RNS Number : 7343Y
Cape plc
06 March 2012
 



 

 

Embargoed: 0700hrs, 6 March 2012

 

Cape plc

("Cape" or the "Group")

 

UNAUDITED PRELIMINARY RESULTS: 12 months ended 31 December 2011

 

Cape plc, the international provider of essential, non-mechanical support services to the energy and mineral resources sectors, announces its results for the twelve months ended 31 December 2011.

 

STRONG REVENUE GROWTH IN SECOND HALF AND WELL POSITIONED FOR FURTHER PROGRESS

 

Financial summary

 

FY 2011

FY 2010

      Growth

AER

CER

Revenue

£722.5m

£650.1m

+11.1%

9.4%

Adjusted Profit before tax

£69.4m

£69.1m

+0.4%

-0.3%

Adjusted operating profit margin

10.9%

12.0%

-110 bps

Profit after tax

£49.7m

£52.6m

-5.5%

Basic earnings per share

40.2p

42.6p

-5.6%

Adjusted diluted earnings per share

43.8p

42.6p

+2.8%

Dividend for the year

14.0p

12.0p

+16.7%

 

AER - Actual exchange rates; CER - Constant 2010 exchange rates

 

Highlights

 

·    Record revenues with strongest growth since 2007 - up 21.5% in H2 from pickup in project work in key markets

·    Adjusted Profit Before Tax of £69.4m (2010: £69.1m) and adjusted diluted earnings per share of 43.8p (2010: 42.6p) which includes impact of one-off charges of £5.5m

·    Proposed final dividend of 9.5p per share (2010: 8.0p) giving a 16.7% increase in full year dividend to 14.0p (payout ratio of 32.0%), reflecting the Board's confidence in the Group's prospects.

·    Working Capital outflow of £43.1m, driven by record activity levels in Q4 and timing of investments and receipts on four major projects

·    Firm order book increased by 9.7% to c £940m with over 68% (2010: 63%) of consensus Full Year 2012 revenues secured

·    As expected, momentum is building in a number of key regions and projects indicating that Cape is entering a sustained period of demand growth for its services

·    Significant corporate activity throughout the year, including our move from AIM to the London Stock Exchange's main board, a refinancing of the Group's bank facility and two bolt-on acquisitions

 

 

Commenting on the results, Tim Eggar, Chairman of Cape said:

"These results demonstrate the strength and quality of Cape's business and its growth prospects.  The Group is targeting markets with strong fundamental growth drivers and has made significant investments in both hard assets and people in 2011 to ensure we are able to resource these opportunities.  Our cash flow generation allowed us to invest in our business, while maintaining a strong balance sheet.  We are recommending a 16.7% increase in the full year dividend, reflecting the Board's confidence in the prospects for Cape.  Trading momentum has continued into the new year with excellent visibility and the Board is confident that Cape is well-positioned for continued growth."

Commenting on the results, Martin K May, Chief Executive of Cape said:

 

"Cape delivered its expected return to revenue growth despite the loss making rig refurbishment contract in the second half of the year.  Three of our four geographic regions are contributing to that underlying growth.  We continued to sharpen our strategic focus, completing two bolt-on acquisitions and exiting a smaller business that was not aligned to our strategic direction.  Our focus in the year ahead will be to build further on the Cape brand, the strength of the Group's intellectual property and to realise the very significant growth opportunities ahead of us in our chosen markets where we already see our offering gaining considerable traction."

 

 

Analyst meeting

The Group will be presenting to analysts at 9.30a.m today.  The presentation will be available on the company's website later today at http://www.capeplc.com/cape/pages/investors 

 

Enquiries:

 

Cape plc


Martin K May, Chief Executive

+44 (0)20 3178 5498

Richard Bingham, Chief Financial Officer




M:Communications


Patrick d'Ancona

+44 (0)20 7920 2347

Ben Simons

+44 (0)20 7920 2340



 

Forward looking statements

Any forward looking statements made in this document represent the Board's best judgment as to what may occur in the future.  However, the Group's actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors, some of which will be outside the control of the Group.  Such factors could cause the Group's actual results for future periods to differ materially from those expressed in any forward looking statements included in this announcement.

