RNS No 6323m
KBC ADVANCED TECHNOLOGIES PLC
6 August 1999
KBC Advanced Technologies plc
("KBC" or "the Group")
Interim Results for the Six Months to 30 June 1999
FINANCIAL HIGHLIGHTS
6 months 6 months 12 months
to to to
30.6.99 30.6.98 30.12.98
Unaudited Unaudited Audited
Turnover #19.7m #18.7m #39.0m
Operating profit #2.6m #3.3m #7.7m
Profit before tax #5.6m* #3.6m #8.4m
Profit after tax #3.7m* #2.3m #6.1m
Earnings per share 7.88p* 4.90p 13.13p
Dividend per share 1.3p 1.3p 3.9p
* after exceptional gain of #2.8m relating to sale of Sigmafine
- Revenue growth despite difficult market background
- Continuing Services lengthening client engagements
- AEA software alliance
- Sale of Sigmafine business
- First penetration of South American market
- Strong cash flow
- Well positioned to respond to opportunities available
- Oil industry in state of flux
Commenting on the results Michael Press, Chairman of KBC, said:
"During the remainder of 1999 we expect difficult market
conditions to continue. Notwithstanding the corrective actions
taken, turnover for the full year is likely to be below the level
achieved in 1998. We continue to believe, as warned in June, that
profit from operations for the full year will be significantly
below the level achieved during 1998.
"The Group continues to be well positioned to serve the needs of
its refining industry clients. Refiners will remain under
pressure to deliver higher profits and to do so without
significant capital investment. This is precisely what KBC seeks
to deliver through its consulting practice. In a challenging
market environment, we will continue to be proactive and
innovative in matching our services to meet our clients' changing
needs."
Enquiries:
KBC Advanced Technologies plc 6 August 1999: 0171 601 1000
Michael W Press, Chairman Thereafter: 01932 856622
Wayne P C Hutchinson, Chief Operating Officer
Iain P McIntosh, Finance Director
Square Mile Communications Ltd 0171 601 1000
Tim Jackaman/Kirsty Hall
Notes 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. KBC has a broad spread
of clients ranging from large integrated oil companies to small
independent refiners.
KBC Advanced Technologies plc
("KBC" or "the Group")
Interim Results for the Six Months to 30 June 1999
Despite the recent rally in oil prices, market conditions continue
to be difficult for companies which provide services to the
petroleum industry. As warned in the trading update in June,
continued consolidation within the sector and strict controls on
capital and operating expenditure are still dampening demand for
KBC's services in the short term.
Turnover of #19.7m during the first half of 1999 showed a 5%
increase over the same period last year (1998: #18.7m). Although
steps have been taken to reduce costs, operating profit for the
six months ended 30 June 1999 reduced to #2.6m (1998: #3.3m). As
a result of the exceptional gain of #2.8m associated with the sale
of the Group's Sigmafine business, profit before tax in 1999
increased to #5.6m (1998: #3.6m).
Earnings per share increased to 7.88p (1998: 4.90p). However,
excluding the exceptional gain, earnings per share would have been
3.95p, a reduction of 19% on last year.
Notwithstanding the significant cost reduction program implemented
in April and the globalisation of the consultancy resource, KBC's
consultants were not fully utilised. As a result, operating
margins have decreased to 13.0% (1998: 17.7%). However, gross
sales margins remain largely unaffected, confirming that clients
still recognise the high value-added nature of KBC's services.
Cash generation remains strong, with net cash from operations
during the first half of 1999 being #3.4m (1998: #3.5m). The sale
of Sigmafine generated an additional #3.1m.
Despite the challenging market conditions and some evidence of
increased competition from new market entrants, we believe that
the breadth of expertise and experience of our consultancy team,
together with our proprietary software tools, will enable KBC to
continue to occupy a market leading position in our specialised
field. We remain confident that KBC's long term future is
extremely healthy.
Dividend
Reflecting the Board's confidence in the Group's long-term growth
potential, the interim dividend has been held at 1.3p per share
and will be paid on 1 October 1999 to those shareholders on the
register at the close of business on 10 September 1999.
Operational Review
The global oil industry continues to restructure to face the
challenges of a sustained low oil price environment. Despite the
improvement in oil price trend since March, client budgets have
not yet been relaxed, with the industry taking a cautious view on
the sustainability of the recent oil price rally. Refining
margins also remain low. As a result discretionary spending
remains unusually low. The continued consolidation in the oil
industry, and the migration of this trend from the US to Europe,
has exacerbated the impact of this spending constraint.
These conditions have resulted in both a more competitive market
environment and a substantially longer lead time to convert a
sales prospect to a firm order. This has led to consulting
capacity being under utilised, which has depressed profits.
