The oil industry is volatile enough (so to speak) at the best of times – and this is not the best of times. New EU sanctions imposed upon Iran, and the ‘troubles’ in Libya, forced oil and petrochemical consultancy-cum-software firm, KBC Advanced Technologies, to write off £1.5m for doubtful debts, which left its EMEA business (29% of revenues) nursing a £0.75m loss. So, despite a corker of a year for new orders, including a $42m contract at Mexico’s PEMEX, KBC’s 2010 revenues grew by just 1% as reported, to £53.1m, but dipped by 3% at constant exchange rates. Operating margins fell 2 points to 7.1% leaving EPS down 25% to 4.0p.
KBC’s push to become more of a software player also took a step backwards, with software revenues down 7% to £13.8m now 26% of the total (FY09: 28%). KBC is also facing a legal challenge from a competitor over alleged (and of course strongly refuted) copyright infringement; the matter is now subject UK arbitration and should be resolved mid-year.
I suppose if I were an oil industry analyst I would be able to explain why, with oil way past the $100 a barrel mark, firms like KBC aren’t reaping the benefits in markets outside of EMEA. But operating margins in Asia (32% of total revs) were flat at 23.2% and in the Americas (39% of revs) were down 10bps to 18.5%. Nonetheless, chairman Ian Godden expects that “2011 will be very positive for KBC”, which I suppose is the ‘barrel half full’ view.