17th Mar 2009 07:00
Embargoed until 07.00 17 March 2009
KBC Advanced Technologies plc
("KBC" or "the Group")
Preliminary results for the year ended 31 December 2008
KBC Advanced Technologies plc, a leading consultant to the energy industry, today announces its preliminary results to 31 December 2008.
|
12 months to 31 December 2008 |
12 months to 31 December 2007 |
||
|
Revenue |
£52.8m |
£38.1m |
+38% |
|
Profit before tax |
£5.4m |
£2.9m |
+86% |
|
Basic earnings per share |
6.4p |
3.5p |
+82% |
|
Underlying profit before tax (i) |
£5.7m |
£3.0m |
+93% |
|
Underlying earnings per share (i) |
6.9p |
3.7p |
+86% |
|
Full year Dividend per share |
1.35p |
0.75p |
+80% |
Highlights
Impressive operational and financial performance
Year end cash balances grew fourfold to £5.7 million (2007: £1.3 million)
Dividend up by 80% to 1.35p
Realignment of service offering has ensured that Group is able to add value to clients at all stages of economic cycle
Shift expected in 2009 from CapX (capital budget) to OpX (operating budget) services as clients look to maximise margins in competitive markets
Strong growth in order backlog (to 75% of 2008 revenue) provides firm foundation for 2009
Note (i) Underlying profit and earnings per share exclude the impact of the carry forward of software development costs, their amortisation and the amortisation of acquired intangible assets. See note 3.
Ian Miller, Chairman of KBC, commented:
"The first months of 2009 have seen continued progress in sales awards. The strong growth in backlog in 2008 provides a firm foundation for revenue growth in 2009. Although consulting utilisation has not been as high as in the same period in 2008, the higher proportion of software backlog at the year end will be converted to higher software revenues during the first half of 2009, more than compensating for any potential decline in consulting revenue. The current weakness of sterling will also contribute to an increase in our operating margins.
Although forecasting is very difficult in this environment, with careful control of costs we remain cautiously optimistic and expect the business to deliver growth in both scope and scale during 2009, albeit, as we have previously indicated, at a lower rate than in 2008."
- Ends -
For further information, please contact:
|
KBC Advanced Technologies plc |
|
|
George Bright, Chief Executive Nicholas Stone, Operations and Finance Director |
On 17 March: 020 7067 0700 thereafter: 01932 236314 |
|
Arbuthnot Securities |
020 7012 2000 |
|
James Steel/Antonio Bossi/Katie Shelton |
|
|
Weber Shandwick Financial |
|
|
Nick Oborne/Clare Perks |
020 7067 0700 |
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, and Japan. For more information, visit www.kbcat.com.
CHAIRMAN'S STATEMENT
SUMMARY
2008 was an excellent year for KBC, with pre-tax profits growing by 86%, revenue by 38%, contract awards by 20% and workload backlog by 29%. At the year end workload was close to £40m, representing 75% of 2008 revenue. Within this total, software backlog has grown by 35% from £5.3m to £7.1m. Whilst there has been some benefit from the weakness of sterling compared to last year, at constant exchange rates there was still substantial growth in revenues and profits.
The impressive operational and financial performance has led to year end cash balances growing by a factor of four to £5.7m. In addition, the Group has bank facilities of around £4.2m, ensuring that we are in a strong position both to manage our growth organically and to respond to any changes in market conditions.
The business grew during the year in both scale and capability and executed a volume of work well in excess of previous years, as a result of the continued hard work of our skilled employees.
The oil refining and process industries saw a rapid change in market conditions during 2008. The year started with a global shortage of processing capacity, but the significant fall in oil product demand in the summer months meant that the year ended with thin or negative operating margins in many parts of the world. The pace of this change has challenged the industry and has continued to create opportunities for KBC to help its clients. The re-alignment of our services over the last few years has ensured that we are able to add value to our clients at all stages of the economic cycle. As a result so far we have not seen the material impact of the downturn faced by many other businesses.
