Transcript Interim Results – June 2004 - KBC

KBC Advanced
Technologies plc
Investor Presentation
Half-Year Results
30 June 2004
Agenda
1.
2.
3.
4.
Review of 1st half 2004
Strategy update
Financial summary
Customer market conditions and outlook
Appendix: Background on KBC
slides 3 – 4
slides 5 – 9
slides 10 – 18
slides 19 – 20
slides 21 – 24
2
Overview – First half 2004

Business is in transition

Realignment of KBC services to client needs in progress

Strengthening client relationships and key account management

Investment in developing software applications and best practices

Strong growth in software revenue

Repositioning for growth in 2005
3
Operational highlights – First half 2004

Launch of ProfitManager applications and best practices in May

Improved sales performance in UK office with good contract wins
in FSU, Middle East and South Africa

Sales remain strong in Japan and Korea

Revenue in the Americas reduced from previous years

Process and other consulting revenues remain under pressure
during the transition

Growth in Software, Planning, Upstream and Petrochemicals
4
Strategy

Refocus on client relationships and regional business strategies

Implement strategy for growth for 2005 and beyond
 Restructure core business to deliver competitive advantage
through continuous profit improvement built on sustainable
partnerships
 Evolve scope and functionality of Petro-SIM and ProfitManager to
support industry best practice

Broaden consulting into Strategic Planning and Risk Management

Diversify and expand into Petrochemical and Upstream markets

Align internal work processes and implement new MIS
5
ProfitManager - Continuous Improvement Process
Profit Tracker
Management Tools
Monitor
Optimize
Adjust
Sustain
Continuous Improvement
Implement
Evaluate
Identify
Benchmark
Monitoring
Tools
Plan
Demonstrate
Report
Technical feasibility
Operating feasibility
Economics
Interview and observe
Apply engineering fundamentals
Challenge constraints
Refinery performance
Process operations
Base case simulation
Petro-SIM
Software
6
7
Petro-SIM
 Development team recruited in August comprised of exHyprotech employees
 Petro-Sim release announced on 8 September 2004
 Initial release in October 2004
 First update scheduled for first quarter 2005
 Discussions with customers under way
 Demonstration in September at annual NPRA conference
8
Petro-SIM
Reformer
Naphtha
Hydrotreater
CDU
Kero
Hydro treater
Blend optimizer
Diesel
Hydro treater
HF Alky Unit
Visbreaker
FCC
9
Summarised profit and loss account
6 months to
30 Jun 2004
£000
Turnover
Operating profit
Goodwill amortisation
Other operating exceptional items
Net Interest
Loss before tax
Taxation
Loss after tax
Dividends
Retained loss
Earnings/(loss) per share - basic
- fully diluted
- basic before goodwill
and exceptional items
Average number of shares in issue
15,907
487
(245)
(496)
26
(228)
79
(149)
(93)
(242)
6 months to
30 Jun 2003
£000
16,699
39
(280)
(1,020)
74
(1,187)
171
(1,016)
(605)
(1,621)
12 months to
31 Dec 2003
£000
32,274
704
(490)
(2,397)
200
(1,983)
499
(1,484)
(1,906)
(3,390)
(0.32p)
(0.32p)
(2.18p)
(2.15p)
(3.19p)
(3.17p)
0.91p
46.5m
(0.02p)
46.5m
1.37p
46.5m
10
Foreign exchange impact
6 months to
30 Jun 2004
£000
6 months to
30 Jun 2004
£000
at constant
exchange rate
6 months to
30 Jun 2003
£000
Turnover
15,907
16,878
16,699
Operating costs
15,420
_____
16,303
_____
16,660
_____
487
_____
575
_____
39
_____
Operating profit before
goodwill and exceptional
items
11
Exceptional costs
Software dispute, legal fees, etc
Reorganisation
Strategic review
Total
6 months to
30 Jun 2004
£000
Year ended
31 Dec 2003
£000
496
___
496
1,325
878
194
_____
2,397
12
Summarised group cash flow statement
Net cash from operations
Operating exceptional items
6 months to
30 Jun 2004
£000
6 months to
30 Jun 2003
£000
12 months to
31 Dec 2003
£000
1,243
(892)
275
(282)
(1,021)
(1,846)
Net interest received
26
74
200
Tax (paid) refunded
(214)
352
769
Capital expenditure
(259)
(112)
(257)
(1,302)
(1,302)
(1,906)
(33)
(19)
(173)
-
(410)
Dividends paid
Translation difference
Net cash outflow from acquisitions
(821)
(2,920)
(3,348)
13
Summarised group balance sheet
At 30 Jun
2004
£000
At 30 Jun
2003
£000
At 31 Dec
2003
£000
Fixed assets
Net current assets (excl cash)
Cash
Creditors due after 1 year
Provisions
Net assets
6,353
8,879
3,454
(1,132)
17,554
7,630
9,208
4,294
(300)
(704)
20,128
7,071
8,032
4,275
(300)
(1,180)
17,898
Share capital and reserves
Profit and loss
6,781
10,773
6,781
13,347
6,781
11,117
17,554
20,128
17,898
Note: 2003 comparatives restated for UITF38 reclassification of ESOP investment in own shares
14
Revenues by region
2003 6 mths - £m
2003 12 mths - £m
2.2
13%
6.6
4.2
25%
62%
27%
53%
10.3
Europe/Middle East/Africa
8.6
20%
17
Americas
Europe/Middle East/Africa
Asia
Americas
Asia
2004 6 mths - £m
4.6
30%
37%
5.6
33%
5
Europe/Middle East/Africa
Americas
Asia
15
Revenues by business area
14.5
13.3
12.4
12.0
12.1
9.0
8.0
7.2
6.8
6.2 6.2
5.3
1.9
Process Consulting
H1'00
H2'00
2.4
5.5
5.0
4.9
2.8
1.7
2.1 2.2
Other Consulting
H1'01
H2'01
H1'02
H2'02
1.8 1.9 1.8 1.6
2.2
2.6
Software
H1'03
H2'03
H1'04
16
Consultant utilisation
90
80
74
73
75
72
70
78
74
65
60
50
%
40
30
20
10
0
H1
-
01
H2
-
01
H1
-
02
H2
-0
2
H1
-0
3
H2
-0
3
H1
-0
4
17
Order book value
30
£ Million
25
20
15
10
5
0
Jun-01
Dec-01
Jun-02
Dec-02
within next 12 mths - base fees
> 12 mths ahead - base fees
Jun-03
Dec-03
Jun-04
within next 12 mths - fees @ risk
> 12 mths ahead - fees @ risk
18
Market observations
 Refinery utilisation and margins at an all-time high
 Plans/projects for increased capex for
expansion/upgrade
 Renewed emphasis on energy conservation
 Efficiency improvements increasingly driven by best
practices
 Recognition of shortage of key skills and experience
19
Outlook for 2004

