KBC Advanced Technologies

Despite a record backlog of work, profits at leading energy consultants KBC (KBC) have suffered due to currency headwinds. Last year started slowly for KBC, but accelerated strongly in the second half culminating in the award of its largest contract to date - a $42m, three-year deal with Mexican state oil giant Pemex.

KBC helps refinery owners maximise profits, and over the last couple of years has taken £4m of cost out of its business to streamline operations. After a period early in the year of low staff utilisation demand has picked up with new wins from BP and PetroChina.

KBC is witnessing strong demand in Asia and Latin America, however, contracts in the Middle East are proving slow to sign up. The AIM counter estimates that its target audience spans 450 refineries that spend £22bn annually on operating and maintenance expenditure.

In the year to 31 December sales held steady at £53m as pre-tax profits tumbled 20.8% to £3.6m. KBC has had to take a £1.5m provision for bad debts due to a withdrawal from a project in Libya and its exit from Iran due to EU sanctions.

The core software product is Petro-SIM and the release of a new version has led to improved functionality. However, after a standout performance in 2009 the software arm suffered a 6% dip in revenues last year. Allegations of IP infringement by a competitor are being vigorously defended with a conclusion on the case expected later this year.

Broker Cenkos predicts 2011 pre-tax profits of £6.3m and EPS of 6.8p. KBC has boosted its sales awards by 22% to £67.8m so is well placed to deliver on forecasts, however, at current levels we rate the shares as a hold.