1. technology and computing

Innovative
Informative
KBC Advanced Technologies plc
Annual report 2014
Invaluable
KBC delivers innovative software technology and informative specialist consultancy
to solve the hydrocarbon processing industry’s toughest challenges from reservoir
to refinery, pump to processing facility. We aim to provide invaluable solutions to
our customers, empowering them to achieve proven, sustainable and substantial
improvements to their asset performance.
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
OUR BUSINESS
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
We deliver preferred solutions in two ways:
1
2
1
2
Innovative technology
Informative consulting
KBC’s market-leading software modelling
solutions and intellectual property enable
clients to generate design and operating
strategies across the complete hydrocarbon
value chain for upstream, midstream,
downstream and petrochemicals.
KBC’s talented consultants have a distinct
blend of technical and organisational
expertise that equip us with a spectrum
of operational services to guide our
clients’ key strategic decisions.
Read more about our
Technology business on p9
Read more about our
Consulting business on p8
Through the integration of these two offerings we offer an
invaluable service, dedicated to making our clients world-class
in operational excellence and profitability.
3
CONTENTS
OVERVIEW
2
4
FINANCIAL STATEMENTS
At a glance
Chairman’s statement
30 Independent auditors’ report
31 Group income statement and
Group statement of
comprehensive income
32 Group statement of changes in equity
33 Group balance sheet
34 Group cash flow statement
35 Notes to the Group financial statements
57 Company balance sheet
58 Notes to the Company
financial statements
STRATEGIC REPORT
7 Chief Executive’s review
10 Our business model and strategy
12 Financial review and
key performance indicators
14 Principal risks and risk management
GOVERNANCE
16 Board of Directors
17 Executive Committee
and Operating Committee
18 Introduction to governance
19 Corporate governance statement
22 Remuneration Committee report
26 Directors’ report
SHAREHOLDER INFORMATION
62 Notice of the Annual General Meeting
IBCFive‑year summary and
shareholder information
HIGHLIGHTS
Revenue
Adjusted profit before tax
Pipeline of contracted work
£76.0m
£9.5m
£88.0m
76.0
14
13
65.1
12
11
10
63.1
55.7
53.1
14
9.5
13
8.4
14
12
5.8
12
11
5.9
11
10
4.9
88.0
13
10
78.2
82.9
48.7
58.7
KBC Advanced Technologies plc Annual report 2014
1
AT A GLANCE
Our business
KBC is strategically placed to grow in both new and existing
markets. We are focusing on key high-growth markets that
will allow us to expand substantially whilst consistently
delivering invaluable services for our existing clients.
where
we
operate
1
For more than 30 years KBC has been linking
advanced technology with consulting expertise
to guide hydrocarbon processing companies
to greater heights in over 90 countries across
the globe. With the acquisitions of Infochem
and FEESA, KBC is positioned to be the
leading trusted software provider and
technical consultancy across both upstream
and downstream sectors.
Contracts awarded
£79.8m
Countries of business
90+
Number of employees
330+
Read more about our people in the
Chief Executive’s review on p7–9
2
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
KEY
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Middle East
Our offices
In the first year of increased focus on
this region, KBC successfully established
strong positions in Saudi Arabia and
Kuwait, in addition to positioning itself
well in the United Arab Emirates and
Oman. In Saudi Arabia, KBC contracted
a long-term partnership agreement with
the world’s largest integrated refining and
petrochemical complex. In Kuwait, KBC
signed contracts with various national oil
company subsidiaries.
2
3
1 North America
KBC continued its long-term engagements for
all software and service offerings by providing
major North American clients with significant
industry expertise – critical to the safe and
reliable operation of their facilities – while also
adding new major client accounts to leverage
future growth.
2 Russia
North Africa
KBC positioned itself well in both Egypt and Algeria,
two countries where the Group had opportunities
for growth. KBC signed wide-ranging agreements
to form partnerships for workforce development,
operational excellence and profit improvement.
In Algeria, KBC executives positioned the Group
for a partnership with one of Africa’s largest
oil companies.
South America
KBC continued its strong support for major national oil
companies throughout South America, most notably
being awarded a US$48.6m addition to a large
business transformation contract for one of
its key clients.
KBC continues to pursue opportunities in
the FSU given the refining sector will undergo
significant expansion in the future but we
approach this region cautiously with close
attention to current constraints in this
market sector.
3 Asia
KBC was engaged by a national oil company
in South East Asia to lead the content and
delivery of an Operational Excellence
Academy (OEA) programme. The OEA
programme was designed around best
practice instructional delivery design and
focused on developing plant leaders with
technical functional leadership capabilities to
effectively drive operational excellence and
sustain performance. The OEA programme
has been rolled out to cover downstream
operations with an initial contract value at
over US$3m.
KBC Advanced Technologies plc Annual report 2014
3
CHAIRMAN’S STATEMENT
Delivering growth
throughout the year
HIGHLIGHTS
Another year of good strategic,
operational and financial performance
Revenues up 17% to £76.0m
(2013: £65.1m)
Adjusted profit before tax1 up 13% to £9.5m
(2013: £8.4m)
Reported profit before tax of £6.7m
(2013: £7.1m)
Recommended final dividend up
10% to 1.1p per share (2013: 1.0p)
Equity fundraising of £23.1m, net
of expenses, to fund acquisitions
and provide working capital for
larger contracts
(1)Adjusted for development costs carried forward, amortisation of
development costs carried forward, amortisation of acquisition
intangibles, share based payment charges and other items which
do not reflect underlying operations (see note 5b)
Acquisition and integration of FEESA,
improving KBC’s product and service
offerings across the full breadth of the
hydrocarbon processing industry
Consulting revenue increased by 17%,
with strong performance in South America,
further growth in Asia and the Middle East,
and continued improvement in Consulting
operating margin
Another record year for Technology, with
revenues up 17% and key contract awards
in Asia, South America, the Middle East
and Europe
Strong year end pipeline of contracted
work, up by 13% to a record £88.0m
(2013: £78.2m)
Strengthened executive leadership
with appointment of a new CEO
KBC’s medium and long-term market
prospects continue to offer encouraging
international growth opportunities
Summary
2014 was another good year for KBC.
The Group performed in line with expectations,
raised equity for acquisitions and working
capital and completed an important strategic
acquisition. The Company also implemented
a successful executive succession, appointing
a new Chief Executive Officer from within
the Group and appointing a new independent
non-executive director to the Board.
Following a strong finish to 2014, KBC
has started 2015 well and, although there
are many new industry challenges, we remain
well positioned to continue our long‑term
strategy of increasing and strengthening the
Technology business, improving the margins
of the Consulting business and continuing our
long‑term expansion in the upstream oil and
gas industry, together with growth in hotspots
such as the Middle East, Southeast Asia and
South America.
Results
Group revenue for the year increased by 17%
to £76.0m (2013: £65.1m). Profit before tax
calculated on an adjusted basis, as detailed
in note 5b, was 13% higher than the previous
year at £9.5m (2013: £8.4m). This reflected
an adjusted profit margin of 13%. Adjusted
profit after tax increased by 20% from £5.5m
to £6.6m.
The Company raised £23.1m net of expenses
from an equity placing in June 2014. £10m
of the placing monies was used to fund the
acquisition of FEESA Limited in July 2014
and a further £4m was used for working
capital, particularly for large projects
in South America and the Middle East.
2014 was another good year
for KBC, with strong financial
performance and continued
progress across the Group
in all aspects of our strategy.”
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
Despite an improved performance, the net
result of this fundraising, coupled with prior
period one-off tax credits, meant that basic
earnings per share reduced to 5.7p (2013: 9.5p)
and earnings per share calculated on an adjusted
basis remained broadly steady at 9.3p per share
in 2014, from 9.5p in 2013. Diluted earnings
per share was 5.5p in 2014, compared to
9.2p in 2013.
Dividend
The Board proposes to pay a final dividend
for the 2014 financial year of 1.1p per share
(2013: 1.0p). The total cost of the proposed
dividend amounts to £0.9m for the 2014 full
year (2013 full year: £0.8m).
Board and management
During 2014 we strengthened the Board
and executive leadership of KBC with
major external hires and internal promotions.
In November we announced the appointment
of a new Chief Executive Officer effective
1 January 2015, a succession we committed
to when I took over the executive leadership
of KBC. Andrew Howell was appointed to
drive the next phase of KBC’s strategy, with
particular emphasis on developing its position
in the upstream oil and gas industry and the
Technology business. Andrew was previously
the Managing Director of KBC’s Technology
business and had gained wide oil and
gas experience with BP, Hyprotech and
Schlumberger before joining KBC in 2011.
I remain Chairman of the Company. We also
strengthened the composition of the Board
with the addition in February 2014 of a
new independent non-executive director,
Paul McCloskey, and with the appointment
of Andrew Howell and Kevin Smith to the
Board in April 2014.
A new and effective executive team was
established at the end of the year in order
to deliver clear leadership across all aspects
of our business. Kevin Smith was promoted
to Chief Commercial Officer (“CCO”), a new
client-facing position which spans both
Consulting and Technology, to drive the
commercial performance of KBC. Mike Aylott
has been promoted to Chief Technology
Officer (“CTO”) from his role of managing
all the engineering software development.
The CTO position has been created to
drive the realisation of the strategic direction
of the Group towards commercial technology
platforms underpinning all KBC’s activities.
This includes expanding the range of our
engineering software as well as delivering
the full range of KBC knowledge and intellectual
property through technology. Ramon Loureiro,
our most senior partner, remains a key member
of the executive team, ensuring the tradition
and success of KBC’s profit improvement
programmes is captured and further developed
within the Group’s strategy. In addition, the
business development resources of the Group
have been strengthened with a number of
external recruits as part of a sales transformation
strategy to improve commercial performance.
Current trading and outlook
During the second half of 2014 the oil and
gas industry experienced a major upheaval,
with a significant increase in production
in North America and Iraq, an unexpected
slowdown in growth regions such as China
and a subsequent oil price fall as a result of
OPEC choosing not to control the market price.
The longer‑term implications for the market
are still not fully clear, but KBC is assuming a
scenario of low oil prices for at least 18 months
and some further belt-tightening by our clients.
KBC is not affected directly by the US domestic
oil exploration downturn since a large proportion
of its business is in the downstream part of that
market which will be less adversely affected.
Despite this backdrop, KBC achieved solid
results in 2014 and so far in 2015 the market
for KBC’s services, while shifting, has remained
steady. It is difficult to predict the full effect
of the oil price on KBC’s performance in 2015.
Some aspects are positive: more clients need
to optimise their existing assets; Operational
Excellence practices are in high demand;
KBC’s Technology solutions are helping clients
optimise production rates at lower energy costs;
there is strategic rechecking of the economic
viability of large capital expenditure projects;
as oil companies reduce their work forces,
they will need consultants to fill the gaps;
downstream refining profitability is now
returning to higher margins than have been
seen for several years; and upstream operators
are looking to drive more efficient production.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
We entered 2015 with a record
pipeline of contracted work
and a healthy balance sheet
to support the Group and
its continued growth.”
At the same time there are potential
challenges for KBC: pricing pressure from
a general focus on the oil and gas supply
chain; cash collection and conversion; revenue
from upstream oil exports sometimes being
needed by national oil companies (“NOCs”)
in order to fund downstream modernisation
projects; and upstream capital projects delayed
and postponed. Therefore, KBC is not being
complacent and is taking action to reshape
and refocus its business and organisation and
has additional contingency plans should the
market for our services deteriorate.
We entered 2015 with a healthy pipeline of
contracted work of £88.0m (2013: £78.2m), a
record for the Group. Together with a number
of key Consulting contract wins in the first two
months of 2015, this leaves KBC well positioned
to meet its objectives for the coming year.
As always, the exact timing of contract awards
will continue to affect results within any year.
However, the strength of the pipeline of
contracted work, an enhanced range of products
and services and major internal progress in
2014 give the Board confidence for 2015.
Ian Godden
Chairman
17 March 2015
KBC Advanced Technologies plc Annual report 2014
5
Strategic
report
7 Chief Executive’s review
10 Our business model and strategy
12 Financial review and key performance indicators
14 Principal risks and risk management
6
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
CHIEF EXECUTIVE’S REVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Good prospects
for the year ahead
53.0
55.7
63.1
65.1
76.0
55.0
47.2
44.3
17.9
2013
21.0
18.8
2012
13.0
In line with our corporate strategy,
we have continued to productise parts
of our Consulting knowledge, experience
and information into our software and digital
technologies to enhance Technology revenue,
TOTAL REVENUE £m
42.7
Innovation and information
During 2014 KBC embarked on an ambitious
project to align all our software releases
to a common release schedule with shared
infrastructure and integration. Version 6 of
Petro-SIM™ (process facility simulator), the
SIM™ models (refinery reactors), Maximus™
(wellbore and pipeline hydraulics simulator),
Multiflash™ (reservoir PVT chemistry) and
Energy-SIM™ (energy optimisation) have all
now been aligned, with significant advances
in the interoperability of our technology.
Clients will now benefit from the full integration
of well, pipeline, offshore platform, gas plants,
refineries and petrochemicals models with the
ability to execute time-based scenarios including
use of their own workflows and plug-ins to
increase production and reduce costs. 2014
also saw the expansion of KBC’s alliances with
the addition of Flaretot™, a third‑party process
plant flare safety simulator, to the KBC software
suite and the announcement of a plug-in to
Petro SIM for transient pipeline modelling
from BPT, a Norway based technology
company. KBC will continue to expand the
“ecosystem” in which hydrocarbon process
industry clients can embed technology that
furthers the value of our platforms and provides
another high quality revenue stream and will
seek further alliances with oil field services
and industrial automation players.
Revenue by segment
39.2
2014 was another good year for KBC on several
fronts and it was particularly pleasing to see
the measures put into place by the management
team over recent years resulting in improved
performance and growth by the Company.
The partner organisation in Consulting has
driven personal ambition and a focus on
commercial targets for margin realisation
and quality of work delivered. The continued
expansion of Technology sales through the
Consulting business and newly expanded
direct sales channels led to a record level of
revenue. Consulting and Technology, working
closely together, each delivered 17% growth
in top‑line revenue for the year. KBC further
penetrated the upstream oil and gas market,
assisted by the important acquisition of
FEESA, which enables the Group to offer
software and consulting in the production
flow assurance area, anchoring wells and
pipelines to KBC’s established business in
gas processing, refining and petrochemicals.
KBC is now very well positioned to offer
technical engineering and people performance
solutions across the full breadth of the
hydrocarbon processing industry and is able
to move quickly in this chain to support the
developing segments.
13.8
Delivering on our strategy
2014 saw significant strategic contract
wins for KBC in both our targeted upstream
market and our core downstream business.
Consulting continued to deliver successfully
in South America, winning a $48.6m contract
extension with a South American oil and gas
company. This was complemented by strong
Consulting performance in the Middle East
as well as further growth in Asia and Europe.
Our Technology offering in upstream oil
and gas continued to grow and we were
particularly pleased to see the products from
our newest acquisition (FEESA) having an
immediate impact when bundled with our
existing offerings. The contract award from
a European oil field services company in the
fourth quarter of 2014 followed a number
of other Technology contract awards of note
in the United States, the Middle East, China,
Thailand and Vietnam. It is very encouraging
to see the strong demand for KBC’s Technology
products supporting KBC’s focus as a key
software player in the hydrocarbon industry.
2010
2011
TECHNOLOGY
2014
CONSULTING
PIPELINE OF CONTRACTED WORK BY SEGMENT
Technology
35%
Consulting
65%
allow for intellectual property charges
in Consulting fees and support the scale
and leverage of the Consulting organisation
around technology platforms. The appointment
of a CTO for KBC will drive this technology
strategy throughout the Group and our
alliance partners.
Our people
The KBC team includes a diverse set of
consulting and software experts in more than
11 countries, delivering high quality project
work and software technology. In 2014 the
enhancement of both Consulting and software
resources as well as corporate shared services
has driven results for KBC. KBC began a
reorganisation in the last quarter of 2014
to promote the new company strategy with a
defined commercial sales group covering sales,
KBC Advanced Technologies plc Annual report 2014
7
CHIEF EXECUTIVE’S REVIEW CONTINUED
Ever greater, more
integrated solutions
Our people continued
business analysis, product management
and marketing, all targeted at achieving high
quality, recurring revenue. A new delivery
organisation has been built that concentrates
on delivering all aspects of quality in client
projects to achieve target margins. KBC’s
focus on software technology platforms and
productising Consulting knowledge, to drive
higher margin sales and increased scale in
Consulting, has been further enhanced by the
establishment of a CTO role with a remit to
expand technology development and adoption
by KBC. The Company has been reorganised
into a clear structure that provides focus on
commercial, operational, innovation and
back office disciplines appropriate for
a technology‑based consulting firm.
KBC’s market
For the five years to 2014 high energy prices
drove strong capital investment and strong
profit margins throughout the oil industry.
Those same economics also encouraged
technical innovations that led to a rapid oil
production increase and an increasingly
oversupplied energy market. The oil market
responded rapidly to the decision by OPEC
at the end of November 2014 to renounce
its traditional market-balancing role, with oil
prices plunging more than 50%. These lower
prices turned the industry on its head and for
oil companies the key to both survival and
success is to control their positions in the
market, rather than being controlled by it.
To achieve this, KBC believes that the operators
will need access to many of KBC’s products
and services to enhance their performance.
In the near term, companies in our industry
need to focus on revenue generation and
capital investment to safeguard their balance
sheets, generate cash flow and service debt.
In the medium term, success requires
companies to focus on sound operational
fundamentals and ongoing evaluation of
their market position to ensure performance
is optimised against a changing market
environment. In the long term, companies
will be best served by revisiting and
revalidating their investments against the
market potential and their own corporate
strategy. KBC can assist in all these areas
and has a strong reputation for delivering
value on all these horizons.
8
KBC Advanced Technologies plc
Annual report 2014
Consulting
Revenue
Pipeline of contracted work
£55.0m
(2013: £47.2m)
14
55.0
13
47.2
12
(2013: £52.7m)
46%
Revenue due in
more than 1 year
(2013: 42%)
44.3
11
10
£57.3m
54%
Revenue due
within 1 year
(2013: 58%)
42.7
39.2
ACHIEVEMENTS IN 2014
Continued quality execution of the South American business transformation project
A large (US$48m) extension to the same South American project
First profit improvement and strategy project in Kuwait in many years
Repeat business for a second gas plant optimisation project in Saudi Arabia
An award for the establishment of an Operational Excellence Academy in Malaysia
A significant sustainable profit improvement programme in Thailand
A major technical capability development project award in Saudi Arabia
Consulting revenue in 2014 increased by 17%
to £55.0m (2013: £47.2m) with an operating
margin of 4% (2013: 3%). Out of the Consulting
pipeline of work of £57.3m (2013: £52.7m),
£31.2m (2013: £30.6m) is expected to convert
into revenue in 2015. Through our focus on
high quality Consulting revenue, our target
is to deliver Consulting margins of 9%–10%
over the next two years.
Many other promising developments in the
Middle East and North Africa have resulted
from a focused investment in the region that
will add further value for KBC.
2014 saw a return to growth for Consulting
solutions in the North America market, strong
growth in Southeast Asia and good growth
in Russia.
The large South American business
transformation project continues to deliver
on time and on budget, with clear recognition
by the client of KBC’s quality consulting,
methodologies, project management
and technology in delivering value in many
aspects of the refinery transformation.
The focus on the Consulting partner
model with its sales, solution, execution
and mentoring accountability has continued to
prove valuable in the quest to raise Consulting
margins and build strength in KBC’s key
geographical markets. Senior leadership has
been strengthened and the Group is in a good
position to take advantage of growth areas
in the South America, Middle East and
Southeast Asia markets.
The Consulting business functions have
been grouped into four key areas for delivery
of services to clients: Production Optimisation,
Operations Management, Strategic Business
Transformation and Human Performance
Improvement. These are the core value areas
of KBC’s Consulting offering and are being
re-packaged to achieve bigger contract
engagements with clients to improve
leverage, utilisation and margins for KBC.
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
Pipeline of contracted work
£21.0m
(2013: £17.9m)
14
21.0
13
17.9
12
11
10
£30.7m
(2013: £25.5m)
30%
Revenue due
within 1 year
(2013: 26%)
70%
Revenue due in
more than 1 year
(2013: 74%)
18.8
13.0
13.8
ACHIEVEMENTS IN 2014
Two major South American software contracts with greater than US$5m total contract value each
A £3.3m contract with a European oil field services company
Large software licence expansion projects in Thailand, Vietnam and China
Large renewals and licence expansions in the Middle East
New upstream licence agreements in Australasia
Agreement signed with Flaretot Limited of London, UK, to market its flare system design
and rating tool, integrated with Petro-SIM
2014 was a record year for KBC’s Technology
business, reflecting the focus and determination
of the organisation to be a key engineering
software provider to the industry. Revenue
for the year was up 17% on 2013 at £21.0m
(2013: £17.9m), representing good year on
year progress.