RESULTS
Revenue for the year was up by 38%, from £38.1m to £52.8m, operating profit increased by 75% to £5.5m and profit before tax by 86% to £5.4m. On a constant exchange rate basis, revenue would have been £49.0m and operating profit £4.7m, growth of 29% and 52% respectively. On an underlying basis operating profit grew by 81% to £5.8m (2007: £3.2m). The improvement of the cash position has led to a reduction in finance cost to £0.1m from £0.3m in 2007 which contributed to an 86% increase in profit before tax to £5.4m from £2.9m. Basic earnings per share were 6.4p, an increase of 82% over 2007 (3.5p).
DIVIDEND
In view of the very strong results for the year and the significantly improved cash position of the Group, the Board is pleased to recommend a final dividend of 1.0p per share. With an interim dividend of 0.35p per share paid in October 2008, this leads to a total payment of 1.35p per share, an increase of 0.6p per share over 2007 (0.75p per share). Upon recommencing payment of dividends in 2007, the Board initially took a cautious approach to dividend payments. Having now delivered growth over a two year period, the Board believes that it is an appropriate time to establish a long term dividend policy which will offer shareholders a progressive dividend payment whilst maintaining a dividend cover of between three and five times with cover initially at the upper end of the range. The dividend will be payable on 19 May 2009 to shareholders on the register at close of business on 8 May 2009.
CURRENT TRADING AND OUTLOOK
Although we have yet to see any material impact of the current economic climate on our business, there is no doubt that 2009 will be a more challenging year than 2008. Whilst our Market Services group has been forecasting a reduction in refining industry margins for some time, the scale and speed of the reduction have been much greater than expected as a result of the rapid deterioration of economic conditions in all major economies. In these circumstances there is a natural tendency for companies to defer decisions and cut costs, making our sales process more challenging. Nevertheless, the issues faced by our clients provide many opportunities for us to help them through these difficult times. Our service offerings are designed to focus on both the operating and capital budgets (OpX and CapX) of our clients and we expect a shift towards OpX work during 2009 as capital spending is delayed or constrained.
The first months of 2009 have seen continued progress in sales awards. The strong growth in backlog in 2008 provides a firm foundation for revenue growth in 2009. Although consulting utilisation has not been as high as in the same period in 2008, the higher proportion of software backlog at the year end will be converted to higher software revenues during the first half of 2009, more than compensating for any potential decline in consulting revenue. The current weakness of sterling will also contribute to an increase in our operating margins.
Although forecasting is very difficult in this environment, with careful control of costs we remain cautiously optimistic and expect the business to deliver growth in both scope and scale during 2009, albeit, as we have previously indicated, at a lower rate than in 2008.
Ian K Miller
CHAIRMAN
BUSINESS REVIEW
THE REFINING MARKET
2008 has seen a dramatic swing in oil prices. In the first half of the year the consensus was that global GDP and oil demand were growing satisfactorily, and that there were strains on oil and product supply. The resultant increases in oil prices led to a reduction in oil product demand in most western economies and a slowing of the rapid growth in the developing countries, particularly China and India. The response of the US market was akin to the oil price shocks of the 1970s, with gasoline consumption falling by 6% compared to 2007.
The spreading of the economic crisis to most major economies by the end of the fourth quarter further exacerbated the impact on the oil markets and led to significant demand destruction and oil prices falling by more than US$100 per barrel during the year. Attention switched from concern over future supply to concern over disappearing product demand. Eventually OPEC, in a rare show of unity, cut supplies of oil in order to stabilise the market.
This type of turbulent market offers many opportunities for consulting companies.
KBC'S RESPONSE
During 2008 KBC has delivered strong growth in all financial measures. Our expanded range of services gives KBC an exposure to a broader spectrum of the refining and other process industries' planning, investment and operating activities: from strategic review of capital investment opportunities to day-to-day operational improvements, and many other aspects in between. With the addition of a strategic consulting capability to our portfolio, our range of services now covers:
Strategic Consulting - providing strategy support to our clients, comprising market forecasting, business analysis (including bankruptcy support, project financing support and expert witness), M&A support (due diligence on behalf of buyers/sellers and rationalisation studies), and feasibility and definition studies.
Operational Excellence ("OpX") - helping clients to ensure that their facilities are operated in a safe, environmentally acceptable and profitable manner. The service covers planning and scheduling, reliability and maintenance, safety, health and environment, leadership development, human performance and continuous improvement. The addition in 2007 of CarbonManager™ to our range of software allows us to take advantage of the foreseeable increase in activity in the carbon reduction area.
