22nd Sep 2005 07:02
KBC Advanced Technologies plc22 September 2005 Thursday 22 September 2005 KBC Advanced Technologies plc ("KBC") INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2005 DEMONSTRATE CONTINUED IMPROVEMENT IN UNDERLYING BUSINESS PERFORMANCE KBC Advanced Technologies plc, a leading consultant to the oil industry,announces its results for the six months ended 30 June 2005. Financial Summary *Six months *Six months ended ended 30 June 2005 30 June 2004Revenue £13.6 million £15.9 millionTrading (loss)/profit (£1.7 million) £0.3 millionLoss before tax (£1.7 million) (£0.1 million)Basic loss per share (3.67p) (0.15p) * Reported for the first time under IFRS Highlights• Strong committed order book over 20% ahead of previous year-end• Several large contracts under final negotiation• Excellent growth in Asia with first half sales equal to 2004 full year sales• New refinery-wide simulation software Petro-SIM(TM) delivering good initial sales• Increase in energy conservation projects Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said: "Significant progress has been made over the last six months. Although in somecases the timing of sales awards has shifted to the second half, our committedorder book has grown strongly in the period. Asia offers several majoropportunities at the moment and the operations there have produced our strongestperformance ever in this region. We expect the trend in the order book tocontinue in the second half and remain confident of a return to tradingprofitability by the end of the year." - Ends- For further information, please contact: KBC Advanced Technologies plc www.kbcat.com ---------------Peter Close, Chief Executive ) On 22 September: 020 7067 0700Nicholas Stone, Finance Director ) Thereafter: 01932 236314 Weber Shandwick Square Mile 020 7067 0700James ChandlerRachel TaylorYvonne Alexander A briefing for analysts will be held at 0915 for 0930 today at the offices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS Notes to Editors: KBC Advanced Technologies plc, a leading independent processengineering consultancy, delivers improved profitability through consultingservices and practical solutions to owners and operators in the oil refining,petrochemical and other process industries worldwide. KBC provides processconsulting, strategic planning advice, petroleum and chemical price forecasting,economic studies and capital project reviews to help clients find the mostcost-effective way to achieve their short- and long-term objectives. KBCanalyses plant operations and management systems, recommends changes formaterial and measurable improvements in profitability, and providesimplementation services to assist clients in realising these improvements. Incarrying out this work, KBC makes extensive use of its proprietary refinery-widesimulation and process modelling technology. Formed in 1979, KBC has principaloffices in the UK, USA, Singapore, Japan, Russia and the Netherlands. For moreinformation, visit www.kbcat.com KBC Advanced Technologies plc ("KBC" or the "Group") INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2005 DEMONSTRATE CONTINUED IMPROVEMENT IN UNDERLYING BUSINESS PERFORMANCE Chairman's statement During the first half of 2005 there have been encouraging improvements in salesawards and strong growth in the sales pipeline. The committed order book is nowmore than 20% ahead of the comparable position at the end of 2004. There hasbeen strong growth in Asia, with sales awards in that region during the firsthalf being almost the same as in the whole of 2004. There has also been goodprogress in the sales of Petro-SIM(TM), KBC's refinery-wide simulation software,which has delivered sales awards totalling £2.3 million to date since its launchat the end of last year. Our energy conservation services activities have alsoincreased and are performing well. As a result of the positive background in the oil and gas industry, KBC isseeing a change in the mix of its clients' priorities towards longer-terminvestment opportunities. We are rebalancing our service portfolio to ensurethat we can maximise the opportunity that this substantial new market provides.Whilst there has been a reduction in the demand for non-investment profitimprovement services, we have still been able to deliver quarter on quarterrevenue growth in the first half, with revenues ahead of the second half of2004. Despite the real improvement we have seen, financial performance within anyperiod is sensitive to the timing of sales awards and as a consequence a tradingloss of £1.7m was recorded in the first half. During the third quarter we have made progress on significant new contract opportunities and we expect continued improvement during the second half resulting in trading profitability in the fourth quarter, an improved overall operating performance for the second half and a return to profitability in 2006. The market prospects remain strong and the Board continues to explore opportunities to ensure that KBC is positioned to exploit them. Operational review During the period the value of contract awards has been evenly balanced betweenour three geographic regions, the Americas, Asia and Europe/Middle East/Africa,representing a significant growth in Asia in line with the strong economicindicators in that area. First half awards for the Asia region almost matchedfull year 2004 performance in that region, and the sales pipeline is up by morethan 60% on the same period in 2004. To meet this demand, operational resourceshave been strengthened in our Singapore