Final Results

Embargoed until 0700 hrs 25 March 2014

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

Preliminary results for the year ended 31 December 2013

KBC Advanced Technologies plc, a leading consultancy and software provider to the global hydrocarbon processing industry, today announces its preliminary results for the year to 31 December 2013.

Highlights

· Year of major progress and significant change

· Adjusted profit before tax1 up 45% to £8.4m (2012: £5.8m); reported profit before tax of £7.1m (2012: £3.7m)

· Adjusted profit margin1 increased to 12.9% (2012: 9.2%), the highest for 5 years benefiting from early success of the restructuring programme

· Basic earnings per share improved to 9.5p (2012: loss per share of 2.9p)

· Dividend reinstated; recommended final dividend of 1.0p per share

· Good flow of contracts and healthy year end order book of £78.2m (2012: £82.9m)

· Consulting division turnaround on track

· Continued successful investment in Technology division - new product development and integration of Infochem

· Markets continue to offer exciting international growth opportunities

1 Adjusted for development costs carried forward, amortisation of development costs carried forward, amortisation of acquisition

intangibles, share based payment charges and other items which do not reflect underlying operations (see note 3b)

Ian Godden, Chairman of KBC, commented:

"2013 was a year of major progress and significant success. The business delivered better than expected results and benefited in particular from a number of major project wins, the first significant benefits from the acquisition of Infochem and the restructuring of the overall business to improve operational efficiency and bring new talent in the Group."

"The demand for KBC's services remains buoyant throughout most of the world and we are encouraged by the sustainable improvement in prospects for the North American downstream sector, driven by growth in light, tight oil and gas production. We see substantial and continued opportunities for major work in the high growth markets of the world where we have strengthened our presence."

"2014 has started well and, together with the substantial changes made in 2013, we are confident that the Group is well placed to continue to deliver growth in 2014 and beyond."

-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

2013 was a year of major progress and significant success. The business delivered better than expected results and benefited in particular from a number of major project wins, the first significant benefits from the acquisition of Infochem Computer Services Ltd ("Infochem"), and the restructuring of the overall business to improve operational efficiency and bring new talent into the Group.

The appointment of a Managing Director for Technology and a Managing Partner of a simplified and consolidated Consulting business has strengthened the executive team substantially. In addition, new hires during 2013 in Finance and HR, combined with the upgrading of Commercial Services, have provided the executive team with a stronger set of functional skills and support to lead and manage the business worldwide.

2014 has started well and, together with the substantial changes made in 2013, we are confident that the Group is well placed to continue to deliver growth in 2014 and beyond.

Results

Group revenue for the year increased by 3% to £65.1m (2012: £63.1m). Profit before tax calculated on an adjusted basis in 2013, as detailed in note 3b, was 45% higher than the previous year at £8.4m (2012: £5.8m). This reflected an adjusted profit margin of 12.9%, the highest it has been for the last five years and a substantial improvement on last year's adjusted profit margin of 9.2%. The after tax position of the Group improved substantially, recovering from a loss after tax of £1.6m in 2012 to a profit after tax of £5.5m.

As a result basic earnings per share rose to 9.5p (2012: loss per share of 2.9p) and earnings per share calculated on an adjusted basis rose to 9.5p per share in 2013 from a loss per share of 1.5p in 2012. Diluted earnings per share was 9.2p in 2013, compared to diluted loss per share of 2.9p in 2012.

Dividend

Following the improved performance and reflecting its confidence in the Group's prospects, the Board has taken the decision to resume payment of dividends and proposes to pay a final dividend for the 2013 financial year of 1.0p per share. The total cost of the proposed dividend amounts to £0.6m for the full year 2013 (2012 full year: £nil).

Board and management

During 2013 we strengthened the composition of the Board with the addition of a new Non-Executive Director, Paul Taylor, formerly Finance Director of AVEVA Group plc, whom we appointed as Deputy Chairman, Senior Independent Director and Chairman of the Audit Committee. Since the year end Paul McCloskey was appointed as a Non-Executive Director, in February 2014. Paul recently retired from a successful career as a senior international executive in the upstream oil and gas industry. Along with the existing members, myself as Chairman, and Oliver Scott, an experienced investor and Chairman of the Remuneration Committee, this creates a very strong Board to see KBC progress its ambitious growth plan over the next few years.

Mike Kirk retired from the Board at the end of 2013, having served KBC excellently as a Non-Executive Director for nine years.

