25th Sep 2012 07:00
25 September 2012
KBC Advanced Technologies plc
("KBC" or "the Group")
Half year results for the six months ended 30 June 2012 and cash subscription to raise up to £1.35m
KBC Advanced Technologies plc, a leading consultant to the energy industry, today announces its half year results for the six months ended 30 June 2012.
Highlights
·; Challenging first half which will impact overall performance for the year; action taken to reduce costs and rebalance resources across the Group to enhance overall consultant utilisation
·; Commenced review of consulting operations - objective to radically restructure in order to make a significant step-change in profitability; already seeing very significant opportunities in a number of markets
·; Infochem successfully integrated and demonstrating that KBC can derive significant value from upstream oil and gas and increase relative proportion of software revenues
·; Cash subscription to raise up to £1.35m to provide additional working capital for the Group
·; Financial performance
- Group revenue: £27.5m (2011: £26.0m)
- Profit before tax: £0.7m (2011: £2.2m)
- Basic loss per share: 1.6p (2011: Earnings per share 2.8p)
·; Board confident of return to strong growth path in 2013 and beyond.
Ian Godden, Chairman of KBC, commented:
"Taking into account our pipeline of business, we believe that the second half of the year will show a substantial improvement over the first half, albeit that our full year expectations for the Group are now lower than were previously expected. The exact timing of contract awards, particularly for software licences, will continue to have an impact on the results for the year.
Looking further out, we are confident that this is a temporary setback for the Group. We believe that our strategy of expanding our software portfolio upstream, refocusing our consulting operations and our leading position in the growth markets of Asia, and Central and South America will put the Group back on a strong growth path in 2013 and beyond."
- Ends -
For further information, please contact:
KBC Advanced Technologies plc | |
George Bright, Chief Executive Officer | On 25 September: 020 7067 0700 |
Caroline Brown, Chief Financial Officer | thereafter: 01932 236314 |
Cenkos Securities plc | |
Jon Fitzpatrick | 020 7397 8900 |
Neil McDonald | 0131 220 9771 |
Weber Shandwick Financial | |
Nick Oborne/Stephanie Badjonat/Robert Cook | 020 7067 0700 |
Notes to Editors:
KBC is a leading consultancy and software provider to the global energy, process and natural resources sectors. With over 30 years of experience, operating out of 14 global locations, KBC combines best-in-class software with experienced engineers and operations personnel using robust methodologies to create world class solutions for its clients. For more information, visit www.kbcat.com
KBC Advanced Technologies plc
("KBC" or "the Group")
Half-year results for the six months ended 30 June 2012 and cash subscription to raise up to £1.35m
Chairman's Statement
As indicated in our pre-close statement, KBC's performance in 2012 will be weighted to the second half. This is driven primarily by further delays in the renewal of a major software contract in Latin America, together with continued challenging market conditions in many Western economies. The actions to reduce costs that we noted in the pre-close statement have now been implemented and we are rebalancing resources across the group to enhance overall consultant utilisation. However, the lower than expected performance in the first half will impact our overall performance for the year, which we now anticipate will be below current market expectations.
Revenues for the period increased by 5.8% to £27.5m (2011: £26.0m). We continued to execute successfully the six-site PEMEX project, resulting in a reduction in the workload backlog at 30 June 2012 to £38.8m, compared to £55.8m reported at 30 June 2011 and £48.7m at 31 December 2011. Profit before tax decreased to £0.7m from £2.2m in the prior half year and underlying profit before tax (see note 7 to the financial statements) decreased to a loss of £0.1m from a profit of £2.6m in 2011.
KBC has started a review of its consulting operations with an objective of radically restructuring in order to make a significant step change in profitability. Infochem Computer Services Limited ("Infochem"), which we acquired in June 2012, has been integrated into KBC's software business and is starting to demonstrate that KBC can derive significant value from the upstream oil and gas sector to increase the overall contribution of software-related revenues.
The issue of new equity will raise up to £1.35m from existing institutional shareholders which will be used to provide additional working capital resources to the Group.
