Final Results

KBC Advanced Technologies plc

("KBC" or "the Group")

Preliminary results for the year ended 31 December 2010

KBC Advanced Technologies plc, a leading consultant to the energy industry, today announces its preliminary results for the year to 31 December 2010.

Highlights

·; Excellent year for new business development and sales awards - sales awards increased by 22% to £67.8 million; sales awards in H2 were a record for the Group

·; Workload backlog at year end was up 43% to £58.7 million, the highest level in the Group's history

·; Results in line with expectations

- Revenues increased by 1% to £53.1 million

- Underlying profit before tax* declined to £4.9 million (2009: £5.7 million), driven largely by unfavourable foreign exchange rate movements; statutory profit before tax was £3.6 million (2009: £4.6 million)

·; Total dividend per share for the year up by 19%, reflecting resilience of results, the Board's confidence in the future and stated intention to adopt a more progressive dividend policy

·; Strong second half cash generation with year-end cash balances increased by 13% to £4.5 million

·; All indications are that 2011 will be very positive for the Group

Note * Underlying profit before tax excludes the impact of the carry forward of software development costs, their amortisation, the amortisation of acquired intangible assets and one-off redundancy costs and bad debt provisions. See note 3 to this statement.

Ian Godden, Chairman of KBC, commented: 

"The second half of 2010 was a record in terms of sales awards, with a total of £44.7m compared to £23.1m in the first half year and £30.8m in the second half of 2009. The backlog grew from £39.8m at the end of June to £58.7m at the year-end (Dec 2009: £40.8m).

Despite the unfavourable foreign exchange movements, the fixed cost base in early 2011 is marginally lower than in 2010 and the savings programmes of the last two years will continue to show benefit. All indications are that 2011 will be very positive for KBC."

- Ends -

For further information, please contact:

Notes to Editors:

For 30 years KBC's consultants have provided independent strategic and engineering expertise to enable leading companies in the global energy business and other process industries to manage risk while maximising value from their assets.

In times of economic uncertainty and increasing environmental pressure, KBC's proprietary methodologies and innovative tools guide its clients' key strategic decisions, enabling them to prioritise and implement initiatives that maximise return on investment and improve operational performance. KBC offers Strategic and Market, Capital Investment, Operating, Organisational and Environmental Solutions.

For more information, visit www.kbcat.com.

Chairman's statement

SUMMARY

2010 was an excellent year for KBC in terms of new business development and sales awards, despite the backdrop of a challenging economic environment. Sales awards for the year were £67.8m, up by 22% on 2009's total of £55.3m. The consequent workload backlog at 31 December 2010 was £58.7m, compared to £40.8m at the previous year end, an increase of 43% to the highest level in the Group's history. Revenue was essentially unchanged compared to 2009, although reported underlying operating profit declined by around 14% due to higher costs driven largely byunfavourableforeign exchange movements.

During the course of the year the economic environment for our customers was mixed, according to their region, supply arrangements, product mix and age of their respective facilities. By the end of the year the need to optimise production processes and minimize costs led to increasing work in KBC's traditional markets. In the developing economies our clients' investment programmes and need to enhance their skill base also led to a steady stream of new business. The highlight of the year was plainly the award of a six site performance improvement programme in Mexico worth US$42m. This combination of the environment and strong sales awards, although hampered by low utilisation in the first half of the year, produced a much stronger second half result.

RESULTS

Revenue for the year showed a 1% increase to £53.1m (2009: £52.6m). Underlying profit before tax declined by 14% to £4.9m in line with expectations (2009: £5.7m) and underlying earnings per share were 5.6p (2009: 6.8p). On a statutory basis, operating profit was £3.8m (2009: £4.8m), profit before tax was £3.6m (2009: £4.6m) and basic earnings per share were 4.0p (2009: 5.4p).

Year-end cash balances increased by 13%, with a net cash balance of £4.5m compared to £4.0m in the previous financial year. This is a significant increase from the £1.7m at 30 June 2010 and is a result of strong second half cash flows.

DIVIDEND

The Board recommends a final dividend of 1.3p per share. Combined with an interim dividend of 0.55p per share paid in October 2010, this leads to a total payment of 1.85p per share, an increase of 19% over 2009 (1.55p per share). This recommendation reflects the overall resilience of the results, our confidence in the future and the previously stated intention to adopt a more progressive dividend policy and to reduce the dividend cover. Subject to approval at the Annual General Meeting, the dividend will be payable on 17 May 2011 to shareholders on the register at close of business on 6 May 2011.

