10th Sep 2007 07:01
KBC Advanced Technologies plc10 September 2007 10 September 2007 Embargoed until 0700 KBC Advanced Technologies plc ("KBC" or "the Group") Interim results for the six months ended 30 June 2007 KBC Advanced Technologies plc, a leading consultant to the energy industry,today announces its interim results to 30 June 2007. 6 months to 6 months to 30 June 30 June 2007 2006 Revenue £18.4m £17.3mProfit before tax £1.38m £0.38mBasic earnings per share 1.61p 0.46pDividend per share 0.25p 0.00p •Business has continued to perform strongly in the first half •Profit before tax increased by 260% to £1.4m (2006: £0.4m) •Interim dividend of 0.25p per share reflecting confidence in sustained business turnaround •Contract awards increased by 60% to £19m (2006: £12m) •Order book backlog 24% higher at £28m (2006: £22m) •Strong refining margins set to continue for the foreseeable future •Recruitment programme has increased consulting capacity by more than 10% Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said: "With a growing order backlog, anticipated increases in Petro-SIM TM sales and astable refining industry outlook, the Board is confident that the current strongtrading position will continue through the second half of this financial yearand into 2008." -Ends- KBC Advanced Technologies plc George Bright, Chief Executive On 10 September: 020 7067 0700Nicholas Stone, Operations and Finance Director thereafter: 01932 236314 Weber Shandwick Financial Richard Hews/Hannah Marwood 020 7067 0700 An analyst's presentation will be held at 9.30am at Weber Shandwick Financial's offices, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS. Copies of the presentation will be available on the Company's website: www.kbcat.com Notes to Editors: KBC Advanced Technologies plc, a leading independent consulting, processengineering and software group, delivers improved operating performance to theoil refining, petrochemical, and other process industries worldwide. We provideprocess consulting, strategic planning advice, energy price forecasting andmarket analysis, economic studies, capital project services, and training tohelp clients achieve their business objectives and improve their competitiveposition. The KBC human performance improvement division provides organisationaleffectiveness services, training programmes, operations manuals, and personneldevelopment services. Our consultants recommend changes for material andmeasurable improvements in profitability. To assist clients in realising suchimprovements, KBC provides implementation services and software solutions,including the KBC SIM models and Petro-SIM for process optimisation, and energyoptimisation software packages. Formed in 1979, KBC has offices in the UK, USA,Canada, Singapore, the Netherlands, Russia, China, and Japan. For moreinformation, visit www.kbcat.com. KBC Advanced Technologies plc ("KBC" or "the Group") Interim results for the six months ended 30 June 2007 Chairman's Statement We are pleased to report that the business has continued to perform strongly inthe first half of 2007. Revenues of £18.4m showed an increase of 6% over thesame period last year (2006: £17.3m) and, with a strong focus on cost control,profit before tax increased by 260% to £1.4m (2006: £0.4m). Continued focus on sales growth led to contract awards for the period increasingby 60% to £19m (2006: £12m). The resulting order book backlog is 24% higher at£28m as at 30 June 2007 (2006: £22m). With crude prices remaining near nominal all time highs, strong refining marginsare set to continue for the foreseeable future. This environment provides KBCwith the opportunity to continue to grow its Operational Excellence (OpX) andCapital Excellence (CapX) programmes amongst its refining clients. Demand forHuman Performance Improvement (HPI) and Energy optimization services continuesto be very strong, particularly in North America. CapX activity is high inEurope and the Middle East as a result of both asset transaction activity andplanned expansion projects. OPERATING REVIEW With our clients in the oil refining sector generating record margins, we havecontinued to enhance our service and product offerings to meet the market'schanging requirements. An example of this is the expansion of multi-yeartechnical services agreements to provide clients with a flexible resource tomeet increasing demands for engineering input. Significant clients for theseservices include: •PETRONAS •Nerefco •Irving Oil •Valero •Marathon Petroleum •Rompetrol •HOVENSA •Cepsa The traditional KBC profit improvement business remains strong in certainregions with ongoing work for Sinopec in China and other clients in the MiddleEast, and emerging opportunities in Eastern Europe. Our activities in project design optimisation and due diligence related torefining asset disposals continue to develop across all three operating regions.We are securing contracts at the