Final Results

Embargoed until 0700 hrs 26 March 2013

KBC Advanced Technologies plc ("KBC", "the Company" or "the Group")

Preliminary results for the year ended 31 December 2012

KBC Advanced Technologies plc, a leading consultancy and software provider to the global hydrocarbon sector, today announces its preliminary results for the year to 31 December 2012.

Highlights

·; Year of significant change - new leadership and restructured organisation

·; Acquisition and integration of Infochem, a leading software and services provider to the upstream sector

·; Underlying profit before tax of £5.5m, ahead of expectations (2011: £5.9m)

·; Profit before tax of £3.7m (2011: £4.9m)

·; Software revenue up by 45% to £18.8m (2011: £13.0m)

·; Strong balance sheet with material net cash at year end

·; Record level of contract awards with backlog of £82.9m at year end (2011: £48.7m)

Ian Godden, Chairman of KBC, commented:

"2012 was a year of significant change for KBC. After a slow start in the first half, the Group responded decisively and, under the new leadership team, ended the year with a very strong final quarter, culminating in the award of a major multi-year consulting and software contract. This helped us generate an underlying profit before tax slightly ahead of revised expectations.

In June we completed the acquisition of Infochem, which has been integrated with our existing software business. This represents the successful first step in our growth strategy to increase the proportion of Group revenue from software and to expand into the upstream oil and gas sector.

2013 has started well and, together with the benefits of the reorganisation and restructuring, we are confident that the Group is well placed to deliver on its plans to grow the business profitably."

-Ends-

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.

CHAIRMAN'S STATEMENT

Summary

2012 was a year of significant change for KBC. After a slow start in the first half, the Group responded decisively and, under the new leadership team, ended the year with a very strong final quarter, culminating in the award of a major multi-year consulting and software contract. This helped us generate an underlying profit before tax slightly ahead of revised expectations.

In June we completed the £9.5m acquisition of Infochem Computer Services Ltd ("Infochem"), which has been integrated with our existing software business. This represents the successful first step in our growth strategy to increase the proportion of Group revenue from software and to expand into the upstream oil and gas sector.

In the third quarter we welcomed our new Chief Financial Officer, Caroline Brown, and strengthened our balance sheet with a small placing of new shares to raise £1.2m. The new leadership team has focused on a fundamental review of our cost base and a restructuring of our consulting operations, both of which are well underway.

2013 has started well and, together with the benefits of the reorganisation and restructuring, we are confident that the Group is well placed to deliver on its plans to grow the business profitably.

Results

Group revenue for the year increased by 13% to £63.1m (2011: £55.7m). However, due to higher costs and provisions, operating profit calculated on an underlying basis in 2012 was 5% lower than the previous year at £5.7m (2011: £6.0m) and underlying profit before tax was down 7% to £5.5m (2011: £5.9m). The earnings figures for the year are adversely impacted by the decision to de-recognise a deferred tax asset in the UK subsidiary, together with the increase in earnings in higher-tax jurisdictions. The loss after tax for 2012 of £1.6m (2011: £3.3m profit) equates to a basic loss per share of 2.9p (2011: earnings per share of 5.9p). Earnings per share calculated on the underlying profit measure declined from 7.1p in 2011 to a loss per share of 2.1p. Diluted loss per share was 2.9p in 2012, compared to diluted earnings per share of 5.9p in 2011. The Group is continuing to review the location of its assets and resources globally to minimise its effective tax rate.

Dividend

In September 2012, after a slow first half, the Board took the decision not to pay a dividend for the 2012 financial year. The Board will review the position during 2013 with the intention of returning to a progressive dividend policy in respect of the current financial year.

Board and management changes

During the year George Bright and Nicholas Stone left the Group and the Board welcomed Caroline Brown as its new Chief Financial Officer. In addition to my role as Chairman, I took on additional responsibilities, on an interim basis, to lead a reorganisation of KBC's businesses and accelerate implementation of the consulting restructuring.

A new management and operating structure has been introduced to improve efficiency, assist in exploiting the full range of KBC's technology and to place greater emphasis on business development within the consulting group. The business is led by a new Operating Board comprising myself, Caroline Brown and three members of our senior management team: Kevin Smith, Managing Partner of Consulting, Andy Howell, Managing Director of Technology, and Ramon Loureiro, Senior Partner of Consulting.