CURRENT TRADING AND OUTLOOK

The second half of 2010 was a record in terms of sales awards, with a total of £44.7m compared to £23.1m in the first half year and £30.8m in the second half of 2009. The backlog grew from £39.8m at the end of June to £58.7m at the year end (Dec 2009: £40.8m). Accordingly we started 2011 with an increased workload and we expect consultant utilisation to be higher than in 2010 despite the planned increase to our resource base as the year progresses. The sales success of last year has continued into 2011 with significant contract awards in India and Canada. Energy services are in particular demand with oil prices rising again and there are several strong opportunities developing in the Former Soviet Union (FSU). We have also seen unusually high demand for software for this time of year.

We will continue to look for opportunities to create shareholder value though the organic development of our services and products, ongoing review of both strategic and opportunistic acquisition targets and the use of the standing authority to repurchase our own shares. Despite the unfavourable foreign exchange movements, the fixed cost base in early 2011 is marginally lower than in 2010 and the savings programmes of the last two years will continue to show benefit. All indications are that 2011 will be very positive for KBC.

Ian Godden

Chairman

Business review

OUR MARKET AND ITS IMPACT ON KBC

The majority of our work is in the oil-refining sector and the trends that affect KBC the most are oil price volatility, customer M&A activity, oil demand growth, the pressure on refining margins as a result of the differential in prices of oil products and crude, and the availability of experienced engineering staff.

2010 was a relatively stable year for crude prices, with many refiners able to secure a reasonable margin. As a result of this stability much of our work in 2010 was focused on helping clients with capital expenditure projects and the transfer of assets. It remains highly likely that in 2011 the current refining expansion plans in the BRIC economies will continue, either to meet demand generated by their expanding economies or in a strategic drive to export oil products. KBC is well placed to continue to serve its clients' expansion plans in these markets. The current tensions in the Middle East may impact the geographic distribution of capital spending during 2011 as increasing focus is placed on countries' domestic infrastructure projects rather than foreign investment projects.

In addition, there was significant customer M&A activity in 2010 as new regional players sought to expand their portfolio and as established players looked to exit or reduce their exposure to the refining business. In the UK deals were announced with both the Stanlow and Grangemouth refineries being sold to Essar and PetroChina respectively and last week it was announced that US refiner, Valero, is to purchase Chevron's Pembroke refinery. BP has also recently announced that its Texas City and Carson refineries in the US are to be sold. Overcapacity in both the US and Europe continues to be a problem and at some stage further rationalisation will be needed to restore both volume and economic balance.

This uncertainty, as well as low margins in the OECD countries and continued expansion of capacity and capabilities in the emerging economies, has been a good environment for KBC's consulting and software solutions. The squeeze on margins continues, with crude pricing not being matched by product price rises. The current geopolitical situation unfolding across North Africa and the Middle East has quashed any attempts by OPEC at short to medium term stability on crude prices in 2011. Having broken through the psychological US$100 ceiling, crude prices may therefore remain high for a considerable time. This volatility and uncertainty, a key driver for KBC's services, is already generating extra demand in the operational area, especially in energy reduction programmes. We expect this trend to continue during 2011. We also recognise that under these circumstances the price pressure we have experienced over the last 12 months in selling such services will continue.

Continued expansion of refining capacity in the developing world helped drive demand for our Capital Solutions in 2010 and we expect this to be sustained during 2011. As many of these projects are driven by national strategic as well as economic considerations, it is likely that the current pace of consulting work associated with new project builds will continue for the foreseeable future. As these projects develop into operational plants, the relative lack of operational expertise and experience in some of these countries will also provide KBC with opportunities to support them through the operating cycle.

Although the majority of our revenues are derived from work in the oil refining industry, we also undertake work in related sectors. In the emerging markets we executed a number of projects in the petrochemicals area, particularly primary olefins, aromatics and refinery/petrochemical plant integration. These areas offer significant margin improvement opportunities for our clients. Additionally, we have executed work on alternative energy sources such as biofuels and LNG. Although these fuels today are a small proportion of the total energy mix, we will continue to develop further capabilities in this area as the contribution of alternative fuels to the energy pool will inevitably increase over time. Our environmental solutions provide exposure to other growth markets including mining and minerals.

KBC's STRATEGY AND range of services

KBC's strategy is to position itself as the preferred independent provider of consulting and software services for the process industries. We have built our worldwide presence through organic development and selective value-enhancing acquisitions. We work for a wide range of clients (majors, national entities, independents and smaller companies) and provide impartial and objective advice to those clients.