feasibility and design stages of new expansionand greenfield investment projects in the refining sector in spite of, andsometimes because of, the schedule delays and cost escalation that are impactingmany of these projects. We have further developed our partnerships with engineering contractors. Thisroute to market has enabled us to accelerate the growth in CapX services byleveraging the relationships and market penetration of our partners. In Europe,for example, we are working with Fluor on feasibility and configuration studiesfor the new POAS refinery in Turkey. In Asia we are jointly executing a similarstudy for Essar with Worley Parsons. The framework agreements that we have withthese companies are proving to be an excellent model that delivers benefits toboth parties and to our joint clients. In the Americas we were recently awarded a contract with an Alon USA refinery inCalifornia to evaluate options for managing greenhouse gas emissions under avariety of expansion scenarios. Our strong expertise in energy managementprovides us with an excellent platform to undertake this type of work, given theclose relationship between energy consumption and emissions. With increasedpolitical and consumer emphasis on managing and reducing carbon emissions, weexpect this type of project activity to grow and progress for many years.In order to execute our increasing backlog and drive growth, we have beenactively recruiting, adding an additional 26 employees during this period, whichhas increased our consulting capacity by more than 10%. Utilisation has remainedconsistently high and is expected to increase further in the second half as ournew employees gain experience. Consulting revenue in the period increased to£15.8m from £15.0m in the first half of 2006. Margins before overheadallocations have improved from an average of 33% during 2006 to 37%, driving theincreased profitability of the business. Sales of Petro-SIM, our flagship refinery simulator, continue to develop.Petro-SIM is now installed in over 60 sites and we expect that the pace ofinstallation will increase in the second half. Software revenue was up on thesame period last year by 10% at £2.6m from £2.3m and the contribution continuesto be very strong with a 62% margin. The most recent sale of Petro-SIM was afull refinery model to the Coryton Refinery in the south of England, recentlyacquired by Petroplus from BP. RESULTS Reported revenue for the first half of 2007 is £18.4m, up by 6% from the £17.3mreported for the same period last year. Direct costs are down by 27% in thisperiod due to lower use of sub-contractors, while other costs have increasedbroadly in line with revenue. As a result, operating profit has increased by276% to £1.5m from £0.4m in the first half of 2006. Note 3 to this statementshows the measure of underlying profit that excludes the impact of the carryforward of software development costs and the amortisation of acquiredintangible assets which is not materially different from the reported measure. Profit before tax after finance revenue and charges is £1.4m up from £0.4m forthe same period in 2006. After the tax charge of £0.5m, or 37%, profit for theperiod was £0.9m (2006: £0.2m). Basic earnings per share is 1.61p up from 0.46pin the first half of 2006. The effective tax rate of 37% is slightly improvedfrom 38% in the same period last year but nevertheless still higher than anongoing natural rate for the business. This is due to the availability of prioryear tax losses which means that certain of the withholding tax suffered is notrecoverable and is written-off. Net bank overdraft at 30 June 2007 was £1.4m from a net cash position of £1.2mat 31 December 2006. This increase is a result of an increase in debtors andwork in progress from long term projects, in particular in China where theinvoicing is milestone driven. It also reflects the dividend paid in respect oflast year, an increase in capital expenditure to update IT infrastructure anddeferred consideration paid for last year's acquisition of TTS PerformanceSystems Inc. Although this represents a significant reduction in cash resources,it is not expected to be permanent and is comfortably within the facilitiesavailable to the Group. DIVIDEND An interim dividend of 0.25p per share will be paid on 10 October 2007 toshareholders on the register on 28 September 2007. This reflects the Board'sconfidence in the sustained turnaround in business performance. A dividend of 0.5p per share was paid during the period as a final and onlydividend for the year to 31 December 2006. OUTLOOK Refining industry margins have been strong throughout 2007 and have reachedexceptional highs in some areas at times of unplanned shut downs. Althoughmargins have reduced in the last two months, this has been due primarily toreductions in product stock levels and is unlikely to be sustained. Refiningcapacity, especially for conversion of lower quality