Capital Excellence ("CapX") - providing design and project management support for new and brown field projects from concept through to start-up. These services are executed either on behalf of asset owners directly, or through the several alliances we have developed with key engineering and construction companies.
An important element of our growth was our continued ability in a tight employee market to recruit well qualified consultants, including the hiring of a leadership team for the strategic consulting business. As KBC is a people business, training is a vital investment and the programme that commenced in 2007 continued during 2008 and has contributed to these results. This investment will continue during 2009 but at a rate commensurate with the lower rate of growth of our consultant base.
STRATEGY
Our strategy is to anticipate movements in the market, and then provide relevant solutions in a timely fashion. We expect that the strong demand for our CapX services seen over the last few years will decline in the near term due to the current shortage of project financing. Many projects will require a re-evaluation and we expect to see an increase in locally managed small capital projects. Conversely, we expect demand for our OpX programme to increase as owners strive to maximize margins in very competitive markets. We see 2009 as a year of "asset sweating", an area where KBC has considerable capability and track record. Finally, in the light of the current economic difficulties we anticipate an increase in asset transfers, both as a result of non-performing assets and as the strongest asset owners attempt to consolidate and rationalise their market position. We look forward to high growth in our strategic consulting work as a result of the inevitable activity in this area.
Although no acquisitions were concluded in 2008, we will continue to search for acquisition opportunities. We will, however, also focus on investing for organic growth, fuelled by the recruitment of established teams rather than individuals.
CONTRACT AWARDS
2008 was a record year with contract awards exceeding £52m, an increase of more than 20% over 2007.
Key contracts awarded include:
The renewal of our 6-site Petro-SIM™ software lease with Pemex in Mexico
A multi million dollar HPI "Learning and Development" program for Chevron
Four multi million pound contracts for refinery design projects in the Middle East region
Continued and expanding Technical Services partnership with Irving Oil in Canada
Extension of the Strategic Alliance with PETRONAS in Malaysia
Appointment as Technical Advisor to PetroSA for their new Mthombo refinery in South Africa
Continuing Technical Services for the new Colombian Reficar refinery
A 9-site Middle East Petro-SIM software licence for implementation in 2009
All of these contracts contributed to 2008 results and will continue to deliver material revenues during 2009.
CONSULTING ACTIVITIES
Demand for our process engineering optimisation expertise remained high throughout the year across all regions. The Profit Improvement Programs at Sinopec, which commenced at the end of 2005, are now drawing to a close. Several other similar but smaller projects were undertaken in the Middle East, the US and Malaysia, where we are increasingly working outside the refining sector in gas processing, petrochemicals and, most recently, LNG plants.
Demand for our Energy Services during 2008 outstripped our capacity. Energy costs can comprise 50% or more of a refinery's non-feedstock costs and the current narrowing of margins has resulted in energy efficiency being a significant competitive advantage. The correlation between energy consumption and carbon emissions has also led to an increase in demand for these services.
Our HPI (Human Performance Improvement) business has once again shown significant growth, particularly in the US. Amongst other achievements, KBC's largest contract by value for 2008 was for HPI services. The strong US demand has constrained our ability to expand this service outside of North America. However, during 2008 some limited capability in both our London and Singapore offices was established. We anticipate continued high growth in this area and we are planning to fully establish this key service in both the EMEA and Asia regions at the earliest opportunity.
During 2008 we saw CapX revenue grow to a peak of 30% of total revenue in the middle of the year. However, we expect our CapX work to decline in the short term as a result of the difficulty of securing project finance for private sector companies. Nevertheless there are still a significant number of new refinery projects, especially in the Middle East, South America, and the developing Asian economies. Most of these projects are owned by the increasingly influential national oil companies. The drivers behind such developments are nationally strategic as well as economic and they are therefore less susceptible to delay or change due to economic conditions.
In the strategic consulting area we continue to work for asset owners, engineering and construction companies, and investment banks. In spite of difficulties in project financing in the latter part of the year, a significant amount of transaction-related work was undertaken in all our operating regions. A notable success was the role played by KBC in the sale of the national Albanian refining assets, for which we received a material success fee. We were successful in strengthening our capability in this area during 2008.
