RNS Number:8165C
KBC Advanced Technologies plc
10 September 2004
Embargoed until 0700 10 September 2004
KBC Advanced Technologies plc
("KBC")
Interim results for the six months ended 30 June 2004
KBC Advanced Technologies plc, a leading consultant to the oil industry,
announces its results for the six months ended 30 June 2004.
Six months Six months
ended 30 June ended 30 June
2004 2003
Turnover #15.9 million #16.7 million
Operating profit * #0.5 million #0.0 million
Profit before tax * #0.5 million #0.1 million
Basic earnings/(loss) per share (0.32p) (2.18p)
Adjusted earnings/(loss) per share * 0.91p (0.02p)
* before goodwill amortisation and exceptional items
Highlights
*Year of transition; re-aligning business to deliver competitive advantage
in partnership with clients
*Significant improvement in operating profit compared with prior year
period
*Petro-SIM launched earlier this week which will form the core of KBC's
software and consulting offering
*Traditional consulting remains challenging in the US, but progress is
being made in Europe and Asia
*Strong growth in software revenues
*New initiatives in the upstream oil industry and petrochemicals lead to
contract awards in excess of #3 million
*Underlying improvement masked by weak US$ - turnover up 6% at constant
exchange rates against the second half of 2003.
Commenting on the results, Christopher Powell-Smith, Chairman of KBC said:
"Despite the rise in oil prices trading has remained difficult in 2004. However,
the current environment is such that the technology and expertise of KBC is in
high demand. Our strategy this year of re-positioning the business to deliver
sustainable competitive advantage in partnership with our clients will ensure
that we strengthen our position as a market leader in this field.
We are delighted to announce the launch of Petro-SIM which is a key enabler in
delivering this strategy of competitive advantage, holding an unrivalled
position in the market and a driving force for the resumption of growth in
revenues and operating profit in 2005."
- Ends -
For further information, please contact:
KBC Advanced Technologies plc www.kbcat.com
Peter Close, Chief Executive On 10 September: 020 7067 0700
Nick Stone, Finance Director Thereafter: 01932 236314
Weber Shandwick Square Mile
Mike Kirk/Sarah MacLeod/Sarah Richardson 020 7067 0700
A briefing for analysts will be held at 9.45 for 10.00am today at the offices of
Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS.
Notes to Editors:
KBC Advanced Technologies plc is the leading independent process engineering
group delivering improved profitability through consulting services and
practical solutions to owners and operators of oil refineries and other clients
in the process industries worldwide. KBC analyses plant operations and
management systems, recommends changes that deliver material and measurable
improvements in profitability and provides implementation services to assist
clients in realising measurable financial improvements. KBC also forecasts crude
and petroleum products prices, and offers economic and pricing studies focused
on the future outlook for the oil industry. KBC works with its clients both to
implement its recommendations and to realise and monitor the resulting
improvements in profits on a continuing basis. In carrying out this work its
consultants make extensive use of the process simulation software tools which
KBC has developed.
Chairman's Statement
As we indicated in our 2003 Annual Report, 2004 is a year of transition for KBC
while we progress the strategic initiatives needed to turn the business round.
Underpinning all of the initiatives are the changes we are making to realign the
business to our clients' needs. It is clear that we must offer our clients a
continuous process designed to deliver sustainable competitive advantage in
partnership with them. This realignment has therefore focused on key account
management to strengthen client relationships while not losing the flexibility
to respond effectively to our traditional one-off consulting projects.
The successful pursuit of the software dispute in order to recover our rights to
HYSYS.Refinery was a key enabling step. Software will play an increasingly
important role as we build the business, both as a tool for our consultants and
as a technology transfer mechanism to our customers. While early indications are
positive, the benefits of this transition will not have a material impact on our
financial performance in 2004.
Results
KBC operates in a US dollar denominated environment. Our underlying performance
in key markets is, therefore, masked by changes in the US dollar/sterling
exchange rate. At constant exchange rates turnover increased from the same
period in 2003 by around 1%. However, the continuing weakness in the US dollar
in the first half of 2004 led the sterling equivalent turnover to decrease by
close to #1m compared to the first half of 2003. Consequently the reported
results show a decrease in turnover of 5%, or #0.7m, over the same period last
year. Turnover increased by 6% when compared with the second half of 2003 at
constant exchange rates, and by 2% at the prevailing rates.
