Refineries-focused engineering consultant KBC Advanced Technologies encountered challenging trading conditions in the first half. Although workload backlog (orders and contract work-in-progress) of £39.8m was up 14 per cent from last year, contract awards of £23.1m fell from £24.5m a year ago. This forced the group to reduce fixed costs further, which should deliver savings of £0.4m this year and £1.3m on an annualised basis. However, management expects stronger trading in the second half, in line with previous years, and that the project pipeline will enable KBC to meet full-year analyst forecasts.
Excess refining capacity in the US and Europe provides opportunities for KBC's operational support services, although European refiners have been slow to commit financially. Consulting income on new capital projects held up well due to many emerging countries developing infrastructure projects. But recent EU sanctions aimed at Iran's refining industry has prevented new projects from starting, although further details of the sanctions are awaited before their full impact can be assessed.
The group's refinery simulation software has proved very successful and is now installed in more than 180 sites. However, a competitor has alleged copyright infringement, although KBC refutes the claim and is confident it will have no impact on sales.
Broker Cenkos Securities is forecasting full-year pre-tax profits of £4.9m and EPS of 5.2p.
|KBC ADVANCED TECHNOLOGIES (KBC)|
|ORD PRICE:||45p||MARKET VALUE:||£24.9m|
|TOUCH:||44-46p||12-MONTH HIGH:||52p||LOW: 36p|
|DIVIDEND YIELD:||3.7%||PE RATIO:||8|
|NET ASSET VALUE:||52p*||NET CASH:||£1.66m|
|Half-year to 30 Jun||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 29 Sep
Payment: 13 Oct
*Includes intangible assets of £8.8m, or 16p a share
KBC shares trade on a modest nine times earnings estimates, which doesn't look too taxing against the backdrop of an improving outlook and a lower cost base. Good value.
Last IC view: Good value, 49p, 16 Mar 2010