CONSULTING OPERATIONS
Consulting revenues in the first half were up on the same period in 2011 at £22.2m compared with £19.5m. However, utilisation was significantly lower than in the first half of 2011, especially in the EMEA region. In response to this short term pressure, we have reduced our consulting workforce over the past five months through attrition as well as post period-end redundancies. Annualised savings from this programme are £0.9m, achieved at a one off cost of £0.4m which will be taken in the second half. The majority of the cost benefits will be realised in 2013.
We continue to successfully implement the multi-site Profit Improvement Program for PEMEX, and we have a full-time presence at all six refineries. Elsewhere, our long standing relationship with Canada's Irving Oil has been further extended to include a multimillion-dollar organisational development programme, the Technical Service Agreement with Grupa Lotos continues, and we have embarked on an efficiency audit program for BP during the period. To date we have worked at five BP sites across all three regions. The engineering office we set up in Mumbai in 2011 is now fully operational, allowing us to use a lower cost base to execute both consulting and software development projects.
Since the period end, we have commenced a RMB 25m (approx. US$4m) contract with the Fujian Refining and Petrochemical Complex (FREP)1* in China which will provide best practice technology, including KBC software, implemented over a seven month period. We have also contracted, and started to execute a US$2.5m Profit Improvement Program for India's IOCL Panipat refinery as well as securing a second consulting contract with Idemitsu in Japan. These projects will help to deliver improvements to consultant utilisation in the second half.
In response to the challenging first half, we are reviewing the contribution of our portfolio of consulting services. We have already developed a new consulting framework, aimed at improving client added value. We will seek to better utilise our experienced consulting base through organisational changes, both in the way projects are executed and in revised leadership roles. Additionally, we are reviewing our cost base and accelerating a new ERP system in 2013 to drive faster and more accurate business decisions. These actions will restructure the consulting operations to improve profitability, improve flexibility and enhance client engagement. Whilst these actions will not be fully implemented in the second half, we are already seeing very significant opportunities in a number of markets that we expect will start to deliver value during the next six months.
1 FREP is a joint venture of ExxonMobil, Sinopec and Saudi Aramco
SOFTWARE
Software revenues in the first half year were lower than in the same period in 2011 at £5.3m (2011: £6.5m), around 43% of which was from new licence awards. This difference in performance is almost entirely attributable to the single Latin American software renewal which we are confident will be secured before the end of this year.
In June 2012 we completed the acquisition of London-based Infochem. This acquisition was a critical first step in a strategy to expand our portfolio of software and services into the upstream oil & gas market sector, increasing the relative proportion of software in our total revenue mix.
In software there continues to be a wealth of opportunities and work is progressing to conclude a number of significant renewals during the remainder of the year. With Infochem's suite of software now added to our portfolio, we have a much broader market opportunity. We have already integrated Petro-SIM™ with Infochem's Multiflash™ software and are now in discussions with several resellers to further extend our market reach.
RESULTS
Revenue for the period was £27.5m, up from the £26.0m reported for the same period last year.
Direct costs were £3.9m, up from £3.4m in the first half of 2011. Staff costs were higher at £15.9m compared to £14.6m in 2011. Other operating charges increased by 19% and include the costs of arbitration and the acquisition. Operating profit decreased to £0.7m (2011: £2.3m). The underlying operating loss for the period of £0.1m compared to a profit of £2.6m in 2011. Underlying loss before tax in the first half of the year was £0.1m (2011: £2.6m underlying profit before tax).
The profit before tax for the period is £0.7m (2011: £2.2m). The tax charge reflects a forecast for the second half year and is materially higher than previous years. There is a one-off tax charge of £1.4m (2011: £nil) in respect of deferred tax on UK trading losses. Due to uncertainty over the timing of recoverability of the losses, the decision has been taken to derecognise the asset and take the benefit of the losses as UK profits become available in subsequent periods.
Basic losses per share in the period were 1.6p, down from basic earnings per share of 2.8p in the first half of 2011, with an underlying loss per share of 0.1p against underlying earnings per share of 3.3p in the first half of 2011.
Net debt at 30 June 2012 was £5.1m; this compares with net cash of £2.7m at 30 June 2011 and net cash of £5.8m at 31 December 2011. The decline in cash in the six month period was primarily due to the acquisition of Infochem in June 2012 and the reduced first half profitability.