Caroline Brown, Director and Chief Financial Officer, appointed in 2012 to assist with KBC's major drive to improve its commercial and financial performance, has contributed substantially to that objective. She will be leaving the Board and Group on 6 April 2014, having achieved a major upgrade of the Finance and Commercial Services functions and contributed to the much improved trading performance since 2012. We are in the process of seeking a replacement and in the meantime have appointed an interim Chief Financial Officer, Andrew Hebb, to ensure cover during the transition. Since 2009 Andrew has been a professional Interim CFO for a number of companies in both the professional services and software markets. Prior to that, as CFO, he helped build Hedra plc into a major public sector consulting business which was sold to Mouchel in 2008.Previously Andrew held CFO and operational roles in major UK companies.

A new and effective Operating Board was established during the year, delivering clear leadership across all aspects of our business. The Operating Board now consists of Kevin Smith (Managing Partner of Consulting), Andrew Howell (Managing Director of Technology) and Ramón Loureiro (Senior Partner of Consulting), alongside me as Chairman.

Current trading and outlook

The demand for KBC's services remains buoyant throughout most of the world and we are encouraged by the sustainable improvement in prospects for the North American downstream sector, driven by growth in light, tight oil and gas production. We see substantial and continued opportunities for major work in the high growth markets of the world where we have strengthened our presence.

We enter 2014 with a healthy pipeline of contracted work of £78.2m (2012: £82.9m). Together with a number of key consulting contract wins in the first two months of 2014, this means that KBC is well positioned to meet its objectives for the coming year. The exact timing of contract awards will continue to affect results within any year. However, given the strength of the order book, an enhanced range of products and services and major internal progress in 2013, the Board looks to the future with confidence.

Ian Godden

Chairman

BUSINESS REVIEW

KBC's market

The worldwide hydrocarbon sector continues to grow and remains an important marketplace for KBC. There are opportunities to grow both in KBC's traditional markets of downstream refineries and petrochemicals and in KBC's more recently targeted upstream production and midstream marketplaces. Significant change in the geographical demand and supply mix favours KBC's expertise in helping oil and gas companies to achieve operational excellence in uncertain conditions.

The increase in US domestic crude oil and gas production from shale and tight oil continues to influence the outlook for hydrocarbon markets in the medium term, alongside large offshore gas discoveries which are generating significant LNG investment opportunities in East Africa and Australia. In upstream oil, investment in production assets continues to provide growth opportunities for current facilities. Upstream exploration, of less direct relevance to KBC, shows some signs of a cyclical slowdown in spending, especially for deep water exploration projects.

The major investments in downstream assets and new capacity are mainly in the FSU (Former Soviet Union), Middle East, India and parts of Asia, all target growth markets for KBC. In the FSU, there is a major 10 year programme to upgrade refinery assets which KBC is well positioned to support. In the Middle East, new world-scale refinery and petrochemical facilities are being built which will need a large number of skilled workforces, requiring services in organisational and skill enhancements well suited to KBC's service offerings.

India, China and South East Asia continue to generate demand for new capacity and upgraded downstream assets, and remain determined to improve their working practices and workforce skills. In addition to the organisational development opportunities common to the developing markets, the current market conditions place a focus on maximising value extraction from existing facilities and ensuring operational readiness for new facilities. Both of these focus areas play to KBC's strengths in asset optimisation and margin capture.

Despite some recent short term cutbacks in high cost exploration regions, the upstream production sector will continue to provide major new market opportunities for KBC in the next few years as the oil and gas companies and oilfield service companies use sophisticated software to reduce capital expenditure and apply profit improvement techniques more typical for downstream assets.

KBC's strategy

KBC's long term strategy is to broaden its Technology offering and expand the business into the upstream sector in order to increase significantly the proportion of Technology revenues within the Group. The acquisition of Infochem, and our investment in the Technology business and in upstream capability are significant steps towards this objective.

The restructuring programme, although not expected to be complete until the end of 2014, is largely implemented or well under way. Oversized offices in the mature regions have been closed or downsized and extra lean offices have been added in growth regions; trading entities have been reorganised; an emphasis on increased consulting utilisation and base consulting rates has improved margins in the Consulting business; improvements in sales and marketing have been implemented although the benefits for business development will take time to filter through. Investment in new direct software sales resource in 2013 is expected to improve software sales in future years.

Performance targeting has been introduced throughout the Group with new KPI measures established recently to drive extra efficiency. Further work over the next few years will be targeted on further improving business processes and back office systems. The combination of these improvements will help support margin improvements in Consulting in future years.

The simplification and reorganisation of the consulting business is now complete, with the remaining tasks being to strengthen the existing leadership with selective outside hires and re-align the structure for the long term future.

