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KBC Advanced Technologies, the AIM-listed software provider and consultancy to the energy industry, saw its operating margin rise to two points to 9% in the first half (period ended 30 June), after profits rose 24% to £2.3m. Revenue meanwhile was up a more modest 1.5% to £26m, underlining what we noted previously in KBC: contracts up but order book down that it has been struggling to build momentum. KBC is optimistic about the second half however due to its claim that all five key business drivers all remained positive in the half. These are oil demand growth, the pressure on refining margins, oil price volatility, customer M&A activity, and the availability of experienced engineering staff.
The H1 picture was somewhat mixed. Software sales were the star of the show, up 12% to £6.5m (10% of which was from new licences and rest renewals) with strong growth across EMEA and Asia, although a fall in the Americas region. Consulting meanwhile fell 1.5% to £19.5m due to lower demand in Asia and the Americas, but which was partly offset by a strong performance in EMEA. Overall EMEA revenue grew 10% to £8.3m, Asia grew 9% to £7.4m and Americas fell 9% to £10.3m.
KBC's backlog rose to £55.8m vs. £39.8m in H110, and although down slightly on £58.7m at 31 December 2010, this does indeed point to a healthy momentum going into H2 if it can translate this into new revenue. The good news is that due to its usual seasonal increase in sales towards the end of the year, KBC is expecting software growth to continue in H2. Consequently, consulting headcount is being increased to meet the anticipated growth in demand. Chairman Ian A Godden said he expects KBC to “be very busy for the rest of the year” and so is confident in the company meeting its expectations for FY11 – analysts are expecting FY11 revenue of c£57.6m, and growth of c7%.
One potential blip for KBC however is an ongoing arbitration process, commenced last September by a competitor alleging KBC’s unauthorised use of certain software code. KBC refutes the allegations of course, and the protracted award is now expected by the end of September.