DIVIDEND
The adverse impact on short-term cash flows due to the acquisition of Infochem, the execution of ongoing contracts, and the continued delay in timing of a major software contract has led to some short term working capital issues. The Board has prudently decided to resolve this by a cash subscription and the suspension of dividend payments for 2012. It is the Board's intention to resume dividend payments for the 2013 financial year.
ISSUE OF NEW EQUITY
As a result of the short-term working capital issues highlighted above, the Company will issue up to 2.7m new ordinary shares of 2.5p each ("Ordinary Shares") (the "Subscription Shares") at a price of 50p per share (the "Subscription Price") to institutional investors to raise a total of up to £1.3m net of costs. Subscription is conditional only on admission of the Subscription Shares to trading on AIM. These funds will be used to provide additional working capital for the Group. The Subscription Price represents a discount of approximately 25% to the closing mid-market price of 67p per Ordinary Share on 24 September 2012, being the business day prior to the date of this announcement.
The Subscription Shares will represent approximately 4.6% of the Company's enlarged issued ordinary share capital immediately following admission of the Subscription Shares to trading on AIM.
Application will be made to the London Stock Exchange for the Subscription Shares to be admitted to trading on AIM. It is expected that admission will take place and trading in the Subscription Shares on AIM will commence on 1 October 2012. The Subscription Shares will, when issued, rank pari passu in all respects with the existing issued Ordinary Shares including the right to receive dividends and other distributions declared following the date of relevant admission.
Kestrel Partners LLP ("Kestrel") has subscribed for 960,000 Subscription Shares on behalf of Kestrel Opportunities, a cell of Guernsey Portfolios PCC Limited ("Kestrel Opportunities") on the terms outlined above. Following the purchase Kestrel Opportunities holds 3,892,810 Ordinary Shares, representing 6.62% of the enlarged issued share capital of the Company.
Oliver Scott, Non-Executive Director of KBC, is a founding partner of and holds a beneficial interest in Kestrel, the investment manager of Kestrel Opportunities, and is a shareholder in Kestrel Opportunities. Mr Scott therefore has a legal interest in a total of 3,892,810 Ordinary Shares, representing 6.62% of the issued share capital of the Company.
OUTLOOK
Taking into account our pipeline of business, we believe that the second half of the year will show a substantial improvement over the first half, albeit that our full year expectations for the Group are now lower than were previously expected. The exact timing of contract awards, particularly for software licences, will continue to have an impact on the results for the year.
Looking further out, we are confident that this is a temporary setback for the Group. We believe that our strategy of expanding our software portfolio upstream, refocusing our consulting operations and our leading position in the growth markets of Asia, and Central and South America will put the Group back on a strong growth path in 2013 and beyond.
Ian A Godden
Chairman
25 September 2012
KBC ADVANCED TECHNOLOGIES PLC | ||||
Half yearly financial report for the six months ended 30 June 2012 | ||||
Financial Highlights | ||||
(Unaudited) | (Unaudited) | |||
2012 | 2011 | |||
Revenue (£000) | 27,504 | 26,046 | ||
Operating profit (£000) | 725 | 2,262 | ||
Profit before taxation (£000) | 686 | 2,226 | ||
(Loss)/profit for the period (£000) | (902) | 1,514 | ||
(Loss)/earnings per share - basic (p) | (1.6) | 2.8 | ||
(Loss)/earnings per share - diluted (p) | (1.6) | 2.7 | ||
Dividend per share (p) | 1.55 | 1.30 | ||
Cash generated from operations (£000) | 4,166 | 1,030 | ||
Independent review report |
to KBC Advanced Technologies plc |
Introduction We have been engaged by the company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2012 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and the related notes.