SOFTWARE
Software sales and revenues showed continued strong growth in 2008. The licensing of Petro-SIM by nine refineries in the Middle East at the year end led to the milestone of 100 licences sold since the launch of Petro-SIM in 2004. Our SIM series standalone reactor models continue to lead the market, with additional sales generated by the increased functionality of Petro-SIM. Software innovation continues at a fast pace with the release of version 3.2 of Petro-SIM at the end of 2008, followed by testing of version 4 prior to release in 2009. These improvements are designed to make it easier to use Petro-SIM to optimise existing facilities and to maximise the return on future capital investments. We also made significant improvements to SuperTarget™ (our utilities optimisation software) and to OptiSteam™, Persimmon™ and CarbonManager™ which help our clients reduce energy consumption and emissions.
INDUSTRY OUTLOOK
Volatility in crude oil and product prices, increasing product inventories and demand destruction associated with the global economic slowdown are expected to exert increasing pressure on refiners to generate adequate margins. There is also likely to be an increasing focus associated with emissions control that will add further pressure, especially now that the new US administration appears to be taking this issue seriously. There will also be start-ups of new refining capacity that has been under construction over the last few years that will tend to be more efficient than some of the existing plant. We expect a focus on cost reduction, including selection of crude, and believe that we could see closures of smaller less efficient refineries that struggle to compete. Although there will be a slowdown in construction of new facilities after 2009, the management of risk of those projects that do proceed will become a critical factor in achieving expected project returns.
The change in fortunes in this industry is nothing new: it is part of the normal business cycle, although one that has accelerated rapidly over the last six months. KBC is well positioned to assist in this time of change through maximising efficiency and margins. Our OpX program has a proven pedigree and is ideally suited to the short and longer term needs of our clients. KBC's CapX services will continue to be used on those new projects which proceed to completion, and our new Strategic Consulting capability will add client value at the decision making stages, providing KBC with a new entry point into the oil and gas industry.
2009 will be a year of significant transformation for our clients. The demographics of the industry are unchanged and there remains a shortage of experienced managers to meet the challenges. There will be no lack of consulting opportunities and KBC has the proven solutions required by the industry. In an uncertain world, we are cautiously optimistic that we will continue to meet our clients' and shareholders' expectations.
OPERATING RESULTS
Group revenue increased by 38%, growing from £38.1m in 2007 to £52.8m in 2008. Whilst exchange rates movements have had a material impact, it is important to recognise the significant achievement in delivering these record results in market conditions that became extremely challenging towards the end of the year. The revenue for the year would have been £49m without the significant fall in value of sterling relative to the US dollar and Euro which constitute respectively 47% and 37% of our revenues. Software revenue increased by 11% to £7.9m and consulting revenue increased by 45% to £44.9m. Now included in the software revenue is an annualised total of £4.1m of ongoing maintenance and support revenue with the balance being new licence sales.
Group costs increased by 35% compared to the previous year as the scale and capacity of the business was increased to match the demand for our services. Direct costs, staff and associate consultant costs increased by around 40%, although approximately £8m, or 27% of the total, represents variable costs of associate consultants and subcontractors, as well as performance related bonuses. By contrast depreciation and amortisation increased by only 6%. This differential reflects the investment made during the year in our employee base and the fact that the business is not capital intensive and so requires a relatively low level of investment in fixed and other assets.
Other operating charges increased by 20%, although this includes a significant benefit from foreign exchange gains. A realised gain of £0.55m was made on the value of cash received in foreign currencies when measured against the sterling value of the revenue originally booked. In addition a net unrealised gain of £0.54m was recorded on the value of working capital balances and associated forward exchange contracts as measured at year end against the original booked value of the transactions. If their impact were ignored, other operating charges would have increased by 28% in the year.
The consulting operating margin has been maintained in comparison to 2007 at around 34%. However, the software margin has declined to just over 50% due to the reduction in development costs that are carried forward and an increase in costs written off during the year related to the development of version 4 of Petro-SIM. Unallocated sales and overhead costs have fallen as a proportion of revenue from 31% in 2007 to 26% in 2008. The resulting operating profit has grown by 75% to £5.5m (2007: £3.1m). Our measure of underlying profit that ignores the carry forward of software development costs, their amortisation and the amortisation of acquired intangible fixed assets was £5.8m: growth of 81% from £3.2m in 2007.
