9th Sep 2008 07:00
9 September 2008
Embargoed until 0700
KBC Advanced Technologies plc
("KBC" or "the Group")
Half year results for the six months ended 30 June 2008
KBC Advanced Technologies plc, a leading consultant to the energy industry, today announces its half year results to 30 June 2008.
|
6 months to 30 June 2008 |
6 months to 30 June 2007 |
Change |
12 months to 31 December 2007 |
|
|
Revenue |
£24.45m |
£18.38m |
+33% |
£38.12m |
|
Profit before tax |
£2.85m |
£1.38m |
+107% |
£2.90m |
|
Basic earnings per share |
3.31p |
1.61p |
+106% |
3.52p |
|
Dividend per share |
0.35p |
0.25p |
+40% |
0.75p |
Strong first half performance
Pretax profit and earnings per share doubled
Twin market approach of CapX and OpX services proving effective
Demand for our services increasing
Contract awards increased by 39% and workload backlog by 17%
Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said
"Although the oil market has been subject to unprecedented volatility recently, we believe that the case for a long term increase in refining capacity remains clear. This provides a very robust business environment for KBC's services, now and in the future.
We remain confident that our increasing portfolio of services and products, addressing both the CapX and OpX elements of our clients' requirements augmented by our proprietary software tools, will continue to deliver strong growth during the remainder of 2008 and beyond."
-Ends-
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KBC Advanced Technologies plc |
|
|
George Bright, Chief Executive Nicholas Stone, Operations and Finance Director |
On 9 September: 020 7067 0700 thereafter: 01932 236314 |
|
Weber Shandwick Financial |
|
|
Nick Oborne/Rachel Martin/Hannah Marwood |
020 7067 0700 |
|
Arbuthnot Securities |
|
|
James Steel/Antonio Bossi |
020 7012 2000 |
An analysts' 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, process engineering and software group, delivers improved operating performance to the oil refining, petrochemical, and other process industries worldwide. We provide process consulting, strategic planning advice, energy price forecasting and market analysis, economic studies, capital project services, and training to help clients achieve their business objectives and improve their competitive position. The KBC human performance improvement division provides organisational effectiveness services, training programmes, operations manuals, and personnel development services. Our consultants recommend changes for material and measurable improvements in profitability. To assist clients in realising such improvements, KBC provides implementation services and software solutions, including the KBC SIM models and Petro-SIM™ for process optimisation, and energy optimisation software packages. Formed in 1979, KBC has offices in the UK, USA, Canada, Singapore, the Netherlands, Russia, China, Japan and Korea. 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 2008
Chairman's Statement
We are pleased to report that the business has performed very strongly in the first half of 2008. Revenues of £24.4m increased by 33% over the same period last year (2007: £18.4m) and profit before tax doubled to £2.8m (2007: £1.4m) demonstrating the benefits of delivering a broader range of services and products through our existing global office network.
Demand for our services was strong throughout the period and across all three operating regions. This has underpinned the significant growth in sales during the period, with new contract awards increasing by 39% to £27m (2007: £19m). The resulting workload backlog has increased by 17% to £35m at 30 June 2008 (31 December 2007: £30m).
OPERATING REVIEW
Refining industry margins have remained strong during 2008 in most parts of Europe, the Middle East and Asia, with North America seeing a decline from the high margin levels of 2007. Although continued high oil prices are having an impact in certain markets, overall demand for oil products is still expected to increase further in 2008. During these volatile market conditions, demand for our services has remained robust. In the Middle East and Asia we continue to execute work driven primarily by "CapX" (capital projects) services, while in North America the key demand driver has been for "OpX" services, which relate to operational effectiveness of existing assets.
We have worked on a variety of CapX projects ranging from individual asset evaluation through to design studies for new refinery projects. We have continued to be successful in subcontracting detailed engineering work to engineering contractor partners in Asia and elsewhere, which gives us an important increase in capacity and enhances our breadth of capability. The economic analyses and forecasts produced by KBC Market Services for the oil and refined product markets have continued to be an important offering in the market. In addition, heightened interest in the oil markets has enabled KBC to raise its profile with appearances on television and radio, as well as references in the trade and mainstream press.
Demand for our OpX services has remained at high levels, particularly in the US. The entire suite of services including energy optimisation, profit improvement and human performance improvement ("HPI") has played its part in delivering a strong performance. The need for US refiners to meet ever stricter regulatory requirements and manage the issues of an ageing workforce has been a particular driver of the very strong growth of HPI services in that region. Our broad suite of services is designed to meet the industry's current and future requirements, both in the US and globally, and we have been investing in training to ensure that we can roll this service out worldwide.