We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. |
Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts. |
Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. |
Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. |
Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. |
BDO LLP |
Chartered Accountants and Registered Auditors |
Gatwick, United Kingdom |
Date |
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). |
| |||||||
Condensed consolidated income statement | |||||||
for the six months ended 30 June 2012 | |||||||
(Unaudited) | (Unaudited) | (Audited) | |||||
6 months ended 30 June 2012 | 6 months 30 June 2011 | Year Ended 31 December 2011 | |||||
Note | |||||||
£000 | £000 | £000 | |||||
Revenue | 27,504 | 26,046 | 55,725 | ||||
Direct Costs | (3,914) | (3,352) | (7,412) | ||||
Staff & associate costs | (15,897) | (14,633) | (30,822) | ||||
Depreciation and amortisation | (699) | (547) | (1,169) | ||||
Other operating charges | (6,269) | (5,252) | (11,311) | ||||
Operating profit | 725 | 2,262 | 5,011 | ||||
Finance revenue | 7 | 13 | 20 | ||||
Finance cost | (46) | (49) | (101) | ||||
Profit before tax | 686 | 2,226 | 4,930 | ||||
Tax expense | 4 | (1,588) | (712) | (1,673) | |||
(Loss)/profit for the period | (902) | 1,514 | 3,257 | ||||
(Loss)/earnings per share attributable to the ordinary equity shareholders of the parent company | 6 | ||||||
Basic | (1.6)p | 2.8p | 5.9p | ||||
Diluted | (1.6)p | 2.7p | 5.9p | ||||
| |||||||||
Condensed consolidated statement of comprehensive income | |||||||||
for the six months ended 30 June 2012 | |||||||||
(Unaudited) | (Unaudited) | (Audited) | |||||||
6 months | 6 months | Year ended | |||||||
ended 30 June 2012 | ended 30 June 2011 | 31 December 2011 | |||||||
£000 | £000 | £000 | |||||||
(Loss)/profit for the period | (902) | 1,514 | 3,257 | ||||||
Other comprehensive (loss)/income: | |||||||||
- exchange differences on retranslating foreign operations recognised directly in equity | (116) | (142) | 58 | ||||||
Total comprehensive (loss)/income recognised in the period | (1,018) | 1,372 | 3,315 | ||||||
| |||||||||
Condensed consolidated statement of changes in equity | |||||||||
for the six months ended 30 June 2012 | |||||||||
Issued capital | Share premium | Capital Redemption reserve | Merger reserve | Own shares | Share Based payments | Foreign Exchange reserve | Retained earnings | Total | |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
At 1 January 2011 | 1,386 | 8,072 | 113 | 929 | (245) | 1,597 | 2,372 | 15,905 | 30,129 |
Total comprehensive income | - | - | - | - | - | - | (142) | 1,514 | 1,372 |
Share-based payments | - | - | - | - | - | 102 | - | - | 102 |
Exchange translation adjustment | - | - | - | - | - | (18) | - | - | (18) |
Shares issued | 14 | 9 | - | - | (12) | - | - | 11 | |
Shares purchased | - | - | - | - | (162) | - | - | - | (162) |
Utilisation of own shares | - | - | - | - | 243 | - | - | (243) | - |
Dividends | - | - | - | - | - | - | - | (714) | (714) |
At 30 June 2011 | 1,400 | 8,081 | 113 | 929 | (176) | 1,681 | 2,230 | 16,462 | 30,720 |
At 1 January 2012 | 1,400 | 8,081 | 113 | 929 | (175) | 1,880 | 2,452 | 17,817 | 32,497 |
Total comprehensive loss | - | - | - | - | - | - | (116) | (902) | (1,018) |
Share-based payments | - | - | - | - | - | 150 | - | - | 150 |
Exchange translation adjustment | - | - | - | - | - | - | - | - | - |
Shares issued | 2 | 5 | - | - | - | - | - | - | 7 |
Dividends | - | - | - | - | - | - | - | (857) | (857) |
At 30 June 2012 | 1,402 | 8,086 | 113 | 929 | (175) | 2,030 | 2,336 | 16,058 | 30,779 |
| ||||||
Condensed consolidated balance sheet | ||||||
for the six months ended 30 June 2012 | ||||||
(Unaudited) | (Unaudited) | (Audited) | ||||
30 June 2012 | 30 June 2011 | 31 December 2011 | ||||
Note | ||||||
£000 | £000 | £000 | ||||
Non-current assets | ||||||
Property, plant and equipment | 1,361 | 1,222 | 1,255 | |||
Goodwill | 9 | 10,386 | 7,389 | 7,505 | ||
Other intangible assets | 11,182 | 1,387 | 1,367 | |||
Deferred tax assets | 1,335 | 1,184 | 2,764 | |||
24,264 | 11,182 | 12,891 | ||||
Current assets | ||||||