During 2008 we provided in full for £0.3m of debtor and work in progress balances in connection with an optimisation and software project conducted for Houston Refining LP, part of the Lyondell Basell group that petitioned for 'Chapter 11' creditor protection in the US in January 2009. The project is still ongoing with £0.2m of future revenue in year end backlog and the terms of the Chapter 11 process have secured funding for work conducted after the petition date to be paid for. The process for resolving the historic balances is likely to be long and complex, and there is no way of forecasting currently when or if any of those balances are likely to be paid. No material bad debt provisions were deemed necessary during 2007.
Finance cost of £0.1m (2007: £0.3m) reflects a significant fall in bank interest payable as the cash position of the Group has improved. Also included in the charge is the unwinding of the discount applied to deferred consideration for the acquisitions made in 2006 in order to record on the balance sheet the net present value of those future payments.
PROFIT BEFORE TAX
The profit before tax of £5.4m shows an increase of 86% from £2.9m in 2007.
TAX
The tax charge of £1.8m (2007: £1.0m) for the year is made up of current tax expense of £1.0m and deferred tax of £0.8m. Within the current tax expense is £0.7m of tax payable on overseas operations and £0.4m of withheld tax that is not expected to be recoverable against UK corporation tax as a result of the continuing availability of losses brought forward. The deferred tax charge is the usage of tax losses brought forward against current profits and the consequent reduction of the deferred tax asset held on the balance sheet.
The tax rate of around 33% (2007: 34%) of pre-tax profits remains higher than the current rate of UK corporation tax of 28%. The main reasons for the higher rate are the non-recovery of withheld tax on payments from overseas territories of £0.3m (5%), higher taxes on earnings in overseas subsidiaries £0.1m (2%) and expenses not deductible for tax purposes of £0.2m (3%). The impact of these factors has been partially offset by non-taxable income of £0.3m (5%) derived from foreign exchange movements on intercompany balances.
A net deferred tax asset of £1.2m (2007: £2.1m) remains on the balance sheet representing prior year tax losses that have not yet been utilised and are expected to be utilised in future years.
EARNINGS AND DIVIDENDS
The profit after tax of £3.6m (2007: £1.9m) equates to basic earnings per share of 6.4p, compared to 3.5p in 2007, an increase of 82%. Diluted earnings per share were 6.3p and 3.5p respectively. Earnings per share calculated on the underlying profit measure increased by 86% from 3.7p to 6.9p. A final dividend of 1.0p per share is proposed for the year, following the interim dividend of 0.35p per share paid in October 2008. This leads to a total payment of 1.35p per share, making an increase of 0.6p per share over 2007 (0.75p per share). The dividend will be payable on 19 May 2009 to shareholders on the register at close of business on 8 May 2009.
PROVISION FOR ONEROUS LEASE
The Company holds a lease for an office property occupied by the business until May 2001 and vacated by a subtenant in 2006. The rental market weakened between 2001 and 2006 and during that year the Board re-assessed the probable cash outflow from the lease and determined that an addition of £0.55m to the current onerous lease provision was required to cover the expected cost over its remaining life. This was provided in full in the 2006 financial statements. The property is now fully tenanted until the end of its lease. Having re-assessed the probable cash outflow from this lease following the conclusion of the new subleases, the Board has determined that no further provision is required.
CARRY FORWARD OF SOFTWARE DEVELOPMENT COSTS
Prior to 2006 the Group had written off all software development costs to the Income Statement each year. Under UK GAAP there was discretion for Directors to write off expenditure as incurred, irrespective of the stage of development of the software product. However, under IAS that discretion is no longer available and, under the accounting policy adopted in 2005 on conversion to IAS, development expenditure is carried forward when "its future recoverability can be reasonably regarded as assured and technical feasibility and commercial viability can be demonstrated". During 2006 the Board took the view that the Petro-SIM development had reached this stage. Hence, after a charge for each year's amortisation, in the accounts for 2006 and 2007 net expenditure of £0.76m was carried forward against expected future sales.