The increase in Technology revenue reflects
our drive and determination to raise the
proportion of Technology revenue in the long
term with Technology representing 28% of
2014 revenue (2013: 27%). Recurring revenue
for 2014 was a record £9.0m (2013: £7.8m).
Out of the total Technology contracted pipeline
of work of £30.7m (2013: £25.5m), £9.3m
(2013: £6.7m) is expected to convert into
revenue in 2015. FEESA and Infochem
technology revenue has exceeded our initial
expectations with both acquisitions being
accretive in 2014 and enabling the pull-through
of Petro-SIM into the upstream market space.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
FEESA was acquired in July 2014 and has been
successfully integrated, with the two founders
of that company now holding senior executive
positions on KBC’s Operating Committee.
Work continues, as planned, to ensure that
the acquired company standardises on KBC’s
product lifecycle management processes
and quality assurance.
Technology
Revenue
The Technology margin decreased from 34%
in 2013 to 24% in 2014 due to much higher
amortisation from the recent acquisitions and
a focused investment in sales and marketing
for Technology.
As part of the successful equity placing in
June 2014, undertaken primarily to raise funds
for acquiring technology assets, Norway’s
Kongsberg Gruppen ASA acquired a 5% stake
in KBC and has since engaged in an upstream
technology and services alliance to add higher
value solutions to its oil company clients
and accelerate KBC’s penetration into this
market. This alliance is seen as giving KBC
an accelerated critical mass in upstream to
position, sell and deliver significant expansion
in upstream technology revenue.
Of particular importance in the year was
the seven-year contract with a major oil field
services company for the licensing of KBC’s
upstream full simulation portfolio including
Multiflash, Maximus and Petro-SIM. This is the
first significant sale combining the technology
of our two recent upstream acquisitions with
KBC’s heritage software and demonstrates
the value of KBC’s integrated upstream
technology strategy.
KBC’s traditional refining technology business
continued to strengthen in 2014 with key
contract awards in Asia, South America and
the Middle East. Our Japanese market saw
a marked reduction in Technology revenue
in 2014 due to one unusually high contract
award in 2013. The refinery reactor and process
simulation technology, supported by energy
simulation, forms a high value, rigorous
picture of refinery wide profitability and,
when delivered with KBC’s consulting
services, is a world‑class solution.
KBC continues to look for value-adding
acquisitions that will expand the Technology
portfolio and contribute to revenue and
profit growth.
Andrew Howell
Chief Executive Officer
17 March 2015
KBC Advanced Technologies plc Annual report 2014
9
OUR BUSINESS MODEL AND STRATEGY
We are progressing
toward our goals
In late 2014 KBC launched a revised strategy, building on
the success of the 2011 to 2014 period, to grow revenues, further
improve the Group’s profitability and drive shareholder value. It is
clear, bold, aggressive and will transform KBC into a technology
company supported by expert consulting.
ocused market
F
penetration
Focus on growth in the following markets:
Technology
Upstream
Integrate sales of Maximus, Multiflash
and Petro-SIM, continue expansion in
oil field services companies and launch
upstream operational excellence and
profit improvement programmes
ISE
T
C
Y
G
O
RT
PE
EX
SOFT
WA
RE
TE
CH
NO
L
Increase footprint in second tier independent
refiners, convert more national oil company
refiners and win new business with
engineering, procurement, construction
and management (“EPCM”) companies
Growth markets
(Latin America, Asia, MENA)
Invest in these key hotspot regions
for Technology platform sales and
business transformation projects
HIGH TECHNOLOGY
OFFERING OF UNRIVALLED
DEPTH AND QUALITY
enerate additional revenue
G
streams through organic,
alliance and acquisitive
technology growth
Y
IN T E
LLEC TUAL PROPERT
All our activity supports or underpins the technology drive of the Group,
with all Consulting offerings to be delivered on a technology platform,
either our own or licensed from third parties and customised for resale.
Productising Consulting knowledge will also enable KBC to improve both
leverage from resources and increase the lower grade to higher grade ratio
of employees, which in turn will contribute to the scalability and focus on
delivered profit margin for the Consulting business. The Group also has a
strong focus on working with selective alliance partners in the industry to
deliver our technology and services deeper into our markets.
10
KBC Advanced Technologies plc
Annual report 2014
Broaden and strengthen strategic
partnerships and alliances
Enhance the third-party ecosystem for
technology plug-ins to the KBC software
platforms and develop an alliance culture
llow for expansion in scope
A
of production solutions in the
upstream market
Further develop existing alliance
relationships and partner with key
engineering companies and consultancies
that have niche presence in upstream
Maximise hydrocarbon market
reach through strategic acquisitions,
partnerships and alliances
Corporate strategy to target new
alliances in 2015/16
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
KBC’s growth strategy
comprises six simple focus areas:
ccelerate Technology
A
revenues and increase
Consulting margins
Increase Technology sales
Increase KBC’s revenue from Technology,
productise Consulting knowledge and create
an ecosystem of third‑party technology suppliers
Increase Consulting margin to 10%+
Use technology to increase the leverage
of resources, pursue larger, combined,
business transformation projects and
focus on key margin generating business
roductise Consulting IP to
P
commercialise as technology
Use KBC operations and engineering
knowledge to provide content for software
systems, configure KBC and third‑party
technology to scale consulting and increase
leverage, and develop new software
as a service with Consulting solutions
apital reinvestment and
C
strong financial discipline
Tight cost control
2015 discretionary cost reduction programme,
long-term reshaping of Consulting leverage
and changes in back office systems
integration to improve efficiencies
Progressive dividend
KBC is committed to a progressive
dividend policy
Increase profits and cash flow
The core focus of KBC is free cash flow
from increased profit throughout the
business with a key drive towards becoming
a technology company with expert consulting
1
2
3
4
5
6
Be a technology leader
for engineering and operations software, increasing the
high quality software revenue mix and anchoring
all Consulting solutions to a technology platform
Position in our market sectors with differentiated advanced technology
Secure revenue, profit and cash flow
from Consulting activity and the move into upstream Profit
Improvement Programmes with key industry alliances that
reduce client costs and increase their production
Modernise KBC’s own systems
be operationally excellent ourselves with efficiency and scale
Ensure KBC is a great place to work
that develops leaders with robust succession plans
Ensure a high quality image and brand
that commands premium prices and repeat business
throughout the market
Progress was made on all six fronts in 2014 with
a step up in the strategy execution planned for
the current year.
KBC Advanced Technologies plc Annual report 2014
11
FINANCIAL REVIEW AND KEY PERFORMANCE INDICATORS
Strong results
2014 was a year of strong results for KBC. The Group continues to improve
significantly and a more solid base has been established in the last 12 months
from which to make further gains across all areas of the business.
Results
Group revenue increased by 17% in 2014 to
£76.0m (2013: £65.1m). Consulting revenue
was up by 17% to £55.0m (2013: £47.2m).
Technology revenue was also up 17% to
£21.0m (2013: £17.9m) and included £9.0m
of royalty, maintenance, support and upgrade
revenue (2013: £7.8m).
Direct costs increased by 41% (£3.8m) to
£13.1m in 2014 (2013: £9.3m), mainly due
to an increase in subcontractor costs (£2.0m)
and the provision of one-off software for a
South American Consulting project. The use
of subcontractors is dependent on the types
of contract we work on during the year and
can therefore fluctuate year on year. The 11%
increase in staff and associate costs to £35.9m
(2013: £32.4m) was proportionally less than
the increase in revenue, reflecting average
headcount 9% higher than 2013 and an increase
in short‑term employee costs relating wholly
to medical insurance and claims. Indirect
operating costs increased by 22% to £14.1m
(2013: £11.6m) reflecting increased investment
in IT systems, people and sales training.
In addition the costs incurred in acquiring
FEESA of £0.4m (2013: £nil) are included here.
Depreciation and amortisation charges were
significantly higher at £5.7m (2013: £4.4m)
due to increased amortisation relating to the
acquisition of FEESA in mid‑2014, the Group’s
continuing investment in intellectual property
and contract‑based intangibles.
Profit before tax, adjusted for items which do
not reflect underlying operations, rose by 13%
to £9.5m (2013: £8.4m). This measure adjusts
for development costs carried forward of £1.6m
(2013: £1.3m), amortisation of development
costs carried forward of £1.3m (2013: £1.1m),
amortisation of acquisition intangibles of £2.1m
(2013: £1.4m), share‑based payment charge
of £0.7m (2013: £0.5m) and other items which
do not reflect underlying operations.
Profit before tax was £6.7m (2013: £7.1m),
a 6% reduction on 2013.
12
KBC Advanced Technologies plc
Annual report 2014
Tax
The tax charge of £2.6m (2013: £1.6m)
is made up of a current tax expense of
£3.1m and a deferred tax credit of £0.5m.
The current tax expense includes £2.5m
(2013: £2.5m) of tax payable on overseas
operations and £1.6m (2013: £1.0m) of
withholding tax. £0.6m of the withholding tax
is expected to be recovered against overseas
tax payable by way of double tax relief. As in
prior periods, the balance is not expected to
be fully recoverable as a result of there being
no creditable tax liability in the UK.
The 2014 tax charge is higher than last year,
with an increase in the overall effective tax
rate from 22% to 39%. Following revision
of the Group’s transfer pricing framework
last year, the 2013 effective tax rate benefited
significantly from a one-off tax credit. The 2013
effective tax rate before the prior period tax
credit was 42% which would correspond to
an overall reduction in the comparable group
effective tax rate over the period.
The Group effective tax rate continues
to benefit from enhanced tax deductions
for qualifying research and development
expenditure. The Group is continuing
to review the location of its assets and
resources globally to further reduce its
effective tax rate in subsequent periods.
Earnings and dividends
The profit after tax for 2014 of £4.1m
(2013: £5.5m) equates to basic earnings per
share of 5.7p (2013: 9.5p) and diluted earnings
per share of 5.5p in 2014 (2013: 9.2p). The
decrease in basic earnings per share is a
result of the share placing in June 2014
and the prior period one-off tax credits.
Revenue
£76.0m
14
76.0
13
65.1
12
63.1
11
55.7
10
53.1
Adjusted profit before tax
£9.5m
14
9.5
8.4
13
12
3.7
4.9
11
10
3.6
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
The earnings per share calculated on the
adjusted measure was 9.3p (2013: 9.5p).
See note 5 for more details.
The Board has decided to continue the
payment of dividends with a proposal to pay
a dividend in respect of the 2014 financial year.
Assuming it is approved by shareholders at
the Annual General Meeting, the dividend will
be paid on 22 July 2015 to shareholders on the
register at close of business on 10 July 2015.
Carry forward of software
development costs
During 2014 the Group incurred research
and development costs of £3.7m (2013: £2.7m).
This increase largely reflects additional research
and development costs of Infochem and FEESA
following the acquisition. Of this amount £1.6m
(2013: £1.3m) related to development
expenditure for the Group’s software suite
and has been carried forward as an intangible
asset to be amortised against expected future
sales. The balance was charged directly to
staff and associate costs and direct costs
in the Income statement. The amortisation
of previously capitalised software development
costs amounted to £1.3m (2013: £1.1m).
Net cash and working capital
Net cash at 31 December 2014 was £11.0m
(2013: £6.9m). The increase is due to the
addition of the net placing funds (£23.1m),
offset by the acquisition of FEESA (£10.0m)
and an increase in working capital requirements.
At the year end the Group had no outstanding
bank loans (2013: £3.0m).
Trade and other receivables increased
during the year from £23.2m to £42.3m.
The increase in trade receivables of £5.3m
to £15.0m reflects a timing difference on
the receipt of cash. This had substantially
reduced by the end of January 2015, when
trade receivables had fallen to £9.2m and
net cash had increased to £15.0m. Amounts
recoverable under contracts increased
by £13.8m, reflecting higher Technology
accrued revenue of £6.1m and higher
Consulting amounts recoverable of £7.7m.
This is expected to be billed in the first
half of 2015. Trade and other payables also
increased during the year from £12.2m
to £17.5m due largely to a significant
multi-year contract.
Going concern
The Group’s financial statements are prepared
on a going concern basis. The Directors are
satisfied that the Group has sufficient resources
and borrowing facilities to meet its requirements
for a period of at least 12 months from the date
of this statement.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Earnings per share
5.7p
14
5.7
9.5
13
12
(2.9)
5.9
11
4.0
10
Operating margin
9.4%
9.4
14
11.4
13
12
6.1
11
10
9.0
7.1
Andrew Howell
Chief Executive Officer
Andrew Hebb
Interim Chief Financial Officer
17 March 2015
KBC Advanced Technologies plc Annual report 2014
13
PRINCIPAL RISKS AND RISK MANAGEMENT
Managing risk
KBC recognises the importance of identifying and assessing our
principal risks and uncertainties. We have set out below the key risks
with the main systems and processes that are in place to manage
and mitigate these risks.
1. Foreign currencies
3. Credit
6. Market risks
Most transactions continue to be in US dollars,
euro or sterling.
The main credit risk faced is attributable to trade
receivables. As the majority of the Group’s clients
are state-owned or very large oil companies, the risk
of non-payment tends to be less of the traditional
credit nature and more related to client satisfaction
and/or trade sanctions.
There is a risk of slow adoption of upstream
technology by oil and gas companies. It is a normal
risk for all consulting firms, including KBC, that their
services are discretionary and are subject to change
and cancellation by clients at short notice.
The proportion of revenue in each currency was:
US dollars
Euro
Sterling
Other
2014
2013
79%
7%
7%
7%
81%
8%
6%
5%
Mitigation
The Group’s policy, where possible, is to sign
contracts that are denominated in their functional
currency (primarily US dollars or sterling) and
to match the currency to which expenses have
been incurred. The Group has a number of overseas
subsidiaries and branches whose revenues and
costs are denominated in currencies other than
sterling, the most significant of which are in the
USA. Where appropriate the Group considers
hedging against the foreign currency translation
exposure arising on their results.
2. Liquidity
Client payment terms vary from contract to contract
and can involve extended periods of time before
invoices are raised and cash flow can be irregular.
In addition, cash is sometimes received in countries
where exchange control regulations delay the Group’s
ability to transfer the cash outside those countries.
Mitigation
At 31 December 2014 the Group held net
cash balances of £11.0m compared £6.9m as
at 31 December 2013. Cash balances in excess
of immediate needs are placed on short-term
deposit in the money markets.
During the year the Group restructured its financing
facilities by fully repaying the outstanding balance
on a bank loan (2013: £3.0m), terminating a three
year revolving credit facility (2013: £2.0m) and
increasing the Group’s overdraft facility to £3.5m
(2013: £1.5m). The overdraft facility is available to
the Group for use in managing the timing of cash
flow in different countries and currencies.
Interest charges on the Group’s overdraft facility
are linked to the LIBOR rate appropriate to the
duration and currency of any drawdown.
14
KBC Advanced Technologies plc
Annual report 2014
Mitigation
Wherever possible, early cash flow is incorporated
into contract terms. Provision is made for doubtful
receivables when there are circumstances which,
based on experience, are evidence of a likely
reduction in the recoverability of the receivable.
4. Economic and social
Changes in the market sectors, including oil price,
energy demand, M&A activity and the availability
to our clients of skilled staff, can all impact upon
the volume of business available to KBC.
Mitigation
Our range of services has expanded over the years
and continues to evolve so that we are able to
offer appropriate solutions to our clients in varying
circumstances. Contingency plans are prepared in
case the market for the Group’s services deteriorates.
5. Political and environmental
Some of KBC’s work and proposed work is
in regions subject to political changes and
environmental disasters which could disrupt the
markets or affect our ability to execute work for
clients and/or collect payment for work performed.
Mitigation
Appropriate payment terms are negotiated
whenever possible to ensure KBC’s exposure is
minimised and the nature of our contracts requires
us to work in a flexible manner. Resourcing is
managed globally which enables us to adapt and
redeploy the workforce as and when necessary.
We minimise fixed overhead in countries at risk.
Security consultants are retained for advice
on potential risk and we avoid working
in very high risk or hostile areas.
Mitigation
We are conservative in our forecasting of
Technology revenues from the upstream sector
and focus our sales efforts on the large oil field
service companies to endorse KBC’s products
and introduce our software to the upstream industry.
Our strategy includes recruitment of personnel
with upstream experience.
Our mix of manpower includes use of associates
for certain skills and to retain some flexibility in the
staff numbers. The compensation structure at senior
levels now includes a higher proportion of variable
pay. In addition, we continue to consider different
scenarios when forecasting resourcing needs of
the business.
7. Loss of intellectual property (“IP”)
Theft or misuse of the Group’s IP is an ongoing risk.
Mitigation
Strict contractual terms ensure that ownership of IP
is retained by the Group. We continue to innovate
in both software and services as well as protecting
software by anti-piracy measures.
8. S
ystems failure, internal fraud,
financial mismanagement
KBC is heavily dependent on internal IT and
management systems. Any organisation needs
to ensure it protects itself against the risk
of fraudulent activity and mismanagement
of its finances.
Mitigation
KBC has strong, well-established financial and IT
controls, as well as rigorous policies and procedures
for IT backup and recovery processes. We continue
to innovate and improve these areas through our
internal Operational Excellence programme.
Governance
16 Board of Directors
17 Executive Committee and Operating Committee
18 Introduction to governance
19 Corporate governance statement
22 Remuneration Committee report
26 Directors’ report
BOARD OF DIRECTORS
A dedicated
Board
1
The Board recognises the importance of high standards of corporate
governance and has ultimate responsibility for the management
of the Group. There are a number of Board committees to which the
Board has delegated certain key matters.
2. Andrew Howell
4. Paul Taylor
Chief Executive Officer
Deputy Chairman and Independent
Non-Executive Director
A R N
Skills and experience:
1. Ian Godden
A R N
Chairman
Skills and experience:
Ian is a Non-Executive Director of Bristows Group
Inc (USA) and Chairman and CEO of Glenmore
Energy Inc (USA). He was until recently Chairman
of Farnborough International, the company responsible
for the Farnborough Airshow and other international
aerospace, defence and security events. After gaining
experience in the worldwide oil industry early in his
career, Ian focused on strategy consulting in the
USA and Europe. During the 1990s he was UK
Managing Partner and a European Board member
of Booz Allen and Hamilton. From 2000 to 2004,
he was UK Managing Partner of Roland Berger
Strategy Consultants and from 2007-2011 he was
Chairman of ADS, the trade organisation of the
UK aerospace, defence and security industries.
Ian has a BSc Engineering degree from Edinburgh
University and an MBA from Stanford University,
California. He is a Fellow of the Royal Aeronautical
Society. Ian was appointed a Non-Executive
Director of KBC in July 2008 and became
Chairman in January 2011. He acted as Executive
Chairman in 2013 and 2014 and returned to being
Non-Executive Chairman on 1 January 2015.
He is a member of the Audit, Nomination and
Remuneration Committees.
Andrew was appointed as Chief Executive Officer
on 1 January 2015. He previously held the role of
Managing Director of Technology, managing the
Technology side of KBC’s business including
technology development, customer support and
strategy development. Prior to joining KBC Andrew
worked for Schlumberger, holding senior management
positions related to oil and gas development and
production, and for Aspen Technology (Hyprotech)
where he managed technology development for
the oil and gas industry. He started his process
engineering career with BP Exploration and has a
degree in Chemical Engineering from the University
of Cambridge. Andrew is a member of the Executive
Committee and was first appointed as a Director
of KBC in April 2014.
KBC Advanced Technologies plc
Annual report 2014
Paul is a Non-Executive Director and Chairman of the
Audit Committees of Anite plc, Ubisense Group plc,
Escher Group Holdings plc and Digital Barriers plc.
From 2001 to 2011 he was Group Finance Director with
AVEVA Group plc. Paul is a Fellow of the Association
of Chartered Certified Accountants. He was appointed
a Non-Executive Director of KBC in May 2013 and
Deputy Chairman in October 2013. He is Chairman
of the Audit Committee and a member of the
Nomination and Remuneration Committees.
He is also the Senior Independent Director.
