7th Sep 2006 07:02
KBC Advanced Technologies plc07 September 2006 Embargoed until 07.00 7 September 2006 KBC Advanced Technologies plc ("KBC" or "the Group") Interim results for the six months ended 30 June 2006 KBC Advanced Technologies plc, a leading consultant to the oil industry, todayannounces its interim results to 30 June 2006. Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005Revenue £17.3m £13.6m £28.5mProfit/(loss) before tax £0.4m £(1.7)m £(2.0)mBasic profit/(loss) per share 0.46p (3.67)p (4.23)pTotal equity £17.7m £16.4m £16.2m Highlights • Significant turnaround in business - return to profitability • Revenues of £17.3m up 27% from prior year • Strong current trading and contract awards • Acquisition of TTS Performance Systems brings greater order visibility • Board changes - George Bright appointed as Chief Executive and Nick Stone became Operations and Finance Director • Growth in revenues and earnings expected in second half Commenting on the results, Christopher Powell-Smith, Chairman of KBC, said: "The positive market environment, coupled with the turnaround in performance,provides the Board with confidence in the longer term outlook for the business." - Ends - For further information, please contact:KBC Advanced Technologies plcGeorge Bright, Chief Executive On 7 September: 020 7067 0700Nicholas Stone, Operations and Finance Director thereafter: 01932 236314 Weber Shandwick | Square MileRachel Taylor/Lana Pugh 020 7067 0700 About KBC: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, organisational effectivenessservices, energy price forecasting and market analysis, economic studies,capital project services, and training to help clients achieve their businessobjectives and improve their competitive position. KBC analyses plant operationsand management systems and 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 Profimatics TM SIM models and Petro SIM TM software for processoptimisation, and the Linnhoff March TM energy optimisation software packages.Formed in 1979, KBC has offices in the UK, USA, Canada, Singapore, theNetherlands, Russia, China, and Japan. For more information, visitwww.kbcat.com. KBC Advanced Technologies plc ("KBC" or "the Group") Interim results for the six months ended 30 June 2006 Chairman's Statement We are pleased to report a significant turnaround in the business in the firsthalf of 2006. The profit before tax of £0.4m represents a step change and is thefirst reported profit since 2003. The business is performing strongly and we areconfident that this will continue into 2007. The strong growth first seen in the fourth quarter of 2005 has been maintained,with revenues of £17.3m in the first half of 2006 representing a 27% increaseover the prior year period, and a 16% increase over the second half of 2005.Like for like revenues in the first half of 2006 increased by 21% over the prioryear period demonstrating strong organic growth. The Group is seeking to increase the proportion of larger, longer-term contractsthat provide better forward visibility of revenues and profitability, althoughthe timing of contract awards remains a significant factor. Whilst orders signedin the period showed a 26% reduction on the same period last year, this positionhas been corrected by large contract awards in July and August 2006. In February 2006 we completed the acquisition of TTS Performance Systems Inc("TTS"), a consultancy based in Denver, Colorado, specialising in humanperformance improvement in the process industries. The integration process isnow complete and the business is meeting our expectations. TTS works with majoroil companies in North America which value their expertise in the area of humanperformance improvement, especially at a time of increasing shortage ofexperienced engineering personnel. On 26 June 2006 KBC's shares moved from the Official List of the UK ListingAuthority to AIM, the London Stock Exchange's international market for smallergrowing companies. AIM has simpler administrative requirements and a moreflexible regulatory regime which is more appropriate for KBC's intention toincrease the scale of the business both organically and through acquisitions. Management changes During the period we have also seen the successful transition to the newmanagement team under the leadership of George Bright and Nick Stone. GeorgeBright became Chief Executive at the time of the AGM in May 2006, havingpreviously been Chief Operating Officer. At the same time Nick Stone took on theadditional responsibility of Operations, becoming Operations and FinanceDirector. Changes to roles below Board level have also been made to provideadditional support to the new management structure. Peter Close, who had led the business since September 2003, announced hisplanned retirement from the business at the AGM when he stepped down from theposition of Chief Executive. He will retire from the Board on 30 September 2006.The Board would like to take this opportunity to thank Peter for hiscontribution in helping to rebuild the business over the last three years. The focus on improved profitability has started to deliver results. Newprocedures have been introduced to enhance the efficiency of contract executionand strengthen operating margins. In addition, plans are being implemented toincrease the proportion of revenues derived from software sales. An integralpart of this strategy is the establishment of a substantial installed base ofPetro-SIM TM and the SIM series refinery simulation models. Operating review During the first half year contract awards were evenly split across KBC's threeoperating regions: Americas, Europe Middle East and Africa (EMEA), and Asia.With our clients in the oil refining sector generating record margins, we aredeveloping