In response to the harsh market environment, KBC has taken steps
to reduce its cost base. During the second quarter, KBC reduced
staff levels by 10% through a redundancy program. The benefit of
the lowered cost base will be delivered in the second half. These
staff reductions have been targeted to ensure that the long term
growth potential of the business is not affected. In areas such
as Continuing Services, which are still demonstrating strong
growth, recruitment will continue.
In addition to active management of its cost base, the Group
continues to develop its core consulting services to further
differentiate KBC in the market place. One recent development is
a new product, designed for the small refinery market. Another is
the selective use of innovative commercial terms whereby KBC's
fees are based, in part, upon the profit improvements created from
its work.
Although the financial results were disappointing, there were
several notable accomplishments during the first half of 1999.
In June it was announced that the two software related
transactions announced in December 1998 and March 1999 had been
finalised.
A definitive agreement was concluded with AEA Technology plc to
cross-license certain technologies and jointly develop and market
software products.
A final agreement was signed with OSI Software Inc for the sale of
KBC's Sigmafine mass balance, data reconciliation and yield
accounting technology. KBC will, however, retain a license to use
Sigmafine in its consulting practice.
These arrangements largely complete the repositioning of KBC's
software business. KBC will now focus on its core strengths in
consulting and proprietary process technology, with partners being
used to develop the software 'wrapper' in which the technology
resides.
In our consulting business, KBC is pleased to have been awarded
its first PIP in the South American market, despite
developing a market presence only late last year, and continues to
generate significant income from the Japanese market.
We continue to experience strong growth in Continuing Services
contracts following the initial PIP. We have also had some
initial success at signing multi-year contracts covering
Continuing Services at the same time as starting a PIP. Both
serve to lengthen the duration of the engagement with our clients
which will lower sales costs and enhance revenue visibility.
Year 2000 Compliance
To address the issue of Year 2000 compliance the Directors
appointed a cross-disciplinary committee to co-ordinate and manage
all global compliance activities. After a full inventory of the
activities of the Group, its products and suppliers, remedial
steps are being taken where necessary. Testing of KBC's own
products is complete and the final steps are being taken to ensure
compliance. Internal systems have been thoroughly evaluated and
compliance is expected later in the year following delivery of
upgrades from third party suppliers. Assurances are currently
being sought from clients as to their own compliance status to
avoid interruption in KBC's revenues.
Given the complexity of the problem and an organisation's
dependency on third parties, it is not possible for any
organisation to guarantee that there will be no disruption as a
result of Year 2000 problems. However, the Board believes that it
will achieve an acceptable state of readiness such that no
material risk to the business in expected.
The costs involved in implementing action plans are immaterial and
have been included as part of the normal operating and capital
cost of the business.
Organisation and Management
John C Brice and Krik V Krikorian, two of the three founders of
the Group, have elected to retire on 3 September 1999. However, I
am pleased to report that they have agreed to continue to be
available to the Group periodically, on a part time basis,
beginning in 2000 so we will not lose access to their valuable
talents and insights. Mr Brice will be resigning from the Board
coincident with his retirement.
1999 Outlook
During the remainder of 1999 we expect difficult market conditions
to continue. Notwithstanding the corrective actions taken,
turnover for the full year is likely to be below the level
achieved in 1998. We continue to believe, as warned in June, that
profit from operations for the full year will be significantly
below the level achieved during 1998.
In a market with strong growth prospects new competitors
periodically enter the market. While we are never complacent, we
remain confident that our unrivalled experience and track record,
unique proprietary tools, superior service and product offerings,
together with our independence, will continue to differentiate KBC
in the market place.
The Group continues to be well positioned to serve the needs of
its refining industry clients. Refiners will remain under
pressure to deliver higher profits and to do so without
significant capital investment. This is precisely what KBC seeks
to deliver through its consulting practice. In a challenging
market environment, we will continue to be proactive and
innovative in matching our services to meet our clients' changing
needs.