5. Paul McCloskey
A R N
Independent Non-Executive Director
3. Kevin Smith
Skills and experience:
Chief Commercial Officer
Paul worked for Husky Energy, one of Canada’s
largest integrated energy companies, between
2009 and 2013 where he ran the Atlantic Region
business unit, being responsible for oil exploration,
development and production operations. A graduate
in Chemical Engineering, Paul previously held
management positions in Hess, a leading global
independent energy company primarily engaged
in the exploration and production of crude oil and
natural gas, and other organisations in the oil and
gas industry. He commenced his career with Conoco.
Paul was appointed a Non-Executive Director of
KBC in February 2014. He is a member of the
Audit, Nomination and Remuneration Committees.
Skills and experience:
Kevin was appointed as Chief Commercial Officer
on 1 January 2015. He previously held the role of
Managing Partner with responsibility for overseeing
KBC’s consulting business, including all aspects
of related business development, project execution
and innovation. Prior to that he was Executive Vice
President, responsible for KBC’s Organisational
Consulting business which has grown since its
inception with the acquisition of TTS Performance
Systems Inc where he was Vice President of
Operations at the time of acquisition by KBC in
2006. He previously worked for EQE International
Inc, an ABS Group company, and Kimberly Clark
Corp, with whom he holds five patents. He has
a BS in Chemical Engineering from the University
of Tennesse, Knoxville. Kevin is a member of the
Executive Committee and was first appointed
as a Director in April 2014.
We take pride in working collaboratively and innovatively
with our clients worldwide to drive bottom-line improvements
in business performance and operational skills.”
16
Skills and experience:
6. Oliver Scott
A R N
Non-Executive Director
Skills and experience:
Oliver is a co-founder and partner of Kestrel
Partners LLP, where he acts as a fund manager and
is also responsible for structuring the partnership’s
investment management activities. He was formerly
a Director of corporate finance at KBC Peel Hunt,
stockbrokers and financial advisors, where he
specialised in advising smaller quoted and unquoted
companies. He is currently Chairman (Non-Executive)
of both ClearSpeed Technology Ltd and
ZF Acquisitions Ltd. Oliver has a degree in Business
Economics and is a member of the Securities
and Investment Institute. He was appointed a
Non-Executive Director of KBC in December 2010.
He is Chairman of the Nomination and Remuneration
Committees and a member of the Audit Committee.
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
KEY
Chairman
Member
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
2
SHAREHOLDER INFORMATION
The KBC Executive Committee focuses on the long-term vision and strategy
for the Company, as well as management of the overall results for the business,
directing the Operating Committee and managing corporate activities.
Andrew Howell Chief Executive Officer
See biography on page 16
Michael Aylott Chief Technology Officer
4
FINANCIAL STATEMENTS
EXECUTIVE COMMITTEE
Kevin Smith Chief Commercial Officer
See biography on page 16
3
Mike was appointed as Chief Technology Officer
on 1 January 2015, having most recently held the
post of Senior Vice President, R&D. Mike’s work
with KBC has always been in process simulation and
engineering software development, starting with the
development of Petrofine in the mid-1980s and then
both developing and managing R&D over a broad
range of technology and application developments
including Petro-SIM and related products. Mike
holds a Masters in Chemical Engineering from
Cambridge and learnt his trade while a research
associate at Edinburgh University and ICI working
on dynamic process simulation.
Andrew Hebb Interim Chief Financial Officer
Andrew has been a professional Interim CFO
since 2009 for a number of companies in both
the professional services and technology sectors.
Prior to that, as Chief Financial Officer, he helped
build Hedra plc into a major public sector consulting
business which was sold to Mouchel in 2008.
Andrew has also held Chief Financial Officer
and operational roles in a number of major UK
companies including PWC Consulting and Burton
group. He is a Fellow of the Chartered Institute
of Management Accountants.
5
Janet Ireland Company Secretary
Janet joined KBC in 1985 and was appointed
Company Secretary in June 2000. She is responsible
for administration of board affairs as well as legal,
statutory and compliance matters. She previously
held administrative positions in the John S Latsis
Group and at Pritchard-Rhodes Ltd. Janet is a
Fellow of the Institute of Chartered Secretaries
and Administrators.
Anna McLean Global HR Executive
Anna is responsible for leading the development
and delivery of the HR strategy to attract, retain and
develop KBC’s world-class talent pool. With over
15 years’ HR experience in the consulting industry,
Anna joined KBC in September 2013. Her previous
experience includes delivery of HR services for the
UK and Singapore practices of an American consulting
business followed by seven years with Ernst & Young
where she ultimately led the UK & Ireland Advisory
Services HR function through its significant growth
during her tenure. Anna has a degree in European
Community Studies and is a member of the
Chartered Institute of Personnel and Development.
Ramón Loureiro Senior Partner
Ramón is responsible for mentoring the Technical
Partners and future Consulting Partners of the
company, as well as ensuring the core process and
technical skills of KBC are enhanced and developed.
A chemical engineer with over 40 years of experience,
Ramón started his career at Exxon Research and
Engineering Co in the USA, where he held various
technical roles. He joined KBC in 1986 and helped
conceive, develop and lead many Profit Improvement
Programmes worldwide. He has previously led the
Research and Development group, and the regional
business development and operations groups of
KBC. Ramón holds a BS in Chemical Engineering.
OPERATING COMMITTEE
The KBC Operating Committee provides leadership and oversight for day-to-day operational performance
and drives the implementation of the short-term business strategy to achieve the annual plan and the first
steps in the foundation of the longer-term strategy. Members of the Operating Committee are:
6
Bill Tetreault
Neil Hawkes
Managing Partner, Global Operations
Senior Vice President, Research and Development
Jonathan Allwood
Jason Durst
Managing Partner, Consulting Solutions
Senior Vice President, Operational Excellence
Martin Watson
Anna McLean
Managing Director, Software and Marketing
Global HR Executive
David Parsons
James Jordan
Senior Vice President, Global Sales
Group Financial Controller
KBC Advanced Technologies plc Annual report 2014
17
INTRODUCTION TO GOVERNANCE
Complying with corporate
governance best practice
Paul Taylor
Deputy Chairman and
Senior Independent Director
We have seen a number of changes announced
and delivered during the year relating to the
structure of the Board. These are covered
in more detail elsewhere but key to good
governance is the leadership demonstrated
by the Board and as such the appointment
of Andrew Howell as CEO, Ian Godden
returning to the role of Non Executive Chairman,
the appointments of Paul McCloskey as an
Independent Non Executive Director and
Kevin Smith as an Executive Director not only
add real commercial strength to the Board’s
activities but also embrace the ongoing
improvements in our governance structures.
We are hoping to conclude the search for
a new Chief Financial Officer shortly.
The Board continues to recognise the
importance of good governance and its role
in ensuring that the business is well managed.
The framework in which we operate and
continue to develop is one that is aimed at
dealing with the complexities of our business
and acknowledging our size but also capable
of adding value to the business as we grow.
The Company continued to review its corporate
governance framework which, taking account
of both the size and nature of the business
and its specific circumstances, sets the standards
aimed to meet the general provisions of the
“Corporate Governance Code for Small and
Mid-size Quoted Companies”, published
in 2013 by the Quoted Companies Alliance
(the “QCA Corporate Governance Code”).
BOARD COMPOSITION
THE ROLE OF THE BOARD
This remains the standard at which we aim
to perform at all levels within the business.
The Board sets KBC’s overall strategic direction,
reviews management performance and ensures
that the Group has the right level of resources
in place to support these. The Board is satisfied
that the necessary controls and resources are
in place to ensure that these responsibilities
are addressed.
Operational management is delegated
to the Executive Committee and Operating
Committee to cover such matters as sales,
project delivery, customer relationships and
investment opportunities. The membership
provides a broad mix of disciplines, industry
experience and geographical coverage.
Paul Taylor
Deputy Chairman and
Senior Independent Director
17 March 2015
AS AT 17 MARCH 2015
ROLE OF THE CHAIRMAN
6
BOARD
MEMBERS
Chairman (1)
Executive Directors (2)
Non-Executive Directors (3)
two of which are independent
The QCA Corporate Governance Code
provides that the Board should be balanced
between executive and non-executive
directors and should have at least two
independent non-executive directors.
18
KBC Advanced Technologies plc
Annual report 2014
The Chairman provides leadership to
the Board of Directors and ensures that
the Board works cohesively to set the
Group’s strategy and direction. He ensures
that meetings of the Board address the
appropriate issues for the Group and
focus on key tasks. The Chairman is
the direct liaison between the Board
and the Chief Executive Officer. He is
also responsible for ensuring effective
communication with shareholders and
is the principal representative of the
Company externally.
ROLE OF THE EXECUTIVE DIRECTORS
The Executive Directors, led by the
Chief Executive Officer, provide input
to the Board in setting the strategic
direction of the Group, implement the
Board’s approved strategy and ensure
adequate resources to achieve effective
management of the Group’s operations.
R
OLE OF THE
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors provide
objective input and guidance to the
setting of strategy and management
of the business, challenging and
scrutinising management’s performance,
ensuring that appropriate controls and
risk management systems are in place,
determining remuneration policies for
executive directors and considering board
composition and succession planning.
OVERVIEW
CORPORATE GOVERNANCE STATEMENT
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
The Board of Directors is accountable to the Company’s
shareholders for good corporate governance. This statement
describes how this has been applied.
The workings of the Board
and its Committees
The Board
At the date of this report the Board comprises
the Chairman, two Executive Directors, and
three Non-Executive Directors. Throughout
2013 the current Chairman held the role of
Executive Chairman. The Chief Financial Officer
resigned from the Board as of 6 April 2014
and two additional executive directors were
appointed at the end of April 2014. There
were two non-executive directors up until
24 February 2014 when a third was appointed.
Two of the Non-Executive Directors, Paul Taylor
and Paul McCloskey, are considered
independent. Paul Taylor is also Deputy
Chairman and the Senior Independent
Director. The details of all Directors are
set out on page 16.
The Board meets at least six times per year
to deal with matters specifically reserved for
its decision. These matters include agreeing
and monitoring strategic plans and financial
targets, major decisions on resource, overseeing
management of the Company in the interest
of shareholders and ensuring processes are
in place to manage major risks, treasury matters,
changes in accounting policies, corporate
governance issues, litigation and reporting
to shareholders. The Executive Committee,
which includes the two Executive Directors,
focuses on implementation of the Board’s
approved strategy and oversees day-to-day
operating decisions to ensure proper
management of the Company’s business.
During 2014 the Board met eight times,
excluding ad hoc meetings, to deal with
procedural and other matters. Attendance at
Board and non-executive director subcommittee
meetings is recorded in the table on page 20.
To enable the Board to discharge its duties
all Directors receive appropriate and timely
information. Briefing papers are distributed
by the Company Secretary to all Directors
in advance of Board meetings. The Chairman
ensures that all Directors are properly briefed
on issues arising at Board meetings.
The Chairman ensures that all Directors, in
the furtherance of their duties, have access
to independent professional advice as required
and at the Company’s expense. All Directors
are encouraged to bring independent judgement
to bear on issues of strategy, performance,
resources (including key appointments) and
standards of conduct. The Non-Executive
Directors have a particular responsibility to
ensure that the strategies proposed by the
Executive Directors are fully considered.
All Directors have access to the advice
and services of the Company Secretary
who is responsible for ensuring that Board
procedures are followed and that the Board
complies with applicable rules and regulations.
The appointment and removal of the Company
Secretary is a matter for the Board as a whole.
The following Committees report to the
main Board, thereby enabling the main Board
to meet its responsibilities. The terms of
reference of the Nomination, Remuneration
and Audit Committees are available on the
Group’s website.
NOMINATION COMMITTEE
1
CHAIRMAN
3
MEMBERS
During 2014 the Company’s Nomination
Committee was, and continues to be, chaired
by Oliver Scott. The Nomination Committee
consists of the Non-Executive Directors
and the Chairman of the Board.
The Nomination Committee meets as required
and is responsible for proposing candidates
for appointment to the Board and the structure
and composition of the Board as a whole. In
appropriate cases recruitment consultants are
used to assist the process. The Nomination
Committee met four times during 2014,
excluding ad hoc meetings.
All Directors are subject to election by the
shareholders at the first Annual General Meeting
following their appointment and to further
re-election thereafter by the shareholders
at least every three years.
REMUNERATION COMMITTEE
1
3
CHAIRMAN
MEMBERS
During 2014 the Company’s Remuneration
Committee was, and continues to be, chaired
by Oliver Scott. The Remuneration Committee
consists of the Non-Executive Directors and the
Chairman of the Board.
The Remuneration Committee meets
at least twice a year, with the Executive
Directors in attendance by invitation as
appropriate, to determine the remuneration
of the Executive Directors and oversee
remuneration issues for senior executives
of the Group. The Remuneration Committee
is responsible for determining policy, within
agreed terms of reference, of the Group’s
framework of executive remuneration and
its cost. The Remuneration Committee sets
the contract terms, remuneration and other
benefits for Executive Directors, including
performance related bonus plans, pension
rights and compensation payments. Further
details of the Group’s policies on remuneration,
service contracts and compensation payments
are given in the Remuneration Committee
report on pages 22 to 25. The Remuneration
Committee met four times during 2014,
excluding ad hoc meetings.
KBC Advanced Technologies plc Annual report 2014
19
CORPORATE GOVERNANCE STATEMENT CONTINUED
The workings of the Board
and its Committees continued
The Board continued
AUDIT COMMITTEE
1
3
CHAIRMAN
MEMBERS
During 2014 the Audit Committee was
and continues to be, chaired by Paul Taylor.
The Audit Committee comprises the
Non-Executive Directors and the
Chairman of the Board.
The Audit Committee, which meets at least
twice a year, provides a forum for reporting
by the Group’s external auditors. Meetings
are also attended, by invitation, by the
Executive Directors.
The Audit Committee follows written terms
of reference and is responsible for reviewing
a wide range of matters including adequacy
of the Group’s accounting systems and control
environment, the integrity of the Group’s
financial statements and its reporting
procedures to shareholders.
The Audit Committee advises the Board
on the appointment of external auditors
and their remuneration and discusses with
the external auditors the nature, scope and
results of the audit. The Audit Committee
keeps under review the cost effectiveness,
independence and objectivity of the external
auditors, including the level of non-audit fees
charged. Auditor objectivity and independence
is safeguarded by ensuring that non-audit
services provided by the external auditors
are kept to a minimum and are restricted
to matters concerning tax compliance
and associated advisory services.
The Audit Committee also monitors the
effectiveness of the Group’s internal controls
and risk management systems. It considers
annually whether it is appropriate to introduce
a separate internal audit function. To date
it has concluded that this is not necessary
given the structure of the Group’s accounting
function and the size of the Group.
The Executive Committee comprises
the Executive Directors and other senior
managers. It focuses on the long-term
vision and strategy for the Company. Primary
responsibilities include the oversight of the
development, maintenance and implementation
of the strategy, management of the overall
financial results for the business, directing
the Operating Committee and managing
shareholder, corporate governance and growth
activities. Members of the Executive Committee
are shown on page 17.
OPERATING COMMITTEE
The Audit Committee met twice during 2014,
excluding ad hoc meetings.
EXECUTIVE COMMITTEE
The Executive Committee handles
implementation of the Group’s strategy on
behalf of the Board. During 2014 operations
of the Group were managed through two
separate business lines, Consulting and
Technology, with an Operating Board
(comprising the Chairman of the Board,
the leaders of the two business lines and
the Senior Partner) having oversight of
strategic and operational activities. At the
end of the year a reorganisation took place
to combine management of the Consulting
and Technology businesses on a global basis.
The Operating Committee, formed at the end
of 2014, comprises key operational managers
from within the Group, providing leadership
and oversight for the day-to-day operational
performance of the business, and drives the
implementation of the short-term business
strategy to achieve the annual plan and the
first steps in the foundation of the longer-term
strategy. The Operating Committee reports
to the Executive Committee with a primary
interface through the Chief Commercial
Officer. Members of the Operating
Committee are shown on page 17.
ATTENDANCE AT MEETINGS OF DIRECTORS
Number of scheduled meetings
I Godden
P McCloskey
O Scott
P Taylor
C Brown (to 6 April 2014)
A Howell (from 28 April 2014)
K Smith (from 28 April 2014)
20
KBC Advanced Technologies plc
Annual report 2014
Board
meetings
Audit
Committee
meetings
Nomination
Committee
meetings
Remuneration
Committee
meetings
8
7
7
8
8
2
6
6
2
2
2
2
2
—
—
—
4
4
3
4
4
—
—
—
4
3
3
4
4
—
—
—
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
Performance evaluation
Performance of the Board and Non-Executive
Director Committees of the Board is reviewed
collectively by all the Directors. Except
as set out below, individual performance
evaluation of each Director is carried out
by the Chairman or the Senior Independent
Director and the results are reviewed with the
other Directors. The Chairman is appraised by
the Non-Executive Directors, led by the
Senior Independent Director.
An evaluation of the performance during 2014
of the Board as a whole, the Committees and
individual Directors commenced in early 2015.
The Senior Independent Director reviewed
these matters with each Director individually
and the Chairman conducted a review with the
Senior Independent Director. The conclusions
of the overall assessments and actions
required are reviewed by all the Directors.
Internal control
The Board has overall responsibility for the
Group’s system of internal control. The system
of internal control is designed to manage rather
than eliminate the risk of failure to achieve
business objectives. In pursuing these
objectives, internal controls can only provide
reasonable and not absolute assurance
against material misstatement or loss.
A process was in place during the first
part of the year for identifying, evaluating
and managing the significant risks faced
by the Group. In the middle of the year the
Chairman conducted a thorough review of the
current risks faced by the business and revised
processes and procedures are currently
being put in place. Internal controls and risk
management are regularly reviewed by
the Audit Committee.
The Board performs a regular review of the
effectiveness of the system of internal control
and takes actions necessary to remedy any
significant failings or weaknesses identified in
the review. The processes used by the Board
to review the effectiveness of the system
of internal control include the following:
»» the Audit Committee reviews the
effectiveness of the Group’s risk
management process and significant
risk issues are referred to the Board
for consideration;
»» the Chairman of the Audit Committee
reports the results of Audit Committee
meetings to the Board and the Board
receives minutes of all such meetings;
»» the Audit Committee maintains close
contact with the Chief Financial Officer
and periodically instigates investigations
into the effectiveness and other aspects
of internal control;
»» the Board receives the results of
self‑assessment reports from senior
managers covering the risks faced by
the Group, together with compensating
internal controls. A record of such risks
is maintained and reviewed on a regular
basis, with risk weightings assigned to
ensure priority is given to the major risks
identified by the Group; and
»» the Board receives regular reports
concerning specific contract risks faced
by the Group.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Relations with shareholders
KBC values and maintains an active dialogue
with its shareholders through a programme
of investor relations. The Directors meet
frequently with representatives of institutional
shareholders to discuss their views and review
corporate governance issues. Feedback from
these meetings is discussed at meetings of the
Directors. Major shareholders are consulted
on significant issues concerning the Company’s
corporate governance. Information is also made
available to shareholders via the Annual and
Half Year Reports and the Group’s website
(www.kbcat.com).
The Annual General Meeting provides
an opportunity to communicate with private
and institutional shareholders and the
Company welcomes their participation.
The Chairman ensures that members of
the Audit, Remuneration and Nomination
Committees are available at Annual General
Meetings to answer questions. Details of
resolutions to be proposed at the Annual
General Meeting in 2015 can be found in
the Notice of Meeting at page 62.
By order of the Board
Janet Ireland
Company Secretary
17 March 2015
Principal risks facing the business are
described on page 14.
KBC values and maintains an active
dialogue with its shareholders
through a programme of
investor relations.”
KBC Advanced Technologies plc Annual report 2014
21
REMUNERATION COMMITTEE REPORT
The Group’s policy is to attract, retain and motivate high calibre
executives capable of achieving the Group’s objectives and to offer
a remuneration package that is competitive within the sector in
which the Group operates.
Details of each Director’s remuneration
are set out on page 25.
Remuneration Committee composition,
responsibilities and operation
During 2014 the Company’s Remuneration
Committee (the “Committee”) consisted
of the Non-Executive Directors (Oliver Scott,
who chaired the Committee, Paul Taylor
and Paul McCloskey from 24 February 2014)
and the Chairman of the Board (Ian Godden).
Paul Taylor and Paul McCloskey are
considered independent.
The Executive Directors have been invited
as necessary to attend meetings other
than when their own remuneration has
been considered.
The Committee determines the policy, within
agreed terms of reference, of the overall
remuneration package for Executive Directors
and oversees remuneration issues for other
senior executives. The Group and the
Committee seek advice from time to time
from external remuneration consultants.
The Committee was advised on remuneration
related matters by MM&K in 2014 and 2013.
