KBC Advanced Technologies

Energy industry consultant KBC performed resiliently in recession-hit 2009 and entered 2010 with a robust order book.

Revenue and underlying pre-tax profits were flat in the year to December at KBC, which helps refinery owners maximise profits and manage risk. Sales and profits marked time at £52.6m (2008: £52.8m) and £5.7m (2008: £5.7m) respectively, due to the knock-on effects of declining oil product demand in Europe and North America on levels of discretionary spend from refinery operators.

Nevertheless, KBC secured £55.3m of contracts last year, 6% up on 2008, with work won from the likes of PetroVietnam, Sinopec and Petrobras, and began the current year with a reassuring workload backlog of £40.8m, up from £39.6m year-on-year and buoyed by far better second half contract momentum.

Software sales were ‘very strong throughout the year’, with new license sales and burgeoning maintenance and support revenue behind an 88% increase in overall software sales and KBC says it has yet to see the full benefits of £2.8m of annualised costs stripped out of the business.

Having finished 2009 with net cash balances of £4m, KBC increased the dividend 15% to 1.55p (covered more than four times by earnings of 6.8p). Management’s confidence stems from the fact the ‘frozen budgets’ of last year are being released and more refiners in North America and Europe are expected to undertake profits improvement projects this year. At the same time, ongoing capital projects in emerging markets should further enliven the group’s financials.

Based on cautious forecast pre-tax profits of £5.1m, earnings of 5.9p and a 1.55p dividend, KBC shares, recommended by Growth Company Investor at 44.5p in 2007, are swapping hands for 8.2 times forward earnings, an unwarranted discount to other listed energy-sector-exposed consultants. If you bought on our advice, sit tight for a return to growth.