RNS No 5724c
KBC ADVANCED TECHNOLOGIES PLC
26th February 1998
KBC Advanced Technologies plc
("KBC" or "the Company")
Preliminary Results for the Year Ended 31 December 1997
FINANCIAL HIGHLIGHTS
1997 1996 Change
Turnover #33.1m #27.3m +21%
Operating profit #7.7m #6.0m +27%
Profit before tax #8.2m #6.1m +34%
Profit after tax #5.1m #3.8m +34%
Earnings per share 11.31p 9.05p +25%
* Strong organic growth underpins the first full year
results since flotation
* Successful expansion of Profit Improvement Program
* Geographical expansion - new contracts in the Middle
East and Japan
* Continued investment in core technology supplemented
with the purchase of Honeywell's Profimatics models business
* New Chairman Designate appointed
Richard Davies, Chairman, KBC Advanced Technologies plc,
commented on the results: "In 1997 we achieved another year
of profitable growth while broadening the scope and
geographic base of the business, and made our first
acquisition.
The current financial year has started well and trading is
in line with our expectations. I am confident that the
Group will make further progress in the year ahead and will
continue to deliver on our strategic objectives."
Enquiries:
KBC Advanced Technologies plc 26.2.98: 0171 583 4567
Richard Davies, Chairman Thereafter: 01932 856622
Michael Press, Deputy Chairman
Peter Close, Chief Executive
Square Mile Communications Ltd 0171 583 4567
Tim Jackaman / Rachel Gilman
Notes: KBC Advanced Technologies plc is a leading
independent process engineering group, providing specialised
consultancy and support services to enable oil refiners to
improve operational efficiency and profitability. Through
its Profit Improvement Program (PIP) KBC analyses refinery
operations and recommends changes that deliver material and
measurable improvements in profitability. KBC has a broad
spread of clients ranging from large integrated oil
companies to small independent refiners.
KBC Advanced Technologies plc
("KBC" or "the Company")
Preliminary Results for the Year Ended 31 December 1997
CHAIRMAN'S STATEMENT
I am pleased to report that KBC's first year as a public
company has been one of achievement, with good progress in
all areas of our business. Following the Company's
flotation on the London Stock Exchange in March, we have
achieved another year of profitable growth while broadening
the scope and geographic base of our business. We also
completed our first acquisition prior to the year end.
RESULTS
Group turnover increased by 21% to #33.1 million (1996:
#27.3 million). Consolidated operating profits of #7.7
million are up 27% on the previous year (1996: #6.0 million)
and Group pre-tax profits have risen by 34% to #8.2 million
(1996: #6.1 million). Operating margin rose from 22.1% to
23.3%.
Profit after tax increased by 34% from #3.8 million to
#5.1million and earnings per share increased by 25% from
9.05p to 11.31p. The percentage increase in earnings per
share is lower than the percentage increase in profit after
tax because the weighted average number of shares in issue
increased as a result of shares issued at flotation and the
exercise of options by employees.
Net interest for the year was #496,000 compared to #82,000
in 1996. This increase primarily reflects the net cash of
#5.5 million raised at flotation and continued effective
management of working capital.
In December we acquired Honeywell's Profimatics process
models' business for a consideration of #3.8 million.
The tax charge for the year as a percentage of profit before
tax was 37.9% (1996: 38.1%). The rate is higher than the
weighted average UK corporation tax rate of 31.5% largely
due to the combined effect of the US Federal and State tax
rates which averaged 40%.
The Board is recommending a final dividend of 2.6p per share
payable on 1 April 1998 to those shareholders on the
register at 13 March 1998.
INDUSTRY OUTLOOK
In the USA and Western Europe, the petroleum refining and
marketing industry continues to consolidate. This trend is
driven by surplus refining capacity and low refining margins
which, in turn, create the need for improved profitability.
This environment is favourable to KBC and the industry is
particularly receptive to companies which can provide profit
improvement opportunities that are not dependent upon
capital investment.
In other markets, although refining margins are somewhat
better, there is still pressure to improve profitability.
KBC has less market penetration outside the USA and Western
Europe and consequently there are significant opportunities
for the Company's Profit Improvement Programs (PIPs). Japan
is a typical example of the opportunities available to KBC.
Having recently deregulated its refining markets, many of
the Japanese refining companies are experiencing lower
refining margins and are therefore focusing on increasing
profitability. KBC has now been contracted for a third PIP
in Japan. In the Middle East KBC has recently signed a
three refinery contract, one of the largest contracts
entered into by KBC.
FUTURE POSITIONING
The Group has continued to expand its profit improvement
activities in the downstream oil industry, both in terms of
scope and geographical coverage. We have successfully
extended the program by offering services in the areas of
mechanical reliability, oil loss and operations
effectiveness, building upon our core services of yield
performance and energy efficiency.
A key element of KBC's strategy is to maintain its position
as a leading source of intellectual property and know-how in
refinery processing. To further strengthen our core
business we acquired Honeywell's Profimatics process models
business prior to the year end.