MM&K provides administration services to
the Company in connection with operation
of the Group’s share incentive plans. It did
not provide any other services to the
Company during 2014 or 2013.
Remuneration policy
The Group’s policy is to attract, retain and
motivate high calibre executives capable of
achieving the Group’s objectives and to offer
a remuneration package (consisting of basic
salary, benefits, incentive share schemes,
pension and a performance related bonus)
that is competitive within the sector in which
the Group operates.
The details of individual components of the
remuneration package and service contracts
are discussed below.
Basic salary and benefits
The basic salaries and benefits of all employees
are reviewed every year. In reviewing salaries,
consideration is given to personal performance,
the Group’s overall performance and external
comparative information. Benefits principally
relate to pensions, car allowances, life
assurance, disability insurance and private
health care.
Statement of consideration of conditions
elsewhere in the Group
The Committee takes into account the pay
and employment conditions of all employees in
the Group when considering changes to salaries
and other benefits for Directors. The Committee
is kept aware of changes in remuneration
policy for other senior executives in the
Group and these are taken into consideration,
consistent with the Group’s general aim
of seeking to reward all employees fairly
according to the nature of their role, their
performance and market forces.
Incentivisation of
Executive Directors and senior staff
In 2013 the Committee discontinued the
previous cash and share incentivisation plans
and replaced them with a new plan, with
the objective of aligning the interests of the
Executive Directors and senior managers
more closely with those of shareholders over
the medium to long term. Further details are
set out below.
Performance bonuses
A performance bonus is payable to Executive
Directors and senior staff on the achievement
of performance conditions established by the
Remuneration Committee. The performance
conditions include the Group’s financial
performance and market expectations,
as well as individual performance.
Following the adoption in 2013 of a new
incentivisation plan for Executive Directors and
senior staff, cash bonuses are no longer capped,
but are at the discretion of the Committee.
DIRECTORS’ CONTRACTS
Nature of
agreement
I Godden, Chairman
P McCloskey, Non-Executive Director(2)
O Scott, Non-Executive Director
P Taylor, Non-Executive Director
C Brown, Executive Director(3)
A Howell, Executive Director(4)
K Smith, Executive Director(4)
(1) Replaced earlier agreement
(2) Appointed 24 February 2014
(3) Resigned 6 April 2014
(4) Appointed 28 April 2014
22
KBC Advanced Technologies plc
Annual report 2014
Service agreement
Contract for services
Contract for services
Contract for services
Service agreement
Service agreement
Service agreement
Effective date of
agreement
18 February 2014(1)
24 February 2014
1 December 2013
24 May 2013
19 September 2012
28 April 2014
28 April 2014
Unexpired
term at
31 December
2014
Notice
period
—
2.2 years
1.9 years
1.4 years
n/a
—
—
3 months
3 months
3 months
3 months
n/a
6 months
6 months
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
Pensions
The Group operates defined contribution
pension schemes. Contributions are calculated
as a percentage of basic salary.
The Chairman and Non-Executive Directors
are not eligible for membership of the Group’s
pension schemes.
Fees
The Committee sets the fees of the Chairman.
The fees for the Non-Executive Directors
are determined by the Executive Directors.
Neither the Non-Executive Directors nor the
Chairman are involved in any discussions or
decisions about their own remuneration.
Directors’ contracts
Details of the contracts of Directors who
served during the year are shown on page 22.
Directors’ interests in shares
The beneficial interests of the Directors in
the Ordinary share capital of the Company
are shown on page 26.
Share options and incentive plans
The Group has operated share option plans
and a Long Term Incentive Plan, as described
on the following pages.
Share options outstanding over new shares at
31 December 2014 are summarised in note 25
to the financial statements. These are included
in the details of options held by the Directors
during the year shown on page 24.
Long Term Incentive Plan 2006
(“LTIP 2006”)
The LTIP 2006 was closed in 2013 and
replaced with the Discretionary Share Option
Plan 2013. No awards have been made under
the LTIP 2006 since 2012.
In summary, two types of award were
granted under the LTIP 2006:
1.Awards of shares in the Company (“Matching
Shares”), linked to and ‘‘matching’’ on a
maximum 1:1 basis (gross of tax) shares
acquired by participants following compulsory
or voluntary investment of an amount
equivalent to a defined proportion of their
annual bonus in shares (‘‘Deferred Shares’’).
2.Awards of Performance Shares to Executive
Directors and selected senior managers,
which ordinarily vest three years after the
date of the award, subject to continued
employment of the individual concerned
within the Group and to the satisfaction
of challenging performance conditions.
Awards under the LTIP 2006 are included in
the details of options held by the Directors
during the year and are shown on page 24.
Discretionary Share Option Plan 2013
(“DSOP 2013”)
The DSOP 2013 was introduced in June 2013
and is due to last five years. Share options of
5% of the Company’s issued share capital
were granted within the first 12 months of
the DSOP 2013. Subsequent grants of share
options up to 2% of the Company’s then-issued
share capital have been and will be made in
each of the four following 12 month periods.
Under the DSOP 2013 share options awarded
to participants are split between “Career
Options” and “Price Target Options”.
Career Options automatically vest after
an agreed period of time, provided the
participant remains employed by the Group.
The vesting periods for the initial tranche of
Career Options awarded in June 2013 was
split with 50% vesting 18 months from the
date of grant and 50% vesting three years
from the date of grant. Career Options
awarded subsequently have three-year
vesting time periods. Career Options range
between 40% and 60% of an individual’s
total share option award.
Price Target Options vest on the attainment
of certain share price targets for a continuous
period of three months. The share price
targets and the associated vesting are:
»» 3
3.3% of the Award vests on a 50%
increase on the Base Price;
»» 3
3.3% of the Award vests on a 75%
increase on the Base Price; and
»» 3
3.3% of the Award vests on a 100%
increase on the Base Price.
The “Base Price” for the annual award in
each year is the average share price between
1 January and 31 March in the year of grant.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
The Base Price for new staff (or for employees
promoted) at other points in the year is the
average price over the three months preceding
the date of the award.
Share price targets must be achieved within
ten years from the date of grant. Once achieved,
the Price Target Options vest.
Share options were granted to the two
Executive Directors on 5 June 2014 and
18 November 2014. The Base Price for
these share options was 115.3p and
102.4p respectively. Share options were
also granted to senior staff on 5 June 2014
and 27 October 2014. The Base Price
for these share options was 115.3p
and 108.5p respectively.
In 2013 share options were granted
to an Executive Director and senior staff
on 26 June 2013 and to senior staff on
1 October 2013. The Base Price for these
share options was 65.5p and 78.6p respectively.
Unapproved Share Option Plan (“USOP”)
On 26 June 2013 share options were granted
to Godden Associates Limited of which
Ian Godden is a director. The performance
conditions related to adjusted profit before tax
for the 2013 financial year, adjusted EPS for
2014 and an increase in the Company’s share
price from a base price of 65.5p. It is not
envisaged that any further share options
will be granted to anyone under this plan.
Employee Trusts
The KBC Advanced Technologies plc
Employee Trust and the KBC Advanced
Technologies plc Employee Benefit Trust
2013 (the “Trusts”) are available to transfer
existing issued shares in the Company upon
exercise of share options.
Directors’ interests in share options
and Long Term Incentive Plan awards
The interests of the Directors in options
to purchase or subscribe for shares of the
Company at 31 December 2014, which
include options granted by the Trusts, are
set out overleaf. Awards under the Group’s
long-term incentive plan are also included.
Performance conditions for all options and
awards are shown above.
KBC Advanced Technologies plc Annual report 2014
23
REMUNERATION COMMITTEE REPORT CONTINUED
Directors’ interests in share options and Long Term Incentive Plan awards continued
Options exercised by Directors during the year are set out below. No options were exercised by Directors during the year ended 31 December 2013.
Options have been exercised since the year end by Andrew Howell over 82,500 shares and by Kevin Smith over 42,500 shares. Other than the
foregoing, the interests of the Directors to subscribe for or acquire Ordinary shares have not changed up to the date of this report.
The mid-market price of the Company’s shares at the end of the year was 91p and the range of mid-market prices during the year was
between 82.5p and 138p.
At
1 January
2014 (1)
Exercise
price
Pence
Mid market
closing price
(if higher)(2)
Pence
Period
during which
options are
exercisable
Net value at
31 December
2014(3)
£
Exercised
Granted
Lapsed
At
31 December
2014
100,000
100,000
43,750
13,333
—
—
56,250
86,667
—
—
—
2.5
46.0
78.0
n/a
n/a
—
—
275,000
125,000
—
—
—
—
—
—
275,000
125,000
—
—
78.0
78.0
2015–2018
2015–2018
250,250
113,750
50,000
40,000
10,000
10,000
22,500
22,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21,600
32,400
10,000
15,000
50,000
40,000
10,000
10,000
22,500
22,500
21,600
32,400
10,000
15,000
—
—
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
59.5
77.5
78.0
78.0
78.0
78.0
135.5
135.5
91.0
91.0
2015
2015–2016
2015
2015–2023
2015
2016–2017
2015–2024
2017–2018
2015–2024
2017–2018
45,500
36,400
8,850
8,850
19,913
19,913
19,116
28,674
8,850
13,275
16,000
20,000
10,000
22,500
22,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21,600
32,400
10,000
15,000
—
—
—
—
—
—
—
—
16,000
20,000
10,000
22,500
22,500
21,600
32,400
10,000
15,000
—
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
77.5
78.0
78.0
78.0
78.0
135.5
135.5
91.0
91.0
2015–2016
2015
2015–2023
2015
2016–2017
2015–2024
2017–2018
2015–2024
2017–2018
14,560
17,700
8,850
19,913
19,913
19,116
28,674
8,850
13,275
C Brown
LTIP 2006
DSOP 2013
I Godden(4)
USOP
USOP
A Howell
LTIP 2006
LTIP 2006
DSOP 2013 PTO
DSOP 2013 PTO
DSOP 2013 Career
DSOP 2013 Career
DSOP 2013 PTO
DSOP 2013 Career
DSOP 2013 PTO
DSOP 2013 Career
—
K Smith
LTIP 2006
DSOP 2013 PTO
DSOP 2013 PTO
DSOP 2013 Career
DSOP 2013 Career
DSOP 2013 PTO
DSOP 2013 Career
DSOP 2013 PTO
DSOP 2013 Career
—
DSOP 2013 PTO = Price Target Options (see explanation on page 23)
DSOP 2013 Career = Career Options (see explanation on page 23)
(1) Or on appointment if later
(2) On day immediately prior to date of the award
(3)Net value of options are calculated using mid market price of the Company’s shares at the end of the year, less exercise price. Net values are before performance criteria,
which will determine the extent to which exercise is permitted
(4) Options granted to Godden Associates Limited
24
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Directors’ remuneration
The remuneration of individual Directors is shown in the table below.
2014
£000
2013
£000
Emoluments:
– basic salaries
– compensation for loss of office
– benefits
665
101
56
446
—
5
– fees
822
78
451
205
– pension contributions
900
16
656
—
916
656
The remuneration of individual Directors was as follows:
Salary
and fees
£000
I Godden
P McCloskey(2)
O Scott
P Taylor
C Brown(3) (1 January–6 April 2014)
A Howell(4)(5) (28 April–31 December 2014)
K Smith(4)(5) (28 April–31 December 2014)
Benefits(1)
£000
2014
Total
£000
2013
Total
£000
2014
Pension
£000
2013
Pension
£000
281
30
35
35
164
177(6)
122
24
—
—
—
—
30 (6)
2
305
30
35
35
164
207
124
297
—
35
21
252
—
—
—
—
—
—
—
8
8
—
—
—
—
—
—
—
844
56
900
656
16
—
(1) Benefits are made up primarily of private health care, life assurance, disability insurance and provision of car allowance
(2) Appointed as a Director 24 February 2014
(3) Resigned as a Director 6 April 2014
(4) Remuneration was paid in US dollars and has been translated at an average rate of $1.6465 for 2014
(5) Appointed as a Director 28 April 2014
(6) Includes relocation costs
Ms Brown exercised options during the year and simultaneously realised a cash gain of £65,423 through the sale of the shares acquired in part
to fund the tax liability upon exercise of the options.
Ms Brown received a cash payment in lieu of a pension contribution. In 2014 this represented 8.69% of basic salary (2013: 8.62%).
Messrs Howell and Smith participated in the Group’s profit-sharing/401(k) plan, a defined contribution employee benefit plan in the USA. The employer’s
contribution for each of them was 8% of aggregate basic salary in a full year up to a maximum salary of US$260,000 per annum.
No payments were made, or benefits accrued, under any other pension arrangements.
The charges to the Income statement in the year for share-based incentives in respect of the Directors were: Ms Brown £7,000 (2013: £38,000),
Mr Godden £97,000 (2013: £145,000), Mr Howell £44,000 (2013: £nil) and Mr Smith £35,000 (2013: £nil).
By order of the Board
Janet Ireland
Company Secretary
17 March 2015
KBC Advanced Technologies plc Annual report 2014
25
DIRECTORS’ REPORT
Key performance indicators
used in the business are shown
in the graphs on page 1 and in the
Strategic report on pages 8, 9,
12 and 13.
A more detailed review of the
development and performance of the
business is given in the Chairman’s
statement on pages 4 and 5 and in
the Strategic review on pages 7 to 14.
The Directors present their report and
audited financial statements for the year
ended 31 December 2014.
of share options and Mr Scott (through
Kestrel Opportunities) acquired an
additional 321,870 shares.
Dividend
The Board’s recommendation for the
payment of a final dividend is shown
in the Strategic report on page 13.
Other than the above, there have
been no changes in the shareholdings
of current Directors up to the date of
these financial statements.
Directors and their interests
The Directors during the year are shown
in the table below. The interests of the
Directors in the share capital of the Company
(all beneficially held except where noted)
at 31 December 2014 are shown below.
Employees
The Group continues to place a high emphasis
on attracting, retaining and developing
employees to achieve the Group’s business plan
objectives. The Group pursues an active policy
of employee involvement and development,
including communication through staff
meetings, written communications to all
staff and use of the Group’s intranet.
The interests of the Directors in options to
acquire shares of the Company, which includes
options granted by the Trusts and awards under
the Company’s Long Term Incentive Plans
and the Discretionary Share Option Plan
2013, are shown on page 24. None of the
Non-Executive Directors have any interest
in options to acquire shares in the Company.
Since the year end, Mr Godden acquired
75,000 additional shares, Mr Howell acquired
54,843 additional shares through the exercise
of share options, Mr Smith acquired 25,893
additional shares through the exercise
Employees are provided with information
on matters affecting them as employees,
on developments within the business and
on the various factors affecting the Group’s
performance. Group policies and practices
are continually reviewed and improved as
required to meet the needs of employees
and the business.
Principal risks and uncertainties
facing the Company and its subsidiary
undertakings and how they are
controlled are described on page 14.
The Group is committed to providing equality
of opportunity for all employees and in particular
ensures that fair selection and development
procedures apply. The aim of the Group’s
policy is to ensure that no job applicant or
employee receives less favourable treatment
than any other on the grounds of age, sex,
sexual orientation, disability, marital status,
colour, religion, race or ethnic origin.
The Group encourages the involvement
of senior employees in the Group’s success
through share incentive schemes, as well
as a bonus scheme which emphasises
performance and delivery of business
plan objectives.
Ethics
The Group has well established policies on
business ethics. Employees are given a copy
of the policies on joining the Group and all
employees are required to review the policies
regularly and report any non-compliance
or suspicion of non-compliance. A regular
review emphasises understanding of the
policies, consultation where required and
sound judgement. The results of reviews are
reported to the Board via the Audit Committee.
INTERESTS OF THE DIRECTORS IN THE SHARE CAPITAL OF THE COMPANY
2.5p Ordinary shares
At
1 January
2014 (1)
I Godden
P McCloskey
O Scott(3)
P Taylor
C Brown
A Howell
K Smith
(1) Or at date of appointment if later
(2) Or at date of resignation if earlier
(3) Non-beneficial interest held through Kestrel Opportunities Fund (“Kestrel Opportunities”)
26
KBC Advanced Technologies plc
Annual report 2014
157,500
—
7,378,863
—
—
—
21,790
At
31 December
2014 (2)
201,000
—
9,858,428
—
—
—
21,790
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
Corporate governance
Information concerning corporate governance
is set out in the Corporate governance
statement on pages 18 to 21.
Financial instruments
An explanation of the Group’s financial risk
management objectives, policies and strategies
is set out on page 14 and in note 23.
Shares held in treasury
In October 2014 the Company purchased
214,000 Ordinary shares of 2.5p each in the
Company which were transferred into treasury
to satisfy the future exercise of share options.
Outstanding shareholders’ authority
The authority granted on 4 June 2014 by
the shareholders for the Company to make
market purchases, within the meaning of
Section 693 of the Companies Act 2006,
of up to 8,873,307 Ordinary shares of 2.5p
each in the capital of the Company remains
outstanding until the earlier of the conclusion
of the Annual General Meeting of the Company
in 2015 and 30 June 2015.
Shares issued
The Company issued 20,869,565 new Ordinary
shares of 2.5p each on 10 June 2014 in a
share placing.
One million new Ordinary shares of 2.5p
each were issued in July 2014 as part of the
consideration for the acquisition of FEESA on
21 July 2014. Half of these consideration
shares are subject to selling restrictions for
12 months from the date of acquisition with
the remainder restricted for a further 12 months.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Except for the above, no shares were issued
during 2014 other than in connection with the
operation of the Company’s employee share
incentive schemes.
Disclosure of information to auditors
All of the current Directors have taken all the
steps that they ought to have taken to make
themselves aware of any information needed
by the Company’s auditors for the purposes
of their audit and to establish that the auditors
are aware of that information. The Directors
are not aware of any relevant audit information
of which the auditors are unaware.
Registered auditors
A resolution to re-appoint BDO LLP as the
Company’s auditors and to authorise the
Directors to fix their remuneration will be put
to the members at the Annual General Meeting.
Substantial shareholdings
SUBSTANTIAL SHAREHOLDINGS AS AT 31 DECEMBER 2014
At 31 December 2014 the Company had been notified of the interests shown below, excluding those of Directors, in 3% or more of its issued
share capital.
Name
Percentage
of issued
share capital
%
Kestrel Partners LLP, UK
AXA Investment Managers SA, UK
Killik Asset Management, UK
Kongsberg Gruppen ASA, Norway
Coltrane Master Fund, L.P., USA
Hargreave Hale Limited, UK
13.55
11.81
5.66
4.93
3.85
3.67
SUBSTANTIAL SHAREHOLDINGS AS AT 17 FEBRUARY 2015
At 17 February 2015 the Company had been notified of the interests shown below, excluding those of Directors, in 3% or more of its issued
share capital.
Name
Percentage
of issued
share capital
%
Kestrel Partners LLP, UK
AXA Investment Managers SA, UK
Killik Asset Management, UK
Kongsberg Gruppen ASA, Norway
Coltrane Master Fund, L.P., USA
Hargreave Hale Limited, UK
13.91
11.75
5.63
4.90
3.83
3.65
KBC Advanced Technologies plc Annual report 2014
27
DIRECTORS’ REPORT CONTINUED
Directors’ responsibility
for the financial statements
The Directors are responsible for preparing
the Strategic report, the Annual Report and
the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors have elected
to prepare the Group financial statements
in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by
the European Union and the Company financial
statements in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law). Under company law
the Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Group and the Company and of the
profit or loss of the Group for that period.
The Directors are also required to prepare
financial statements in accordance with
the rules of the London Stock Exchange
for companies whose securities are
traded on AIM.
In preparing these financial statements,
the Directors are required to:
»» select suitable accounting policies
and then apply them consistently;
»» make judgements and accounting estimates
that are reasonable and prudent;
»» state whether the Group financial
statements have been prepared in
accordance with IFRSs as adopted
by the European Union, subject to
any material departures disclosed and
explained in the financial statements;
»» state whether the Company
financial statements have been prepared
in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law), subject to any material
departures disclosed and explained
in the financial statements; and
»» prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with
the requirements of the Companies Act 2006.
They are also responsible for safeguarding
the assets of the Company and hence for
taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for ensuring the
Annual Report and the financial statements
are made available on a website. Financial
statements are published on the Company’s
website in accordance with legislation in the
United Kingdom governing the preparation
and dissemination of financial statements,
which may differ from legislation in other
jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility
of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the
financial statements contained therein.