Operating costs before exceptional items and goodwill amortisation fell by 2% at
constant exchange rates, or by 8% when the benefits of the weaker US dollar are
included. Operating profit before exceptional charges and goodwill amortisation
for the period increased from #0.04m to #0.5m. At constant exchange rates the
increase would have been to a slightly higher figure of #0.6m.
Operating exceptional charges totalling #0.5m have been incurred relating to the
costs of the ongoing legal proceedings with AEA Technology PLC ("AEA") and Aspen
Technology Inc ("Aspen"), being gross costs of #0.8m, less #0.3m costs awarded
against AEA in arbitration. Net funds fell by #0.8m overall with the major
factors being a net cash inflow from operations of #1.3m, offset by the cash
impact of exceptional operating costs of #0.3m and the 2003 final dividend of
#1.3m.
Dividend
KBC dividend payments have not been covered by earnings for the last two years.
In the 2003 Annual Report we indicated that we would be considering realignment
of our dividend payments to relate them more closely to the underlying earnings
of the business. In this period of transition at KBC the Board has therefore
decided that it would now be appropriate to pay a reduced interim dividend of
0.2p (2003: 1.3p) per share for the first half of 2004. This will be paid on 8
October 2004 to shareholders on the register at the close of business on 24
September 2004. On an ongoing basis it is anticipated that the split in our
dividend will be approximately one third/two thirds between our interim and
final results.
Software Dispute
It was extremely pleasing to be able to report in May this year that we had been
successful in obtaining the source code for HYSYS.Refinery. Costs have also been
awarded in our favour in respect of the arbitration hearing which will lead to a
further cost recovery later this year.
The HYSYS.Refinery product has been rebranded as Petro-SIM and was launched
earlier this week. A team of developers familiar with the software has been
recruited to ensure that we can continue to enhance the product range The next
version of Petro-SIM is due to be released in early 2005. Petro-SIM will form
the core of our service offering, combining the value delivered through the
experience of our consultants with a refinery-wide simulation product unrivalled
in the current market.
Operational review
The operational focus of the business during the period has been on the
development of the next generation of software and consulting services,
incorporating the recent launch of Petro-SIM. A strategic planning consultancy
group has been formed to advise our clients on commercial, technical and
strategic planning, and business risk management. Several initial assignments
are under way. In May we announced the ProfitManager initiative which provides
simulation software-based services to oil refineries to support business
processes, allowing our team to deliver continuous improvement in operating
profitability. This should result in a longer term and more relationship focused
partnership with our clients, capable of reacting to changes in a dynamic
environment.
Overall revenues in the process consulting area remained below target during the
first half of 2004. However, the continuing efforts put into rebuilding revenues
in Western Europe and the results of the business development initiatives in
KBC's UK office are now yielding results, with significant contracts now under
way in the Middle East, FSU and South Africa. Whilst the level of business has
been lower than previous years in North America, loss of projects to competition
remains low. The ongoing challenge in the US is the repositioning of our
relationships with the key group of clients that has emerged from the
consolidation in the oil refining industry over the last few years. Sales remain
strong in the Japanese and Korean markets.
In our increasingly important software business we have delivered revenue growth
of 70% compared to the same period in 2003 as we have continued to increase
sales of our stand-alone reactor models. Revenue generation in most of our other
business streams, including energy consulting, planning services, petroleum
economics, and reliability and maintenance, has been on track. It is also
pleasing to note that the new initiatives in the upstream oil industry and
petrochemicals led to new contract awards in excess of #3m in the first half of
2004. We continue to assess the market's changing requirements for our
consulting services and will be ensuring that our capabilities and capacity are
aligned to the medium and longer term industry needs.
2004 Outlook
Despite high oil prices, trading in 2004 remains difficult. We do not expect any
material revenues from Petro-SIM this year and only next year will the benefits
of the service transition that we are undertaking start to become evident.
Petro-SIM development costs are now being incurred and we expect these to total
around #400,000 in the second half of 2004, with an annualised total of #1m for
the next few years to be written off to the profit and loss account. In view of
this investment in the future, it is expected that operating profit before
exceptional items and goodwill will fall in the second half of the year compared
to the first half, and accordingly the full year is expected to deliver an
operating result in line with 2003.