 

About Cape:

Cape plc (www.capeplc.com), which is listed on the main market of the London Stock Exchange, provides a range of non-mechanical industrial services including access systems, insulation, painting, coatings, blasting, industrial cleaning, training and assessment to both industrial plant operators and major international engineering and construction companies.

 

As a single source provider, Cape is able to provide a range of specialist multi-disciplinary services specifically tailored to meet the needs of the client providing the most intelligent and cost efficient solutions for our customers' non-mechanical in-plant maintenance and capital needs.

 

In the year ended 31 December 2011, Cape reports revenues of £722.5 million.  With scale and leading market positions across its international footprint, Cape employs over 19,000 people in 30 countries.

 

 



 

Chairman's statement

 

I am pleased to report that Cape delivered a robust performance in 2011. Despite the setback of a loss making one-off rig refurbishment contract previously announced in our IMS of 9 November 2011, these results demonstrate the strength and quality of Cape's business and its growth prospects.  Our strong revenue growth in the second half of the year provides evidence of the continuing progress we are making as we realise our vision of becoming the leading specialist provider of our range of essential non-mechanical services.

 

Cape continues to enjoy a well balanced revenue stream with 54% (2010: 56%) of our revenues derived from essential plant maintenance (production support) activities and c40% derived from construction support services.  The fundamental dynamics driving the marketplace for our services are the essential operating expenditure (opex) on maintenance of ageing infrastructure assets, particularly in the UK, as well as committed spend on major energy and resources construction projects in our strategically selected markets internationally.

 

 

Results

 

Group revenue increased 11.1% to £722.5m (2010: £650.1m) with adjusted profit before tax increasing to £69.4m (2010: £69.1m).  The Adjusted diluted earnings per share were 43.8p (2010: 42.6p) and basic earnings per share were 40.2p (2010: 42.6p).  These results include the full impact of the specific one-off charges and in particular a £4.1m charge for the loss making rig refurbishment contract in the UK which completed in the first week of January 2012. 

 

We saw strong double digit revenue growth in the second half in three of our four regions.  During 2011 we also saw the medium-term LNG opportunity in Australia become more clearly defined with a further five projects achieving FID (Final Investment Decision) in addition to the three already under construction.  We have also seen the commencement of several new downstream projects in the Gulf/Middle East and the commencement of our works on the Sonatrach GL3-Z LNG project in Algeria.  These developments give us confidence that demand for our construction support services will continue to gain momentum in our chosen markets.  Further commentary on these results and the regional performances is contained in the Regional Business Review.

 

Overall our performance in the year demonstrates our proven ability to meet the exacting needs of our blue-chip customers both in terms of operational execution and safety.  This is being achieved through a combination of advantages including the outstanding quality of our people and the innovative solutions that Cape provides to meet customer requirements.

 

We continue to pursue our well defined strategy of developing the business through organic growth and targeted acquisitions in both existing and new geographies, while continuously improving the efficiency of our operations.

We completed two bolt-on acquisitions in 2011 and are actively progressing a number of further opportunities which meet our specific criteria.

 

Dividend

 

The Board is pleased to recommend a final dividend of 9.5p (2010: 8.0p).  This brings the total dividend for the year to 14.0p, a 16.7% increase.  The Board remains committed to a progressive dividend policy, and will review the return of capital to shareholders during 2012 in conjunction with progress against our growth plans.