By order of the Board
Janet Ireland
Company Secretary
17 March 2015
28
KBC Advanced Technologies plc
Annual report 2014
Financial
statements
30 Independent auditors’ report
31 Group income statement and
Group statement of comprehensive income
32 Group statement of changes in equity
33 Group balance sheet
34 Group cash flow statement
35 Notes to the Group financial statements
57 Company balance sheet
58 Notes to the Company financial statements
SHAREHOLDER INFORMATION
62 Notice of the Annual General Meeting
IBCFive‑year summary and shareholder information
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF KBC ADVANCED TECHNOLOGIES PLC
We have audited the financial statements of KBC Advanced Technologies plc for the year ended 31 December 2014 which comprise the Group
and Company balance sheets, the Group income statement, the Group statement of comprehensive income, the Group cash flow statement,
the Group statement of changes in equity and the related notes. The financial reporting framework that has been applied in the preparation of the
Group financial statements is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union.
The financial reporting framework that has been applied in preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Financial Reporting Council’s (“FRC’s”) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
»» the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 31 December 2014
and of the Group’s profit for the year then ended;
»» the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
»» the parent company’s financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
»» the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic report and Directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
»» adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
»» the parent company financial statements are not in agreement with the accounting records and returns; or
»» certain disclosures of Directors’ remuneration specified by law are not made; or
»» we have not received all the information and explanations we require for our audit.
John Everingham (Senior Statutory Auditor)
For and on behalf of BDO LLP, statutory auditors
Gatwick
17 March 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
30
KBC Advanced Technologies plc
Annual report 2014
GROUP INCOME STATEMENT
OVERVIEW
FOR THE YEAR ENDED 31 DECEMBER 2014
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Note
Revenue
3
Direct costs
Staff and associate costs
8
Depreciation and amortisation
5
Other operating charges
2014
£000
2013
£000
75,954
65,080
(13,113)
(9,254)
(35,855)
(32,383)
(5,691)
(4,414)
(14,132)
(11,640)
Operating profit
5
7,163
7,389
Finance revenue
6
86
208
Finance cost
6
Profit before tax
Tax expense
9
Profit for the year
(578)
(476)
6,671
7,121
(2,592)
(1,584)
4,079
5,537
Earnings per share attributable to the ordinary equity shareholders of the parent company
Basic
10
5.7p
9.5p
Diluted
10
5.5p
9.2p
2014
£000
2013
£000
4,079
5,537
— exchange differences on translation of foreign operations recognised directly in equity
1,595
(856)
Total comprehensive income recognised in the year
5,674
4,681
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Profit for the year
Other comprehensive income/(loss):
KBC Advanced Technologies plc Annual report 2014
31
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Issued
capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Merger
reserve
£000
At 1 January 2013
1,470
9,370
113
929
Profit for the year
—
—
—
—
Other comprehensive loss
—
—
—
—
Sharebased
payments
£000
Foreign
exchange
reserve
£000
Retained
earnings
£000
Total
£000
(172)
2,180
2,166
15,311
31,367
—
—
—
5,537
5,537
—
—
(856)
—
(856)
Own
shares
£000
Total comprehensive (loss)/income
—
—
—
—
—
—
(856)
5,537
4,681
Share-based payments
—
—
—
—
—
530
—
—
530
9
67
—
—
(1)
—
—
—
75
Shares issued
Purchase of non-controlling interest
(note 15)
—
—
(137)
(137)
2,710
1,310
20,711
36,516
—
—
4,079
4,079
—
1,595
—
1,595
—
—
1,595
4,079
5,674
—
—
—
—
At 1 January 2014
1,479
9,437
113
929
Profit for the year
—
—
—
—
—
Other comprehensive profit
—
—
—
—
—
Total comprehensive income
—
—
—
—
Share-based payments
—
(173)
—
—
—
—
—
700
—
—
700
540
22,607
—
—
—
—
—
—
23,147
Shares issued in business
combination (note 22)
25
—
—
1,205
—
—
—
—
1,230
Share buyback
—
—
—
—
(196)
—
—
—
Movement in own shares
—
—
—
—
(149)
—
—
149
Dividends
—
—
—
—
—
—
—
(802)
2,044
32,044
113
2,134
3,410
2,905
Shares issued for cash, net of
transaction costs
At 31 December 2014
32
KBC Advanced Technologies plc
Annual report 2014
(518)
24,137
(196)
—
(802)
66,269
GROUP BALANCE SHEET
OVERVIEW
AS AT 31 DECEMBER 2014
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Note
2014
£000
2013
£000
Property, plant and equipment
12
1,026
851
Goodwill
13
15,401
10,200
Other intangible assets
13
18,336
12,011
9
786
447
35,549
23,509
42,312
23,178
2,438
1,647
11,883
11,960
Non-current assets
Deferred tax assets
Current assets
Trade and other receivables
16
Current tax receivable
Cash and cash equivalents
17
Total assets
56,633
36,785
92,182
60,294
—
(600)
Non-current liabilities
Long-term borrowings
20
9
(2,866)
(1,476)
18
(53)
(69)
(2,919)
(2,145)
(17,539)
(12,201)
(860)
(4,429)
(4,441)
(4,745)
Deferred tax liabilities
Provisions
Current liabilities
Trade and other payables
19
Short-term borrowings
20
Current tax payable
Provisions
18
(154)
(258)
(22,994)
(21,633)
Total liabilities
(25,913)
(23,778)
Net assets
66,269
36,516
Equity attributable to ordinary equity shareholders of the parent company
Share capital
24
2,044
1,479
Share premium
26
32,044
9,437
Other reserves
26
2,247
1,042
Own shares
26
(173)
(518)
24,731
Retained earnings
30,452
Total equity
66,269
36,516
Total equity and liabilities
92,182
60,294
The financial statements on pages 31 to 56 were approved and authorised for issue by the Board of Directors on 17 March 2015 and were
signed on its behalf by:
Ian Godden
Andrew Howell
DirectorDirector
Registered number: 01357958
KBC Advanced Technologies plc Annual report 2014
33
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Note
2014
£000
2013
£000
6,671
7,121
5,691
4,414
647
(439)
Net cash inflow from operating activities
Profit before tax
Adjustments for:
Depreciation and amortisation
12, 13
Foreign exchange losses/(gains)
Finance revenue
6
(86)
(208)
Finance cost
6
578
476
Share-based payment expense
25
Increase in trade and other receivables
17
Increase/(decrease) in trade and other payables
17
700
530
14,201
11,894
(19,233)
(4,285)
2,370
(7,960)
(351)
Cash used in operations
(2,662)
Income taxes paid
(3,369)
(1,917)
Net cash used in operating activities
(6,031)
(2,268)
(9,885)
—
Investing activities
Acquisition of subsidiary, net of cash acquired
22
Payment of deferred consideration
—
(1,900)
Purchase of tangible non-current assets
12
(669)
(195)
Purchase of intangible non-current assets
13
(1,552)
(1,334)
Decrease in advance contract payments
Finance revenue received
6
Net cash (used in)/generated from investing activities
—
12,287
86
208
(12,020)
9,066
Financing activities
Issue of ordinary shares
24,014
75
Issue cost of ordinary shares
(867)
—
Payments to acquire treasury shares
(196)
—
Purchase of non-controlling interest
—
Finance costs paid
Dividends paid to equity holders of parent
(2,400)
6
(578)
(476)
11
(802)
—
Net cash generated from/(used in) financing activities
18,571
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange adjustments
Cash and cash equivalents at 31 December
34
KBC Advanced Technologies plc
Annual report 2014
(137)
(3,000)
Repayment of bank borrowings
17
(2,938)
520
3,860
9,931
6,384
572
(313)
11,023
9,931
NOTES TO THE GROUP FINANCIAL STATEMENTS
OVERVIEW
FOR THE YEAR ENDED 31 DECEMBER 2014
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
1. Accounting policies
KBC Advanced Technologies plc is a public limited company incorporated and domiciled in England and Wales. The Company’s ordinary shares
are traded on AIM, part of the London Stock Exchange.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
The Group financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by
the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted
by the Group are set out in note 1 and those adopted by the Company in note 31.
The Group financial statements are presented in sterling, rounded to the nearest thousand pounds (£000) except where otherwise indicated.
They are prepared on the historical cost basis except that certain financial instruments are stated at fair value.
Changes in accounting policies
a) New standards, interpretations and amendments effective from 1 January 2014
None of the new standards, interpretations and amendments, effective for the first time from 1 January 2014, have had a material effect
on the financial statements.
b) New standards, interpretations and amendments not yet effective
Other than that listed below the Directors do not consider any new standards, interpretations and amendments that have been issued
but are not yet effective to have a material impact on the Group’s financial statements in the period of initial application.
»» IFRS 15 Revenue from contracts replaces both IAS 11 and IAS 19 as well as SIC 31, IFRIC 13, IFRIC 15 and IFRIC 18, establishing a single,
comprehensive framework for revenue recognition. IFRS 15 is effective for annual periods beginning on or after 1 January 2017 and is yet to
be endorsed by the European Union (“EU”) at the date of approval of these financial statements. The Group has begun a systematic review
of all existing major consulting and software contracts to ensure that the impact and effect of the new standard is fully understood and
changes to the current accounting procedures are highlighted and acted upon in advance of the effective date.
Basis of consolidation
The Group financial statements include the financial statements of the Company and all the subsidiaries drawn up to 31 December each year
during the years reported for the periods during which they were members of the Group. On acquisition, assets and liabilities of subsidiaries
are measured at their fair values at the date of acquisition with any excess of the cost of acquisition over this value being capitalised as goodwill.
Revenue — Consulting
Fixed price service contracts
Revenue on fixed price service contracts is recognised using the percentage of completion method. Under this method revenues recorded
represent the aggregate of costs incurred during the year and a portion of estimated profit on individual contracts based on the relationship
of costs incurred to total estimated costs for each contract. Revisions in estimates are reflected in the accounting period when the revision
becomes known. Anticipated losses on contracts are charged to income in their entirety when the losses become evident.
Time and material contracts
Revenue for time and materials contracts is recognised as services are performed, generally on the basis of contract allowable labour hours
worked multiplied by the contract defined billing rates, plus allowable direct costs and expenses incurred in connection with the performance
of the contract.
Amounts received in excess of revenue recognised are shown as deferred revenue.
Contract work in progress is included in trade and other receivables and represents revenue recognised in excess of payments on account. Revenue — Technology
Software licences
Revenue from licence sales is recognised once the software has been delivered and when no significant contractual obligations remain.
Revenue from ongoing maintenance, support and upgrades is recognised over the contractually agreed period.
Service consulting and software maintenance
Revenue from service consulting and software maintenance is recognised over the period in which services are provided.
Royalties
Revenue from royalty contracts held with resellers is recognised when it becomes receivable from the resellers.
KBC Advanced Technologies plc Annual report 2014
35
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
1. Accounting policies continued
Revenue — Technology continued
Bonuses and penalties
Where some or all of a contract’s revenues are dependent on the impact of KBC’s performance (e.g. in identifying benefits of changes in a client’s
operations), that element of revenue is only recognised once the contract is sufficiently advanced that it is probable that the performance target
will be met and the bonus can be measured reliably. Penalties on contracts are provided for at the Directors’ best estimate of the expenditure
required to settle the Group’s liability.
Direct costs and operating charges
Direct costs include costs of subcontractors. Operating charges include administrative overheads.
Research and development
Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured and technical feasibility and commercial viability can be demonstrated. Where these
criteria are not met the expenditure is expensed to the income statement.
Following the initial recognition of development expenditure the cost model is applied requiring the asset to be carried at cost less any accumulated
amortisation and accumulated impairment losses. Any expenditure carried forward is amortised over the period of expected future sales from
the related project. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more
frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less
any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
Impairment of assets
The Group assesses at each reporting date whether there is an indication that goodwill, intangibles or property, plant and equipment may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in
use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of
continuing operations are recognised in the income statement in those expense categories consistent with the nature of the impaired asset.
Foreign currencies
Transactions in foreign currencies are recorded in the functional currency at the rate ruling at the date of the transaction. All monetary assets
and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Retranslation
differences are recognised in the income statement.
All goodwill arising is denominated in the functional currency of the foreign operation on which it arose.
Profits, losses and cash flows of overseas branches and subsidiary undertakings are translated at the average rate of exchange ruling during
the period as it is a reasonable approximation of the actual transaction rate. The balance sheets of overseas branches and subsidiaries are
translated at the rate of exchange ruling at the balance sheet date.
The exchange differences arising on the retranslation of opening net assets and of results for the year are taken directly to reserves until the
disposal of the net investments, at which time they are recognised in the income statement. The cumulative translation differences for foreign
subsidiaries were deemed to be zero at the transition date for the adoption of IFRSs.
Financial instruments
Financial assets and financial liabilities, in respect of financial instruments, are recognised on the Group balance sheet when the Group
becomes a party to the contractual provisions of the instrument.
Financial instruments are initially recorded at fair value. Subsequent valuation depends on the designation of the instrument.
Non-derivative financial instruments
The Group’s non-derivative financial instruments comprise trade receivables, trade payables, financial liabilities, cash and cash equivalents.
Cash and cash equivalents comprise cash balances and deposits with maturities of three months or less at inception.
Trade receivables and payables and financial liabilities are measured initially at fair value, and subsequently at amortised cost. Trade receivables
are stated net of allowances for irrecoverable amounts.
36
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
1. Accounting policies continued
Financial instruments continued
Non-derivative financial instruments continued
Trade receivables, which generally have 30–90 day terms, are recognised and carried at the lower of their original invoiced value and recoverable
amount. Provision for potential bad debts is made when there is objective evidence that the Group will not be able to recover balances in full.
The main factors used in assessing such impairment of trade receivables are the age of the balance and the circumstances of the individual customer.
When the probability of recovery of a debtor balance is assessed as being remote, it is written off, together with any associated provision.
The fair values of non-derivative financial instruments are approximately equal to their book values.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three
months or less.
For the purpose of the Group cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
Retirement benefit costs
The Group operates contributory pension schemes covering the majority of its permanent employees. The schemes’ funds are administered
by trustees and are independent of the Group’s finances. The schemes are defined contribution schemes and there are no commitments other
than the regular contributions which are charged against the income statement in the year in which they become payable.
Provisions
The Group has recognised a provision for liabilities of uncertain timing or amount for onerous leases. The provision is measured at the best
estimate of the expected future rentals payable less expected future rentals receivable. The amount is discounted at a pre-tax rate which
reflects the current market assessments of the time value of money and risks specific to the liability.
Share-based payments
The Group operates a number of executive and employee share schemes. The cost of equity-settled transactions with employees is measured
by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the
date on which the relevant employee becomes fully entitled to the award. The cumulative expense recognised at each reporting date reflects
the extent to which the vesting period has elapsed and the number of awards that, in the opinion of the Directors of the Group at that date, will
vest and for which the market and/or non-market conditions will be met. At each balance sheet date before vesting, the cumulative expense
is calculated and the movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with
a corresponding entry in equity. No expense is recognised for awards that do not ultimately vest.
Leasing commitments – lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and are
charged to the income statement on a straight-line basis over the lease term.
Leasing commitments – lessor
Where the Group has sublet part of its premises, income is taken to the income statement on a straight-line basis over the sublease term.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment loss. Amortisation is provided on all
intangibles at rates calculated to write off the cost of each asset over its expected useful life for a period of up to six years.
Externally acquired intangible assets, acquired through business combinations, comprise intellectual property and other intangibles, which
include purchased patents, know-how, trademarks, licences and distribution rights. These are capitalised at fair value and amortised on
a straight-line basis over their estimated useful economic lives.
Contract intangibles are capitalised at cost and amortised with respect to the percentage complete of the contracts that they relate to.
Internally generated intangible assets comprise development costs.
Current estimates of useful economic life of intangible assets are as follows:
GoodwillIndefinite
Intellectual property
Five to six years
Development costs (internally generated)
One to five years
Contract intangibles
Life of contract to which they relate
Other intangibles
Five years
KBC Advanced Technologies plc Annual report 2014
37
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
1. Accounting policies continued
Current and deferred tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax
rates and laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:
»» w
here the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
»» in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future and taxable profit
will be available against which the temporary differences can be utilised; and
»» d
eferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related
asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax
is recognised in the income statement.
Property, plant and equipment
Property, plant and equipment assets are stated at cost less accumulated depreciation. Such cost includes costs directly attributable to making
the asset capable of operating as intended.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value, of each
asset over its expected useful life as follows:
Leasehold improvements
The lease term or useful life if shorter
Furniture, fixtures and fittings
Five years
Office equipment
Five years
Computer hardware
Three years
Useful lives and residual values are assessed annually.
2. Critical accounting judgements and estimates
The preparation of the financial statements requires the use of estimates and judgements that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. These estimates are
based on management’s best knowledge of the amount, events or actions and actual results may ultimately differ from those estimates.
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
are addressed below.
a) Impairment of goodwill
The Group carries out an annual impairment review or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. An impairment loss is recognised when the recoverable amount of goodwill is less than the carrying amount. The impairment
tests reflect the latest financial budgets, which are based on various assumptions relating to the Group’s businesses including resource
utilisation, foreign exchange rates, contract awards and contract margins.
There is an inherent risk in estimating financial budgets; however, the Board believes this has been performed on a fair basis.
b) Revenue recognition
Revenue on fixed price service contracts is recognised using the percentage-of-completion method by measuring the proportion of costs
incurred for work performed to total estimated costs.
These estimated costs are updated during the term of the contract and may result in revision by the Group of recognised revenue and estimated
costs in the period in which they are identified. Profits on fixed price service contracts result from the difference between incurred costs and
revenue earned.
Contract accounting requires significant judgement relative to assessing risks, estimating contract revenue and costs, and making assumptions
for scheduling and technical issues. Due to the size and nature of many of the Group’s contracts, developing total revenue and cost at completion
estimates requires the use of significant judgement.
In estimating the expected contract revenue and costs, historical performance gained from other such contracts and experience is used, which
carries a risk that the judgements applied may not reflect the future outturn of the project.
38
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
2. Critical accounting judgements and estimates continued
c) Development costs
Development expenditure is capitalised when the Group considers its future recoverability can reasonably be regarded as assured and technical
feasibility and commercial viability can be demonstrated. Any expenditure carried forward is amortised over the period of expected future sales
from the related project. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more
frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. The technical
and market uncertainties inherent in the development of new products mean that internal development costs will not be capitalised as intangible
fixed assets until commercial viability of a project is demonstrable and there is probable economic benefit.
3. Revenue
Revenue arises from:
2014
£000
2013
£000
Fixed price service contracts
46,587
39,802
Time and material contracts
8,386
7,427
54,973
47,229
10,950
7,140
Consulting
Technology
Software licences
Software maintenance
7,627
6,620
Service consulting
1,019
2,863
Royalties
Total revenue
1,385
1,228
20,981
17,851
75,954
65,080
4. Segmental analysis
With regard to the balance sheet, those elements of the balance sheet where segmental reporting is prepared have been disclosed.
Those elements are trade receivables and provisions, amounts recoverable on contracts and deferred revenue.
At the balance sheet date 39% of total trade receivables were concentrated with one of the Group’s customers (2013: 7%). The balance
was spread over 123 (2013: 172) customers, none of whom comprised more than 5% (2013: 5%) of the total. An analysis of ageing of trade
receivables and provisions is given in note 16.
Consulting
£000
Technology
£000
Unallocated
£000
Total
£000
54,973
20,981
—
75,954
Operating profit
2,117
5,046
—
7,163
Finance revenue
—
—
86
86
Finance cost
—
—
(578)
(578)
2,117
5,046
(492)
6,671
—
—
(2,592)
(2,592)
2,117
5,046
(3,084)
4,079
Consulting
£000
Technology
£000
10,410
4,635
(3)
15,042
(273)
(270)
—
(543)
Net carrying amount
10,137
4,365
Amounts recoverable on contracts
13,659
802
Year ended 31 December 2014
Revenue from external customers
Profit/(loss) before tax
Tax expense
Profit/(loss) for the year
As at 31 December 2014
Trade receivables
Provisions
Deferred revenue
Unallocated
£000
Total
£000
(3)
14,499
12,377
—
26,036
4,471
—
5,273
KBC Advanced Technologies plc Annual report 2014
39
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
4. Segmental analysis continued
Year ended 31 December 2013
Revenue from external customers
Consulting
£000
Technology
£000
Unallocated
£000
Total
£000
47,229
17,851
—
65,080
Operating profit
1,251
6,138
—
7,389
Finance revenue
—
—
208
208
Finance cost
—
—
(476)
(476)
1,251
6,138
(268)
7,121
—
—
(1,584)
(1,584)
1,251
6,138
(1,852)
5,537
Consulting
£000
Technology
£000
5,863
3,918
Profit/(loss) before tax
Tax expense
Profit/(loss) for the year
As at 31 December 2013
Trade receivables
Total
£000
Unallocated
£000
(48)
9,733
(647)
(249)
(13)
(909)
5,216
3,669
(61)
8,824
Amounts recoverable on contracts
5,928
6,306
—
12,234
Deferred revenue
2,305
3,238
—
5,543
Provisions
Net carrying amount
Geographical segments
Revenue from
external customers
Non-current assets
2014
£000
2013
£000
2014
£000
2013
£000
25,195
18,858
6
—
United States of America
8,059
7,084
7,109
6,232
Thailand
3,738
2,196
—
—
Canada
3,196
4,597
13
11
Russia
2,862
1,726
—
—
Mexico
2,553
2,722
—
—
Japan
2,158
5,909
9
6
United Kingdom
2,062
1,613
27,515
16,732
26,131
20,375
111
81
75,954
65,080
34,763
23,062
Ecuador
Other
Revenues above are based on the location of the customer and non-current assets on the location of the assets. The countries listed represent
those where the total revenue or assets are greater than 4% of the Group total.