We have also strengthened the quality control and software development systems within the Technology business and made further investment in direct sales channels.

Furthermore, the strengthened executive teams in Consulting and Technology are working well together and are focused on building greater capability to sell and execute larger programmes for clients.

Operations - Consulting

Consulting revenue in 2013 increased by 7% to £47.2m (2012: £44.3m) with an operating profit margin of 3% (2012: operating loss margin of 8%).

Having implemented a major simplification and reorganisation of the Consulting business in early 2013, the emphasis has been on efficiency and effectiveness of the business. The Group has focused on increasing the high impact consulting solutions that use all of KBC's capabilities in profit improvement, including margin capture, reliability and maintenance, energy efficiency, business transformation, organisation upskilling and strategic efficiency.

The new Consulting partnership model, combined with clearer geographical performance targets and long term objectives for increasing the skills of our own professionals, is beginning to have a positive impact on performance.

The highlights of 2013, in addition to the first phase of the major four year best practices project in Latin America, include:

· An Asset Health Check study for a leading Middle East upstream company

· A number of energy efficiency studies and margin capture projects for clients in Japan

· A series of reliability and maintenance improvement projects for a Canadian company

· Completion of phase 1 and the securing of phase 2 of a significant operational excellence project in Southeast Asia

· Major energy efficiency studies for key Russian downstream clients

· A significant workforce capability development programme for a major upstream client in Australia

A two year investment in KBC's resources in high growth geomarkets was started in 2013, with the appointment of new leadership, extra staffing and transfer of skills to China and the Middle East, to be followed by similar moves in 2014 and 2015 in FSU, Latin America, Northeast Asia and India.

Operations - Technology

Reflecting the exceptional level of Technology sales in 2012, due to a particularly large licence sale to a major Latin American client, revenues for the year were 5% down on last year at £17.9m (2012: £18.8m). Looking over the past 3 years, Technology revenues have increased by 38%, or £4.9m, since 2011 when Technology revenues were £13.0m.

The visibility of Technology revenue has been enhanced significantly due to a substantial seven-year, circa £10m, contract for Infochem's Multiflash™, awarded in 2013, with revenue recognised rateably. In addition, a major investment was made in the year to upgrade and launch in December a new version of KBC's core technology product, Petro-SIM™, and to produce a world leading new version for upstream production clients, called Petro-SIM Production™, which integrates the acquired Infochem technology. The benefits from this are expected to flow in 2014 and beyond, although KBC is conscious that the pace at which KBC is able to penetrate the upstream market will be gradual, reflecting the well known conservatism and slow pace of adoption of technology in that sector.

Throughout 2013 KBC strengthened its Technology management team and further improved the direct sales channel. The highlights of 2013 were:

· The seven-year contract with a large oil and gas services company for the Multiflash technology

· A new contract with a Japanese refiner to provide a five-year licence for Petro-SIM, selected SIM models and software services

· Expansion of Petro-SIM and SIM model deployment, plus model calibration and training, in a US independent refiner

· Major extension and growth of Petro-SIM and SIM models plus implementation services with a premier Eastern European refiner

· First sale of Petro-SIM Production to a midstream/upstream oil and gas company based in Australia.

The Technology business has implemented a new and improved organisation, implemented its Product Lifecycle Management Process across all product development, launched an internal incentive plan more suited to a software-led business and has increased investment in direct business development and sales channels. A review of its agent and reseller agreements identified a number of potential changes, some already implemented and some to be introduced in 2014.

Results

Group revenue increased by 3% in 2013 to £65.1m (2012: £63.1m). Consulting revenue was up by 7% to £47.2m. Technology revenue in 2013, down 5% to £17.9m (2012: £18.8m), included £7.6m of royalty, maintenance, support and upgrade revenue (2012: £6.4m).

Direct costs increased by 7% to £9.3m in 2013 (2012: £8.7m), reflecting an increase in Group revenue and in particular Consulting revenue. Without the restructuring programme implemented in 2012, oil sector inflation, particularly in USA, Russia, India and China would have caused these increases to be much more significant. Also as a result of the restructuring programme, staff and associate costs decreased by 6% to £32.4m (2012: £34.3m) and other indirect operating costs decreased by 15% to £11.6m (2012: £13.6m). Depreciation and amortisation charges were significantly higher at £4.4m (2012: £2.7m) due to increased amortisation relating to the Infochem acquisition in mid 2012 and contract based intangibles initially recognised in December 2012.

Profit before tax, adjusted for items which do not reflect underlying operations, rose by 45% to £8.4m (2012: £5.8m). This measure adjusts for development costs carried forward of £1.3m, amortisation of development costs carried forward of £1.1m, amortisation of acquisition intangibles of £1.4m, share based payment charge of £0.5m and other items which do not reflect underlying operations.