crude, is tight andexpected to get tighter as demand for more highly refined, cleaner fuelsincreases. We therefore expect refinery margins to remain strong through to theend of 2008 with occasional periods of very high margins when unexpecteddisruptions occur. There is no sign of a slowdown in global oil product demand growth despite thehigher prices and environmental pressures. It is widely anticipated that only asmall proportion of this demand will be satisfied by alternative fuels. Wetherefore see the refining industry remaining positive for the foreseeablefuture. In the longer term, the lower quality of crude oils from new productioncapacity will increase demand for projects to expand the conversion capacity ofrefineries. This is a particular expertise of KBC and we expect this to helpdrive growth. A consequence of the challenges facing the refining industry is the continuingshortage of experienced engineering personnel in North America and Europe.Recruitment was a key component of our 2007 business plan and we are pleased toreport that we have been able to attract well qualified personnel into theGroup. We will continue to invest in our people to ensure adequate depth andbreadth of consulting experience and to grow our capacity further. Since the acquisition of Veritech Inc in November 2006, which has now beensuccessfully integrated, we have been focusing on larger acquisitionopportunities to provide a step change in the scale and scope of the business.We have investigated a number of opportunities although we have not concludedany to date. It is crucial that we continue to build scale and extend ourservice offering to improve our profit margin through increased operationalleverage of the existing global infrastructure. There remains a large number ofopportunities in the markets that we are reviewing but only those that makestrategic sense and enhance shareholder value will be pursued. With a growing order backlog, anticipated increases in Petro-SIM sales and astable refining industry outlook, the Board is confident that the current strongtrading position will continue through the second half of this financial yearand into 2008. Christopher B. Powell Smith Group income statementfor the period ended 30 June 2007 Notes Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Revenue 18,379 17,288 35,378Direct costs (2,663) (3,646) (6,342)Staff and associate costs (9,909) (9,210) (18,698)Depreciation and amortisation (349) (367) (742)Other operating charges (3,956) (3,666) (7,702) --------- --------- ---------Operating profit 1,502 399 1,894 Finance revenue 22 15 28Finance cost (149) (33) (185) --------- --------- ---------Profit before tax 1,375 381 1,737Tax expense (509) (142) (663) --------- --------- ---------Profit for the period 866 239 1,074 --------- --------- ---------Attributable to equity holders of the parent 866 239 1,074 --------- --------- ---------Earnings per shareBasic 2 1.61p 0.46p 2.10pDiluted 2 1.55p 0.44p 2.00p --------- --------- --------- Group balance sheetat 30 June 2007 Unaudited Unaudited Audited as at as at as at 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Non-current assets Property, plant and equipment 1,292 1,466 1,314 Goodwill 6,620 6,478 6,714 Intangible assets 1,667 777 1,665 Deferred tax asset 2,603 2,168 2.603 --------- --------- --------- 12,182 10,889 12,296 --------- --------- --------- Current assets Trade and other receivables 16,910 11,926 13,423 Income tax asset 61 71 326 Cash and short-term deposits 618 723 1,178 Other financial assets 63 47 56 --------- --------- --------- 17,652 12,767 14,983 --------- --------- --------- Total assets 29,834 23,656 27,279 --------- --------- --------- Non-current liabilities Trade and other payables (733) - (1,376) Provisions (433) (105) - Deferred tax liabilities (868) - (868) --------- --------- --------- (2,034) (105) (2,244) --------- --------- --------- Current liabilities Trade and other payables (6,206) (5,605) (5,752) Income tax payable - - (6) Bank overdraft (2,025) (284) - Provisions (153) (16) (663) --------- --------- --------- (8,384) (5,905) (6,421) --------- --------- --------- Total liabilities (10,418) (6,010) (8,665) --------- --------- --------- Net assets 19,416 17,646 18,614 --------- --------- --------- Equity attributable to equity holders of the parent Issued capital 1,397 1,350 1,370 Share premium 7,824 8,319 7,782 Other reserves 984 226 984 Own shares (2,136) (2,136) (2,136) Retained earnings 11,347 9,887 10,614 --------- --------- --------- Total equity 19,416 17,646 18,614 --------- --------- --------- Total equity and liabilities 29,834 23,656 27,279 --------- --------- --------- Group statement of recognised income and expenditurefor the period ended 30 June 2007 Unaudited Unaudited 6 months to 6 months to 30 June 30 June 2007 2006 £000 £000 Attributable profit for the period 866 239 Foreign currency translation 19 (582) --------- --------- Total