We are at the leading edge of technology in our chosen fields and we provide a full capability through the provision of both consulting and software products and services. Our competitive advantage is our ability to combine these two activities in a focused part of the process industry, providing an attractive value proposition for our clients throughout the asset life-cycle.

Our range of services is determined by anticipating changes in the market and then providing our clients with relevant solutions. 2010 particularly has been a development period for increasing the breadth and scope of our Strategic Solutions. We have seen an increase in M&A activities in our markets over the last few months and we expect this to continue in 2011.

KBC's solution sets have been developed in order to best meet the evolving needs of our clients:

§ Strategic Solutions: A range of services including technical due diligence for M&A activities, project configurations and feasibility studies, contract strategy and negotiation support, and expert witness services. These services are primarily targeted at both the buy and sell side of asset transfers and are executed on behalf of both asset owners and financial institutions.

§ Operating Solutions: Process engineering optimisation, reliability and maintenance, operations planning, alternative fuels and feedstocks, petrochemicals and improved safety performance. These are core KBC capabilities focused on clients' margin improvement.

§ Organisational Solutions: Organisational alignment, leadership training, training systems optimisation, performance management systems and operating manual development. This area interacts with all three solution sets above, and has become increasingly important as the demographic problems of both the old and new economies play out. This service is aimed at ensuring the human capital needed to run new facilities and operate existing plants is both adequate and competent.

§ Environmental Solutions: A relatively new area of focus for KBC, which includes emissions reduction, emissions compliance, environmental impact assessments, contaminated land investigation and environmental management systems. A key interaction in this area is in the strategic and capital investment consulting areas.

2010 review of CONSULTING

The drivers of success in our business, in common with most consulting businesses, are the overall market demand, combined with the quality of our services and the appropriate development and utilisation of staff.

We started 2010, in common with 2009, with unexpectedly slow demand for services, mainly as a result of slippage in contract signature dates. However, market conditions improved over the third and fourth quarters. The slow start to the year led in turn to consultant utilisation at a lower level than anticipated and we therefore implemented a redundancy programme during June 2010 which allowed us to further reduce our annual costs, increase our utilisation and streamline our management structure.

Sales success during the year was dominated by the US$42m award covering the optimisation of all six refineries for PEMEX in Mexico. We are now well into the execution of the first two sites and we expect the second of the three phases to commence in April 2011.

Other significant awards included:

We also took the opportunity during 2010 to continue to improve our business processes in areas which include project management, R&D and marketing. These activities will continue in 2011 to assist KBC in maintaining its competitive advantage. In addition, we established a Leadership Development Programme in association with Rice University in Houston to prepare KBC's next generation of managers and leaders.

2010 SOFTWARE REVIEW

KBC's software business has continued to build on the very strong growth that was achieved in 2009. Business was strongest in Asia but breakthrough deals were also closed with major clients in the Americas, Middle East and former Soviet Union, which bodes well for future continuation of this growth trend.

Our development programme reached the culmination of a five year strategy to implement major improvements in the latest version of Petro-SIM™. Version 4 represents a major leap forward in the technology with tighter integration of our oil characterisation methodology and our rigorous reactor models as well as other improvements in user-friendliness. Following an extensive testing programme, using both in-house resource and key client users, the new version was released in October. The software has already been in extensive use on a number of key consulting projects which highlights the powerful differentiation that our consulting business gains from our leading software technology. The new version has already been deployed with several clients and was key to at least one significant sale before year end.

We completed the first year of a reseller agreement for Petro-SIM with Hyperion in Russia, with some key initial successes and a good outlook for further growth in 2011. Based on experience with this arrangement, it may be a model we will look to extend to other areas in the future. Other significant software license awards included sale of our energy management software to Reliance Industries and Petro-SIM sales to both PetroChina and Sinopec's design institutes.

There were also new releases of ProSteam™, KBC's proprietary fuel/steam/power modelling and optimisation software, and SuperTarget™, KBC's proprietary energy pinch modelling software. Within our wider portfolio of software products, energy software now represents approximately 10% of our total software revenue and continues to grow year-on-year. As part of the roll-out of ProSteam applications for the optimisation of utilities at two refineries for Tüpras in Turkey, KBC successfully completed the first deployment of a BabelFish™ performance dashboard system, following our announcement of a global collaboration agreement with ISS at the end of 2009.

We also implemented a new web-based software support helpdesk in line with our drive to continuously improve our response time to clients' queries, working towards achieving 'world class' client support.

With the achievement of our five year software development strategy, the focus is currently on extracting further value from our existing product portfolio. We are also reviewing other areas where new software products could bring additional synergies to further differentiate our consulting activities, as well as adding bottom-line value in their own right.