 

Corporate governance

 

I am pleased to confirm that Cape is in full compliance with the UK Corporate Governance Code.   There is a clear division of responsibilities at the head of the Company, and our Committees operate effectively through independent non-executives with a good balance of skills, experience and knowledge of the Company.  The Audit Committee is actively engaged in a review of the Group's risk management processes and controls and the work of the Board Committees is described more fully in the Corporate Governance section of our forthcoming Annual Report.

 

People

 

On 16 November 2011, I was pleased to invite Brendan Connolly to join the Board as a Non-Executive Director.  Brendan is currently Regional President for the Middle East, FSU, Eastern Europe and Russia for Intertek, which provides inspection, certification and testing services to clients in oil & gas, power and other industries.  Brendan was previously Chief Executive Officer of Moody International which was acquired by Intertek and prior to this, he spent more than 25 years with Schlumberger.  Brendan's extensive experience will be of great value to the Board.

As previously announced, David McManus, who has served as a Non-Executive Director for eight years, latterly as Chairman of the Remuneration Committee, will step down from the Cape Board when a suitable replacement has been found.  His independent advice and significant contribution to our success have been greatly appreciated and he will leave the Board with our thanks and best wishes.  We will make a further announcement in due course.

I would like to take this opportunity to acknowledge the skills and dedication of employees throughout the Group, many of whom I have now had the opportunity to meet, who have once again delivered a creditable performance.  Their skills, and the strength of the management team, are the real assets of Cape.

 

Outlook and prospects

The Group is targeting markets with strong fundamental growth drivers and has made significant investments in both hard assets, people and know how in 2011.  Trading momentum has continued into the new year with excellent visibility and the Board is confident that Cape is well-positioned for continued growth.

 

 

Tim Eggar

Chairman

6 March 2012

 

    

 

 

Throughout this document various non statutory measures are used and referred to as adjusted.  These are defined and reconciled to their statutory equivalent in Note 3.


 

 

Chief Executive's review

 

The strength of the Cape brand

 

We made good progress in executing each of our strategic objectives in 2011.  The development of the Cape brand has also been at the forefront of the restructuring carried out in the year and the strength of Cape's franchise was again illustrated by the increase in breadth and depth of our business.  We delivered essential maintenance and shutdown support services on 287 industrial assets onshore and offshore in 2011 including 39 power stations, 31 oil & gas processing plants, 12 LNG and GTL plants, 39 petrochemical plants and 66 offshore sites.  In the nuclear environment we continue to provide maintenance services at all 8 of the EDF (former British Energy) stations in the UK as well as comprehensive services at both Sellafield and the Winfrith and Harwell research sites.  Cape also delivered construction support services on 65 construction projects in 2011 and is recognised by major international E&C contractors for consistently delivering the highest safety standards in challenging and remote environments.

 

Financial performance

 

Cape delivered its expected return to meaningful revenue growth in the second half of the year. Revenue growth in H2 was 21.5%, driving full year revenues to a record £722.5m (2010: £650.1m).  We have been anticipating that a sustained period of growth in demand for Cape's services would commence in the second half of 2011 driven by the release of work packages on a number of large construction projects in the Far East/Pacific Rim and Gulf/Middle East markets as well as the increasing demand for our essential maintenance support activities in the UK. 

 

The adjusted profit before tax of £69.4m (2010: £69.1m) was impacted by the two one-off charges highlighted in our IMS on 9 November 2011.  We recognised a higher than anticipated final charge of £4.1m in respect of the rig refurbishment contract in the UK which we completed in the first week of January 2012.  Cape does not seek to undertake this type of high risk contract and I am confident that the circumstances surrounding the acceptance of this contract have been fully investigated and appropriate actions taken to ensure that contracts of this nature are not accepted in future.  The charge of £1.4m in respect of the costs relating to our decision to cease hire and sales activity at our depot in Queensland remains unchanged.  Our focus is on delivering profitable growth with a low risk profile and, notwithstanding the above, Cape continues to outperform its principal competitors in margin delivery.  

