equity holders (802) -
of parent
Net cash generated from/(used in)
financing activities 18,571 (2,938)
--------------------------------------------- ---------- ---------
Net increase in cash and cash equivalents 520 3,860
Cash and cash equivalents at 1
January 9,931 6,384
Exchange adjustments 572 (313)
--------------------------------------------- ---------- ---------
Cash and cash equivalents at 31
December 11,023 9,931
--------------------------------------------- ---------- ---------
1. Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2014
or 2013. Statutory accounts for the years ended 31 December 2014
and 31 December 2013 have been reported on by the independent
auditors. The independent auditors' reports on the annual reports
and financial statements for 2014 and 2013 were unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2013 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2014 will be delivered to the Registrar
in due course.
The financial information set out in this preliminary results
release has been prepared using the recognition and measurement
principles of International Accounting Standards, International
Financial Reporting Standards and Interpretations adopted for use
in the European Union (collectively Adopted IFRSs). The accounting
policies adopted in these preliminary results have been
consistently applied to all the years presented and are consistent
with the policies used in the preparation of the statutory accounts
for the period ended 31 December 2013.
2. Segmental analysis
With regard to the Balance sheet, those elements of the Balance
sheet where segmental reporting is prepared have been disclosed.
Those elements are trade receivables and provisions, amounts
recoverable on contracts and deferred revenue.
At the Balance sheet date 39% of total trade receivables were
concentrated with one of the Group's customers (2013: 7%). The
balance was spread over 123 (2013: 172) customers, none of whom
comprised more than 5% (2013: 5%) of the total.
Consulting Technology Unallocated Total
Year ended 31 December GBP000 GBP000 GBP000 GBP000
2014
Revenue from external
customers 54,973 20,981 - 75,954
--------------------------- ------------ ------------ ------------- ---------
Operating profit 2,117 5,046 - 7,163
Finance revenue - - 86 86
Finance cost - - (578) (578)
--------------------------- ------------ ------------ ------------- ---------
Profit/(loss) before
tax 2,117 5,046 (492) 6,671
Tax expense - - (2,592) (2,592)
---------------------------
Profit/(loss) for the
year 2,117 5,046 (3,084) 4,079
--------------------------- ------------ ------------ ------------- ---------
Consulting Technology Unallocated Total
As at 31 December 2014 GBP000 GBP000 GBP000 GBP000
Trade receivables 10,410 4,635 (3) 15,042
Provisions (273) (270) - (543)
--------------------------- ------------ ------------ ------------- --------
Net carrying amount 10,137 4,365 (3) 14,499
--------------------------- ------------ ------------ ------------- --------
Amounts recoverable
on contracts 13,659 12,377 - 26,036
--------------------------- ------------ ------------ ------------- --------
Deferred revenue 802 4,471 - 5,273
--------------------------- ------------ ------------ ------------- --------
2. Segmental analysis continued
Consulting Technology Unallocated Total
Year ended 31 December GBP000 GBP000 GBP000 GBP000
2013
Revenue from external
customers 47,229 17,851 - 65,080
------------------------------- ------- ------------ ------------ ------------- ---------
Operating profit 1,251 6,138 - 7,389
Finance revenue - - 208 208
Finance cost - - (476) (476)
------------------------------- ------- ------------ ------------ ------------- ---------
Profit/(loss) before tax 1,251 6,138 (268) 7,121
Tax expense - - (1,584) (1,584)
-------------------------------
Profit/(loss) for the
year 1,251 6,138 (1,852) 5,537
------------------------------- ------- ------------ ------------ ------------- ---------
Consulting Technology Unallocated Total
As at 31 December 2013 GBP000 GBP000 GBP000 GBP000
Trade receivables 5,863 3,918 (48) 9,733
Provisions (647) (249) (13) (909)
--------------------------- ------- ------ ------------ ------------ ------------- ---------
Net carrying amount 5,216 3,669 (61) 8,824
--------------------------- ------- ------ ------------ ------------ ------------- ---------
Amounts recoverable
on contracts 5,928 6,306 - 12,234
--------------------------- ------- ------ ------------ ------------ ------------- ---------
Deferred revenue 2,305 3,238 - 5,543
--------------------------- ------- ------ ------------ ------------ ------------- ---------
Geographical segments Revenue from Non-current
external customers assets
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
--------------------------- ----------- ---------- -------- --------
Ecuador 25,195 18,858 6 -
United States of America 8,059 7,084 7,109 6,232
Thailand 3,738 2,196 - -
Canada 3,196 4,597 13 11
Russia 2,862 1,726 - -
Mexico 2,553 2,722 - -
Japan 2,158 5,909 9 6
United Kingdom 2,062 1,613 27,515 16,732
Other 26,131 20,375 111 81
--------------------------- ----------- ---------- -------- --------
75,954 65,080 34,763 23,062
--------------------------- ----------- ---------- -------- --------
Revenues above are based on the location of the customer and
non-current assets on the location of the assets. The countries
listed represent those where the total revenue or assets are
greater than 4% of the Group total.