Trade and other receivables | 20,989 | 25,583 | 22,860 | |||
Current tax receivable | 1,181 | 657 | 568 | |||
Cash and cash equivalents | 4,614 | 2,656 | 5,815 | |||
Other financial assets | 46 | 8 | 54 | |||
26,830 | 28,904 | 29,297 | ||||
Total assets | 51,094 | 40,086 | 42,188 | |||
Non-current liabilities | ||||||
Long-term borrowings | (4,200) | - | - | |||
Deferred tax liabilities | (3,269) | - | (1,197) | |||
(7,469) | - | (1,197) | ||||
Current liabilities | ||||||
Trade and other payables | (10,327) | (9,366) | (7,850) | |||
Short-term borrowings | (1,800) | - | - | |||
Current tax payable | (719) | - | (644) | |||
(12,846) | (9,366) | (8,494) | ||||
Total liabilities | (20,315) | (9,366) | (9,691) | |||
Net assets | 30,779 | 30,720 | 32,497 | |||
Equity attributable to equity holders of parent | ||||||
Issued capital | 1,402 | 1,400 | 1,400 | |||
Share premium | 8,086 | 8,081 | 8,081 | |||
Other reserves | 1,042 | 1,042 | 1,042 | |||
Own shares | (175) | (176) | (175) | |||
Retained earnings | 20,424 | 20,373 | 22,149 | |||
Total equity | 30,779 | 30,720 | 32,497 | |||
Total equity and liabilities | 51,094 | 40,086 | 42,188 | |||
| |||||||
Condensed consolidated cash flow statement | |||||||
for the six months ended 30 June 2012 | |||||||
(Unaudited) | (Unaudited) | (Audited) | |||||
6 months | 6 months | Year | |||||
Ended 30 June 2012 | Ended 30 June 2011 | ended 31 December 2011 | |||||
Note | £000 | £000 | £000 | ||||
Net cash inflow from operating activities | |||||||
Profit before tax | 686 | 2,226 | 4,930 | ||||
Adjustments for: | |||||||
Depreciation and amortisation | 699 | 547 | 1,169 | ||||
Foreign exchange gains | (16) | (10) | (56) | ||||
Finance revenue | (7) | (13) | (20) | ||||
Finance cost | 46 | 49 | 101 | ||||
Share-based payment expense | 150 | 102 | 300 | ||||
1,558 | 2,901 | 6,424 | |||||
Decrease/(increase) in trade and other receivables | 2,917 | (2,364) | 359 | ||||
(Decrease)/increase in trade and other payables | (317) | 508 | (1,008) | ||||
Decrease/(increase) in financial assets and liabilities | 8 | (15) | (61) | ||||
Cash generated from operations | 4,166 | 1,030 | 5,714 | ||||
Income taxes paid | (706) | (1,475) | (2,086) | ||||
Net cash flows from/(used in) operating activities | 3,460 | (445) | 3,628 | ||||
Cash flows from investing activities | |||||||
Acquisition of subsidiary | 10 | (9,090) | - | - | |||
Net funds acquired with subsidiary undertaking | 1,319 | - | - | ||||
Purchases of tangible non-current assets | (375) | (169) | (443) | ||||
Purchases of intangible non-current assets | (1,563) | (282) | (635) | ||||
Finance revenue received | 7 | 13 | 20 | ||||
Net cash used in investing activities | (9,702) | (438) | (1,058) | ||||
Cash flows from financing activities | |||||||
Issue of ordinary shares | 7 | 11 | 23 | ||||
Purchase of ordinary shares for cancellation | - | (162) | (175) | ||||
Advances from bank borrowings | 6,000 | - | - | ||||
Finance costs paid | (46) | (49) | (101) | ||||
Dividends paid to equity holders of parent | (857) | (714) | (1,100) | ||||
Net cash generated from/(used in) financing activities | 5,104 | (914) | (1,353) | ||||
Net (decrease)/increase in cash and cash equivalents | (1,138) | (1,797) | 1,217 | ||||
Cash and cash equivalents at beginning of period | 5,815 | 4,506 | 4,506 | ||||
Exchange adjustments | (63) | (53) | 92 | ||||
Cash and cash equivalents at period end | 4,614 | 2,656 | 5,815 | ||||
NOTES TO THE CONDENSED CONSOLIDATED SET OF FINANCIAL STATEMENTS | ||||||
For the six months ended 30 June 2012 | ||||||
1. | General information | |||||
KBC Advanced Technologies plc (the 'Company') is a company domiciled in England. The condensed consolidated set of financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the 'Group'). | ||||||
2. | Accounting policies | |||||
Basis of preparation | ||||||
The Group prepares its condensed consolidated financial statements in accordance with IFRS as adopted by the European Union, and the statements have been prepared using the accounting policies set out in the Group's 2011 statutory accounts except as described below due to the business combination in the period.