Although the development of the current version of Petro-SIM is now all but complete, the revenues and contribution from the software business have grown further in 2008, as noted previously. Development expenditure incurred during the year of £0.1m has been carried forward and is amortised against expected future revenue. The net impact in these financial statements of this is a charge of £0.1m after charging amortisation for the year of £0.3m.
WORKING CAPITAL
Trade and other receivables increased during the year from £16.3m to £24.2m, an increase of 49% compared to the revenue increase of 38%. However a significant element of this increase is matched by growth in deferred revenue included within trade and other payables where an improvement in terms of trade has seen invoices raised before the work has been executed. If deferred revenue is excluded, the net increase in receivables is in line with revenue at 38%. There is however also an impact from the very significant sterling/Euro exchange rate movements in the last month of the year. If the receivables balances are measured at constant currency, the increase is 9% compared to the like for like revenue increase of 29%.
FINANCIAL RISK MANAGEMENT
The Group's principal financial instruments comprise trade debtors, trade creditors, cash, short term deposits and short term lines of credit used to finance the Group's operations and future growth. The major financial risks faced by the Group are interest rates, currency risk, contract risks, and the continued availability of equity and debt finance.
INTEREST RATES
At 31 December 2008 the Group held cash balances of £5.7m and no overdraft balances, compared to cash balances of £1.3m at 31 December 2007. Cash balances in excess of immediate needs are placed on short term deposit in the money markets. Overdraft facilities available to the Group for use in managing the timing of cash flow in different countries and currencies were used periodically during the year. Current overdraft facilities available to the Group total £2.2m. In addition a three year revolving credit facility of £2.0m was negotiated in early 2008 to provide additional liquidity and possible acquisition funds. Interest charges on this facility are linked to the LIBOR rate appropriate to the duration and currency of any draw down.
W George Bright Nicholas P Stone
CHIEF EXECUTIVE OPERATIONS AND FINANCE DIRECTOR
Group Income Statement
Year ended 31 December 2008
|
2008 |
2007 |
||
|
Notes |
£000 |
£000 |
|
|
Revenue |
3 |
52,769 |
38,115 |
|
Direct costs |
(7,913) |
(5,619) |
|
|
Staff and associate costs |
(29,620) |
(21,171) |
|
|
Depreciation and amortisation |
(812) |
(762) |
|
|
Other operating charges |
(8,935) |
(7,422) |
|
|
Operating profit |
5,489 |
3,141 |
|
|
Finance revenue |
14 |
35 |
|
|
Finance cost |
(112) |
(279) |
|
|
Profit before tax |
5,391 |
2,897 |
|
|
Tax expense |
(1,803) |
(988) |
|
|
Profit for the year |
3,588 |
1,909 |
|
|
Earnings per share |
|||
|
Basic |
6.4p |
3.5p |
|
|
Diluted |
6.3p |
3.5p |
Group Balance Sheet
At 31 December 2008
|
2008 |
2007 |
||
|
£000 |
£000 |
||
|
Non-current assets |
|||
|
Property, plant and equipment |
1,690 |
1,456 |
|
|
Goodwill |
7,670 |
6,628 |
|
|
Other intangible assets |
1,296 |
1,604 |
|
|
Deferred tax asset |
1,637 |
2,600 |
|
|
12,293 |
12,288 |
||
|
Current assets |
|||
|
Trade and other receivables |
24,192 |
16,257 |
|
|
Cash and short term deposits |
5,691 |
1,349 |
|
|
29,883 |
17,606 |
||
|
Total assets |
42,176 |
29,894 |
|
|
Non-current liabilities |
|||
|
Trade and other payables |
(172) |
(753) |
|
|
Provisions |
(203) |
(356) |
|
|
Deferred tax liabilities |
(463) |
(543) |
|
|
(838) |
(1,652) |
||
|
Current liabilities |
|||
|
Trade and other payables |
(12,380) |
(7,012) |
|
|
Current tax payable |
(552) |
(455) |
|
|
Provisions |
(153) |