Current trading and outlook

In 2012, contract awards were £95.4m (2011: £44.9m), a record for KBC, resulting in an order book at the year end of £82.9m (2011: £48.7m) which, together with a large new software contract award in Japan, has contributed to a strong start to the year.

The exact timing of contract awards, particularly for software licences, will continue to affect results within any year. However, given the strength of the order book, the enhanced range of products and services and a restructured business that is better able to deliver profitable growth, the Board looks to the future with confidence.

Ian Godden

Chairman

BUSINESS REVIEW

KBC's market

The worldwide hydrocarbon sector continues to grow, despite the state of the world economy, and therefore remains an important marketplace for KBC to serve. In 2012 the downstream hydrocarbons segment remained our primary market and continued to provide attractive opportunities for KBC. During the year we also expanded into the upstream production segment of the market.

The rising level of US domestic crude oil and gas production from shale and tight oil is arguably the single most important new development influencing the outlook for hydrocarbon markets in the medium term. Cheap feedstock from US shale gas developments is causing a revitalisation of the petrochemicals sector in the US and is challenging petrochemical businesses in other parts of the world. In addition, large offshore gas discoveries are generating significant LNG investment opportunities in East Africa and Australia. In upstream oil, investment continued apace providing double digit growth in certain parts of the world for services and new technologies. Finally, although 2012 was marked by volatility for the global refining industry, with significant swings in refining margins, by the end of the year refining margins were much stronger than originally forecast and many underperforming assets were in need of major profit improvement initiatives.

These fluctuating market conditions and major investments in new plants in certain parts of the world continue to suit KBC's developing range of consulting and software products and services. In the emerging markets the demand continued not only for our profit improvement support through technological excellence and organisational services but also for our strategy, feasibility and capital project services. Even in the more mature markets of North America and Europe, where economic growth in downstream is relatively flat, there has been increasing demand for our more traditional cost reduction and process optimisation offerings. In addition, the shale revolution is generating many new opportunities for KBC, not only in the Americas, but also around the world.

With our expansion into the upstream market, activity in the upstream production sector is increasingly important to KBC as capital expenditure grows to develop challenging new discoveries and enhance existing production from mature regions. With oil prices remaining at current levels, activity in this area is set to increase across all producing regions both onshore and offshore. This provides KBC with new market opportunities as the oil and gas companies and the oilfield service companies are increasingly looking to utilise sophisticated software to manage growing upstream expenditure and apply profit improvement techniques more typical for downstream assets.

KBC's strategy

KBC has refined its strategy over the last six months and adjusted its core strategic direction to serve better the future needs of our customers. We shall:

·; Continue our focus on consulting and technology for the design, operation and management of hydrocarbon processing facilities worldwide

·; Maintain our emphasis on services that add significant profit improvement for our clients from their core hydrocarbon assets

·; Increase KBC's presence in the midstream and upstream hydrocarbon industry, both organically and through acquisition

·; Widen and grow KBC's Technology business, through further exploiting intellectual property within KBC and continued acquisition of niche technologies along the oil and gas value chain

·; Invest in growing markets including Central and South America, the Middle East, FSU and Asia

Restructuring

In response to the slow first half we carried out a review of the business overall and of the consulting organisation in particular, in order to achieve higher utilisation and to realise efficiency gains.

All of the consulting operations including technical, organisational and skills-building are now managed as a single resource under the direction of the Managing Partner of Consulting. To capture what we believe to be the enhanced potential to expand our activities into other areas of intellectual property exploitation, we have renamed the former software business as Technology. The realignment of the Technology business, that was already underway under the direction of the Managing Director for Technology, has been accelerated. The new Operating Board is designed to ensure that the Consulting and Technology businesses are effectively co-ordinated to maximise client engagement.

In addition, significant work has been undertaken to ensure that KBC's cost structure is appropriate and that it is able to optimise its business processes to further improve efficiency and effectiveness. This will deliver further improvements in 2013 and beyond.

Operations - Consulting

Consulting revenue in 2012 increased by 4% to £44.3m (2011: £42.7m).