SOFTWARE ARBITRATION

We have previously referred to allegations made by a software competitor concerning the infringement of its rights in certain software code. All of the allegations have been refuted absolutely but certain of them are now subject to a UK arbitration process that is expected to be concluded by the middle of this year. As is evident from the software sales made in the last quarter of 2010, this process is having no adverse impact on our business, either externally or internally.

OPERATING RESULTS

Group revenue increased by 1% in 2010 to £53.1m compared with £52.6m in 2009. At constant exchange rates revenue would have been £51.6m.

Following the 88% increase in software revenues in 2009, 2010 was a year of consolidation at this higher level of annual revenue, resulting in a modest decline of 7% to £13.8m from £14.8m in 2009. The total now includes £6.5m of maintenance and support revenue, up from £4.7m last year, with the balance being new license sales.

Consulting revenue increased by 4% from £37.8m to £39.2m with the increase coming largely in the second half of the year.

Group costs increased by 3% compared to the previous year, although at constant exchange rates would have shown no increase. Staff and associate consultant costs decreased by around 8% at constant exchange rates, or a total of £2.7m. This follows the cost saving actions of the last two years and reflects a £0.9m increase in development costs carried forward. Direct costs increased by 16% largely due to the increased level of onsite work executed in 2010 and the travel and subsistence costs associated with it. Other operating charges increased by 17% at constant exchange rates, or £1.8m. However, £1.5m of this relates to the bad debt charge excluded from our underlying profit measure.

Operating profit on an underlying basis was £5.0m, down from £5.8m in 2009. This measure ignores the carry forward of software development costs, their amortisation, the amortisation of acquired intangible fixed assets, redundancy costs and the write off of debtors judged to be irrecoverable from business in Iran and Libya. The Iranian element follows the new sanctions regime introduced by the EU in the second half of 2010 and its impact on current projects and software licenses where there were debtor and work in progress balances. In our January trading update we indicated we would be making a provision for doubtful debts of up to £1.0m in this regard. Since then the political turmoil in Libya has meant that we have had to withdraw from a project underway there. As a result we have increased the charge to £1.5m. Statutory operating profit fell by 21% to £3.8m (2009: £4.8m).

The finance cost of £0.1m (2009: £0.2m) reflects a small decrease in bank interest payable with higher average cash balances held during the year. Also included in the charge is the unwinding of the discount applied to deferred consideration for the acquisitions made in 2006 in order to record on the balance sheet the net present value of those future payments. With the final payments made in 2010, this item will not appear in 2011.

PROFIT BEFORE TAX

The profit before tax of £3.7m shows a decrease of 21% from £4.6m in 2009.

TAX

The tax charge of £1.4m (2009: £1.6m) for the year is made up of current tax expense of £2.4m and a deferred tax credit of £1.0m. The current tax expense includes £2.1m of tax payable on overseas operations and £0.5m of withheld tax that is not expected to be recoverable against UK corporation tax as a result of the continuing availability of losses brought forward. The deferred tax credit is principally for short term timing differences expected to reverse in future years.

The tax rate of around 39% (2009: 34%) of pre-tax profits remains higher than the current rate of UK corporation tax of 28%. The main reasons for the higher rate are the non-recovery of tax withheld on payments from overseas territories of £0.3m and expenses not deductible for tax purposes of £0.5m. The impact of these factors has been partially offset by non-taxable income of £0.1m and tax overprovided in earlier years of £0.1m.

A net deferred tax asset of £1.9m (2009: £1.0m) remains on the balance sheet representing mainly prior year tax losses that have not yet been utilised and other timing differences.

EARNINGS AND DIVIDENDS

The profit after tax of £2.2m (2009: £3.0m) equates to basic earnings per share of 4.0p, compared to 5.4p in 2009. Diluted earnings per share were 4.0p and 5.3p respectively. Earnings per share calculated on the underlying profit measure decreased from 6.8p to 5.6p.

A final dividend of 1.3p per share is proposed for the year, following the interim dividend of 0.55p per share paid in October 2010. This leads to a total payment of 1.85p per share, making an increase of 19% over 2009 (1.55p per share). Assuming it is approved by shareholders at the AGM, the dividend will be payable on 17 May 2011 to shareholders on the register at close of business on 6 May 2011.

Carry forward of software development costs

The latest version of Petro-SIM, version 4, was released in 2010 and it was for the first time possible to determine that this version had reached the stage where development expenditure should be carried forward, based on the same test used with the previous version. Thus the Board has determined that development costs incurred in 2010 amounting to £1.1m should be carried forward against future sales revenue. Amortisation of £0.4m was charged to the income statement in the year, thus giving an overall net credit of £0.7m. Net expenditure of £0.3m on version 3 of Petro-SIM is also held on the balance sheet at 31 December 2010 against future support revenue of historic sales of that version.

