Pre 8 a.m. comments

Good morning! It's a busy day for results again, and this morning I shall first be looking at preliminary results for the year ended 31 Dec 2012, from a company whose shares I hold personally, KBC Advanced Technologies (LON:KBC). It is a software and consultancy business serving the oil industry, in particular helping oil refineries optimise profitability.

At 66p a share, and with 58.9m in issue, the market cap is £39m.

The recent history of KBC is that they encountered trading problems during 2012 with a soft H1, warned on profits, but then recovered rapidly after a restructuring & new management being brought in, such that they issued a series of positive trading updates later on in 2012. This is reflected in the share price gyrations in the last year:

 

Results from KBC this morning are not the easiest to interpret, since they have had an enormous tax charge, which more than wipes out all profit, so clearly some one-offs in there, but also a problem in that they allude to having a tax inefficient structure - i.e. high profits in high tax countries, and vice versa. Action is being taken to restructure to minimise future tax liabilities, so I'm prepared to view that as a temporary factor.

This renders the EPS figures meaningless, as these show a loss due to the tax problem.

Underlying profits are £5.5m (against £6.0m last year), which seems a reasonable outcome given the poor H1. Cash has absolutely gone through the roof, given a large customer prepayment made near the year end. This resulted in year end cash of £21.1m, which adjusts down to £6.4m once that large customer prepayment is stripped out, less £5.4m in bank loans, takes them to a small underlying net cash position of £1m.

So a bit of a messy year, which ended well, with a "very strong final quarter". The all important outlook comments are positive.

 

In 2012, contract awards were £95.4m (2011: £44.9m), a record for KBC, resulting in an order book at the year end of £82.9m (2011: £48.7m) which, together with a large new software contract award in Japan, has contributed to a strong start to the year.

The exact timing of contract awards, particularly for software licences, will…

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