office and we anticipate that this trendwill continue. As we reported in our trading statement on 30 June 2005, we have seen anincrease in energy conservation driven projects during this period, withengagements with bp and Chevron in the US, and Total and two other majorrefiners in Europe. Refiners in the developing world are now also starting tofocus on energy conservation. With crude prices in excess of US$60 per barrel,we believe that this will remain a priority with many companies for theforeseeable future. Sales of Petro-SIM, KBC's refinery-wide simulation software, have a long leadtime and as a result it was six months after its launch before we recorded ourfirst awards. However, they have picked up strongly since the first quarter ofthe year. During the second quarter several clients licensed Petro-SIM,including OMV, MOL and Tamoil. This has continued into the third quarter, withfurther sales in Europe and two large contracts with Fuji Oil Company in Japanand SK Corporation in Korea. Revenue from Petro-SIM is expected to be around£850k in 2005. Interest in the product continues to grow and there is a strongsales pipeline with several other clients at an advanced stage of evaluation andcontract negotiation. The contribution, before overhead, from the work we have won remains healthy,albeit on a lower volume of work than in previous years. The global industrythat KBC serves requires a significant level of overhead and sales costs thatlead to high operational gearing at KBC. The Board is focused on building scaleboth to fill gaps in the range of services required by our clients and to ensurea return to sustainable profitability. Consolidation within the oil industry is continuing and refiners are facing manynew challenges over safety, reliability, crude quality and capacity constraints.We believe that there will be an increase in demand for assistance to addressthese challenges. With its broad range of products and services, and globalreach, KBC is well positioned to meet this demand. We have identified severalprospects for growth which will enhance our ability to build and sustainrelationships with clients, and improve our operating gearing. The Board regardsthe progression of these opportunities as a matter of priority. Results Revenue of £13.6m in the first half of 2005 shows an increase compared to 2004second half revenue of £13.3m. Encouragingly, revenue during the secondquarter of 2005 showed an increase of 16% over the first quarter. Although,compared to the prior year period, revenue decreased in the first half of 2005by around 14% from £15.9m, there is no seasonality in this business, making thesecond half of 2005 a more informed comparative. Operating costs beforeexceptional items decreased by 2%, despite the increase in staff costs relatingto the recruitment of the Petro-SIM development team in the autumn of 2004. Thisresulted in a trading loss for the first half of 2005 of £1.7m compared with aprofit during the same period in 2004 of £0.3m before exceptional charges. There were no operating exceptional charges in this period although thecomparative figures for 2004 contain a charge of £0.5m relating to the costs ofthe legal proceedings with AEA Technology PLC and Aspen Technology Inc whichwere settled in October 2004. Net funds were £2.0m at 30 June 2005, an increaseof £0.3m during the period. This was the result of a strong working capitalimprovement, collection of the final settlement instalment from Aspen TechnologyInc and the share placing that was concluded in April 2005. International Financial Reporting Standards ("IFRS") This is the first set of results to be reported under IFRS and therefore allfigures are stated according to its principles. This involves a restatement ofthe 2004 comparatives, and reconciliation to UK GAAP for both periods isincluded within the notes. Also published today on our website (www.kbcat.com)is a restatement of the results for the year ended 31 December 2004 under IFRS,the accounting policies that have been adopted by KBC as a result of this changeand an explanation of the changes that were required. Details of how to obtaincopies of this restatement are also included in the notes to this statement. Dividend In line with the dividend policy indicated in the 2003 Annual Report, dividendpayments are now related more closely to the underlying earnings of thebusiness. Whilst the outlook for the business is positive, the Board hasdecided that it would not be appropriate to pay an interim dividend this year. Outlook It is very encouraging that sales awards totalled close to £15.0m during thefirst half of 2005, representing a doubling of the total achieved in the secondhalf of 2004. This led to growth in the committed order book of more than 20% atthe end of the first half year. In our trading statement of 30 June 2005 we referred to the timing of certainsales awards being crucial to delivering the expected profit for the second halfof the year. We still expect to see good progress during the remainder of theyear, with second half revenues expected to be around 10% ahead of thatdelivered in the first half and a substantial improvement in profitability.Notwithstanding the expected growth in revenues and sales awards, it is nowclear that delays to some contracts mean that the revenue to be recognised thisyear is less than previously anticipated. Therefore, it is expected that theresult for the second half of 2005 will be significantly better than the firsthalf, leading to an operating loss for the year as a whole of around £2.0m. Sales prospects have also grown during the period and the trend of an increasingorder book and revenue is expected to continue during the second half of 2005.Several large contracts are under negotiation including a large multi-yearProfit Improvement Program(TM) at two sites in Asia which incorporates our largestPetro-SIM sale to date. Technical and commercial terms have been agreed and workhas commenced in anticipation of imminent contract execution. We thereforeanticipate closing the year with an order book around twice the size of that atthe beginning of the year and as a consequence we are confident of a return toprofitability in 2006. Unaudited Group income statementfor the six months ended 30 June 2005 2005 2004 £000 £000Revenue 13,601 15,907Direct costs (2,555) (2,639)Staff & associate costs (9,302) (9,326)Other operating charges (3,417) (3,621) --------- ---------Trading (loss)/profit (1,673) 321Software litigation costs - (496) --------- ---------Loss before tax and financing (1,673) (175)Interest receivable 20 26Interest payable (32) - --------- ---------Loss before tax (1,685) (149)Taxation (77) 79 --------- ---------Attributable loss (1,762) (70) ========= =========Attributable to shareholders of the parent (1,762) (70) ========= ========= Loss per shareBasic (3.67)p (0.15)pDiluted (3.67)p (0.15)p Unaudited Group balance sheetAt 30 June 2005 2005 2004 £000 £000AssetsNon-current assetsProperty, plant and equipment 1,696 1,910Goodwill 3,951 3,951Intellectual property rights 635 735Investments 2 2Deferred tax asset 1,411 1,389 --------- --------- 7,695 7,987Current assetsTrade and other receivables 10,581 11,717Investments - 300Income tax asset 459 567Cash and bank 1,986 3,454 --------- --------- 13,026 16,038 --------- ---------Total assets 20,721 24,025 ========= ========= LiabilitiesNon-current liabilitiesProvisions due after one year - (343)Deferred tax liabilities - (744) --------- --------- - (1,087) --------- --------- Current liabilitiesTrade and other payables (4,182) (4,999)Provisions due within one year (161) (45) --------- --------- (4,343) (5,044) --------- ---------Total liabilities (4,343) (6,131) --------- --------- --------- ---------Net assets 16,378 17,894 ========= ========= EquityCalled up share capital (1,262) (1,202)Share premium account (6,741) (6,038)Other reserves (209) (180)Own shares 2,136 2,136Profit and loss account (10,302) (12,610) --------- ---------Total equity (16,378) (17,894) ========= ========= Unaudited Group statement of changes in equityfor the six months ended 30 June 2005 2005 2004 £000 £000 Restated opening equity as at 1 January 17,092 19,343Attributable loss for the period (1,762) (70)Exchange adjustments 193 (102)Share based expense recognised in the income statement 92 25Dividends paid - (1,302)Issue of shares 763 - --------- ---------Closing equity 16,378 17,894 ========= ========= Unaudited Group cash flow statementfor the six months ended 30 June 2005 2005 2004 £000 £000Cash flows from operating activitiesLoss before tax and financing (1,673) (175)Depreciation and amortisation 269 425Share based payment expense 92 25Movement in working capital 1,689 686 --------- ---------Cash generated from operations 377 961Interest received 20 26Interest paid (32) -Income taxes paid (705) (214) --------- ---------Net cash flows from operating activities (340) 773 --------- --------- Cash flows from investing activitiesCapital expenditure (137) (259)Movement in short term investments 300 300 --------- ---------Net cash flows from investing activities 163 41 --------- --------- Cash flows from financing activitiesDividends paid - (1,302)Issue of shares 763 -Payment of loan notes (300) (300) --------- ---------Net cash flows from financing activities 463 (1,602) --------- --------- Net increase/(decrease) in cash and cash equivalents 286 (788)Cash and cash equivalents at beginning of period 1,696 4,275Exchange adjustments 4 (33) --------- ---------Cash and cash equivalents at end of period 1,986 3,454 ========= ========= Notes to the 2005 half year results 1 Basis of preparationKBC Advanced Technologies plc (the "Group") has previously prepared its primarynancial statements under UK generally accepted accounting principles ("UKGAAP"). From 2005 the Group is required to prepare its consolidated nancialstatements in accordance with International Financial Reporting Standards("IFRS") as adopted by the European Union ("EU"). For the purposes of thisdocument the term IFRS includes International Accounting Standards. The results for the six months to 30 June 2005 represent the first interimnancial statements the Group has prepared in accordance with its accountingpolicies under IFRS. The rst annual report under IFRS will be for the year ended31 December 2005. A description of how the Group's reported performance andnancial position are affected by this change, including reconciliations from UKGAAP to IFRS for prior year results and the revised summary of signicantaccounting policies under IFRS, is published in the Investor Relations sectionof the corporate website at www.kbcat.com. Copies of the IFRS Restatementdocument and further copies of this Interim report may be obtained from theCompany Secretary, KBC Advanced Technologies plc, KBC House, 42-50 Hersham Road,Walton on Thames, Surrey, KT12 1RZ. The Group is required to apply all relevant standards in force at the rstreporting date: for the Group this is at 31 December 2005. As a consequence,these results have been prepared on the basis that all IFRSs and InternationalFinancial