In the longer term KBC is likely to benefit from the trend
towards outsourcing. Many oil companies are already
outsourcing non-core support services. Over time we expect
this trend to include certain core services where a company
such as KBC can provide improved performance and higher
profitability.
ORGANISATION
Krikor Krikorian, one of the founders of the Company,
elected to retire from the Board in March 1997 at the time
of the flotation. However, he continues to play a leading
role in both process design and catalytic cracking. John
Bunn, who had been a Director since the Company was founded
in 1979, retired as a Non-Executive Director in September
1997. Over the years the Company has benefited from his
wise counsel.
In December last year it was announced that I would be
retiring at the Annual General Meeting on 31 March 1998,
after almost eight years as Chairman. It was also announced
that Michael Press had been appointed Deputy Chairman and
that he would succeed me as Chairman after the AGM. Michael
has extensive experience of the oil refining industry,
having previously held senior positions with a number of
major integrated oil companies including The Standard Oil
Company, British Petroleum and Amerada Hess. His knowledge
of the market and his international experience will, I am
sure, prove a great asset in the future development of the
business.
I would like to take this opportunity to thank all KBC staff
for their commitment and hard work in continuing to develop
KBC into the successful organisation that it is today.
1998 OUTLOOK
The current financial year has started well and trading is
in line with our expectations. I am confident that the
Group will make further progress in the year ahead and will
continue to deliver on our strategic objectives.
Richard J Davies, Chairman 26 February 1998
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
REVIEW OF 1997
Organic growth from profit improvement consulting continued
during 1997. The number of active PIPs increased during the
year, as did contracts for continuing services taken up by
clients following the conclusion of the initial phase of a
PIP.
During 1997 we have successfully broadened both the range of
KBC's services and its geographical base. In addition we
have continued to invest for the Group's long term growth.
A key element of this is the development of our technology
and enhancement of our software tools.
EXPANDED PIP
New services in the areas of mechanical reliability and oil
loss have been further developed during 1997. Benchmarking
in both of these areas is now included in the initial phase
of a PIP. Further work in these areas may be included in
subsequent phases of the program. This enables KBC to
provide a more complete analysis of refinery economic
performance and to help clients exploit their refineries'
full potential in improving profitability.
Improved reliability and maintenance is a priority for many
clients. In response to a growing need to reduce
unscheduled downtime of plant and equipment and improve the
effectiveness of routine maintenance, we have created a
specialised maintenance and reliability team to help clients
implement best practice in these areas.
In the case of oil loss, KBC has established standards for
the measurement of hydrocarbon loss in refineries. Using
methodology developed by the Institute of Petroleum, KBC
undertook a program of oil loss audits at eighteen sites.
The results identified significant discrepancies between
actual and stated oil loss. Given the large volume of crude
oilprocessed at a refinery, even a small percentage loss
reduction can represent a significant improvement in
profitability.
ACQUISITION
Integration of Honeywell's Profimatics process models
business into KBC will be a high priority in 1998. Both KBC
and Profimatics offered stand-alone kinetic reactor models
to refiners throughout the world. The combination of these
two businesses establishes KBC as the industry leader
supplying models of this type. The Profimatics process
models will also be used to enhance PETROfine which supports
KBC's consulting practice. Honeywell will use KBC's models
technology, through a licencing agreement, in its operator
training and advanced process control businesses. The
Profimatics acquisition brings KBC a US West Coast base in
Thousand Oaks, California.
OTHER BUSINESS DEVELOPMENTS
KBC continues to build a consulting practice in the area of
refinery economic decision support. During 1997 the Company
progressed the installation of its first commercial planning
and scheduling system and process monitoring system in
Germany. KBC has also begun to develop a new area of
consulting practice which uses PETROfine, KBC's proprietary
refinery wide simulation model, to improve the accuracy of
the linear programming models used throughout the industry
in crude oil selection and operations planning.
SIGMAfine, KBC's data reconciliation and yield accounting
tool, has been installed in several gas separation plants.
This has identified opportunities for our upstream petroleum
clients to gain increased revenues through better material
balance and loss control. This business is still in the
early stages of development and is progressing in the
Canadian market where it was first introduced.
ORGANISATION
To support the Company's long term growth we have been
successful in recruiting further high quality professional
staff during the year. In particular, a new consulting
office has been established in Breda, The Netherlands. This
office will provide us with a base from which to offer
services to the many local refineries. It will also enable
us to access the engineering talent available in the Belgian
and Dutch refining corridor.
FUTURE
In 1998 we intend to continue the organic growth of the
business supported by selective acquisitions to maintain a
leading position in profit improvement consulting services
in the oil industry, providing high added value to our
customers.
Peter J. Close, Chief Executive
Enquiries
KBC Advanced Technologies plc 26.2.98: 0171 583 4567
Richard Davies, Chairman Thereafter: 01932 856622
Michael Press, Deputy Chairman
Peter Close, Chief Executive
Square Mile Communications 0171 583 4567
Tim Jackaman / Rachel Gilman
Note to Editors: KBC Advanced Technologies plc is a leading
independent process engineering group, providing specialised
consultancy and support services to enable oil refiners to
improve operational efficiency and profitability. Through
its Profit Improvement Program (PIP) KBC analyses refinery
operations and recommends changes that that deliver material
and measurable improvements in profitability. KBC has a
broad spread of clients ranging from large integrated oil
companies to small independent refiners.