The following customer accounts for more than 10% of the Group’s revenue:
Revenue
Customer 1
The revenue generated from the major customer is derived from both Consulting and Technology.
40
KBC Advanced Technologies plc
Annual report 2014
Percentage
2014
£000
2013
£000
2014
%
2013
%
25,195
18,858
33%
29%
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
5. Group operating profit
This is stated after charging/(crediting) the following:
2014
£000
2013
£000
523
533
– intellectual property rights
1,527
1,042
– development costs carried forward
1,299
1,078
– contract-based intangibles
1,805
1,379
Depreciation and amortisation:
Depreciation
Amortisation of intangible assets:
– other intangibles
Total
537
382
5,691
4,414
2,335
2,597
Included in other operating charges:
Operating lease rentals:
– minimum lease payments
– sublease rentals received
Arbitration costs recoverable
Share-based payments
Net foreign exchange differences
(151)
(298)
—
(521)
700
530
70
77
a) Research and development costs
During 2014 the Group incurred research and development costs of £3.7m (2013: £2.7m). Of this amount, £1.6m (2013: £1.3m) related to
development expenditure for Petro-SIM and has been carried forward as an intangible asset to be amortised against expected future sales.
The balance was charged directly to staff and associate costs and direct costs in the income statement.
b) Adjusted profit before tax
2014
£000
2013
£000
Operating profit
7,163
7,389
Amortisation of acquisition intangibles
2,064
1,424
Development costs carried forward
(1,552)
(1,334)
Amortisation of development costs carried forward
1,299
1,078
Exceptional amounts recoverable on contracts provision
—
136
Arbitration costs recoverable
—
(521)
Acquisition costs
352
—
Redundancy and reorganisation income
(38)
(28)
Share-based payments
700
530
9,988
8,674
86
208
Adjusted operating profit
Finance revenue
Finance cost
Adjusted profit before tax
Tax expense
Adjusted profit after tax
(578)
(476)
9,496
8,406
(2,888)
(2,876)
6,608
5,530
KBC Advanced Technologies plc Annual report 2014
41
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
6. Finance revenue/costs
Bank interest receivable
Bank interest payable
7. Auditors’ remuneration
Current auditors
Fees payable to the Group’s auditors for the audit of the Group financial statements
2014
£000
2013
£000
86
208
578
476
2014
£000
2013
£000
15
15
Fees payable to the Group’s auditors and their associates for other services:
Audit of the accounts of the subsidiaries
91
136
– tax compliance services
142
202
– tax advisory services
142
122
– other assurance services
120
101
510
576
2014
£000
2013
£000
26,373
24,114
8. Staff and associate costs
Staff costs (including Directors) comprise:
– wages and salaries
– defined contribution pension cost
1,782
1,667
– medical insurance costs
2,439
1,992
– share-based payments
– social security contributions and similar taxes
Associate costs
700
530
2,065
1,906
33,359
30,209
2,496
2,174
35,855
32,383
2014
Number
2013
Number
Average monthly number of persons employed including Directors:
– management
– technical and sales
– administration
42
KBC Advanced Technologies plc
Annual report 2014
6
7
277
251
49
47
332
305
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
8. Staff and associate costs continued
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group and comprise the Directors of the Company and the members of the Operating Board, as described on page 20.
2014
£000
2013
£000
Salary
954
893
Bonus
—
134
Compensation for loss of office
Other long-term benefits
Fees
101
—
61
13
239
206
Total pension cost
38
38
Social security contributions and similar taxes
52
69
Share-based payment expense
Number of key management personnel in defined contribution pension schemes
220
273
1,665
1,626
2014
Number
2013
Number
3
3
During the year a charge of £57,000 (2013: £239,000) was made in respect of consultancy services provided to the Group by Godden
Associates Limited. There was no amount payable to Godden Associates Limited, of which Ian Godden is a director, at 31 December 2014
(2013: £23,000).
Full details of Directors’ emoluments are given in the Remuneration Committee report on page 25.
9. Tax expense
a) Tax on profit charged in the income statement
2014
£000
2013
£000
Income tax of UK and overseas operations
2,534
2,485
Withholding taxes payable
1,558
975
Current tax expense
Withholding taxes recoverable
(634)
(603)
Adjustment for over provision in prior periods
(408)
(778)
3,050
2,079
Deferred tax expense
Deferred tax credit for the current period
(438)
Adjustment for (over)/under provision in prior periods
Total tax expense
(745)
(20)
250
(458)
(495)
2,592
1,584
Of the total tax expense, £0.2m (2013: £0.8m) relates to UK tax and £2.4m (2013: £0.8m) relates to foreign taxes.
KBC Advanced Technologies plc Annual report 2014
43
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
9. Tax expense continued
b) Reconciliation of the total tax expense
The tax assessed on the profit for the year is higher (2013: lower) than the standard rate of corporation tax in the UK of 21.49% (2013: 23.25%).
The differences are reconciled below:
2014
£000
2013
£000
Accounting profit before tax
6,671
7,121
Taxation at UK statutory income tax rate of 21.49% (2013: 23.25%)
1,434
1,656
Expenses not deductible for tax purposes
220
361
Income not taxable for tax purposes
(72)
(23)
30
(201)
563
Change in statutory tax rate
Unrelieved tax losses carried forward against profits of future years
428
Tax losses brought forward set against current profits
(95)
Difference in tax rates on overseas earnings
786
172
Irrecoverable withholding taxes
924
372
Foreign tax costs deductible for tax purposes
(126)
(67)
Tax overprovided in prior periods
(428)
(528)
Other
(509)
(721)
Tax on profit
—
2,592
1,584
2014
£000
2013
£000
c) Deferred tax
The movement on the deferred tax account is shown below:
At 1 January
(1,029)
(1,507)
Acquisition during the year
(1,524)
—
Income statement credit
Exchange differences
At 31 December
458
495
15
(17)
(2,080)
(1,029)
Deferred tax assets have been recognised in respect of all such tax losses and other temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered.
Recognised deferred tax assets/(liabilities)
Assets
£000
Liabilities
£000
Total
£000
At 31 December 2014
Depreciation in advance of capital allowances
Other temporary differences
10
(2,668)
776
(198)
786
(2,866)
Assets
£000
Liabilities
£000
(2,658)
578
(2,080)
Total
£000
At 31 December 2013
Depreciation in advance of capital allowances
Other temporary differences
44
KBC Advanced Technologies plc
Annual report 2014
(232)
(1,284)
(1,516)
679
(192)
487
447
(1,476)
(1,029)
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
9. Tax expense continued
Recognised deferred tax assets/(liabilities) continued
2014
£000
2013
£000
2,459
2,411
Unrecognised deferred tax assets:
– unrelieved tax losses carried forward against profits of future years
Of the unused tax losses, £11.7m (2013: £11.4m) can be carried forward indefinitely.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries as the Group is in a position to control the timing of the
reversal of temporary differences and it is probable that such differences will not reverse in the foreseeable future. The temporary differences
associated with the investments in subsidiaries for which a deferred tax liability has not been recognised aggregate to £21.0m (2013: £15.4m).
If the earnings were remitted, tax of £0.2m (2013: £0.1m) would be payable.
There are no income tax consequences attaching to the payment of dividends by the Group to its shareholders.
d) Tax on other comprehensive income
The amount included in the foreign exchange reserve represents other comprehensive profit of £1.6m (2013: £0.9m loss) less tax of £nil (2013: £nil).
10. Earnings per share
Basic earnings per share are calculated by dividing after tax net profit for the year attributable to ordinary shareholders of the parent company
by the weighted average number of ordinary shares in issue during the year.
2014
£000
2013
£000
4,079
5,537
—
—
4,079
5,537
Number
000s
Number
000s
Weighted average number of ordinary shares used in basic EPS
71,150
58,442
Number of shares used for basic and adjusted earnings per share
71,150
58,442
Numerator – earnings
Earnings for the purpose of basic EPS
Effect of dilutive potential ordinary shares
Earnings for the purpose of diluted EPS
Denominator – number of shares
Effect of dilutive potential ordinary shares
2,559
1,532
73,709
59,974
Pence
Pence
Basic earnings per share
5.7p
9.5p
Diluted earnings per share
5.5p
9.2p
Basic adjusted earnings per share
9.3p
9.5p
Diluted adjusted earnings per share
9.0p
9.2p
Weighted average number of ordinary shares for the purposes of diluted EPS
Basic adjusted earnings per share are based upon an after tax profit as shown in note 5b.
The LTIP 2006, DSOP 2013 and USOP as detailed in the Remuneration Committee report on page 23 refer to performance criteria related
to EPS growth. The basic earnings per share for adjusted profit as defined above are used for this purpose.
KBC Advanced Technologies plc Annual report 2014
45
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
10. Earnings per share continued
The dilution referred to above is shown below:
Total share options outstanding
Share options excluded (see below)
2014
Number
000s
2013
Number
000s
3,445
3,066
(885)
Potentially exercisable share options
2,560
Fair value shares
(1)
Dilution
2,559
(1,534)
1,532
—
1,532
Share options excluded are those where the exercise price is greater than the share price at 31 December 2014, those with performance
conditions that have not yet been met and those to be settled by the employee trusts.
11. Dividends
2014
£000
2013
£000
802
—
820
592
Leasehold
improvements
£000
Fixtures,
fittings
and office
equipment
£000
Computer
hardware
£000
Total
£000
1,439
800
1,940
4,179
Final dividend of 1.0p (2013: nil p) per ordinary share proposed and paid during the period relating to the previous period’s results
Proposed:
Equity dividend proposed per share for 2014 – 1.1p per share (2013: 1.0p)
12. Property, plant and equipment
Cost:
At 1 January 2013
Additions
30
41
124
195
Disposals
—
(60)
(282)
(342)
Foreign exchange rate movements
At 31 December 2013
(1)
(16)
(7)
(24)
1,468
765
1,775
4,008
6
41
622
669
Acquired through business combinations
—
13
55
68
Disposals
—
(7)
(163)
(170)
Additions
(1)
18
57
74
1,473
830
2,346
4,649
At 1 January 2013
962
685
1,332
2,979
Depreciation charge for the year
107
92
334
533
—
(56)
(280)
(336)
1
(16)
(4)
(19)
1,070
705
1,382
3,157
111
36
376
523
Foreign exchange rate movements
At 31 December 2014
Accumulated depreciation:
Disposals
Foreign exchange rate movements
At 31 December 2013
Depreciation charge for the year
Acquired through business combinations
—
7
43
50
Disposals
—
(7)
(162)
(169)
—
17
45
62
1,181
758
1,684
3,623
Net book value at 31 December 2014
292
72
662
1,026
Net book value at 31 December 2013
398
60
393
851
Net book value at 1 January 2013
477
115
608
1,200
Foreign exchange rate movements
At 31 December 2014
46
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
13. Intangible assets
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Goodwill
£000
Intellectual
property
£000
Development
costs
£000
Contract
intangibles
£000
Other
intangibles
£000
Total
£000
10,263
8,747
5,036
4,614
2,655
31,315
Cost:
At 1 January 2013
Additions
Foreign exchange rate movements
At 31 December 2013
Additions
Acquired through business combinations
—
—
1,334
—
—
1,334
(63)
—
—
(30)
(16)
(109)
10,200
8,747
6,370
4,584
2,639
32,540
—
—
1,552
2,173
—
3,725
4,994
5,411
—
—
2,210
12,615
207
—
—
147
54
408
15,401
14,158
7,922
6,904
4,903
49,288
At 1 January 2013
—
2,522
2,465
438
1,039
6,464
Amortisation charge for the year
—
1,042
1,078
1,379
382
3,881
Foreign exchange rate movements
—
—
—
—
(16)
(16)
At 31 December 2013
—
3,564
3,543
1,817
1,405
10,329
Amortisation charge for the year
—
1,527
1,299
1,805
537
5,168
Foreign exchange rate movements
—
—
—
—
54
54
Foreign exchange rate movements
At 31 December 2014
Accumulated amortisation:
—
5,091
4,842
3,622
1,996
15,551
Net book value at 31 December 2014
15,401
9,067
3,080
3,282
2,907
33,737
Net book value at 31 December 2013
10,200
5,183
2,827
2,767
1,234
22,211
Net book value at 1 January 2013
10,263
6,225
2,571
4,176
1,616
24,851
At 31 December 2014
The remaining useful life of the unamortised intellectual property is five years (2013: five years).
14. Goodwill and impairment
The acquired goodwill arose from two acquisitions made in 2002, Linnhoff March and Petroleum Economics, two acquisitions made in 2007,
TTS Performance Systems and Veritech, 2013’s acquisition of Infochem and the acquisition of FEESA made in 2014. Each acquisition is considered
by management to have the same risks associated with them as they undertake related activities for similar clients in the industry. The net carrying
amount of the goodwill can be analysed between the acquisitions as follows:
2014
£000
2013
£000
Linnhoff March
—
2,450
Petroleum Economics
—
1,502
TTS Performance Systems
—
2,624
Veritech
—
710
Infochem
—
2,914
Consulting
8,229
—
Technology
7,172
—
15,401
10,200
Total
During the year the Group, following a process of fully integrating previous acquisitions over a number of years, undertook an analysis
of its operations. It was concluded that it is now appropriate to consider the Group’s operations as two cash-generating units (“CGUs”) which
correspond to the operating segments identified in note 4. Following the acquisition of FEESA in July 2014, the Group immediately embarked
on integrating its operations such that by the year end the operations were no longer distinct from the rest of the Group’s other operations.
This resulted in the allocation of £1,248,000 of the goodwill to the Consulting CGU and £3,746,000 to the Technology CGU.
KBC Advanced Technologies plc Annual report 2014
47
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
14. Goodwill and impairment continued
The Group tests annually for impairment of goodwill or more frequently if there are indications that it might be impaired. The net carrying
amount was measured against the recoverable amount, determined with reference to value in use expected to be generated by the Group.
To estimate this, the Group prepares cash flow forecasts based upon the most recent financial results and budgets approved by management.
For goodwill impairment test purposes a conservative assumption is applied to these cash flow forecasts which limit the future revenue and
contribution growth to only 5% for both CGUs for the next five years. It is prudently assumed that the terminal growth rate is 2.5% for both
the CGU’s. Financial budgets are based on historical performance of the Group. The Group has used 14% as its post tax discount rate when
assessing acquisition opportunities and has therefore used this rate as the core calculation with sensitivities at lower and higher rates, consistent
with the prior year. Alternative discount rates were considered and did not have a material impact on the value. The resulting value in use was
higher than the net carrying value and therefore the conclusion was reached that no impairment has taken place. The same assumptions
described above were used for each identified CGU in the prior year.
15. Subsidiaries
The principal subsidiaries of KBC Advanced Technologies plc, all of which have been included in these consolidated financial statements,
are as follows:
Proportion of ownership
interest at
31 December
Name of subsidiary
Country of incorporation
2014
2013
KBC Process Technology Limited
England
100%
100%
KBC Advanced Technologies, Inc.
USA
100%
100%
KBC Advanced Technology Pte Limited
Singapore
100%
100%
KBC Advanced Technologies Canada Limited
Canada
100%
100%
KBC Advanced Technologies (Beijing) Limited
China
100%
100%
Infochem Computer Services Limited
England
100%
100%
KBC Advanced Technologies Private Limited
India
100%
100%
KBC Advanced Technologies Sdn Bhd
Malaysia
100%
100%
KBC Advanced Technologies SL
Spain
100%
100%
KBC Process Technology (Middle East) Limited
England
100%
100%
KBC Advanced Technologies Pty Limited
Australia
100%
—
FEESA Limited
England
100%
—
KBC Advanced Technologies (Thailand) Limited
Thailand
100%
—
KBC Advanced Technologies plc is the ultimate parent of the Group.
On 16 January 2013 the non-controlling interest of 25% in KBC Environmental Limited was acquired at a cost of £137,000.
48
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
16. Trade and other receivables
2014
£000
2013
£000
12,147
7,052
Trade receivables:
– not yet due
– past due, zero to six months
2,415
1,617
– past due, beyond six months
480
1,064
15,042
9,733
– provision for impairment of trade receivables (see below)
(543)
(909)
14,499
8,824
1,690
1,234
87
886
26,036
12,234
42,312
23,178
2014
£000
2013
£000
At 1 January
909
2,138
Provided during the year
202
162
– net carrying amount
Prepayments
Other receivables
Amounts recoverable on contracts
Movements on the Group provision for impairment of trade receivables were as follows:
Receivables written off during the year as uncollectible
(568)
At 31 December
17. Cash and cash equivalents
Note
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents per the balance sheet
Overdrafts
20
Revolving credit facility
20
Cash and cash equivalents per the cash flow statement
(1,391)
543
909
2014
£000
2013
£000
9,729
11,912
2,154
48
11,883
11,960
(29)
(860)
—
(2,000)
11,023
9,931
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between
one day and three months depending upon the cash requirements of the Group and earn interest at the prevailing short-term deposit rates.
Included in short-term deposits are cash deposits securing performance guarantees (see note 28).
At 31 December 2014 the Group had undrawn committed facilities of £6,708,000 (2013: £7,081,000) which expire in July 2015.
2014
£000
2013
£000
Movement in working capital:
– trade and other receivables
– trade and other payables
– exchange differences
(19,233)
(4,285)
2,370
(7,960)
647
(439)
(16,216)
KBC Advanced Technologies plc Annual report 2014
(12,684)
49
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
18. Provisions
2014
£000
2013
£000
327
330
28
—
Onerous lease provision
At 1 January
Charge/(credit) to income statement:
– unwinding of discount
131
79
(279)
(82)
At 31 December
207
327
Due within one year or less
154
258
53
69
207
327
– provided during the year
– utilisation of provision
Due after more than one year
As a result of office rationalisation during 2013 a provision for future lease obligations was made based on the Directors’ best estimate
of unavoidable costs associated with exit from the office space concerned. The lease to which this relates ends on 28 September 2018.
19. Trade and other payables
Trade payables
Other taxes and social security
2014
£000
2013
£000
2,955
2,265
139
192
Other payables and accruals
9,172
4,201
Deferred revenue
5,273
5,543
17,539
12,201
Trade payables are generally non-interest bearing and are normally settled within a 35-day period. Other taxes and social security costs payable
are non-interest bearing and are remitted to the appropriate taxation authorities on a monthly or quarterly basis.
20. Loans and borrowings
Book value
2014
£000
Book value
2013
£000
Fair value
2014
£000
Fair value
2013
£000
—
600
—
600
860
29
860
29
Non-current
Bank loan – secured
Current
Overdrafts
Revolving credit facility
—
2,000
—
2,000
Bank loan – secured
—
2,400
—
2,400
860
4,429
860
4,429
The bank loan and revolving credit facility were fully repaid during the year.
The rate at which interest was payable on the bank loan is 1.75% above LIBOR.
The rate at which interest is payable on the overdrafts is 2.275% above LIBOR.
The Group’s bankers hold a cross-guarantee and debenture over all assets of KBC Advanced Technologies plc, KBC Process Technology Limited,
KBC Environmental Limited, Infochem Computer Services Limited, KBC Advanced Technologies SL, KBC Advanced Technologies Inc,
KBC Advanced Technology Pte Ltd, KBC Advanced Technologies Canada Ltd and KBC Advanced Technologies Sdn Bhd.
50
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
21. Obligations under leases
The Group has entered into commercial leases on properties and items of office equipment.