KBC has implemented a restructuring of its consulting business in order to offer a unique combination of technology-based consulting, together with organisational and skills-building consulting. We are finding that clients are increasingly seeking this integrated offering. A new worldwide "partnership" structure within the Consulting group is designed to drive and incentivise this integration and we are investing in the training and development of leaders to match the future requirements of this new structure.

Our ability to offer a truly integrated offering was the key differentiator that led to KBC being awarded the major multi-year consulting and technology transfer contract in South America in December 2012. It also led to the extension of an existing long-term relationship with a Canadian oil company to deliver a multimillion dollar organisational development programme during 2012, and for the work we carried out for an Australian exploration and production company developing a large coal seam gas to LNG project in Queensland.

In 2012 we continued to implement the large multi-site Profit Improvement Program in Mexico, with a full-time presence at six refineries.

KBC's relationship with the Malaysian state oil company continues to grow through the provision of both our simulation software and consulting services. In addition, we have continued to provide project feasibility and techno-economic advisory support for an integrated refinery and petrochemical development in Malaysia.

During the year we also commenced a contract for a refining and petrochemical complex joint venture in China which will provide best practice technology, including KBC software. We also started work on a Profit Improvement Program for a major Indian refining organisation in 2012.

Operations - Technology

The year to December 2012 saw a strong performance from KBC's Technology business. Revenues for the year were up by 45% at £18.8m (2011: £13.0m). Approximately £6.4m (2011: £6.7m) of this total was from maintenance, upgrade and service revenue.

The acquisition of London-based Infochem Computer Services Limited in June 2012 was an important first step in our strategy to expand KBC's portfolio of software and services into the upstream oil and gas market sector and increase the relative proportion of software in our total revenue mix.

As part of the reorganisation, KBC has strengthened the Technology management team and further improved the direct sales channel. We have also made good progress in developing an enhanced range of products for the downstream, upstream and gas production markets. Petro-SIM Production™ has been launched, incorporating Infochem's intellectual property into the Petro-SIM™ platform, and a number of trials are currently in progress.

In December 2012 a large technology transfer package comprising software applications and training materials was delivered to the integrated national oil company of Ecuador as part of a consulting and software contract. This includes a five year licence for KBC's process and energy modelling software tools, including the full Petro-SIM suite.

In early 2013 KBC announced a new contract with a Japanese refiner to provide a five-year licence for Petro-SIM, selected SIM models and software services. 

Results

Group revenue increased by 13% in 2012 to £63.1m (2011: £55.7m). Technology revenue, from software licences and related services, was up by 45% to £18.8m (2011: £13.0m), including £6.4m of maintenance, support and upgrade revenue (2011: £6.7m). Consulting revenue was up by 4% to £44.3m (2011: £42.7m).

Direct costs increased by 18% to £8.7m in 2012 (2011: £7.4m). Staff and associate costs increased by 11% to £34.3m (2011: £30.8m) and other indirect operating costs increased by 20% to £13.6m (2011: £11.3m).

Operating profit calculated on an underlying basis fell by 5% to £5.7m in 2012 (2011: £6.0m) and underlying profit before tax fell by 7% to £5.5m (2011: £5.9m). This measure adjusts for reorganisation costs of £1.7m, development costs carried forward of £2.1m, amortisation of development costs carried forward of £0.8m, amortisation of acquisition intangibles of £0.9m and other items which do not reflect underlying operations.

Profit before tax was £3.7m (2011: £4.9m) down 24% in 2012.

Tax

The tax charge of £5.3m (2011: £1.7m) for the year is made up of current tax expense of £4.0m and a deferred tax charge of £1.3m. See Note 4 below.

The current tax expense includes £4.4m (2011: £0.8m) of tax payable on overseas operations in respect of the year and £0.7m (2011: £0.7m) of withholding tax. Of this amount £0.4m is expected to be recovered against overseas tax payable by way of double tax relief. The balance of £0.3m is not expected to be recoverable as a result of tax losses in the UK and limited eligible income against which relief can be taken in Singapore. There is a £0.7m prior year credit reflecting claims made for research and development and adjustments made on filing returns.