As previously announced, a notable contract award during the period was from a US refiner for our participation in a "Learning and Development" programme. This type of work is a combination of the services brought to KBC through the acquisition of TTS Performance Systems Inc in 2006 and KBC's existing consultancy services, and we are pleased to see the anticipated growth in jointly developed services being delivered so successfully.
The increasing cost of energy has helped to drive the strong demand for our Energy Services business for clients in a variety of energy intensive process industries in addition to the refining market. We have also been successful in rapidly bringing to market a new software tool, CarbonManagerTM, to help clients manage carbon emissions. This market is in the early stages of development, but it could in time offer a good revenue stream for KBC.
KBC's traditional profit improvement work still plays a significant part in our portfolio of services outside North America but interest in this service is growing again in this region.
Our consultants have been extremely busy during this period and utilisation has run at an average of 80%. We aim to reduce this to around the optimal level of 78% to allow sufficient time for research and development activities and maintaining the sales pipeline. Our recruitment programme has been successful in adding a further 11% to our consulting capacity during the period. The use of associate consultants has also increased to 16% of billable hours from 9% last year, enabling us to maintain resource flexibility.
Software revenue has grown by 15% over the same period in 2007 and continues to be a significant contributor to our business success. Petro-SIM™ software is now installed at 82 sites. The annual maintenance, support and upgrade revenues generated by these licences are particularly important in providing recurring revenue. Development activities have focused on the next version of Petro-SIM, due for launch in 2009. Version 4 will incorporate numerous enhancements to maintain Petro-SIM as the leading refinery simulation tool.
RESULTS
Revenue for the first half of 2008 was £24.4m, up by 33% from the £18.4m reported for the same period last year. Direct costs have increased by 26% and staff and associate costs by 39%, while other costs have not increased by any significant amount. This increase in staff and associate costs relates mainly to the hiring of new employees and associate consultants, and to a lesser extent to an increase in the year on year accrual for the profit related bonus scheme in which all Group employees participate. Overall, costs have increased by 28% and, as a result, operating profit has increased by 95% to £2.9m from £1.5m in the first half of 2007. As disclosed in Note 3 to these statements, the underlying operating profit measure that excludes the impact of acquisition intangibles and research and development costs carried forward has increased by 106% to £3.1m.
Profit before tax after finance revenue and charges has doubled to £2.8m from £1.4m for the same period in 2007. After the tax charge of £1.0m, or 35%, profit for the period more than doubled to £1.9m (2007: £0.9m). Basic earnings per share were 3.31p, up by 106% from 1.61p in the first half of 2007. The effective tax rate of 35% has improved from 37% in the same period last year, but is nevertheless higher than the long-run rate for the business. This is being actively managed, but in the short-term the availability of prior year tax losses leads to certain withholding taxes being unrecoverable and therefore written-off, increasing the effective rate.
Net cash at 30 June 2008 was £1.2m from a net cash position of £1.3m at 31 December 2007 and a net overdraft position of £1.4m at 30 June 2007. Close attention to working capital management has limited the investment required in working capital to an 11% increase in trade receivables from June 2007, compared to a 33% increase in revenue. Other cash movements include the dividend paid in respect of last year, deferred consideration paid for the acquisition of TTS Performance Systems Inc in 2006 and the staff performance bonus for 2007. As in 2007 we expect cash resources to strengthen during the second half of the year.
DIVIDEND
An interim dividend of 0.35p per share will be paid on 8 October 2008 to shareholders on the register at 19 September 2008, an increase of 40% over the prior year's interim dividend of 0.25p per share interim dividend last year. This reflects the improved results and the Board's confidence in the outlook for the business.
A dividend of 0.5p per share was paid during the first half as the final dividend for the year to 31 December 2007, making a total of 0.75p for the year ended 31 December 2007.
BOARD CHANGES
After eleven years on the Board of KBC I have decided to stand down and Ian Miller, who joined the Board as a non-executive director in 2004, will take over as Chairman and lead the Group in the next stage of its development. This change will take place with immediate effect and I will retire as a director from the end of September. Following the appointment of Ian Godden as a new independent non-executive director in July and my retirement, KBC will have two independent non-executive directors in addition to Mr Miller as Chairman.
KBC has achieved its principal objective from the time I was appointed Chairman, some four years ago, and is now strongly profitable. It has been a privilege to work with the members of the board and the executive management of KBC and to witness the transformation of the Group's financial and trading position. I have every confidence that, under their guidance, this progress will continue.
OUTLOOK
Although the oil market has been subject to unprecedented volatility recently, we believe that the case for a long term increase in refining capacity remains clear. This provides a very robust business environment for KBC's services, now and in the future.
The management changes implemented over the past few years have helped to make KBC a much more responsive and flexible organisation, better able to meet our clients' needs. Alongside our desire to expand through suitable acquisitions, we continue to seek opportunities to accelerate the delivery of sustained organic growth.