Business combinations Under the acquisition method, an acquisition is recognised at the aggregate of the consideration being transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred in the period ended 30 June 2012 are expensed. The results of the subsidiaries are included in the consolidated financial statements from the date control commences until the date that it ceases.
Borrowings and finance cost Borrowings are initially recognised at their fair value, net of any transactions costs directly attributable to their issue. Subsequently, loans are carried at their amortised carrying value using the 'effective interest method', which spreads the interest expense over the period to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.
For the purposes of this document the term IFRS includes International Accounting Standards and International Financial Reporting Interpretations ("IFRIC").
This Half Yearly Report will be sent to shareholders and published on the Investor Relations section of the corporate website at www.kbcat.com. Further copies of this Half Yearly Report may be obtained from the Company Secretary, KBC Advanced Technologies plc, KBC House, 42-50 Hersham Road, Walton on Thames, Surrey KT12 1RZ.
The financial information contained in this document does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.
The comparatives for the full year ended 31 December 2011 are not the Group's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The Auditors' Report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Sections 498(2)-(3) of the Companies Act 2006.
In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group. | ||||||
3. | Segment information | |||||||
Under IFRS 8, Operating segments, the Group uses a "management approach", under which information is presented on the same basis as that used for internal reporting purposes. | ||||||||
The underlying profit (note 7) also forms part of the internal reporting. | ||||||||
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. | ||||||||
Americas | Asia | EMEA | Unallocated | Total | ||||
£000 | £000 | £000 | £000 | £000 | ||||
Six months ended 30 June 2012 | ||||||||
Rendering of services (Consulting) | 11,613 | 5,968 | 4,591 | - | 22,172 | |||
Sale of goods (Software) | 1,756 | 2,095 | 1,481 | - | 5,332 | |||
Inter-segment revenue | 390 | 209 | 400 | - | 999 | |||
Total revenue | 13,759 | 8,272 | 6,472 | - | 28,503 | |||
Revenues carried out by other segments | (390) | (209) | (400) | - | (999) | |||
Revenue from external customers | 13,369 | 8,063 | 6,072 | - | 27,504 | |||
Contribution | 5,580 | 1,883 | 1,857 | - | 9,320 | |||
Operating profit/(loss) before amortisation | 3,090 | 8 | 128 | (2,078) | 1,148 | |||
Amortisation | - | - | - | (423) | (423) | |||
Operating profit/(loss) | 3,090 | 8 | 128 | (2,501) | 725 | |||
Finance revenue | - | - | - | 7 | 7 | |||
Finance cost | - | - | - | (46) | (46) | |||
Profit/(loss) before tax | 3,090 | 8 | 128 | (2,540) | 686 | |||
Tax expense | - | - | - | (1,588) | (1,588) | |||
Profit/(loss) for the period | 3,090 | 8 | 128 | (4,128) | (902) | |||
As at 30 June 2012 | ||||||||
Trade receivables | 2,051 | 1,966 | 6,649 | - | 10,666 | |||
Provisions | - | (101) | (1,665) | - | (1,766) | |||
Net carrying amount | 2,051 | 1,865 | 4,984 | - | 8,900 | |||
Amounts recoverable on contracts | 3,324 | 3,191 | 4,203 | - | 10,718 | |||
Deferred revenue | 1,916 | 946 | 1,686 | - | 4,548 | |||
Americas | Asia | EMEA | Unallocated | Total | ||