The following customer accounts for more than 10% of the Group's
revenue:
Revenue Percentage
2014 2013 2014 2013
GBP000 GBP000 % %
------------- -------- -------- ------ ------
Customer 1 25,195 18,858 33% 29%
------------- -------- -------- ------ ------
The revenue generated from the major customer is derived from
both Consulting and Technology.
3. Group operating profit
This is stated after charging/(crediting) the 2014 2013
following:
GBP000 GBP000
------------------------------------------------ -------- --------
Depreciation and amortisation:
Depreciation 523 533
Amortisation of intangible assets
- intellectual property rights 1,527 1,042
- development costs carried forward 1,299 1,078
- contract based intangibles 1,805 1,379
- other intangibles 537 382
Total 5,691 4,414
Included in other operating charges:
Operating lease rentals
- minimum lease payments 2,335 2,597
- sublease rentals received (298) (151)
Arbitration costs recoverable - (521)
Share-based payments 700 530
Net foreign exchange differences 70 77
------------------------------------------------ -------- --------
a) Research and development costs
During 2014 the Group incurred research and development costs of
GBP3.7m (2013: GBP2.7m). Of this amount, GBP1.6m (2013: GBP1.3m)
related to development expenditure for Petro--SIM and has been
carried forward as an intangible asset to be amortised against
expected future sales. The balance was charged directly to staff
and associate costs and direct costs in the Income statement.
b) Adjusted profit before tax
2014 2013
GBP000 GBP000
Operating profit 7,163 7,389
Amortisation of acquisition intangibles 2,064 1,424
Development costs carried forward (1,552) (1,334)
Amortisation of development costs carried forward 1,299 1,078
Exceptional amounts recoverable on contracts
provision - 136
Arbitration costs recoverable - (521)
Acquisition costs 352 -
Redundancy and reorganisation income (38) (28)
Share-based payments 700 530
----------------------------------------------------- --------- ---------
Adjusted operating profit 9,988 8,674
Finance revenue 86 208
Finance cost (578) (476)
----------------------------------------------------- --------- ---------
Adjusted profit before tax 9,496 8,406
Tax expense (2,888) (2,876)
----------------------------------------------------- --------- ---------
Adjusted profit after tax 6,608 5,530
----------------------------------------------------- --------- ---------
4. Tax expense
Tax on profit charged in the Income statement
2014 2013
GBP000 GBP000
Current tax expense
Income tax of UK and overseas operations 2,534 2,485
Withholding taxes payable 1,558 975
Withholding taxes recoverable (634) (603)
Adjustment for over provision in prior periods (408) (778)
------------------------------------------------- -------- --------
3,050 2,079
------------------------------------------------- -------- --------
Deferred tax expense
Deferred tax credit for the current period (438) (745)
Adjustment for (over)/under provision in prior
periods (20) 250
------------------------------------------------- -------- --------
(458) (495)
Total tax expense 2,592 1,584
------------------------------------------------- -------- --------
5. Earnings per share
Basic earnings per share are calculated by dividing after tax
net profit for the year attributable to Ordinary shareholders of
the parent company by the weighted average number of Ordinary
shares in issue during the year.
2014 2013
GBP000 GBP000
-------------------------------------------------- -------- --------
Numerator - earnings
Earnings for the purpose of basic EPS 4,079 5,537
Effect of dilutive potential Ordinary shares - -
-------------------------------------------------- -------- --------
Earnings for the purpose of diluted EPS 4,079 5,537
-------------------------------------------------- -------- --------
Number Number
000s 000s
-------------------------------------------------- -------- --------
Denominator - number of shares
Weighted average number of Ordinary shares used
in basic EPS 71,150 58,442
-------------------------------------------------- -------- --------
Number of shares used for basic and adjusted
earnings per share 71,150 58,442
Effect of dilutive potential Ordinary shares 2,559 1,532
-------------------------------------------------- -------- --------
Weighted average number of Ordinary shares for
the purposes of diluted EPS 73,709 59,974
-------------------------------------------------- -------- --------
Pence Pence
-------------------------------------------------- -------- --------
Basic earnings per share 5.7p 9.5p
Diluted earnings per share 5.5p 9.2p
Basic adjusted earnings per share 9.3p 9.5p
Diluted adjusted earnings per share 9.0p 9.2p
-------------------------------------------------- -------- --------
Basic adjusted earnings per share are based upon an after tax
profit as shown in note 3b.
5. Earnings per share continued
The dilution referred to above is shown below:
2014 2013
Number Number
000s 000s
Total share options outstanding 3,445 3,066
Share options excluded (see below) (885) (1,534)
---------------------------------------- -------- ---------
Potentially exercisable share options 2,560 1,532
Fair value shares (1) -
---------------------------------------- -------- ---------
Dilution 2,559 1,532
---------------------------------------- -------- ---------
Share options excluded are those where the exercise price is
greater than the share price at 31 December 2014, those with
performance conditions that have not yet been met and those to be
settled by the employee trusts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JFMBTMBMBTIA
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