 

Our year-end net debt increased to £59.2m (2010: £52.9m) driven by increased working capital requirements, reflecting record activity levels in Q4  and the phasing of investments and receipts on four significant projects.  Our net working capital to revenue ratio increased to 16.8% against our normal sub 13% level.  We expect this to normalise over the first half of 2012.  We invested £20.0m (2010: £11.6m) in capital expenditure during the year with the asset replacement ratio (calculated by dividing gross capex spend by the depreciation charge) increasing to 119% (2010: 71%) and £4.3m (2010: nil) on acquisitions.

 

 

Delivering on our strategy

 

We have a well defined growth strategy built on five key elements. Our focus on executing this strategy throughout the year has generated positive progress on all these objectives.

 

1.   Building strong positions in high growth international markets such as Far East/Pacific Rim and Gulf/Middle East

 

Cape delivered further strong revenue growth of 17% at CER in the Far East/Pacific Rim Region in 2011 and our annual revenues in the region have now increased by over £100m since 2009 levels.  In the Gulf/Middle East we won packages on several major downstream projects and enter 2012 with record order books.  Our strategy is to invest only where we can generate superior returns for our shareholders. We look to invest in markets that offer strong growth prospects and will continue to avoid mainland Europe.

 

2.   Capitalising on the increasing industry trend towards sourcing cost effective bundled multi-disciplinary services from a single source provider

 

Cape's core disciplines remain insulation, access and coatings.  Cape is one of a handful of specialist international service providers able to carry out the full suite of services including passive fire protection and refractory.  In 2011 we completed the acquisition of York Linings, a specialist refractory lining business in the UK, and Shoreguard Marine, an offshore coatings and blasting business in Australia, building on our client offering in these regions.

 

3.   Building on Cape's world class reputation and track record for consistent project execution and delivery on time and on budget

 

We supported 65 major construction projects in 2011 and successfully completed some landmark projects including the Saudi Kayan project, the world's largest ethylene plant, where our peak manpower exceeded 1,000 and the Pearl GTL plant in Qatar where our peak manpower reached 500.  In Singapore, our workforce on the Exxon Singapore Parallel Trains (SPT) Olefins project reached c1,600.  When the insulation schedule came under pressure at the Pluto LNG project in Western Australia, the EPC contractor was able to turn to Cape to provide additional resource at short notice.  Cape's reputation for delivery of major projects in challenging and often remote environments to the highest international safety standards continues to set us apart from the competition.

 

4.   Capturing increasing levels of maintenance and capital spending to maintain and extend the life of ageing energy infrastructure in the UK

 

Our UK revenues increased by 9.4% year on year driven primarily by onshore work in the power generation sector where we enjoy a dominant position with a presence on 23 of the UK's largest 52 stations.

 

5.   Maintaining our uncompromising safety proposition with a strive to provide injury free project execution

 

Cape delivered 55 million man hours in 2011 and our safety performance has again been outstanding with an LTI (Loss Time Injury) Frequency Rate of 0.025 per 100,000 man hours an improvement of 12.3% on last year's performance.  This significant improvement from an already excellent performance last year is a testament to Cape's uncompromising approach to safety and our willingness to take the lead on safety standards.  This was again recognised by our clients in the year with numerous awards.  We can never be complacent about safety, and we remain committed to continuously improving safety standards.

 

 

Developing the quality of our asset

 

We implemented our new corporate structure in 2011 with the establishment of our International Head Quarters (IHQ) in Singapore.  This improves the alignment of our business with our market opportunities. 

 

Cape's developed intellectual property and the strength of the Cape brand will normally result in our automatic inclusion on bidder lists.  We will often work at an early stage with our clients on insulation specifications for major projects.  The consequences of thermal/cryogenic insulation failure are serious and Cape's expertise and quality assurance, developed over the past 30 years, places us at the forefront in the field.