£000 | £000 | £000 | £000 | £000 | ||
Six months ended 30 June 2012 | ||||||
Rendering of services (Consulting) | 8,388 | 5,131 | 6,022 | - | 19,541 | |
Sale of goods (Software) | 1,876 | 2,304 | 2,325 | - | 6,505 | |
Inter-segment revenue | 704 | 128 | 352 | - | 1,184 | |
Total revenue | 10,968 | 7,563 | 8,699 | - | 27,230 | |
Revenues carried out by other segments | (704) | (128) | (352) | - | (1,184) | |
Revenue from external customers | 10,264 | 7,435 | 8,347 | - | 26,046 | |
Contribution | 4,412 | 3,073 | 3,260 | - | 10,745 | |
Operating profit/(loss) before amortisation | 1,841 | 1,082 | 923 | (1,275) | 2,571 | |
Amortisation | - | - | - | (309) | (309) | |
Operating profit/(loss) | 1,841 | 1,082 | 923 | (1,584) | 2,262 | |
Finance revenue | - | - | - | 13 | 13 | |
Finance cost | - | - | - | (49) | (49) | |
Profit/(loss) before tax | 1,841 | 1,082 | 923 | (1,620) | 2,226 | |
Tax expense | - | - | - | (712) | (712) | |
Profit/(loss) for the period | 1,841 | 1,082 | 923 | (2,332) | 1,514 | |
Trade receivables | 3,262 | 2,034 | 9,192 | - | 14,488 | |
Provisions | (227) | (34) | (1,705) | - | (1,966) | |
Net carrying amount | 3,035 | 2,000 | 7,487 | - | 12,522 | |
Amounts recoverable on contracts | 2,815 | 4,267 | 4,590 | - | 11,672 | |
Deferred revenue | 2,356 | 1,411 | 2,634 | - | 6,401 |
4. Tax
Tax is charged at 49% for the six months ended 30 June 2012 (30 June 2011 - 32% and 31 December 2011 - 34%) representing the best estimate of the average annual effective tax rate expected to apply for the full year, applied to the pre-tax income of the six month period. | |
There is a one-off tax charge of £1.4m (2011: £nil) in respect of deferred tax on UK trading losses. The UK trading losses have previously been recognized in full for deferred tax purposes. Due to uncertainty over the timing of recoverability of the losses, the decision has been taken to derecognize the asset and take the benefit of the losses as these are utilised in subsequent periods. | |
5. | Dividends | |||||||
6 months | 6 months | Year ended | ||||||
ended 30 June 2012 | ended 30 June 2011 | 31 December 2011 | ||||||
£000 | £000 | £000 | ||||||
Final dividend of 1.55 pence (2011 - 1.30 pence) per ordinary share proposed and paid during the year relating to the previous year's results | 857 | 714 | 714 | |||||
Interim dividend of nil pence (2011 - 0.70 pence) per ordinary share paid during the year | - | - | 386 | |||||
857 | 714 | 1,100 |
6. | (Loss)/earnings per share | |||||||
6 months Ended 30 June 2012 | 6 months ended 30 June 2011 | Year ended 31 December 2011 | ||||||
£000 | £000 | £000 | ||||||
Numerator - earnings | ||||||||
(Loss)/earnings for the purpose of basic EPS | (902) | 1,514 | 3,257 | |||||
Effect of dilutive potential ordinary shares | - | - | - | |||||
(Loss)/earnings for the purpose of diluted EPS | (902) | 1,514 | 3,257 | |||||
Denominator - number of shares | ||||||||
Weighted average number of ordinary shares | ||||||||
used in basic EPS | 55,280 | 54,777 | 55,027 | |||||
Effect of dilutive potential ordinary shares | 558 | 427 | 425 | |||||
Weighted average number of ordinary shares for the purposes of diluted EPS | 55,838 | 55,204 | 55,452 | |||||
Basic (loss)/earnings per share | (1.6)p | 2.8p | 5.9p | |||||
Diluted (loss)/earnings per share2 | (1.6)p | 2.7p | 5.9p |
2.The effect of the dilutive share options is to decrease the loss per share and therefore the share options are anti-dilutive and are not included in the diluted earnings per share calculation.