Working capital

Trade and other receivables increased during the year from £21.0m to £23.2m. However trade and other payables increased from £6.4m to £8.9m with a sharp increase in deferred revenue. When deferred revenue is deducted from total receivables to give a net measure there was a marginal decrease from one year to the next. It is also worth noting that net trade receivables decreased in the year from £10.7m to £9.1m with a corresponding increase in amounts recoverable on contracts but not yet invoiced from £8.7m to £12.5m.

Financial risk management

The Group's principal financial instruments comprise trade receivables, trade payables, cash, short term deposits and short term lines of credit used to finance the Group's operations and future growth. The major financial risks faced by the Group are interest rates, currency risk, contract risks and the continued availability of equity and debt finance.

INTEREST RATES

At 31 December 2010 the Group held net cash balances of £4.5m, compared to cash balances of £4.0m as at 31 December 2009. Cash balances in excess of immediate needs are placed on short term deposit in the money markets. Overdraft facilities available to the Group for use in managing the timing of cash flow in different countries and currencies were used periodically during the year. Current overdraft facilities available to the Group total £5.6m. In addition, a three year revolving credit facility of £2.0m was negotiated in early 2008 to provide additional liquidity and possible acquisition funds. Interest charges on this facility are linked to the LIBOR rate appropriate to the duration and currency of any drawdown.

CONTRACT RISKS

Some of the Group's commercial contracts include terms where revenues are related to performance in the form of bonuses or penalties. The Group's exposure under such contracts is reviewed regularly by the Executive Committee and the Board.

CREDIT RISK

The main credit risk faced is related to trade receivables. The majority of the Group's clients are state owned or very large oil companies and therefore historically the recoverability risk tends to be driven more by issues relating to client satisfaction and clarification of deliverables than by traditional credit risks. Provision is made for doubtful receivables when there are circumstances indicating a likely reduction in the recoverable amount such as historic late or non-payment of invoices or specific customer or contractual issues.

LIQUIDITY RISK

Client payment terms can vary from contract to contract and can involve extended periods of time before invoices are raised.

FOREIGN CURRENCIES

Most transactions continue to be in US dollars, Euro or sterling. The proportion of revenue in each currency was:

Where a revenue currency differs to that in which costs are incurred, a proportion of the foreign exchange exposure is hedged using forward exchange contracts in the currency markets. Contracts were in place at the balance sheet date for the sale of US$4.0m (2009: nil) at an average rate during 2010 of US$1.56 (2009: nil) and €1.5m (2009: €5.0m) at an average rate of €1.19 (2009: €1.11).

The Group has a number of overseas subsidiaries and branches where revenues and costs are denominated in currencies other than sterling, the most significant of which are in the US. The foreign currency translation exposure arising on their results is not hedged.

George Bright Nicholas Stone

Chief Executive Operations and Finance Director

Group income statement

For the year ended 31 December 2010

Group statement of comprehensive income

For the year ended 31 December 2010

Group statement of changes in equity

For the year ended 31 December 2010

The amount included in the foreign exchange reserve represents other comprehensive income for each component net of tax.

Group balance sheet

At 31 December 2010

Group cash flow statement

For the year ended 31 December 2010

Notes to the financial information

1. Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009. Statutory accounts for the years ended 31 December 2010 and 31 December 2009 have been reported on by the independent auditors. The independent auditors' reports on the annual reports and financial statements for 2010 and 2009 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 2009 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar in due course.

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention, except for certain financial instruments which have been measured at fair value.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.

2. Segmental 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 8% of total trade receivables were concentrated with one of the Group's customers (2009: 8%). The balance was spread over 134 (2009: 118) customers, none of whom comprised more than 7% (2009: 8%) of the total.

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.

3. Group operating profit

This is stated after charging/(crediting) the following:

a) Research and development costs

During 2010 the Group incurred research and development costs of £2.4m (2009: £2.8m). Of this amount £1,068,000 (2009: £105,000) 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. 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.

The earnings per share based upon the basic and diluted IIMR EPS are 4.0p and 4.0p (2009: 5.4p and 5.3p).

Basic underlying earnings per share are based upon an after tax profit as defined in note 3b of £3.07m (2009: £3.82m) and on 55,281,000 (2009: 56,330,000) 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 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 2010, those with performance conditions that have not yet been met and those to be settled by the Employee Trust.