The deferred tax charge includes a one-off tax charge of £1.4m (2011: nil) which is the release of the opening deferred tax asset in respect of trading losses in the UK. The decision to release this opening asset was taken in the first half year due to uncertainty over the timing of recoverability of the losses. Notwithstanding the derecognition of the deferred tax asset in 2012, the Group's tax charge in subsequent periods will benefit from these losses and further UK trading losses for the year as UK profits become available. The balance of the deferred tax charge principally relates to short term timing differences expected to reverse in future years.

The 2012 effective tax rate was significantly higher than in previous years. The main reasons for this are continuing trading losses in the UK, increasing profitability of operations in the US and the Far East, and the release of the opening deferred tax asset in respect of UK trading losses. The Group is continuing to review the location of its assets and resources globally to minimise its effective tax rate.

Earnings and dividends

The loss after tax for 2012 of £1.6m (2011: £3.3m profit) equates to a basic loss per share of 2.9p (2011: earnings per share of 5.9p). The diluted loss per share was 2.9p in 2012, compared to earnings per share of 5.9p in 2011. The loss per share calculated on the underlying measure was 2.1p (2011: earnings per share of 7.1p).

The Board has decided not to pay a dividend for the 2012 financial year. The Board will review the position during 2013, with the intention of returning to a progressive dividend policy in respect of the current financial year.

Carry forward of software development costs

During 2012 the Group incurred research and development costs of £2.4m (2011: £2.0m). Of this amount £2.1m (2011: £0.6m) 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. The amortisation of previously capitalised software development costs in 2012 amounted to £0.8m (2011: £0.6m).

Working capital and net cash

Trade and other receivables reduced during the year from £22.9m to £18.9m. Trade and other payables increased from £7.9m to £22.1m due largely to a large multi-year contract signed at the end of the year.

Cash and cash equivalents at the year end were £21.1m (2011: £5.8m), showing a strong recovery during the final quarter. Cash and cash equivalents per cash flow were £6.4m (2011: £5.8m). The difference is largely due to an advance payment received at the year end in connection with a new contract. As at the year end the Group had outstanding bank loans totalling £5.4m (2011: nil).

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.

Ian Godden Caroline Brown

Chairman Chief Financial Officer

Group Income Statement

For the year ended 31 December 2012

Group Statement of Comprehensive Income

For the year ended 31 December 2012

Group Statement of Changes in Equity

For the year ended 31 December 2012

Group Balance Sheet

As at 31 December 2012

Group Cash Flow Statement

For the year ended 31 December 2012

1. Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011. Statutory accounts for the years ended 31 December 2012 and 31 December 2011 have been reported on by the independent auditors. The independent auditors' reports on the annual reports and financial statements for 2012 and 2011 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 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012 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 2011.

2. Segment information

The Group has adopted IFRS 8 Operating segments, which uses a "management approach", under which information is presented on the same basis as that used for internal reporting purposes.

With regard to the balance sheet, those elements of the balance sheet where regional reporting is prepared have been disclosed. Those elements are trade receivables and provisions, amounts recoverable on contracts and deferred revenue.

Transactions between the reportable segments are carried out at internally agreed rates and are reflected in the performance of each segment.

At the balance sheet date 7% of total trade receivables were concentrated with one of the Group's customers (2011: 7%). The balance was spread over 162 (2011: 132) customers, none of whom comprised more than 5% (2011: 6%) of the total.

Measure of underlying profit/(loss) is shown in note 3b.

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 5% of the Group total.

The following customers account for more than 10% of the Group's revenues:

3. Group operating profit

a) Research and development costs

During 2012 the Group incurred research and development costs of £2.4m (2011: £2.1m). Of this amount £2,055,000 (2011: £635,000) 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) Underlying operating profit

4. Tax expense

Tax on profit charged in the income statement

5. (Loss)/Earnings per share

Basic (loss)/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.

Basic underlying loss per share are based upon an after tax loss as shown in note 3b of £1.17m (2011: £3.93m profit) and on 56,380,000 (2011: 55,027,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period after excluding the shares owned by the Employee Trust.

The dilution referred to above is shown below:

Share options excluded are those where the exercise price is greater than the share price at 31 December 2012, those with performance conditions that have not yet been met and those to be settled by the Employee Trust.