Benefiting from healthy refinery margins
​KBC's H1 sales of £36.2m (+5.4%) and adjusted PBT of £4.2m (+3%) were in line with our estimates, albeit impacted by £0.46m of forex losses. KBC's robust orderbook, strength in refineries and early restructuring measures (which have produced savings of £3.5m pa thanks to a 10% headcount reduction and office consolidation in North America), helped mitigate the worst effects of the lower crude price. From a divisional perspective, Consultancy revenues and adjusted EBIT came in at £27.3m (+5.1%) and £1.7m respectively - improving margins sequentially to 6.2% from 2.9% in H2'14, thanks to lower headcount and better staff utilisation. In Technology, turnover was "solid" up 6.2% to £8.9m including key contract wins in Australia, Oman and the US, delivering adjusted EBIT of £2.5m and margins of 28.3%. Recurring revenues from royalties, maintenance, support and upgrades jumped 23% to £5.3m. The upstream focused FEESA unit (acquired in July 2014 for £11.2m), continues to perform well against a challenging backdrop, and offers the group a "unique selling point". H2 2015 has started well, showing good momentum, as evidenced by the recent contract wins and "good Technology opportunities". As such we make no change to our full year 2015 turnover and adjusted PBT forecasts of £73m and £10.5m - underpinned by the healthy June backlog of £74m and a seasonally stronger 2nd half for Technology. At 110p, KBC appears cheap trading on forward EV/EBITA and PE multiples of 7.4x and 13.7x respectively (falling to 12.1x if the £10.6m cash pile is stripped out).
KBC Group is a bank-insurance group engaged in providing products and services mainly to retail, private banking, SME and mid-cap clients. Co. focuses on its primary markets of Belgium, the Czech Republic, Slovakia, Hungary and Bulgaria. Co. is also present in Ireland and, to a limited extent, in several other countries to support corporate clients from its primary markets. Co.'s main brands are KBC and CBC in Belgium, CSOB in Czech Republic and Slovakia, K&H in Hungary, CIBANK and DZI Insurance in Bulgaria, and KBC Bank Ireland in Ireland. As of Dec 31 2014, Co. had 1,601 bank branches. In addition, Co. had total assets of Euro245.17 billion.
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