Profit before tax was £7.1m (2012: £3.7m) up 92% in 2013.

Tax

The tax charge of £1.6m (2012: £5.3m) is made up of a current tax expense of £2.1m and a deferred tax credit of £0.5m.

The current tax expense includes £2.5m (2012: £4.4m) of tax payable on overseas operations in respect of the year and £1.0m (2012: £0.7m) of withholding tax. Of this amount £0.6m is expected to be recovered against overseas tax payable by way of double tax relief. As in prior periods, the balance is not expected to be recoverable as a result of tax losses in the UK.

The 2013 tax charge is significantly lower than last year, showing a reduction in the effective tax rate from 145% to 22%. The main reason for this is the revision of the Group's transfer pricing framework for the sale of software and provision of services and resources between group companies. The revision to the policy was effective from 2012 and gives rise to a £1.4m tax credit in these results which relates to the prior period. The 2013 effective tax rate before the prior period tax credit is 42%.

In addition, the prior year tax charge included a one-off charge of £1.4m on the release of the deferred tax asset in respect of UK trading losses. Finally, the group effective tax rate continues to benefit from enhanced tax deductions for qualifying research and development expenditure.

The Group is continuing to review the location of its assets and resources globally to further reduce its effective tax rate in subsequent periods.

Earnings and dividends

The profit after tax for 2013 of £5.5m (2012: £1.6m loss) equates to a basic earnings per share of 9.5p (2012: loss per share of 2.9p). The diluted earnings per share was 9.2p in 2013, compared to a loss per share of 2.9p in 2012. The earnings per share calculated on the adjusted measure was 9.5p (2012: loss per share of 1.5p). See note 5 for more details.

The Board has decided to resume payment of dividends with a proposal to pay a dividend in respect of the 2013 financial year. Assuming it is approved by shareholders at the annual general meeting, the dividend will be paid on 12 August 2014 to shareholders on the register at close of business on 18 July 2014.

Carry forward of software development costs

During 2013 the Group incurred research and development costs of £2.7m (2012: £2.4m). Of this amount £1.3m (2012: £2.1m) 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 amounted to £1.1m (2012: £0.8m).

Working capital and net cash

Trade and other receivables increased during the year from £18.9m to £23.2m. Trade and other payables reduced by 45% from £22.1m to £12.2m due largely to a significant multi-year contract signed at the end of 2012.

Net cash at 31 December 2013 was £6.9m (2012: £13.3m). The difference is due to a large advance payment being received at the end of 2012 in connection with a contract. Net cash flow from operations, after this adjustment, was £11.9m (2012: £12.0m). At the year end the Group had outstanding bank loans totalling £3.0m (2012: £5.4m).

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 2013

Group Statement of Comprehensive Income

For the year ended 31 December 2013

Group Statement of Changes in Equity

For the year ended 31 December 2013

Group Balance Sheet

As at 31 December 2013

Group Cash Flow Statement

For the year ended 31 December 2013

1. Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 2012. Statutory accounts for the years ended 31 December 2013 and 31 December 2012 have been reported on by the independent auditors. The independent auditors' reports on the annual reports and financial statements for 2013 and 2012 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 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2013 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 2012.

2. Segment information

Following a restructure of the business, the Group revised its internal reporting structure from a regional management structure to a product-based structure as presented below.

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

At the Balance sheet date 7% of total trade receivables were concentrated with one of the Group's customers (2012: 7%). The balance was spread over 172 (2012: 162) customers, none of whom comprised more than 5% (2012: 5%) 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.

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

The revenue generated from the major customers is derived from both Consulting and Technology.

3. Group operating profit

a) Research and development costs

During 2013 the Group incurred research and development costs of £2.7m (2012: £2.4m). Of this amount, £1.3m (2012: £2.1m) 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) Adjusted profit before tax

4. Tax expense

Tax on profit charged in the income statement

5. Earnings/(loss) per share

Basic earnings/(loss) per share are calculated by dividing after tax net profit/(loss) 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/(loss) per share based upon the basic and diluted EPS are 9.5p and 9.2p (2012: (2.9)p and (2.9)p).

Basic adjusted earnings/(loss) per share are based upon an after tax profit/(loss) as shown in note 3b of £5.53m (2012: £(0.87)m) and on 58,442,000 (2012: 56,380,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period after excluding the shares owned by the employee trusts.

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 2013, those with performance conditions that have not yet been met and those to be settled by the employee trusts.