The outlook for 2005 is for a resumption of growth both in terms of revenue and
operating profit, driven by the launch of Petro-SIM. Oil refining capacity is
fully utilised and refinery throughputs are at maximum levels in many countries,
particularly the US. Consequently the industry is experiencing the highest
margins for many years. This environment provides many opportunities to utilise
our technology and experience to increase refining capacity while respecting
environmental constraints and to develop cohesive site-wide energy conservation
strategies. Despite the industry consolidation, oil companies continue to search
for downstream competitive advantage, while retaining the skills required in
their core business. This is the need which KBC seeks to fulfill through
developing partnership alliances to deliver continuous profit improvement. We
expect these opportunities to translate into stronger demand for our improved
services and software next year as clients utilise higher profits to optimise
operations.
Christopher B Powell-Smith
Chairman
10 September 2004
Group profit and loss account
for the six months ended 30 June 2004
Unaudited 6 months to 30 June 2004
---------------------------------------
Before Unaudited Audited
exceptional 6 months to 12 months to
charges and 30 June 31 December
goodwill Exceptional Goodwill 2003 2003
amortisation charges amortisation Total Total Total
Notes #000 #000 #000 #000 #000 #000
------------------------------------------------------------------------------------------------------
Turnover 15,907 - - 15,907 16,699 32,274
Staff costs (7,854) - - (7,854) (8,584) (17,491)
Depreciation
and amortisation (426) - (245) (671) (769) (1,437)
Other operating
charges 4 (7,140) (496) - (7,636) (8,607) (15,529)
------------------------------------------------------------------------------------------------------
Operating
(loss)/profit 487 (496) (245) (254) (1,261) (2,183)
Interest receivable 26 - - 26 74 200
------------------------------------------------------------------------------------------------------
(Loss)/profit on
ordinary activities
before taxation 513 (496) (245) (228) (1,187) (1,983)
Taxation on (loss)
/profit on ordinary
activities (90) 169 - 79 171 499
------------------------------------------------------------------------------------------------------
(Loss)/profit on
ordinary activities
after taxation 423 (327) (245) (149) (1,016) (1,484)
Dividends - equity
interests (93) (605) (1,906)
------------------------------------------------------------------------------------------------------
Retained loss for
the period (242) (1,621) (3,390)
------------------------------------------------------------------------------------------------------
(Loss)/earnings per
share (pence)
- basic 2 (0.32) (2.18) (3.19)
- diluted 2 (0.32) (2.15) (3.17)
Basic(loss)/earnings
per share (pence)
before exceptional
items and goodwill
amortisation 2 0.91 (0.02) 1.37
------------------------------------------------------------------------------------------------------
Group balance sheet
at 30 June 2004
Unaudited Restated and Unaudited Restated and Audited
at 30 June at 30 June at 31 December
2004 2003 2003
---------------------------------------------------------------------------------------
#000 #000 #000 #000 #000 #000
Fixed assets
Intangible assets 4,441 5,082 4,770
Tangible assets 1,910 2,246 1,999
Investments 2 302 302
---------------------------------------------------------------------------------------
6,353 7,630 7,071
Current assets
Debtors 13,622 13,843 12,664
Investments 300 300 300
Cash at bank
and in hand 3,454 4,294 4,275
---------------------------------------------------------------------------------------
17,376 18,437 17,239
Creditors:
amounts falling due
within one year (5,043) (4,935) (4,932)
---------------------------------------------------------------------------------------
Net current assets 12,333 13,502 12,307
---------------------------------------------------------------------------------------
Total assets
less current
liabilities 18,686 21,132 19,378
Creditors:
amounts falling due
after one year - (300) (300)
Provision for
liabilities
and charges (1,132) (704) (1,180)
--------------------------------------------------------------------------------------
17,554 20,128 17,898
--------------------------------------------------------------------------------------
Capital and reserves
Called up
share capital 1,202 1,202 1,202
Share premium
account 6,038 6,038 6,038
Capital reserve 79 79 79
Merger reserve 147 147 147
Reserve for own
shares (685) (685) (685)
Profit and
loss account 10,773 13,347 11,117
-------------------------------------------------------------------------------------
Shareholders'
funds: equity
interests 17,554 20,128 17,898
-------------------------------------------------------------------------------------
Group statement of cash flows
for the six months to 30 June 2004
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2004 2003 2003
Note #000 #000 #000
-------------------------------------------------------------------------------
Net cash inflow/(outflows) from
operating activities 3 961 (1,912) (1,571)
-------------------------------------------------------------------------------
Returns on investments and servicing
of finance
Interest received 26 74 200
-------------------------------------------------------------------------------
Taxation (214) 352 769