(153) |
|
|
Other financial liabilities |
(522) |
(35) |
|
|
(13,607) |
(7,655) |
||
|
Total liabilities |
(14,445) |
(9,307) |
|
|
Net assets |
27,731 |
20,587 |
|
|
Equity attributable to equity holders of parent |
|||
|
Issued capital |
1,427 |
1,420 |
|
|
Share premium |
8,039 |
8,013 |
|
|
Other reserves |
984 |
984 |
|
|
Own shares |
(998) |
(2,136) |
|
|
Retained earnings |
18,279 |
12,306 |
|
|
Total equity |
27,731 |
20,587 |
|
|
Total equity and liabilities |
42,176 |
29,894 |
Group Cash Flow Statement
Year ended 31 December 2008
|
2008 |
2007 |
||
|
£000 |
£000 |
||
|
Net cash flow from operating activities |
|||
|
Profit before tax |
5,391 |
2,897 |
|
|
Finance revenue |
(14) |
(35) |
|
|
Finance cost |
112 |
279 |
|
|
Operating profit |
5,489 |
3,141 |
|
|
Depreciation and amortisation |
812 |
762 |
|
|
Share based payment expense |
295 |
260 |
|
|
Movement in working capital |
185 |
(1,681) |
|
|
Cash generated from operations |
6,781 |
2,482 |
|
|
Finance revenue received |
14 |
35 |
|
|
Finance costs paid |
(112) |
(251) |
|
|
Income taxes paid |
(836) |
(524) |
|
|
Net cash flow from operating activities |
5,847 |
1,742 |
|
|
Cash flow from investing activities |
|||
|
Purchase of tangible non-current assets |
(474) |
(522) |
|
|
Purchase of intangible non-current assets |
(127) |
(316) |
|
|
Purchase of subsidiary undertaking including costs |
(581) |
(623) |
|
|
Net funds acquired with subsidiary undertakings |
- |
- |
|
|
Net cash flow from investing activities |
(1,182) |
(1,461) |
|
|
Cash flow from financing activities |
|||
|
Dividends paid to equity holders of parent |
(475) |
(409) |
|
|
Issue of shares |
46 |
281 |
|
|
Net cash flow used in financing activities |
(429) |
(128) |
|
|
Net increase in cash and cash equivalents |
4,236 |
153 |
|
|
Cash and cash equivalents at 1 January |
1,349 |
1,178 |
|
|
Exchange adjustments |
106 |
18 |
|
|
Cash and cash equivalents at 31 December |
5,691 |
1,349 |
Group Statement of Recognised Income and Expenditure
Year ended 31 December 2008
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Attributable profit for the period |
3,588 |
1,909 |
|
Foreign currency translation |
3,702 |
(73) |
|
Total recognised income and expenditure for the year |
7,290 |
1,836 |
Notes to the financial information
1 Basis of preparation
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2008 or 2007 but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, s237(2) or (3).
The financial statements are prepared under the historical cost convention, except for certain financial instruments which are measured at fair value.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.
2 Segmental information
The primary segment reporting format is determined to be business segments as the Group's risks and rates of return are affected predominantly by differences in the services and products provided.
Secondary segment information is reported geographically by client location for the income statement and by operating business location for the balance sheet as this best reflects the way the business is organised. This difference in analysis is because the assets of the business are not located in the same geographical areas as its customers and therefore the balance sheet analysis is based on office location.
The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.
The consultancy segment delivers improved operational efficiency and financial performance through consulting services to owners and operators of oil refineries and to process industries worldwide.
The software segment produces and maintains process modelling and refinery wide simulation software for the oil industry and other process industries worldwide.
Transfer prices between geographical segments are set on an arm's length basis in a manner similar to transactions with third parties.