Land and
buildings
2013
£000
Other
2013
£000
34
1,927
129
10
5,257
22
—
—
151
—
5,747
44
7,335
151
Land and
buildings
2014
£000
Other
2014
£000
– within one year
1,866
– within two to five years inclusive
3,881
Future minimum rentals payable under non-cancellable operating leases:
– after five years
Certain Group companies have sublet office space within properties. The future minimum sublease payments expected to be received under
non-cancellable sublease agreements as at 31 December 2014 total £1,938,000 (2013: £1,354,000).
The maturity of future minimum sublease payments expected is set out below:
Within one year
Within two to five years inclusive
After five years
2014
£000
2013
£000
388
181
1,550
978
—
195
1,938
1,354
22. Acquisitions during the period
On 21 July 2014 the Group acquired 100% of the voting equity instruments of FEESA, a group which is a supplier of oil and gas sector
software and is incorporated in England and Wales. FEESA also owned a subsidiary incorporated in Australia.
Following the acquisition of FEESA in July 2014, the Group immediately embarked on integrating its operations such that by the year end the
operations were no longer distinct from the rest of the Group’s other operations. The contribution to revenue and operating profit during the
period to 31 December 2014 was £1,264,000 and £305,000 respectively. Had the Group acquired FEESA on 1 January 2014, Group revenue
for the year ended 31 December 2014 would have been £76,673,000 and Group operating profit would have been £6,687,000.
In 2014 the Group incurred £352,000 of acquisition related costs, which were expensed in the Group income statement.
The Directors have allocated fair values to the net assets of the acquisition. Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:
Property, plant and equipment
Book value
£000
Adjustment
£000
Fair value
£000
18
—
18
Other intangibles – intellectual property
—
5,411
5,411
Other intangibles – NPV of customer relationships
—
2,210
2,210
Other intangibles – goodwill on acquisition
Receivables
Cash
Payables
Deferred tax liability
9
—
9
670
—
670
1,397
—
1,397
(673)
—
(673)
—
(1,524)
(1,524)
1,421
6,097
7,518
Consideration paid
11,282
Cash consideration
1,230
Shares issued
12,512
4,994
Goodwill
The main factors leading to the recognition of goodwill are the future synergistic benefits from the integration of acquired software models
with current KBC software models.
KBC Advanced Technologies plc Annual report 2014
51
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
23. Financial instruments – risk management
The Group’s principal financial instruments are trade receivables, trade payables, bank loans, cash and cash equivalents. The main purpose
of these financial instruments is to finance the Group’s ongoing operational requirements.
The Directors are responsible for considering all areas of risk that may affect the operations of the Group and for setting policies designed
to minimise the impact the financial risk may have on the business.
The major financial risks faced by the Group are interest rate risk and foreign currency risk. The Group does not consider that it has any significant
credit risk with most of its customers due to their profile. However the current economic environment is giving reason to carry out more regular
reviews of the financial strength of some of our customers and the imposition of tighter payment terms where appropriate.
Further discussion of financial risk management is given on page 14.
Policies for the management of these risks are shown below.
a) Interest rate risk
The Group has low interest rate risk from long-term borrowing at variable rate. At the year end, the Group was financed through 1% debt
to 99% equity thus minimising the Group’s exposure to interest rate risk.
Cash balances in excess of immediate needs are placed on short-term deposit in the money markets or managed by a third-party fund
manager. Externally managed funds are invested in deposits with, or certificates of deposit issued by, approved banks or building societies.
The Group’s present policy is to place not more than £1.0m for maturity in excess of three months.
The use of the Group’s facilities is kept to a minimum (note 17) and repayments are made as soon as is practically possible. Interest charged
on use of facilities is based on bank base rates and is negotiated annually.
The effect of a 10% movement in the interest rate compared to 2013 would impact finance charges in the income statement by £34,000
(2013: £39,000) should the profile of use of facilities be similar to 2014.
Within
one year
£000
Total
£000
11,883
11,883
11,960
11,960
Interest rate risk
At 31 December 2014
Floating rate:
– cash and bank
At 31 December 2013
Floating rate:
– cash and bank
b) Liquidity risk
Customer payment terms vary from contract to contract and can involve extended periods of time before invoices are raised. The liquidity risk
is managed through use of the overdraft facilities described in note 17.
Regular cash flow forecasts are prepared for the Board and the Executive Committee which, together with information on cash balances, allow
the Group to ensure that it will have sufficient cash to meet its liabilities when they become due and thus mitigate liquidity risk.
The treasury function for the Group is managed centrally.
The maturity of trade and other payables is set out below:
2014
£000
2013
£000
17,539
12,201
Current
In six months or less
52
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
23. Financial instruments – risk management continued
c) Foreign currency risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency.
The majority of transactions continue to be in US dollars, sterling and euro. The Group’s policy, where possible, is to sign contracts that are
denominated in their functional currency (primarily US dollars or sterling) and to match the currency to which expenses have been incurred.
The Group has a number of overseas subsidiaries and branches whose revenues and costs are denominated in currencies other than sterling,
the most significant of which are in the USA.
The effect of movements in the major currencies in which the Group’s operations are carried out and that are different to the operating unit’s
functional currency based on balances at the balance sheet date is as follows:
Currency
Movement
Trade
receivables
2014
£000
Trade
payables
2014
£000
Trade
receivables
2013
£000
Trade
payables
2013
£000
US dollar
10c
290
(7)
253
5
Euro
10c
94
38
122
10
Within trade and other receivables is £2,942,000 denominated in US dollars (2013: £4,448,000), £1,243,000 denominated in euro
(2013: £1,590,000), £102,000 denominated in Qatari riyals (2013: £nil), £34,000 denominated in UAE dirham (2013: £34,000), £7,000
denominated in Japanese yen (2013: £30,000), £nil denominated in Australian dollars (2013: £326,000) and £nil denominated in UK sterling
(2013: £9,000) that are not in the functional currency of the operating unit involved.
d) Credit risk
The Group’s principal financial assets are trade receivables, bank balances and cash. The main credit risk faced is attributable to the trade
receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables which are made where there are
circumstances which, based on experience, are evidence of a likely reduction in the recoverability of the receivable.
As the majority of the Group’s customers are state-owned or very large oil companies, the risk of non-payment tends to be less of the
traditional credit nature and more related to customer satisfaction. The minority of customers who are not state-owned or very large oil
companies are generally non-asset owners and potential investors. For this minority of customers the credit risk is assessed using
a number of methods and payment terms are tightened as appropriate.
The Group does not prepare any formal analysis of the credit rating of its customers.
e) Capital
The Group considers its capital to comprise its ordinary share capital, share premium and accumulated retained earnings. Changes to equity
during the year are detailed in the Group statement of changes in equity on page 32.
The Group’s objective when managing capital is to ensure that funds are raised in an appropriate, cost-effective manner. The Group’s primary
concern is to maintain its ability to continue as a going concern in order to provide returns for shareholders and stakeholders in the Company.
It is the Board’s intention to pay dividends in the future commensurate with the Group’s overall profitability thereby reducing dividend cover.
24. Share capital
2014
Number
2013
Number
2014
£000
2013
£000
At 1 January
59,155,380
58,826,414
1,479
1,470
– issued for cash
20,869,565
—
522
—
1,000,000
—
25
—
726,608
328,966
18
9
81,751,553
59,155,380
2,044
1,479
Issued and fully paid
Ordinary shares of 2.5p each:
– issued as consideration
– issued on exercise of share options
At 31 December
As at 31 December 2014, the Company held 214,000 treasury shares (2013: nil).
KBC Advanced Technologies plc Annual report 2014
53
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
25. Share-based payments
The Group currently has three share schemes that give rise to share-based charges. These are the LTIP 2006, the DSOP 2013 and the USOP.
Further details of these schemes are provided in the Remuneration Committee report on page 23.
The expense recognised for equity-settled share-based payments in respect of employee services received during the year ended
31 December 2014 is £700,000 (2013: £530,000).
The assumptions made in arriving at the charge for each scheme are detailed below.
LTIP 2006
Executive Directors and other staff have been granted rights to acquire shares at nil cost under this plan introduced in 2006. Vesting is subject
to performance criteria related to the Group’s EPS growth over a three year period. Failure to meet the performance criteria causes the awards
to lapse.
For options granted under the LTIP, the share price on the date of grant has been determined to be the fair value of the options. These options
carry a right to accrued dividends during their lifetime, have nil cost to the recipient and are not subject to market conditions.
No other features of option grants were incorporated into the measurement of fair value.
DSOP 2013
The DSOP 2013 granted options to eligible employees with the right to acquire shares for the nominal value of ordinary shares. The options
are exercisable between three months and ten years from the award date, subject to share price and time related performance conditions.
For options granted under the DSOP 2013, the share price on the date of grant has been determined to be the fair value of the options.
USOP
The USOP granted options in 2013 to Godden Associates Limited with the right to acquire shares for nil cost. The options are exercisable
between three months and five years from the award date, subject to share price and EPS related performance conditions.
For options granted under the USOP, the share price on the date of grant has been determined to be the fair value of the options.
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share options during the year:
2014
Number
2014
WAEP
2013
Number
2013
WAEP
Outstanding at 1 January
3,066,155
1.3p
2,182,341
3.7p
Granted during the year
1,412,500
2.5p
2,000,000
2.0p
Exercised during the year
(773,108)
0.9p
(343,966)
22.0p
Lapsed during the year
(260,754)
1.6p
(772,220)
0.5p
Outstanding at 31 December
3,444,793
1.9p
3,066,155
1.3p
999,120
2.5p
142,886
2.5p
Exercisable at 31 December
For the share options outstanding at 31 December 2014 the weighted average remaining contractual life is 6.81 years (2013: 5.95 years).
The options outstanding at 31 December 2014 can be analysed as follows:
Options over new shares
2014
Number
2013
Number
2,559,847
1,532,300
Options over shares held in trust
463,000
510,586
Other options (1)
421,946
1,023,269
3,444,793
3,066,155
Total options outstanding
(1) At 31 December 2014 the Board had not decided whether these options would be satisfied by the issue of new shares or shares bought in the market
The weighted average fair value of options granted at 31 December 2014 was £3,100,000 (2013: £2,233,000). The range of exercise prices
for options outstanding at the end of the year was nil–2.5p (2013: nil–2.5p).
54
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
26. Reserves
The following describes the nature and purpose of each reserve within equity:
Share capital
The balance classified as share capital comprises the nominal value received on issue of the Company’s equity share capital, comprising
2.5p ordinary shares. This balance excludes any treasury shares.
Share premium
The balance classified as share premium comprises the premium received on issue of the Company’s equity share capital.
Other reserves
Capital redemption reserve
The balance classified as capital redemption reserve comprises a historic statutory reserve arising on the redemption of shares and is included
in “other reserves” on the face of the balance sheet.
Merger reserve
The balance classified as merger reserve results from the Company having secured merger relief under Section 612 of the Companies Act 2006,
when subsidiaries were acquired through the issue of the Company’s own equity shares.
Own shares
Own shares comprise 570,790 (2013: 617,290) 2.5p ordinary shares in the Company acquired at a weighted average cost of £0.57 (2013: £0.25)
each held by the employee trusts. The market value of these shares at 31 December 2014 was £518,000 (2013: £725,000). Options over these
shares have been granted to employees, exercisable at prices ranging from nil to 2.5p per share. The 570,790 (2013: 617,290) shares over
which options remain exercisable relate to three year options which may not be exercised unless the performance criteria are met.
These criteria are set out in note 25.
Dividends on the shares owned by the employee trusts, the purchase of which was funded by interest free loans to the Trust from
KBC Advanced Technologies plc, are waived. All expenses incurred by the Trust are settled directly by KBC Advanced Technologies plc
and are charged in the accounts as incurred.
Retained earnings
Share-based payments
The balance classified as share-based payments comprises the accumulated IFRS 2 fair value charge.
Foreign exchange reserve
The foreign exchange reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
27. Capital commitments
At 31 December 2014 the Group had no capital commitments (2013: £nil).
28. Contingent liabilities
Performance guarantees
Bank-backed performance guarantees given to third parties as at 31 December 2014 in respect of Group companies are detailed below:
At 31 December 2014
UK
Tender
bonds
£000
Advance
payment
and
performance
guarantees
£000
Total
£000
Cash cover
£000
66
6,996
7,062
5
Singapore
—
120
120
120
Total
66
7,116
7,182
125
The Directors consider that given the history of non-drawing on any guarantee that these guarantees will not be called upon in the future.
KBC Advanced Technologies plc Annual report 2014
55
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
28. Contingent liabilities continued
Performance guarantees continued
For those guarantees which are secured by cash, the use of the cash is restricted by the terms of the guarantees.
At 31 December 2013
Tender bonds
£000
Advance
payment and
performance
guarantees
£000
Total
£000
Cash cover
£000
63
3,544
3,607
5
UK
Singapore
Total
6
89
95
95
69
3,633
3,702
100
29. Pensions
The Group contributes to defined contribution pension schemes for its Directors and employees. The assets of the schemes are held
separately from those of the Group in independently administered funds.
Amount recognised as an expense
2014
£000
2013
£000
1,782
1,667
30. Other related party transactions
Other than compensation of key management personnel disclosed in note 8 there are no transactions with other related parties.
Full details of Directors’ emoluments are given in the Remuneration Committee report on page 25.
There were no other transactions with Directors of the Company.
56
KBC Advanced Technologies plc
Annual report 2014
COMPANY BALANCE SHEET
OVERVIEW
AS AT 31 DECEMBER 2014
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Note
2014
£000
2013
£000
Intangible assets
34
3,080
2,827
Investments
35
40,924
27,822
44,004
30,649
20,632
13,591
824
366
Fixed assets
Current assets
Debtors
36
Cash and cash equivalents
Creditors: amounts falling due within one year
37
21,456
13,957
(7,208)
(10,214)
Net current assets
14,248
3,743
Total assets less current liabilities
58,252
34,392
—
(600)
58,252
33,792
Creditors: amounts falling due after one year
Net assets
Capital and reserves
38/39
2,044
1,479
Share premium account
39
32,044
9,437
Capital redemption account
39
113
113
Merger reserve
39
2,134
Reserve for own shares
39
Profit and loss account
39
Called up share capital
Shareholders’ funds
929
(173)
(518)
22,435
22,007
58,252
33,792
The financial statements on pages 57 to 61 were approved and authorised for issue by the Board of Directors on 17 March 2015 and were
signed on its behalf by:
Ian Godden
Andrew Howell
DirectorDirector
KBC Advanced Technologies plc Annual report 2014
57
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
31. Accounting policies
Basis of preparation
The financial statements have been prepared under the historical cost convention as modified for certain items which have been measured
at fair value, namely financial instruments, and in accordance with UK applicable accounting standards.
No profit and loss account is presented for KBC Advanced Technologies plc, as permitted by Section 408 of the Companies Act 2006.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax with the following exceptions:
»» p
rovision is made for tax on gains arising from gains on disposal of fixed assets that have been rolled over into replacement assets, only to
the extent that at the balance sheet date there is a binding agreement to dispose of the assets concerned. However, no provision is made
where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into
replacement assets and charged to tax only if the replacement assets are sold;
»» p
rovision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries only to the extent that
at the balance sheet date dividends have been accrued as receivable; and
»» d
eferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and
loss account.
Research and development
Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured and technical feasibility and commercial viability can be demonstrated. Where these
criteria are not met the expenditure is expensed to the income statement.
Following the initial recognition of development expenditure, the cost model is applied requiring the asset to be carried at cost less any
accumulated amortisation and accumulated impairment losses. Any expenditure carried forward is amortised over the period of expected
future sales from the related project. The carrying value of development costs is reviewed for impairment annually when the asset is not
yet in use or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not
be recoverable.
The technical and market uncertainties inherent in the development of new products mean that internal development costs will not be capitalised
as intangible fixed assets until commercial viability of a project is demonstrable and there is probable economic benefit. Expenditure on product
maintenance and support is expensed as incurred.
Receivables
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify
as trading assets and have not been designated as either fair value through profit and loss or available for sale. Such assets are carried at
amortised cost.
Related party transactions
The Company has taken advantage of the exemption granted by FRS 8 from disclosing related party transactions with entities that are wholly
owned by KBC Advanced Technologies plc.
Investments
Investments in subsidiaries are recorded at cost less provision for impairment.
58
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
31. Accounting policies continued
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment loss.
Amortisation is provided on all intangibles at rates calculated to write off the cost of each asset over its expected useful life for a period
of up to ten years as follows:
Intellectual property
Five to six years
Capitalised development expenditure
One to five years
Own shares
Own shares are recorded at cost. Options over some of these shares have been granted to employees of Group subsidiaries.
32. Profit attributable to members of the parent company
The profit dealt with in the financial statements of the parent company was £381,000 (2013: £4,466,000).
33. Directors’ emoluments
Full details of Directors’ emoluments are given in the Remuneration Committee report on page 25.
The parent company has no employees excluding Directors (2013: nil).
34. Intangible fixed assets
Intellectual
property
rights
£000
Development
£000
Total
£000
1,835
6,370
8,205
—
1,552
1,552
1,835
7,922
9,757
1,835
3,543
5,378
Cost
At 1 January 2014
Additions
At 31 December 2014
Accumulated amortisation
At 1 January 2014
Amortisation charge for the year
At 31 December 2014
—
1,299
1,299
1,835
4,842
6,677
Net book value at 31 December 2014
—
3,080
3,080
Net book value at 31 December 2013
—
2,827
2,827
35. Investments
2014
£000
2013
£000
Cost and net book value at 1 January
27,822
27,057
Additions
12,512
235
590
530
40,924
27,822
Subsidiary undertakings:
Capital contribution
At 31 December
In line with UITF 44 an investment of £590,000 (2013: £530,000) has been recognised in relation to the capital contribution made
by the Company to its subsidiaries.
KBC Advanced Technologies plc Annual report 2014
59
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
35. Investments continued
The Company directly holds equity in the following principal subsidiary undertakings:
Proportion of voting rights
and direct equity interest
Name of subsidiary
Country of registration
(or incorporation) and operation
2014
2013
KBC Process Technology Limited
England
100%
100%
KBC Advanced Technologies, Inc.
USA
100%
100%
KBC Advanced Technology Pte Limited
Singapore
100%
100%
Infochem Computer Services Limited
England
100%
100%
KBC Advanced Technologies Sdn Bhd
Malaysia
90%
90%
KBC Advanced Technologies SL
Spain
100%
100%
KBC Advanced Technologies Pty Limited
Australia
100%
—
FEESA Limited
England
100%
—
KBC Advanced Technologies (Thailand) Limited
Thailand
98%
—
The nature of business of these subsidiaries is consulting and technology services to the oil industry and other process industries.
On 16 January 2013, the minority interest of 25% in KBC Environmental Limited was acquired at a cost of £137,000.
36. Debtors
Amounts owed by subsidiary undertakings
Other debtors and prepayments
2014
£000
2013
£000
20,310
13,575
322
16
20,632
13,591
Amounts owed by subsidiary undertakings are not considered to be impaired and are recoverable within six months. There has been no history
of default by any subsidiary undertaking.
37. Creditors
Amounts falling due within one year
2014
£000
2013
£000
Trade creditors
157
141
6,284
5,091
Amounts owed to subsidiary undertakings
Revolving credit facility
—
2,000
Bank loan – secured (see note 20)
—
2,400
Current corporation tax
184
261
Deferred tax liability
498
155
Other creditors and accruals
Amounts falling due after one year
Bank loan – secured (see note 20)
60
KBC Advanced Technologies plc
Annual report 2014
85
166
7,208
10,214
2014
£000
2013
£000
—
600
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
38. Share capital
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
2014
Number
2013
Number
2014
£000
2013
£000
– at 1 January
59,155,380
58,826,414
1,479
1,470
– issued for cash
20,869,565
—
522
—
1,000,000
—
25
—
726,608
328,966
18
9
81,751,553
59,155,380
2,044
1,479
Issued and fully paid
Ordinary shares of 2.5p each:
– issued as consideration
– issued on exercise of share options
At 31 December
Options to subscribe for new ordinary shares of 2.5p each, including LTIP awards and those noted in the Remuneration Committee report,
at 31 December 2014 are as follows:
Date granted
Options
outstanding
Exercise price
pence
Exercise period
June 2013
1,108,348
2.5
December 2014 – June 2023
October 2013
June 2014
75,000
2.5
October 2014 – September 2023
1,076,500
2.5
June 2017 – June 2024
249,999
2.5
October 2017 – October 2024
50,000
2.5
November 2017 – November 2024
October 2014
November 2014
2,559,847
39. Movements on reserves
Profit
and loss
account
£000
Total
£000
(172)
17,011
28,721
—
—
4,466
4,466
—
—
—
530
530
—
—
(1)
—
75
113
929
(173)
22,007
33,792
—
—
—
381
381
Share
capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Merger
reserve
£000
At 1 January 2013
1,470
9,370
113
929
Profit for the year
—
—
—
Share-based payments
—
—
9
67
At 1 January 2014
1,479
9,437
Profit for the year
—
—
Shares issued
Share-based payments
Own
shares
£000
—
—
—
—
—
700
700
540
22,607
—
—
—
—
23,147
Shares issued in business combination
25
—
—
1,205
—
—
1,230
Share buyback
—
—
—
—
(196)
—
(196)
Movement in own shares
—
—
—
—
(149)
149
—
Shares issued for cash, net of transaction costs
Dividends
At 31 December 2014
—
—
—
—
2,044
32,044
113
2,134
—
(518)
(802)
(802)
22,435
58,252
40. Contingent liabilities
The Group’s bankers hold a cross-guarantee and debenture over all assets of KBC Advanced Technologies plc, KBC Process Technology Limited,
KBC Environmental Limited, Infochem Computer Services Limited, KBC Advanced Technologies SL, KBC Advanced Technologies Inc,
KBC Advanced Technology Pte Limited, KBC Advanced Technologies Canada Limited and KBC Advanced Technologies Sdn Bhd.