We remain confident that our increasing portfolio of services and products, addressing both the CapX and OpX elements of our clients' requirements augmented by our proprietary software tools, will continue to deliver strong growth during the remainder of 2008 and beyond.
Christopher B Powell-Smith
Chairman
9 September 2008
|
Group income statement for the six months ended 30 June 2008 |
|
Notes |
Unaudited 6 months to 30 June 2008 £000 |
Unaudited 6 months to 30 June 2007 £000 |
Audited 12 months to 31 December 2007 £000 |
|
|
Revenue |
24,449 |
18,379 |
38,115 |
|
|
Direct costs |
(3,348) |
(2,663) |
(5,619) |
|
|
Staff and associate costs |
(13,725) |
(9,909) |
(21,171) |
|
|
Depreciation and amortisation |
(377) |
(349) |
(762) |
|
|
Other operating charges |
(4,069) |
(3,956) |
(7,422) |
|
|
Operating profit |
2,930 |
1,502 |
3,141 |
|
|
Finance revenue |
10 |
22 |
35 |
|
|
Finance cost |
(93) |
(149) |
(279) |
|
|
Profit before tax |
2,847 |
1,375 |
2,897 |
|
|
Tax expense |
(996) |
(509) |
(988) |
|
|
Profit attributable to equity holders of the parent |
1,851 |
866 |
1,909 |
|
|
Earnings per share |
||||
|
Basic |
2 |
3.31p |
1.61p |
3.52p |
|
Diluted |
2 |
3.25p |
1.55p |
3.49p |
|
Group balance sheet at 30 June 2008 |
|
Unaudited as at 30 June 2008 £000 |
Unaudited as at 30 June 2007 £000 |
Audited as at 31 December 2007 £000 |
||
|
Non-current assets |
||||
|
Property, plant and equipment |
1,475 |
1,292 |
1,456 |
|
|
Goodwill |
6,628 |
6,620 |
6,628 |
|
|
Intangible assets |
1,439 |
1,667 |
1,604 |
|
|
Deferred tax asset |
2,316 |
2,603 |
2,600 |
|
|
|
11,858 |
12,182 |
12,288 |
|
|
Current assets |
||||
|
Trade and other receivables |
18,794 |
16,910 |
16,257 |
|
|
Income tax asset |
- |
61 |
- |
|
|
Cash and short-term deposits |
1,193 |
618 |
1,349 |
|
|
Other financial assets |
- |
63 |
- |
|
|
19,987 |
17,652 |
17,606 |
||
|
Total assets |
31,845 |
29,834 |
29,894 |
|
|
Non-current liabilities |
||||
|
Trade and other payables |
(251) |
(733) |
(753) |
|
|
Provisions |
(280) |
(433) |
(356) |
|
|
Deferred tax liabilities |
(543) |
(868) |
(543) |
|
|
(1,074) |
(2,034) |
(1,652) |
||
|
Current liabilities |
||||
|
Trade and other payables |
(7,725) |
(6,206) |
(7,012) |
|
|
Income tax payable |
(479) |
- |
(455) |
|
|
Bank overdraft |
- |
(2,025) |
- |
|
|
Provisions |
(153) |
(153) |
(153) |
|
|
Other financial liabilities |
(34) |
- |
(35) |
|
|
(8,391) |
(8,384) |
(7,655) |
||
|
Total liabilities |
(9,465) |
(10,418) |
(9,307) |
|
|
Net assets |
22,380 |
19,416 |
20,587 |
|
|
Equity attributable to equity holders of the parent |
||||
|
Issued capital |
1,427 |
1,397 |
1,420 |
|
|
Share premium |
8,038 |
7,824 |
8,013 |
|
|
Other reserves |
984 |
984 |
984 |
|
|
Own shares |
(1,017) |
(2,136) |
(2,136) |
|
|
Retained earnings |
12,948 |
11,347 |
12,306 |
|
|
Total equity |
22,380 |
19,416 |
20,587 |
|
|
Total equity and liabilities |
31,845 |
29,834 |
29,894 |
|
Group cash flow statement for the six months ended 30 June 2008 |
|
Unaudited 6 months to 30 June 2008 £000 |
Unaudited 6 months to 30 June 2007 £000 |
||
|
Net cash inflow from operating activities |
|||
|
Profit before tax |
2,847 |
1,375 |
|
|
Finance revenue |
(10) |
(22) |
|
|
Finance costs |
93 |
149 |
|
|
Operating profit |
2,930 |
1,502 |
|
|
Depreciation and amortisation |
377 |
348 |
|
|
Share based payment expense |
149 |
120 |
|
|
Movements in working capital: |
|||
|
- trade and other receivables |
(2,537) |
(3,488) |
|
|
- trade and other payables |
636 |
349 |
|
|
- exchange differences |
(2) |
119 |
|
|
- financial assets and liabilities |
(1) |
(7) |
|
|
Cash generated from operations |
1,552 |
(1,057) |
|
|
Finance revenue received |
10 |
22 |
|
|
Finance costs paid |
(93) |
(121) |
|
|
Income taxes paid |