2 Segmental information continued
Primary segment is strategic business unit
|
Consultancy |
Software |
Unallocated |
Group |
|
|
£000 |
£000 |
£000 |
£000 |
|
|
2008 |
||||
|
Income statement |
||||
|
External sales |
44,864 |
7,905 |
- |
52,769 |
|
Direct project costs |
(29,431) |
(3,573) |
- |
(33,004) |
|
Depreciation and amortisation |
(275) |
(537) |
(812) |
|
|
Sales and marketing |
(4,580) |
(4,580) |
||
|
Facilities and communications |
(5,068) |
(5,068) |
||
|
Management and support services |
(3,816) |
(3,816) |
||
|
Trading profit/(loss) (segment result) |
15,433 |
4,057 |
(14,001) |
5,489 |
|
Finance revenue |
14 |
14 |
||
|
Finance cost |
(112) |
(112) |
||
|
Profit before tax |
5,391 |
|||
|
Tax expense |
(1,803) |
|||
|
Profit for the year |
3,588 |
|
Consultancy |
Software |
Unallocated |
Group |
|
|
£000 |
£000 |
£000 |
£000 |
|
|
2007 |
||||
|
Income statement |
||||
|
External sales |
30,999 |
7,116 |
- |
38,115 |
|
Direct project costs |
(20,332) |
(2,355) |
- |
(22,687) |
|
Depreciation and amortisation |
(223) |
(539) |
(762) |
|
|
Sales and marketing |
(3,456) |
(3,456) |
||
|
Facilities and communications |
(4,463) |
(4,463) |
||
|
Management and support services |
(3,606) |
(3,606) |
||
|
Trading profit/(loss) (segment result) |
10,667 |
4,538 |
(12,064) |
3,141 |
|
Finance revenue |
35 |
35 |
||
|
Finance cost |
(279) |
(279) |
||
|
Profit before tax |
2,897 |
|||
|
Tax expense |
(988) |
|||
|
Profit for the year |
1,909 |
3 Group operating profit
This is stated after charging/(crediting) the following:
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Depreciation and amortisation |
||
|
- Depreciation |
377 |
385 |
|
- Amortisation of intellectual property rights |
||
|
- Existing intellectual property rights |
219 |
208 |
|
- Development costs carried forward |
216 |
169 |
|
Total |
812 |
762 |
|
Included in other operating charges |
||
|
- Operating lease rentals |
||
|
- Minimum lease payments |
1,804 |
1,690 |
|
- Sublease rentals received |
(235) |
(161) |
|
- Share based payments |
295 |
260 |
|
- Net foreign exchange differences |
(1,092) |
(417) |
a) Research and development costs
During 2008 the Group incurred research and development costs of £1.8m (2007: £1.8m). Of this amount £127,000 (2007: £316,000) related to development expenditure for Petro-SIM and has been carried forward as an intangible asset to be amortised against expected future sales. The balance was charged directly to staff and associate costs and direct costs in the Income Statement.
b) Underlying operating profit
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Operating profit |
5,489 |
3,141 |
|
Amortisation of acquisition intangibles |
219 |
208 |
|
Development costs carried forward |
(127) |
(316) |
|
Amortisation of development costs carried forward |
216 |
169 |
|
Underlying operating profit |
5,797 |
3,202 |
|
Finance revenue |
14 |
35 |
|
Finance cost |
(112) |
(279) |
|
Underlying profit before tax |
5,699 |
2,958 |
The analysis of underlying profit is given to illustrate the effect of non trading items on the results of the Group.
4 Earnings per share
Basic earnings per share are calculated by dividing after tax net profit for the year attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares in issue during the year.
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Profit for the year |
3,588 |
1,909 |
|
Number |
Number |
|
|
000s |
000s |
|
|
Weighted average number of ordinary shares in issue |
57,013 |
55,758 |
|
Shares owned by the KBC Employee Trust |
(1,043) |
(1,575) |
|
Number of shares used for basic and underlying earnings per share |
55,970 |
54,183 |
|
Dilution |
1,090 |
494 |
|
Number of shares used for diluted basis and diluted underlying earnings per share |
57,060 |
54,677 |
|
Pence |
Pence |
|
|
Basic earnings per share |
6.4p |
3.5p |
|
Diluted earnings per share |
6.3p |
3.5p |
|
Basic underlying earnings per share |
6.9p |
3.7p |
|
Diluted underlying earnings per share |
6.8p |
3.7p |
Basic underlying earnings per share as defined in note 3b is based upon an after tax profit of £3.87m (2007: profit £2.02m) and on 55,970,000 (2007: 54,183,000) ordinary shares, being the weighted average number of ordinary shares in issue during the period after excluding the shares owned by the KBC Advanced Technologies plc Employee Trust.
Related Shares:
KBC.L