Dividend indicates KBC Advanced Technologies' confidence

Oil refinery consultancy and software provider KBC Advanced Technologies enjoyed a strong second half to 2010 and the positive trading momentum has carried on into 2011. AIM-quoted KBC had a record order book of £58.7m at the end of 2010, helped by last year's $42m contract with Pemex. That contract is spread over three years. Other contracts were won with PetroVietnam and BP. The confidence of management is shown by the 19% increase in total dividend to 1.85p a share - the final dividend is 1.3p a share. That is a bold statement given the fall in earnings in 2010. Even so, the dividend is three times covered by earnings and KBC is confident that it will grow earnings this year and continue to raise the dividend. The balance sheet is strong with net cash of £4.5m at the end of 2010. House broker Cenkos forecasts a rise in underlying profit to £6.3m in 2011. There was a drop in underlying profit from £5.7m in 2009 to £4.9m in 2010. The first half's trading was poor. KBC made £1.3m of annualised cost savings with a few hundred thousand pounds worth still to come through. Revenues were flat at £53.1m. KBC is finding additional markets for its abilities. One of these is energy management. The rising cost of power is making refineries look much more seriously into reducing their power consumption. Refinery sales can also spark short-term due diligence work for KBC. Software sales have been good but there is litigation with a competitor that might hold back short-term sales. Management believes that the arbitration process should be completed by the middle of this year. The shares are trading on less than 10 times 2011 prospective earnings.