KBC Advanced Technologies plc
Group Profit and Loss Account
for the year ended 31 December 1997
Year Year
ended ended
31 31
December December
1997 1996
#'000 #'000
TURNOVER 33,106 27,348
Staff costs (11,666) (9,362)
Depreciation (784) (606)
Other operating charges (12,954) (11,333)
--------- ---------
OPERATING PROFIT 7,702 6,047
Interest receivable 499 91
Interest payable (3) (9)
--------- ---------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 8,198 6,129
Taxation on profit on ordinary activities (3,108) (2,333)
--------- ---------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION 5,090 3,796
Dividends - equity interests (1,211) (1,778)
--------- ---------
RETAINED PROFIT FOR THE PERIOD 3,879 2,018
========= =========
Earnings per share - basic 11.31p 9.05p
- fully diluted 10.31p 8.43p
KBC Advanced Technologies plc
Group Balance Sheet
as at 31 December 1997
31 December 1997 31 December 1996
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 1,996 -
Tangible assets 1,903 1,388
Investments 358 2
------- -------
4,257 1,390
CURRENT ASSETS
Debtors 7,229 5,829
Cash at bank and in hand 9,205 1,404
16,434 7,233
-------- --------
CREDITORS: amounts falling
due within one year (7,961) (3,712)
-------- --------
NET CURRENT ASSETS 8,473 3,521
-------- --------
TOTAL ASSETS LESS CURRENT
LIABILITIES 12,730 4,911
CREDITORS: amounts falling
due after more than one year (2) (4)
-------- --------
12,728 4,907
CAPITAL AND RESERVES -------- --------
Called up share capital 1,164 1,054
Share premium account 5,537 104
Capital reserve 24 24
Merger reserve 147 147
Profit and loss account 5,856 3,578
-------- --------
SHAREHOLDERS' FUNDS -
equity interests 12,728 4,907
-------- --------
KBC Advanced Technologies plc
Group Cash Flow Statement
for the year ended 31 December
1997 1996
#'000 #'000
Operating profit 7,702 6,047
Depreciation 784 606
Loss on disposal of fixed assets 5 16
(Increase) in debtors (1,385) (1,360)
Increase in creditors 2,362 344
Exchange difference 116 7
-------- --------
Net cash from operations 9,584 5,660
-------- --------
Returns on investments and servicing of
finance
Interest received 499 91
Interest paid (3) (9)
-------- --------
496 82
-------- --------
Taxation (2,349) (2,074)
-------- --------
Capital expenditure and financial investment
Payments to acquire tangible fixed
assets (1,287) (1,022)
Receipts from sales of tangible
fixed assets - 2
-------- --------
(1,287) (1,020)
-------- --------
Acquisitions and disposals
Purchase of business (3,727) -
-------- --------
Equity dividends paid - (1,933)
-------- --------
Management of liquid resources
(Increase)/decrease in short term
deposits (3,181) -
-------- --------
Financing
Repayments of capital element of
finance lease rentals (13) (47)
Redemption of share - (306)
Net proceeds from issue of shares 5,543 237
Repayment of loan - (108)
Purchase of own shares (356) -
-------- --------
Net cash inflow/(outflow) from financing 5,174 (224)
-------- --------
Increase in cash in the year 4,710 491
Reconciliation of net cash flows to
movements in net funds
Increase in cash in the year 4,710 491
Cash outflow from the decrease in
lease financing 13 156
Cash used to increase liquid resources 3,181 -
-------- --------
Change in funds resulting from cash flow 7,904 647
New finance leases - (7)
Translation difference 2 (47)
-------- --------
Movement in net funds in the period 7,906 593
Net funds at 1 January 1,295 702
-------- --------
Net funds at 31 December 9,201 1,295
-------- --------
KBC Advanced Technologies plc
Notes
1. Basis of preparation
The above financial information does not constitute
statutory accounts as defined by section 240 of the
Companies Act, 1985. The results of the year ended 31
December 1997 and the balance sheet at that date are
extracted from the statutory accounts (on which the
auditors have given an unqualified opinion), which will
be filed with the Registrar of Companies. The
comparative financial information is extracted from the
statutory accounts for the year ended 31 December 1996
(on which the auditors have given an unqualified
opinion), which have already been sent to shareholders
and filed with the Registrar of Companies.
Copies of the annual report will be sent to
shareholders. Further copies may be obtained from the
Company Secretary, KBC Advanced Technologies plc, KBC
House, Churchfield Road, Weybridge, Surrey, KT13 8DB.
2. Earnings per share
The calculation of earnings per share is based upon
earnings of #5,090,000 (1996: #3,796,000) and on
45,001,472 (1996: 41,968,472) ordinary shares, being
the weighted average number of ordinary shares in
issue during the period.
END
FR TAMRBLLITBAP
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