(689) |
(250) |
|
|
Net cash flow from operating activities |
780 |
(1,406) |
|
|
Cash flow from investing activities |
|
||
|
Purchase of tangible non-current assets |
(188) |
(179) |
|
|
Purchase of intangible non-current assets |
(34) |
(154) |
|
|
Acquisition deferred consideration paid |
(502) |
(643) |
|
|
Net cash flow from investing activities |
(724) |
(976) |
|
|
Cash flow from financing activities |
|||
|
Dividends paid to equity holders of the parent |
(279) |
(271) |
|
|
Issue of shares |
44 |
70 |
|
|
Net cash flow used in financing |
(235) |
(201) |
|
|
Net decrease in cash and cash equivalents |
(179) |
(2,583) |
|
|
Cash and cash equivalents at 1 January |
1,349 |
1,178 |
|
|
Exchange adjustments |
23 |
(2) |
|
|
Cash and cash equivalents at 30 June |
1,193 |
(1,407) |
|
Group statement of recognised income and expenditure for the six months ended 30 June 2008 |
|
Unaudited 6 months to 30 June 2008 £000 |
Unaudited 6 months to 30 June 2007 £000 |
||
|
Attributable profit for the period |
1,851 |
866 |
|
|
Foreign currency translation |
29 |
19 |
|
|
Total recognised income and expenditure for the period |
1,880 |
885 |
NOTES TO THE 2008 HALF YEAR RESULTS
1 BASIS OF PREPARATION
The Group prepares its consolidated financial statements in accordance with IFRS as adopted by the European Union, and the statements presented here have been prepared using accounting policies that will be applied to the Group's 2008 statutory accounts. For the purposes of this document the term IFRS includes International Accounting Standards.
This Half Year 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 Year 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 240 of the Companies Act 1985.
The comparatives for the full year ended 31 December 2007 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 section 237(2)-(3) of the Companies Act 1985.
2 EARNINGS PER SHARE
The calculation of basic earnings per share is based upon earnings of £1.85m (Jun 2007: £0.87m, Dec 2007: £1.91m) and on 55,869,056 (Jun 2007: 53,621,682, Dec 2007: 54,182,528) ordinary shares, being the weighted average number of ordinary shares in issue during the period after excluding shares owned by the KBC Advanced Technologies plc Employee Trust.
3 UNDERLYING OPERATING PROFIT
|
June 2008 £000 |
June 2007 £000 |
|
|
Operating profit |
2,930 |
1,502 |
|
Amortisation of acquisition intangibles |
103 |
77 |
|
Research and development costs carried forward |
(33) |
(154) |
|
Amortisation of research and development costs carried forward |
97 |
76 |
|
Underlying operating profit |
3,097 |
1,501 |
4 SEGMENTAL INFORMATION
|
Income statement for the six months ended 30 June 2008 |
Consultancy £000 |
Software £000 |
Unallocated £000 |
Group £000 |
|
External sales |
21,508 |
2,941 |
24,449 |
|
|
Direct project expenses |
(13,129) |
(1,510) |
(14,639) |
|
|
Depreciation and amortisation |
(125) |
(252) |
(377) |
|
|
Sales and marketing |
(1,885) |
(1,885) |
||
|
Facilities and communications |
(2,212) |
(2,212) |
||
|
Management and support services |
(2,406) |
(2,406) |
||
|
Trading profit (segment result) |
8,379 |
1,306 |
(6,755) |
2,930 |
|
Finance revenue |
10 |
10 |
||
|
Finance cost |
(93) |
(93) |
||
|
Profit before tax |
2,847 |
|||
|
Tax expense |
(996) |
|||
|
Profit for the period |
1,851 |
|
Income statement for the six months ended 30 June 2007 |
Consultancy £000 |
Software £000 |
Unallocated £000 |
Group £000 |
|
External sales |
15,820 |
2,559 |
- |
18,379 |
|
Direct 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) |
1,502 |
|
Finance revenue |
|
|
22 |
22 |
|
Finance cost |
|
|
(149) |
(149) |
|
Profit before tax |
|
|
|
1,375 |
|
Tax expense |
|
|
|
(509) |
|
Profit for the period |
|
|
|
866 |
Related Shares:
KBC.L