our service and product offerings to meet the market's changingrequirements. The number of multi-year technical services agreements continuesto grow worldwide. Contract awards are increasing in project design optimisationand in due diligence activities associated with refining asset mergers andacquisitions. As a result our client base outside our traditional refineryoperator core is strengthening, with an increasing number of contracts beingawarded by financial services businesses. In the Americas we executed a study on behalf of the Inter-American DevelopmentBank to plan the expansion of refining capacity in Central America. We expect tocontinue our assistance in this project as it moves into the funding phase. InAugust we won a landmark US$6.3m project for Pemex Refinacion in Mexicoinvolving clean fuels studies, refinery reconfiguration projects and thelicensing of Petro-SIM for five sites. Petro-SIM, KBC's proprietary refinery-wide process simulation software, is nowestablished in 32 sites with sales contracts totalling £4.9m to date. In June asimplified version of the product, Petro-SIM Express, was released to provide anentry level platform. This has received a good market response and the firstsale has recently been confirmed in Europe. Petro-SIM Version 3 will be launchedin the third quarter of this year. This new release will contain significantenhancements, both for our internal consulting work and to benefit licensees asa simulation tool. The number of capital construction projects in the industry worldwide has risensignificantly in the last two years as plans have been developed to provide theadditional refining and processing capacity needed to meet growing demand. Thishas enabled KBC to broaden its reach significantly by working collaborativelywith established Engineering, Construction and Procurement (EPC) companies.During the first half of 2006 KBC was engaged to assist in the optimisation ofboth new and major revamp project designs by EPC companies, including Amec andFluor. This provides KBC with growing exposure to this buoyant worldwide market. The strength of the refining industry is leading to a growing shortage ofexperienced engineering personnel in North America and Europe. Whilst thisprovides opportunities for KBC, it also creates pressure on our employee costs,although the recent changes to KBC's remuneration structure have helped toameliorate this. With the economies of both China and India continuing to growrapidly, and given our expectation of continued growth in contracts in thisregion, we have increased the resources in our Singapore office to manage thisexpected growth in a cost effective manner. In May this year we opened an officein Beijing to support our ongoing operations in China. To serve its global client base effectively, KBC requires a worldwide presencewith an associated level of overhead and sales costs resulting in highoperational gearing. The half year results demonstrate the positive effect ofthis gearing when additional sales are achieved with the same cost base. Toensure a return to consistent profitability, however, the Board is focused onincreasing the scale of the business. The first steps have been taken towardsachieving this goal. Results Revenue of £17.3m in the first half of 2006 shows an increase of 27% over the£13.6m in the 2005 first half year and an increase of 16% over the £14.9m in thesecond half of 2005. The TTS acquisition contributed £0.9m of this first halftotal. Operating costs increased by 11% year on year, mainly as a result ofsubcontractor costs incurred. This resulted in a profit before tax for the firsthalf of 2006 of £0.4m compared with a loss during the same period in 2005 of £1.7m. There were no operating exceptional charges in this period. Net cash was £0.4mat 30 June 2006, a reduction of £1.4m during the period. This was caused byincreases in the level of debtors and work in progress on the balance sheet as aresult of the increase in turnover and the milestone-driven invoicing scheduleon the Chinese projects. It should be noted that, as the proportion of softwarelicence sales increases, there will be an increasing impact on the level ofdebtors as the licence element of revenue is recognised on successful implementation of the software, although payment terms may be over a longer period. In order to fund the initial consideration for the acquisition of TTS in January2006, 2,403,320 new ordinary shares were placed with institutional investors anda further 1,121,849 new ordinary shares were issued to the vendors. Dividend After a sustained period of continuing to distribute significant dividends toshareholders despite a deteriorating financial performance, the Board decided in2004 that dividend payments should be related closely to the underlying earningsof the business, with the result that dividend payments ceased in 2004. Whilstthe outlook for the business is positive, the Board does not believe that it isappropriate to resume dividend payments at this time, so no interim dividend hasbeen declared. Outlook The level of contract awards is on a rising trend and the Board expects this tocontinue. The principal markets in which KBC operates remain strong and theopportunities for major contracts continue to be positive, as evidenced by therecent award by Pemex of the contract for $6.3m. The bulk of this project is tobe delivered in 2006, underpinning the Board's expectations for the full year.This positive market environment, coupled with the turnaround in performance,provides the Board with confidence in the longer term outlook for the business. Christopher B Powell-Smith Unaudited Group Income Statementfor the six months ended 30 June 2006 2006 2005 £000 £000 ----------- -----------Revenue 17,288 13,601Direct