Reporting Interpretation Committee ("IFRIC") interpretations, will beadopted by the EU. The failure of the EU to adopt these amended standards intime for full year nancial reporting in 2005, the issue of furtherinterpretations by IFRIC in advance of the reporting date, or the development ofother accepted practice, could result in the need to change the basis ofaccounting or presentation of certain nancial information from that presented inthis document. Appendix A reconciles attributable prot for the six month period to 30 June2004, as previously reported under UK GAAP to IFRS. Appendix B reconciles thebalance sheet and equity as at 30 June 2004 as previously reported under UK GAAPto IFRS. The nancial information contained in this document does not constitute statutoryaccounts as dened in section 240 of the Companies Act 1985. The auditors haveissued an unqualied opinion on the Group's statutory nancial statements under UKGAAP for the year ended 31 December 2004, which have been led with the Registrarof Companies. 2 Reconciliation to UK GAAPThe main items impacting this result when compared to UK GAAP are as follows: Trading loss Loss before tax £000 £000 Reported under IFRS (1,673) (1,685)Employee benefits 83 83Unrealised foreign currency gains and losses 58 58Goodwill amortization - (245) _____ _____Reported under UK GAAP (1,532) (1,789) Trading loss is reported before items identified by the Directors as being ofboth a material and non-recurring nature. 3 Loss per shareThe calculation of loss per share is based upon a loss of £1,762,000 (2004:restated loss of £70,000) and on 48,053,725 (2004: 46,490,913) Ordinary shares,being the weighted average number of Ordinary shares in issue during the periodafter excluding shares owned by the KBC Advanced Technologies plc EmployeeTrust. APPENDIX A - Reconciliation of attributable profit For the six months ended 30 June 2004 As reported Reported under UK under GAAP* Accounting policy changes under IFRS IFRS Foreign Share Intangible currency Employee based asset exchange benefits payments amortisation £000 £000 £000 £000 £000 £000 Revenue 15,907 - - - - 15,907Direct costs (2,639) - - - - (2,639)Staff & associate costs (9,221) - (80) (25) - (9,326)Other operating charges (3,560) (61) - - - (3,621) --------------------------------------------------------------------------Trading (loss)/ profit 487 (61) (80) (25) - 321Software litigation (496) - - - - (496)Amortisation of acquisition intangibles (245) - - - 245 - --------------------------------------------------------------------------(Loss)/ profit before tax and financing (254) (61) (80) (25) 245 (175)Interest receivable 26 - - - - 26(Loss)/ profit before tax (228) (61) (80) (25) 245 (149)Taxation 79 - - - - 79 --------------------------------------------------------------------------Attributable (loss) / profit (149) (61) (80) (25) 245 (70) -------------------------------------------------------------------------- * The order and description of items presented as "reported under UK GAAP" hasbeen adjusted to ease the direct comparison with IFRS presentation APPENDIX B - Reconciliation of balance sheet and equity as at 30 June 2004 As reported Reported under UK under GAAP* Accounting policy changes under IFRS IFRS Foreign Share Intangible currency Employee based asset Dividend exchange benefits payments amortisation accrual £000 £000 £000 £000 £000 £000 £000 AssetsNon-current assetsProperty, plant and equipment 1,910 - - - - - 1,910Goodwill 3,706 - - - 245 - 3,951Intellectual property rights 735 - - - - - 735Investments 2 - - - - - 2Deferred tax asset 1,389 - - - - - 1,389 -------------------------------------------------------------------------------- 7,742 - - - 245 - 7,987 Current assetsTrade and other receivables 11,666 51 - - - - 11,717Investments 300 - - - - - 300Income tax asset 567 - - - - - 567Cash and bank 3,454 - - - - - 3,454 -------------------------------------------------------------------------------- 15,987 51 - - - - 16,038 --------------------------------------------------------------------------------Total assets 23,729 51 - - 245 - 24,025 ================================================================================ LiabilitiesNon-current liabilitiesProvisions due after one year (343) - - - - - (343)Deferred tax liabilities (744) - - - - - (744) -------------------------------------------------------------------------------- (1,087) - - - - - (1,087)Current liabilitiesTrade and other payables (5,043) - (80) 31 - 93 (4,999)Provisions due within one year (45) - - - - - (45) -------------------------------------------------------------------------------- (5,088) - (80) 31 - - (5,044) --------------------------------------------------------------------------------Total liabilities (6,175) - (80) 31 - 93 (6,131) -------------------------------------------------------------------------------- EquityCalled up share capital (1,202) - - - - - (1,202)Share premium account (6,038) - - - - - (6,038)Other reserves (124) - - (56) - - (180)Own shares 2,136 - - - - - 2,136Profit and loss account (12,326) (51) 80 25 (245) (93) (12,610) --------------------------------------------------------------------------------Total equity (17,554) (51) 80 (31) (245) (93) (17,894) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------Total equity and liabilities (23,729) (51) - - (245) - (24,025) ================================================================================ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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