Revenues expected to remain flat in second half

Additional costs of Petro-SIM development in second half estimated
to be annual cost of £1m with £400k impacting 2004

Operating profit before exceptionals and goodwill for full year
expected to remain flat compared with 2003

Year of transition
 Client relationship building
 Work on strategic initiatives
 Investment in software development

Activity level high

Consultant morale and enthusiasm restored
20
APPENDIX
KBC – “The preferred partner to deliver sustainable competitive advantage”
 Leading independent consultants to the downstream oil industry
 Serves the refining, petrochemical and process industries
 Proprietary software tools and methodology, together with
unrivalled experience of consultants are key differentiators
 Global operations serving over 200 clients worldwide
21
KBC evolution
2004
2002
2000
2000
KBC Office Locations
KBC establishes Moscow office to serve FSU clients
KBC extends into oil and gas market analysis with PEL
acquisition and enhance energy services with Linnhoff
March acquisition
Core skills and competencies extrapolated into
Petrochemicals, Gas Processing and Energy industries
KBC extends its operations to include a comprehensive risk
management program with the acquisition of Risk Solutions
1997
KBC Listed on the London Stock Exchange
1996
1995
1993
1986
1983
1979
Development of new business area in Reliability, Availability & Maintenance
On-site Implementation Services takes KBC profit improvement deliverable to
a new dimension
Yield & Energy Survey develops into comprehensive Profit Improvement Program
(PIP)
Development of Petrofine simulation software leads to first refinery-wide Yield & Energy Survey
First yield & energy study applied to petrochemicals (ethylene plant)
22
KBC founded as independent consulting company, specialised in energy improvement in refineries
Global Track Record
23
Mission and Strengths
Delivering competitive advantage
People
 Independence
Technology
 Proven track record
& Tools
 Methodology
 Unique toolsets
Methodology
 Breadth & depth of experience
 Change management experience
in partnership with our clients
24