costs (3,646) (2,555)Staff & associate costs (9,210) (9,302)Depreciation and amortisation (367) (269)Other operating charges (3,666) (3,148)------------------------------ ----------- -----------Operating profit/(loss) 399 (1,673)Finance revenue 15 20Finance cost (33) (32)------------------------------ ----------- -----------Profit/(loss) before tax 381 (1,685)Tax expense (142) (77)------------------------------ ----------- -----------Profit/(loss) for the period 239 (1,762)------------------------------ ----------- ----------- Attributable to equity holders of the parent 239 (1,762)------------------------------ ----------- ----------- Earnings/(loss) per shareBasic 0.46p (3.67)pDiluted 0.44p (3.67)p------------------------------ ----------- ----------- Unaudited Group Balance Sheetat 30 June 2006 2006 2005 £000 £000 ----------- -----------Non-current assetsProperty, plant and equipment 1,466 1,696Goodwill 6,478 3,951Intangible assets - intellectual property rights 777 635Investments - 2Deferred tax asset 2,168 1,411------------------------------ ----------- ----------- 10,889 7,695 ----------- -----------Current assetsTrade and other receivables 11,926 10,581Income tax asset 71 459Cash and short term deposits 723 1,986Other financial assets 47 ------------------------------- ----------- ----------- 12,767 13,026 ----------- -----------Total assets 23,656 20,721------------------------------ ----------- ----------- Non-current liabilitiesProvisions (105) ------------------------------- ----------- ----------- (105) - ----------- -----------Current liabilitiesTrade and other payables (5,605) (4,180)Bank overdraft (284) -Provisions (16) (161)Other financial liabilities - (2)------------------------------ ----------- ----------- (5,905) (4,343) ----------- -----------Total liabilities (6,010) (4,343)------------------------------ ----------- ----------- Net assets 17,646 16,378------------------------------ ----------- ----------- Equity attributable to equity holders of parentIssued capital (1,350) (1,262)Share premium (8,319) (6,741)Other reserves (226) (209)Own shares 2,136 2,136Retained earnings (9,887) (10,302)------------------------------ ----------- -----------Total equity (17,646) (16,378)------------------------------ ----------- -----------Total equity and liabilities (23,656) (20,721)------------------------------ ----------- ----------- Unaudited Group Cash Flow Statementfor the six months ended 30 June 2006 2006 2005 £000 £000 ---------- ----------Net cash flow from operating activitiesOperating profit/(loss) before tax and financing 399 (1,673)Depreciation and amortisation 367 269Share based payment expense 90 92Movements in working capital - trade and other receivables (1,611) 1,280 - trade and other payables 22 309 - financial assets and liabilities (98) 100------------------------------- ---------- ----------Cash generated from operations (831) 377Finance revenue 15 20Finance costs (33) (32)Income taxes paid (427) (705)------------------------------- ---------- ----------Net cash flow from operating activities (1,276) (340)------------------------------- ---------- ---------- Cash flow from investing activitiesCapital expenditure (83) (137)Purchase of subsidiary undertaking including costs (1,122) -Net funds acquired with subsidiary undertaking 5 -Repayment of deposits - 300------------------------------- ---------- ----------Net cash flow from investing activities (1,200) 163------------------------------- ---------- ---------- Cash flow from financing activitiesPayment of loan notes - (300)Issue of shares 1,126 763------------------------------- ---------- ----------Net cash flow used in financing activities 1,126 463------------------------------- ---------- ---------- Net (decrease)/increase in cash and cash equivalents (1,350) 286Cash and cash equivalents at 1 January 1,802 1,696Exchange adjustments (13) 4------------------------------- ---------- ----------Cash and cash equivalents at 30 June 439 1,986------------------------------- ---------- ---------- Unaudited Group Statement of Changes in Equityfor the six months ended 30 June 2006 2006 2005 £000 £000 ---------- -----------Opening equity at 1 January 16,233 17,092Attributable profit/(loss) for the period 239 (1,762)Foreign currency translation (582) 193Share based expense recognised in the income statement 90 92Issue of share capital 1,666 763------------------------------- ---------- -----------Closing equity 17,646 16,378------------------------------- ---------- ----------- Notes 1 Basis of preparationThe 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 2005 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 constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. The auditors haveissued an unqualified opinion on the Group's statutory financial statements underInternational GAAP for the year ended 31 December 2005, which have been filed withthe Registrar of Companies. 2 Earnings per shareThe calculation of earnings per share is based upon earnings of £0.24m (2005:loss £1.76m) and on 51,735,771 (2005: 48,053,725) Ordinary shares, being theweighted average number of Ordinary shares in issue during the period afterexcluding shares owned by the KBC Advanced Technologies plc Employee Trust. 3 AcquisitionsOn 1 February 2006 the Company acquired the share capital of TTS PerformanceSystems Inc. and its sister company, Center for Process Plant Management LLC.The consideration was comprised of cash and shares totalling US$6m. Intangible assets will be written off over six years. Goodwill is calculated asfollows: $000Consideration 6,000Intangible assets (926)Expenses 80Fair value of net assets acquired (476) -------Goodwill 4,678 ------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
KBC.L