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KBC axes its dividend

RESULTS: KBC Advanced Technologies saw its shares slump 20 per cent after axing its dividend and revealing a painful slide in profits
September 26, 2012

Energy software and consultancy group KBC Advanced Technologies (KBC) saw its shares slump 20 per cent on the back of these half-year figures - after it axed its dividend and revealed a painful profit slide. Working capital pressures have also forced KBC to raise £1.3m from institutional investors. Given that, it could be a while before confidence returns and we retire our buy advice.

IC TIP: Hold at 53.5p

Revenues at the high-margin software business fell 18 per cent to £5.3m, reflecting the delayed renewal of a Latin American contract. Consulting revenues, meanwhile, rose 14 per cent but profitability suffered from low utilisation rates in Europe and the Middle East. This prompted KBC to cut divisional staff numbers, saving KBC around £0.9m annually. Those savings will certainly be welcome given that staff costs jumped £1.3m year-on-year to £15.9m

Still, management reckons the second-half has started well. While June's acquisition of software developer Infochem should help KBC build its presence in the upstream segment of the market - although that move also meant additional costs of over £1m.

Broker Cenkos has cut its full-year estimates by around 25 per cent and now expects pre-tax profit of £5.1m, giving EPS of 5.7p (2011: £5.9m/7.1p).

KBC ADVANCED TECHNOLOGIES (KBC)
ORD PRICE:53.5pMARKET VALUE:£30m
TOUCH:53-54p12-MONTH HIGH:91pLOW: 51p
DIVIDEND YIELD:2.9%PE RATIO:36
NET ASSET VALUE:55p*NET DEBT:17%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201126.02.232.800.70
201227.50.69-1.60nil
% change+6-69--

*Includes intangible assets of £21.6m, or 38p a share