recognised income and expenditure for the period 885 (343) --------- --------- Group cash flow statementfor the period ended 30 June 2007 Unaudited Unaudited 6 months to 6 months to 30 June 30 June 2007 2006 £000 £000 Net cash inflow from operating activities Profit before tax and after financing 1,375 381 Finance revenue (22) (15) Finance costs 149 33 --------- --------- Operating profit 1,502 399 Depreciation and amortisation 348 367 Share based payment expense 120 90 Movements in working capital: - trade and other receivables (3,488) (1,611) - trade and other payables 349 22 - exchange differences 119 (98) - financial assets and liabilities (7) - --------- --------- Cash generated from operations (1,057) (831) Finance revenue received 22 15 Finance costs paid (121) (33) Income taxes paid (250) (427) --------- --------- Net cash flow from operating activities (1,406) (1,276) --------- --------- Cash flow from investing activities Purchase of tangible non-current assets (179) (83) Purchase of intangible non-current assets (154) - Purchase of subsidiary undertaking including costs - (1,122) Net funds acquired with subsidiary undertakings - 5 Acquisition deferred consideration paid (643) - --------- --------- Net cash flow from investing activities (976) (1,200) Cash flow from financing activities Dividends paid to equity holders of the parent(271) - Issue of shares 70 1,126 --------- --------- Net cash flow used in financing (201) 1,126 --------- --------- Net decrease in cash and cash equivalents (2,583) (1,350) Cash and cash equivalents at 1 January 1,178 1,802 Exchange adjustments (2) (13) --------- --------- Cash and cash equivalents at 30 June (1,407) 439 --------- --------- NOTES TO THE 2007 HALF YEAR RESULTS 1 BASIS OF PREPARATION The Group prepares its consolidated financial statements in accordance with IFRSas adopted by the European Union, and the statements have been prepared usingthe accounting policies set out in the Group's 2006 statutory accounts. For thepurposes of this document the term IFRS includes International AccountingStandards. This Interim Report will be sent to shareholders and published on the InvestorRelations section of the corporate website at www.kbcat.com. Further copies ofthis Interim Report may be obtained from the Company Secretary, KBC AdvancedTechnologies plc, KBC House, 42-50 Hersham Road, Walton on Thames, Surrey, KT121RZ. The financial information contained in this document does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. A copyof the statutory accounts for the year ended 31 December 2006 has been deliveredto the Registrar of Companies. The auditors' report on those accounts wasunqualified, did not include references to any matters to which the auditorsdrew attention by way of emphasis without qualifying their report and did notcontain a statement under Sections 237(2)-237(3) of the Companies Act 1985. 2 EARNINGS PER SHARE The calculation of basic earnings per share is based upon earnings of £0.87m(Jun 2006: £0.24m, Dec 2006: £1.07m) and on 53,621,682 (Jun 2006: 51,735,771,Dec 2006: 52,250,519) ordinary shares, being the weighted average number ofordinary shares in issue during the period after excluding shares owned by theKBC Advanced Technologies plc Employee Trust. 3 UNDERLYING OPERATING PROFIT June 2007 June 2006 £000 £000 Operating profit 1,502 399Amortisation of acquisition intangibles 77 142Research and development costs carried forward (154) -Amortisation of research and development costscarried forward 76 - --------- ---------Underlying operating profit 1,501 541 --------- --------- 4 SEGMENTAL INFORMATION Income statement Consultancy Software Unallocated Groupfor the period ended 30 June 2007 £000 £000 £000 £000 External sales 15,820 2,559 - 18,379Direct project expenses (9,906) (850) - (10,756)Depreciation and amortisation (105) (244) (349)Sales and marketing (1,499) (1,499)Facilities and communications (2,155) (2,155)Management and support services (2,118) (2,118) --------- --------- --------- ---------Trading profit(segment result) 5,914 1,604 (6,016) 1,502Finance revenue 22 22Finance cost (149) (149) ---------Profit before tax 1,375Tax expense (509) ---------Profit for the period 866 --------- Income statement Consultancy Software Unallocated Groupfor the period ended 30 June 2006 £000 £000 £000 £000 External sales 14,965 2,323 - 17,288Direct project expenses (10,293) (1,176) - (11,469)Depreciation and amortisation (100) (267) (367)Sales and marketing (1,661) (1,661)Facilities and communications (1,789) (1,789)Management and support services (1,603) (1,603) --------- --------- --------- ---------Trading profit (segment result) 4,672 1,047 (5,320) 399Finance revenue 15 15Finance cost (33) (33) ---------Profit before tax 381Tax expense (142) ---------Profit for the period 239 --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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