-------------------------------------------------------------------------------
Capital expenditure and financial
investment
Payments to acquire tangible
fixed assets (259) (112) (257)
-------------------------------------------------------------------------------
Acquisitions
Payment of loan notes (300) (710) (710)
Cash returned from deposit in
respect of acquisition loan
notes 300 300 300
-------------------------------------------------------------------------------
Net cash outflow from
acquisitions - (410) (410)
-------------------------------------------------------------------------------
Equity dividends paid (1,302) (1,302) (1,906)
-------------------------------------------------------------------------------
Management of liquid resources
Decrease in short term deposits 714 3,316 2,806
-------------------------------------------------------------------------------
Financing
Shares issued - - -
Redemption of shares - - -
-------------------------------------------------------------------------------
Net cash inflow/(outflow) from
financing - - -
-------------------------------------------------------------------------------
(Decrease)/Increase in cash in
the period (74) 6 (369)
-------------------------------------------------------------------------------
Reconciliation of net cash flows to
movements in net funds
(Decrease)/Increase in cash in
the period (74) 6 (369)
Decrease in short-term deposits (714) (3,316) (2,806)
-------------------------------------------------------------------------------
Change in net funds resulting
from cash flow (788) (3,310) (3,175)
Loan notes 300 710 710
Cash returned from deposit in
respect of loan notes (300) (300) (300)
Translation difference (33) (19) (173)
-------------------------------------------------------------------------------
Movement in net funds in the
period (821) (2,919) (2,938)
Net funds at start of period 4,275 7,213 7,213
-------------------------------------------------------------------------------
Net funds at end of period 3,454 4,294 4,275
-------------------------------------------------------------------------------
Notes to the accounts
1 Basis of preparation
These unaudited interim financial statements, which do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985, have been
prepared using the accounting policies set out in the Group's 2003 statutory
accounts. UITF 38 which came into force in December 2003 has been adopted in the
preparation of these unaudited interim financial statements. The Group balance
sheets at 30 June 2003 and 31 December 2003 have been restated to reflect the
adoption of UITF 38. The restatement of the Group balance sheet at 31 December
2003 has not been audited.
The statutory accounts for the year ended 31 December 2003 received an
unqualified auditor's report and have been delivered to the Registrar of
Companies.
The interim report will be sent to shareholders. Further copies may be obtained
from the Company Secretary, KBC Advanced Technologies plc, KBC House, 42-50
Hersham Road, Walton on Thames, Surrey, KT12 1RZ.
2 Loss per share
The calculation of basic loss per share is based upon a loss of #149,000 (2003:
loss of #1,016,000) and on 46,490,913 (2003: 46,490,913) Ordinary Shares, being
the weighted average number of Ordinary Shares in issue during the period after
excluding the shares owned by the KBC Advanced Technologies plc Employee Trust.
The diluted loss per share is based upon 46,753,956 (2003: 47,184,755) Ordinary
Shares, allowing for the full exercise of outstanding purchase options, and a
loss of #149,000 (2003: loss of #1,016,000).
The calculation of basic earnings per share before exceptional items and
goodwill amortisation is based upon a profit of #423,000 (2003: Loss of #12,000
being loss on ordinary activities after taxation of #1,016,000 less exceptional
charges of #1,020,000 less tax thereon of #(296,000) and less goodwill
amortisation of #280,000) and on 46,490,913 (2003: 46,490,913) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue during the period
after excluding the shares owned by the KBC Advanced Technologies plc Employee
Trust.
3 Reconciliation of operating loss to net cash inflow/(outflow) from operations
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2004 2003 2003
#000 #000 #000
-------------------------------------------------------------------------------
Operating loss (254) (1,261) (2,183)
Depreciation and amortisation 670 769 1,437
Decrease/(increase) in debtors (672) (1,305) (309)
Increase/(decrease) in creditors 1,257 (62) (371)
Decrease in provisions (40) (53) (145)
-------------------------------------------------------------------------------
Net cash inflow/(outflow) from
operating activities 961 (1,912) (1,571)
-------------------------------------------------------------------------------
4 Exceptional charges
Other operating charges
Other operating charges comprise the following item:
Legal costs of #0.5m have been incurred in respect the ongoing arbitration
process concerning a joint development agreement and in respect of legal
proceedings initiated by the Company in the United States. This net cost
includes a recovery of #0.3m in respect of costs awarded as a result of the
march 2003 arbitration partial award. These costs decreased profit after tax by
#0.5m, with a cash outflow of #0.3m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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