This is in place as security for the overdraft, guarantee and forward exchange facility.
41. Capital commitments
At 31 December 2014 and 2013 the Company had no capital commitments.
KBC Advanced Technologies plc Annual report 2014
61
NOTICE OF THE ANNUAL GENERAL MEETING
FOR THE YEAR ENDED 31 DECEMBER 2014
Notice is hereby given that the Annual General Meeting of KBC Advanced Technologies plc (the “Company”) will be held at Weber Shandwick,
2 Waterhouse Square, 140 Holborn, London EC1N 2AE at 3.00 pm on Wednesday 17 June 2015 for the purpose of transacting the
following business:
Ordinary business
1.To receive the audited financial statements of the Company for the year ended 31 December 2014 and the Directors’
and Auditors’ reports thereon.
2. To re-appoint BDO LLP as the Company’s auditors and to authorise the Directors to fix their remuneration.
3. To re-elect Ian Adam Godden as a Director of the Company.
4. To re-elect Oliver Rupert Andrew Scott as a Director of the Company.
5.To declare a final dividend for the year ended 31 December 2014 of 1.1p per Ordinary share payable on 22 July 2015 to the holders of Ordinary
shares of the Company whose names appear on the register of members of the Company at the close of business on 10 July 2015.
Special business
To consider and, if thought fit, to pass the following resolutions which will be proposed, in the case of Resolution 6, as an ordinary resolution
and, in the case of Resolutions 7 and 8, as special resolutions of the Company:
6. That the Directors be generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 (the “Act”) to allot:
(a)relevant securities (within the meaning of Section 551 of the Act) up to an aggregate nominal amount of £685,027 representing
a number of Ordinary shares of 2.5p each (the “Shares”) equivalent to approximately one third of the issued share capital of the
Company at the date of this Notice; and
(b)equity securities (within the meaning of Section 560 of the Act) up to an aggregate nominal amount of £1,370,055 representing a number
of Shares equivalent to approximately two thirds of the issued share capital of the Company at the date of this Notice (such an amount
to be reduced by the aggregate nominal amount of relevant securities issued under paragraph (a) above), in connection with a rights
issue to holders of Shares in proportion (as nearly as may be) to their holdings of such shares and so that the Directors may impose
such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with equity securities representing
fractional entitlements and with legal or practical problems under the laws of, or the requirements of, any regulatory body or any stock
exchange in any territory or otherwise.
The authorities referred to in this Resolution 6 shall be in substitution for all other existing authorities dealing with the subject matter of this
Resolution 6 and shall expire (unless previously revoked or varied by the Company in general meeting) at the earlier of the conclusion of the
Annual General Meeting of the Company to be held in 2016 and 30 June 2016. The Company may before such expiry make offers or agreements
which would or might require such securities to be allotted after the expiry of the authority and the Directors are hereby authorised to allot
such securities in pursuance of such offers or agreements as if the authority conferred hereby had not expired. This authority shall replace
all existing authorities conferred on the Directors in respect of the allotment of such securities to the extent that the same have not been
previously utilised.
7.That the Directors, pursuant to Section 570 of the Act, be empowered to allot equity securities (within the meaning of Section 560 of the
Act) for cash pursuant to the authority conferred by Resolution 6 as if Section 561(1) of the Act did not apply to any such allotment, provided
that this power shall be limited to:
(a)the allotment of equity securities where such securities have been offered (whether by way of a rights issue, open offer or otherwise
but in the case of the authority granted under paragraph (b) of Resolution 6 by way of rights issue only) to holders of Shares in proportion
(as nearly as may be) to their holdings of Shares and so that the Directors may impose such exclusions or other arrangements as the
Directors may deem necessary or expedient to deal with equity securities representing fractional entitlements and with legal or practical
problems under the laws of, or the requirements of, any regulatory body or any stock exchange in any territory or otherwise; and
(b)the allotment of equity securities pursuant to the authority granted by paragraph (a) of Resolution 6 (other than pursuant to paragraph (a)
of this Resolution 7) of equity securities (i) arising from the exercise of options outstanding at the date of this Resolution 7 and (ii) up to
an aggregate nominal value of £205,528 or 10% of the issued share capital of the Company, whichever is the higher,
and this power shall expire (unless previously revoked or varied by special resolution of the Company in general meeting) at the earlier of
the conclusion of the Annual General Meeting of the Company to be held in 2016 and 30 June 2016. The Company may before such expiry
make offers or agreements which would or might require equity securities to be allotted after the expiry of the authority and the Directors
are hereby authorised to allot equity securities in pursuance of such offers or agreements as if the authority conferred hereby had not expired.
This authority shall replace all existing authorities conferred on the Directors in respect of the allotment of relevant securities to the extent
that the same have not been previously utilised.
62
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Special business continued
8.That the Company be and is generally and unconditionally authorised to make market purchases, within the meaning of Section 693 of the
Act, of Shares provided that:
(a) the maximum aggregate number of Shares which may be purchased under this authority is 12,331,731 Shares;
(b) the minimum price, exclusive of expenses, which may be paid for each Share is 2.5p;
(c)the maximum price, exclusive of expenses, which may be paid for each Share shall be an amount equal to 105% of the average of the
middle market quotations for the Shares taken from the listing of the AIM market of London Stock Exchange plc over the five business
days immediately preceding the day on which the Shares are contracted to be purchased;
(d)the authority to purchase conferred by this Resolution 8 shall expire at the earlier of the conclusion of the Annual General Meeting
of the Company to be held in 2016 and 30 June 2016, unless the authority is extended before then by a resolution of the Company
in general meeting; and
(e)the Company may make a contract to purchase Shares under this authority before its expiry which would or might be executed
wholly or partly after such expiry and in any such case the Company may make such a purchase under the contract after the expiry
of this authority.
By order of the Board
Janet Ireland
Company Secretary
17 March 2015
Registered Office
42–50 Hersham Road
Walton on Thames KT12 1RZ
Notes
1.A member entitled to attend and vote at the Annual General Meeting (“AGM”) convened by the Notice above is entitled to appoint one or more proxies to exercise all and any of his rights to
attend, speak and vote in his place. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares and each such form of proxy shall
specify the shares in respect of which each proxy is appointed. You may not appoint more than one proxy to exercise rights attached to any one share. A proxy need not be a member of the
Company. Forms for the appointment of a proxy that can be used for this purpose have been provided to members with this Notice of Meeting.
2.To be valid, forms of proxy must be lodged with Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY not later than 3.00 pm on Monday 15 June 2015. If the
AGM is adjourned, the proxy must be received at the above address not less than 48 hours before the time of the adjourned AGM. In the case of a poll taken more than 48 hours after it was
demanded, the proxy must be received at the above address not less than 24 hours before the time appointed for the taking of the poll. In the case of a poll taken not more than 48 hours after
it was demanded, the proxy must be received at the above address at the time at which the poll was demanded.
3. Completion of a form of proxy does not prevent a holder of shares from attending and voting at the AGM should he or she so wish.
4.In order to have the right to attend and/or vote at the AGM, a person must be registered on the register of members of the Company not later than 6.00 pm on Monday 15 June 2015 or, in the
case of an adjournment of the AGM, at the time which is 48 hours before the time appointed for the adjourned meeting. Changes to entries in the register of members of the Company
after 6.00 pm on Monday 15 June 2015 shall be disregarded in determining the rights of any person to attend and/or vote at the AGM.
5.To appoint one or more proxies or to give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by the issuer’s
agent (ID number 3RA50) not later than 48 hours before the time appointed for holding the meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the
time stamp generated by the CREST system) from which the issuer’s agent is able to retrieve the message. The Company may treat as invalid a proxy appointment sent by CREST in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
6. In order to facilitate voting by corporate representatives at the AGM, arrangements will be put in place at the AGM so that:
(a)if a corporate member has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all the
other corporate representatives for that member at the AGM, then, on a poll, those corporate representatives will give voting directions to the Chairman and the Chairman will
vote (or withhold a vote) as corporate representative in accordance with those directions; and
(b)if more than one corporate representative for the same corporate member attends the AGM but the corporate member has not appointed the Chairman of the meeting as its corporate
representative, a designated corporate representative will be nominated from those corporate representatives who attend who will vote on a poll and the other corporate representatives
will give voting directions to that designated corporate representative. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its
behalf, all its powers as a member provided that no more than one corporate representative exercises powers over the same share.
7.Copies of the contracts of the Directors with the Company and/or its subsidiaries are available for inspection at the registered office of the Company during normal business hours on any
weekday (except Saturdays and public holidays).
KBC Advanced Technologies plc Annual report 2014
63
NOTICE OF THE ANNUAL GENERAL MEETING CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2014
Explanation of Resolution 3
Following formal performance evaluation, Ian Godden continues to be an effective Director and Chairman and demonstrates commitment
to the role. Mr Godden’s biographical details are set out on page 16.
Explanation of Resolution 4
Following formal performance evaluation, Oliver Scott continues to be an effective Non-Executive Director and demonstrates commitment
to the role. Mr Scott’s biographical details are set out on page 16.
Explanation of Resolution 6
The Directors wish to renew at the forthcoming AGM the authority and power which were granted to them at the AGM held on 4 June 2014.
Such authority and power are normally given on an annual basis to the Directors of a company that has its shares traded on AIM. The Act provides
that the Directors may not issue new shares unless authorised to do so by the shareholders. In Resolution 6 authority is being sought to issue
new Shares up to a maximum aggregate nominal amount of £685,027, representing a number of Shares equivalent to approximately one third
of the issued share capital of the Company at the date of this Notice. Such authority will (except in relation to commitments which have been
made but not fulfilled) lapse on 30 June 2016 or, if earlier, at the conclusion of the AGM of the Company to be held in 2016.
In 2008 the Association of British Insurers (“ABI”) issued new guidance on the approval of authorities to allot shares in which it stated that, in
addition to requests for authorisation to allot new shares in an amount up to one third of the existing issued ordinary share capital of a company,
it would regard as routine requests to authorise the allotment of a further one third in connection with a rights issue. In light of this, paragraph (b)
of Resolution 6 proposes that a further authority be conferred on the Directors to allot unissued Ordinary shares in connection with a rights issue
in favour of holders of equity securities up to a maximum aggregate nominal amount of £1,370,055 (such amount to be reduced by the nominal
amount of any relevant securities issued under the authority conferred by paragraph (a) of Resolution 6).
The granting of this authority will ensure that the Directors are able to maintain a degree of flexibility for the issue of Shares without the need to
obtain shareholders’ consent on each occasion. The Directors have no present intention to exercise this authority except in connection with the
Company’s employee share incentive schemes. In the event that this further authority is exercised, the Directors intend to follow emerging best
practice as regards its use (including as to the requirement for Directors to stand for re-election) as recommended by the ABI.
Explanation of Resolution 7
If new Shares are to be allotted for cash, Section 561(1) of the Act requires the new Shares to be offered first to the existing holders of Shares
on a proportionate basis. Resolution 7, which will be proposed as a special resolution, is in accordance with normal practice and, if passed, will give
the Directors the power to allot Shares for cash without first offering those Shares to existing shareholders. This power will allow the Directors to
implement rights issues, open offers or other similar such issues of Shares without complying fully with the pre-emption requirements of the Act,
which can prove unduly burdensome in certain circumstances (for example, in the case of shareholders resident in certain overseas countries).
Power is also being sought to enable the Directors to issue Shares for cash otherwise than on a pre-emptive basis in relation to outstanding share
options and otherwise for new Shares up to an aggregate nominal amount of £205,528 which represents a number of Shares approximately equal
to 10% of the Company’s issued share capital at the date of this Notice. If given, the power contained in this special resolution will (except in relation
to commitments which have been made but not fulfilled) lapse on 30 June 2016 or, if earlier, at the conclusion of the AGM of the Company to be
held in 2016.
Explanation of Resolution 8
This Resolution, which will be proposed as a special resolution, will grant authority to the Company to purchase its Shares in the market up to a
limit of 12,331,731 Shares, representing approximately 15% of the issued shares at the date of this Notice. The minimum and maximum prices to
be paid for the Shares are detailed in this Resolution and the authority will (except in relation to commitments which have been made but not fulfilled)
lapse on 30 June 2016 or, if earlier, at the conclusion of the AGM of the Company to be held in 2016. Although the Directors do not currently intend
to exercise the authority being sought to make specific purchases of any Shares, they consider it to be beneficial to have the flexibility of such an
authority to make purchases within the terms of the Resolution. The Directors would carefully consider any exercise of the authority being sought
and would only make purchases provided that due consideration had been given to the overall financial position of the Company and if it was in the
best interests of shareholders generally. Shareholders would be advised immediately after any repurchase of Shares as to whether such Shares
had been cancelled or were held in treasury. As at 6 March 2015 options over 2,921,799 Shares were outstanding under the Company’s share
option schemes, representing 3.55% of the Company’s issued share capital at that date. If the authority being sought by the Company to purchase
its Shares were to be exercised in full, such options would represent 4.18% of the Company’s issued share capital at 6 March 2015. The performance
targets of the share option schemes would be adjusted automatically in the event of any change in the Company’s capital structure.
64
KBC Advanced Technologies plc
Annual report 2014
OVERVIEW
FIVE-YEAR SUMMARY
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
2010
£000
2011
£000
2012
£000
2013
£000
2014
£000
39,248
42,733
44,320
47,229
54,973
Revenue – software
13,813
12,992
18,820
17,851
20,981
Revenue – total
53,061
55,725
63,140
65,080
75,954
3,776
5,011
3,860
7,389
7,163
(128)
(81)
(197)
(268)
Profit before tax
3,648
4,930
3,663
7,121
6,671
Adjusted operating profit
5,016
5,969
5,986
8,674
9,988
(128)
(81)
(197)
(268)
4,888
5,888
5,789
8,406
9,496
4.0p
5.9p
9.5p
5.7p
Revenue – consulting
Operating profit
Net interest
Net interest
Adjusted profit before tax
EPS – basic
EPS – diluted
Contracted work
Cash and cash equivalents as cash flow statement
Borrowings
4.0p
5.9p
58,700
48,709
4,506
5,815
—
—
(2.9)p
(2.9)p
(492)
(492)
9.2p
5.5p
78,203
87,987
6,384
9,931
11,023
(5,400)
(3,000)
—
82,864
SHAREHOLDER INFORMATION
Company Secretary
Janet Ireland
Principal solicitors
Shoosmiths
Apex Plaza
Forbury Road
Reading RG1 1SH
Registered office
42–50 Hersham Road
Walton on Thames KT12 1RZ
Nominated advisor and broker
Cenkos Securities plc
6.7.8. Tokenhouse Yard
London EC2R 7AS
Registered number
01357958
Auditors
BDO LLP
2 City Place
Beehive Ring Road
Gatwick RH6 0PA
Principal bankers
HSBC Bank plc
HBEU City of London Corporate Banking Centre
First Floor
60 Queen Victoria Street
London EC4N 4TR
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Key dates
Preliminary announcement of results
Annual General Meeting
Half year results (not confirmed)
The Group’s commitment to environmental issues is reflected in this
Annual Report which has been printed on Chorus Silk, made from FSC®
using
certified materials. The report was printed in the UK by
environmental printing technology, and vegetable-based inks were used
®
throughout. Pureprint is a CarbonNeutral company. Both the manufacturing
mill and the printer are registered to the Environmental Management System
ISO14001 and are Forest Stewardship Council ® (FSC) chain-of-custody
certified. The unavoidable carbon emissions generated during the manufacture
and delivery of this document have been reduced to net zero through a verified
carbon offsetting project.
17 March 2015
17 June 2015
22 September 2015
KBC Advanced Technologies plc Annual report 2014
EUROPE, MIDDLE EAST AND NORTH AFRICA
KBC OFFICES
KBC Advanced Technologies plc
42–50 Hersham Road
Walton on Thames KT12 1RZ
UK
Tel: +44 (0)1932 242 424
Email: info@kbcat.com
Website: www.kbcat.com
KBC Process Technology Ltd
42–50 Hersham Road
Walton on Thames KT12 1RZ
UK
Tel: +44 (0)1932 242 424
KBC Advanced Technologies S.L.
Avenida Diagonal, 613 4B
08028 Barcelona
Spain
Tel: +34 (0)93 548 5000
KBC Process Technology Ltd
4 Cheshire Avenue
Lostock Gralam
Northwich CW9 7UA
UK
Tel: +44 (0)1606 815 100
KBC Process Technology Ltd
Representative office in Russia
47 Bldg. 2, Office 302
Leningradskiy Prospekt
125167 Moscow
Russia
Tel: +7 495 980 8449
KBC Process Technology Ltd
93 Great Suffolk Street
London SE1 0BX
UK
Tel: +44 (0)20 7357 0800
KBC Process Technology Ltd
Westmead House
Farnborough GU14 7LP
UK
Tel: +44 (0)1252 372 321
KBC Process Technology (Middle East) Ltd
Abu Dhabi branch
Office No 201 E, 2nd Floor
Incubator Building
P.O. Box 135079, Masdar City
Abu Dhabi
United Arab Emirates
Tel: + 971 2 508 7300
KBC Process Technology Ltd
Netherlands Branch
Willemstraat 26
4811 AL Breda
Netherlands
Tel: +31 (0)76 531 6131
KBC Process Technology Ltd
Bahrain branch
Office 1144, Al Nakheel Tower
11th Floor, Bldg 1074
Road 3622, Block 436
Seef District, Manama
Kingdom of Bahrain
Tel: + 973 1365 0087
AMERICAS
ASIA-PACIFIC
KBC Advanced Technologies, Inc.
15021 Katy Freeway
Suite 600
Houston, TX 77094
USA
Tel: +1 281 293 8200
KBC Advanced Technology Pte Ltd
435 Orchard Road #16-02/03
Wisma Atria
Singapore 238877
Tel: +65 6735 5488
KBC Advanced Technologies, Inc.
4 Campus Drive
2nd Floor South
Parsippany, NJ 07054
USA
Tel: +1 973 889 8922
KBC Advanced Technologies, Inc.
3131 South Vaughn Way
Suite 300
Aurora, CO 80014
USA
Tel: +1 303 368 0300
KBC Advanced Technologies Canada Ltd
Suite 314
333 11th Avenue SW
Calgary
Alberta T2R 1L9
Canada
Tel: +1 403 206 1533
KBC Advanced Technologies (Beijing) Co Ltd
1903 Tower A
China International Science & Technology
Convention Center
No. 12 Yumin Road
Chaoyang District
Beijing 100029
People’s Republic of China
Tel: +86 (0)10 8225 3838
KBC Advanced Technologies Sdn Bhd
Level 15
Menara Darussalam No.12
Jalan Pinang
50450 Kuala Lumpur
Malaysia
Tel: +60 (3)2178 6344
KBC Advanced Technologies Private Ltd
C-Wing, Unit No.304
Delphi CHS
Hiranandani Gardens
Powai, Mumbai 400076
India
Tel: +91 (0)22 6156 1700
KBC Process Technology Ltd
Japan Branch
Nishi-Shimbashi YS Bldg 5F
2–19–2 Nishi-Shimbashi
Minato-ku
Tokyo 105-0003
Japan
Tel: +81 (0)3 5777 6550
KBC Advanced Technologies Pty Ltd
Level 29, The Forrest Centre
221 St George’s Terrace
Perth WA 6000
Australia
Tel: +61 894 80 3784