7. | Underlying operating profit | |||||||
6 months | 6 months | Year ended | ||||||
ended 30 June 2012 | 3nded 30 June 2011 | 31 December 2011 | ||||||
£000 | £000 | £000 | ||||||
Operating profit | 725 | 2,262 | 5,011 | |||||
Amortisation of acquisition intangibles | 29 | 68 | 119 | |||||
Development costs carried forward | (1,563) | (282) | (635) | |||||
Amortisation of development costs carried forward | 372 | 241 | 560 | |||||
Exceptional bad debt provision | - | - | 357 | |||||
Arbitration costs | 127 | 378 | 557 | |||||
Acquisition costs | 252 | - | - | |||||
Underlying operating (loss)/profit | (58) | 2,667 | 5,969 | |||||
Finance revenue | 7 | 13 | 20 | |||||
Finance cost | (46) | (49) | (101) | |||||
Underlying (loss)/profit before tax | (97) | 2,631 | 5,888 | |||||
Tax expense | 47 | (821) | (1,958) | |||||
Underlying (loss)/profit after tax | (50) | 1,810 | 3,930 |
8. | Loans and borrowings | ||||||
A bank loan of £6,000,000 (30 June 2011 and 31 December 2011 - £nil) was arranged to partly fund the acquisition that has occurred during the period. | |||||||
9. | Goodwill | ||||||
Total | |||||||
£000 | |||||||
Goodwill at 1 January 2012 | 7,505 | ||||||
Additions through acquisition (note 10) | 2,914 | ||||||
Foreign exchange gains and losses | (33) | ||||||
Goodwill at 30 June 2012 | 10,386 | ||||||
10. | Acquisitions during the period | ||||||
On 19 June 2012 the Group acquired 100% of the voting equity instruments of Infochem Computer Services Ltd, a company which is a supplier of oil and gas sector software and is incorporated in England and Wales. | |||||||
The acquired business is being monitored separately from the rest of the Group and the contribution to revenue and operating profit during the six months to 30 June 2012 was £123,000 and £46,000 respectively. Had the Group acquired Infochem Computer Services Ltd on 1 January 2012, Group revenue would have been £28,561,000 and Group operating profit would have been £940,000. | |||||||
The Group incurred acquisition related costs of £252,000 (30 June 2011 and 31 December 2011 - £nil) which have been expensed in the condensed consolidated income statement. | |||||||
The directors have allocated provisional fair values to the net assets of the acquisition as they did not have complete information at the balance sheet date. Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: | |||||||
Book value | Adjustment | Fair value | |||||
£000 | £000 | £000 | |||||
Property, plant and equipment | 12 | - | 12 | ||||
Other intangibles - Intellectual property | - | 6,912 | 6,912 | ||||
Other intangibles - NPV of customer relationships | - | 1,763 | 1,763 | ||||
Receivables | 1,046 | - | 1,046 | ||||
Cash | 1,319 | - | 1,319 | ||||
Payables | (894) | - | (894) | ||||
Deferred tax liability | - | (2,082) | (2,082) | ||||
1,483 | 6,593 | 8,076 | |||||
Consideration paid | |||||||
Initial cash consideration | 9,090 | ||||||
Deferred cash consideration | 1,900 | ||||||
10,990 | |||||||
Goodwill | 2,914 | ||||||
The main factors leading to the recognition of goodwill are the future synergistic benefits from the integration of acquired software models with current KBC software models. | |||||||
11. Post balance sheet events
On 24 September 2012 the Group successfully raised additional cash of up to £1.3m after expenses of £0.05m via a subscription for 2.7m new ordinary shares from certain existing shareholders.
Related Shares:
KBC.L