Michael W Press Executive Chairman
6 August 1999
Enquiries:
KBC Advanced Technologies plc 6 August 1999: 0171 601 1000
Michael W Press, Chairman Thereafter: 01932 856622
Wayne P C Hutchinson, Chief Operating Officer
Iain P McIntosh, Finance Director
Square Mile Communications Ltd 0171 601 1000
Tim Jackaman/Kirsty Hall
Notes 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. 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 Six Months to 30 June 1999
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 June 30 June 31 December
1999 1998 1998
#'000 #'000 #'000
TURNOVER 19,687 18,701 39,006
Staff costs (8,170) (7,098) (14,315)
Depreciation (687) (630) (1,217)
Other operating charges (8,264) (7,658) (15,756)
------ ------ ------
OPERATING PROFIT 2,566 3,315 7,718
Profit on sale of
business 2,811 - -
------ ------ ------
PROFIT ON ORDINARY
ACTIVITIES BEFORE
INTEREST AND TAXATION 5,377 3,315 7,718
Interest receivable 256 300 637
Interest payable - - (2)
------ ------ ------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 5,633 3,615 8,353
Taxation on profit on
ordinary activities (1,915) (1,319) (2,221)
------ ------ ------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 3,718 2,296 6,132
Dividends - equity interests (615) (615) (1,859)
------ ------ ------
RETAINED PROFIT FOR THE
PERIOD 3,103 1,681 4,273
------ ------ ------
Earnings per share
- basic 7.88p 4.90p 13.13p
- diluted 7.51p 4.60p 12.40p
KBC Advanced Technologies plc
Group Balance Sheet
as at 30 June 1999
UNAUDITED Unaudited Audited
at 30 June at 30 June at 31 December
1999 1998 1998
#'000 #'000 #'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 1,760 1,853 1,796
Tangible assets 2,104 2,335 2,275
Investments 1,094 358 1,094
----- ----- -----
4,958 4,546 5,165
CURRENT ASSETS
Debtors 10,528 8,564 9,803
Cash at bank and in
hand 15,565 10,671 10,587
----- ----- -----
26,093 19,235 20,390
CREDITORS: amounts
falling due within
one year (10,253) (9,382) (8,568)
----- ----- -----
NET CURRENT ASSETS 15,840 9,853 11,822
----- ----- -----
TOTAL ASSETS LESS
CURRENT LIABILITIES 20,798 14,399 16,987
CREDITORS: amounts
falling due after
more than one year (1) (2) (2)
------ ------ ------
20,797 14,397 16,985
------ ------ ------
CAPITAL AND RESERVES
Called up share
capital 1,197 1,184 1,188
Share premium account 5,652 5,575 5,586
Capital reserve 24 24 24
Merger reserve 147 147 147
Profit and loss account 13,777 7,467 10,040
------ ------ ------
SHAREHOLDERS' FUNDS
- equity interests 20,797 14,397 16,985
------ ------ ------
KBC Advanced Technologies plc
Group Cash Flow Statement
for the Six Months to 30 June 1999
Unaudited Unaudited Audited
6 months 6 months to 12 months to
to 30 June to 30 June 31 December
1999 1998 1999
#'000 #'000 #'000
Operating profit 2,566 3,315 7,718
Depreciation and
amortisation 687 630 1,217
Increase in debtors (242) (1,337) (2,891)
(Decrease)/increase in
creditors (52) 853 444
Exchange differences 424 14 (55)
------ ------ ------
817 160 (1,285)
------ ------ ------
Net cash from operations 3,383 3,475 6,433
------ ------ ------
Returns on investments and
servicing of finance
Interest received 256 300 637
Interest paid - - (2)
------ ------ ------
256 300 635
------ ------ ------
Taxation (335) (131) (1,761)
------ ------ ------
Capital expenditure and
financial investment
Payments to acquire fixed
assets (344) (991) (1,417)
------ ------ ------
Acquisitions and disposals
Sale of business 3,111 - -
------ ------ ------
Equity dividends paid (1,235) (1,223) (1,836)
------ ------ ------
Management of liquid resources (4,812) (3,237) (3,468)
------ ------ ------
Financing
HP paid (1) (1) (2)
Shares issued 75 57 73
Purchase of own shares - - (736)
------ ------ ------
74 56 (665)
------ ------ ------
Increase/(decrease) in funds
in the period 98 (1,751) (2,079)
------ ------ ------
Reconciliation of Net Funds
Increase/(decrease) in funds
in the period 98 (1,751) (2,079)
Translation difference 68 (20) (7)
------ ------ ------
Movement in net funds in the
period 166 (1,771) (2,086)
Cash outflow from decrease
in lease financing 1 1 2
Investment in short term
deposits 4,812 3,237 3,468
Net funds at start of period 10,585 9,201 9,201
------ ------ ------
Net funds at end of period 15,564 10,668 10,585
------ ------ ------
KBC Advanced Technologies plc
Notes
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 1998
Statutory Accounts.
The Statutory Accounts for the year ended 31 December 1998
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, Churchfield Road,
Weybridge, Surrey, KT13 8DB.
2. Earnings per share
The calculation of earnings per share is based upon earnings
of #3,718,000 (1998: #2,296,000) and on 47,199,396 (1997:
46,843,457) ordinary shares, being the weighted average
number of ordinary shares in issue during the period.
The diluted earnings per share is based upon 49,521,725
(1998: 49,921,577) ordinary shares allowing for the full
exercise of outstanding purchase options, and adjusted
earnings of #3,718,000 (1998: #2,296,000).
3. Sale of business
In June, the Group sold its interest in Sigmafine for #3.1
million in cash. The profit before tax of #2.8 million
(after tax: #1.9 million) is arrived at after provision for
transaction costs of #100,000 and #200,000 for residual
liabilities with regard to guaranteed minimum royalty
payments to the owner of the software tools with which
Sigmafine was originally built.
END
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