 

With our experience and design capability Cape provides complex scaffolding and access solutions for irregular and challenging structures.  For example, in an LNG export terminal, vessels such as a cryogenic heat exchanger, being of welded stainless steel construction and 60 metres high, require complex scaffold design solutions.  Cape has the facility to provide design scaffolds and calculations on-line from its design offices in the UK, Middle East and Australia. Scaffold material and design will generally be based on BS/European standards.

 

Cape Environmental's newly developed Syphonvac IV system for online vessel de-sanding was adopted by both Shell UK at the Gannet and Shearwater platforms and Nexen at their Buzzard platform in the second half of the year.

 

 

Acquisitions and entry into new territories

 

We completed two bolt-on acquisitions in the year.  In April, we announced the acquisition of Shoreguard Marine Pty a specialist marine corrosion protection business in Australia and in August we completed the acquisition of York Linings International Limited, a refractory linings design and installation contractor.  Both acquisitions have now been fully integrated into the Group and are performing well.

 

A key component of our growth strategy is the continued acquisition of businesses that increase our market share, add to our intellectual property, broaden our service offering in local markets or will assist us with entering target markets. We have a growing list of opportunities and expect to complete further acquisitions as and when businesses meet our criteria and valuation objectives. 

 

We successfully established operational bases in three new territories in 2011.  Our newly established operations in Papua New Guinea and India both received early contract awards and we expect our operations in Turkmenistan to commence in 2012.  Following our initial work towards the end of last year we will establish a permanent base in Iraq this year.  The size of the onshore opportunity in Iraq for our services is now increasingly being recognised as we start to provide budgetary pricing to our E&C clients active in that country.

 

 

Our people development programmes are producing positive results

 

We recognise that labour resourcing for major projects will increasingly be a key issue for our business.  In April we appointed a Group Head of International Resourcing to head up our drive to attract the best talent available to support our growth strategy.  This is already proving successful and as an example we have now mobilised in excess of 500 men for the Kumul, Lihir and Bayu-Undan projects in Papua New Guinea and Timor alone demonstrating our capability to provide skilled labour on a scale our international clients require in the most challenging of locations.

 

Following the hugely successful first phase of our Future Leaders' Programme, we commenced a second phase with a further 70 of our key managers participating in our flagship leadership development initiative.  Also in September, a further eight new graduate trainees embarked on a two year training programme.  I am pleased that, with initiatives such as these, Cape was again recognised for its sustained commitment to the development of our people at the Shell sponsored UK Oil and Gas Industry awards held in Aberdeen in November.

 

 

Forward Order Book

 

In overall terms the Group's Forward Order Book has increased by 9.7% to £940m (2010: c.£850m) with some 68% of consensus revenues for 2012 already secured (2010: 63%). 

 

The multi-year term nature of our maintenance contracts combined with the long lead-time of large construction projects, where the main demand for our core services takes place towards the end of the construction phase and often during the pre-commissioning phase, means we enjoy good visibility of future sources of revenue across our business. 

 

 

Prospects for the year ahead

 

Our focus in the year ahead will be to build on the value of the Cape international brand and to realise the significant growth opportunities ahead of us in our target markets.  Momentum is building in a number of key regions and projects indicating that Cape is entering a sustained period of demand growth for its services.  We expect strong organic revenue growth in 2012 supported by the recent growth in the order book, although our operating margin is expected to reduce.  In terms of capital expenditure we expect the asset replacement ratio to continue at broadly 100% which will enable the Group to generate strong cash flow in 2012.

 

I am confident that we are well placed to continue executing our strategy and delivering growth in shareholder returns in the year ahead.

 

 

 

 

Martin K May

Chief Executive

6 March 2012



 

Regional Review

 

Far East/Pacific Rim Region

 

The Far East/Pacific Rim region contributed 33% (2010: 29%) of Group revenue and 22% of the Group's adjusted EBITA (2010: 17%).  Headline adjusted EBITA increased by 28% (23% at CER) to £18.9m (2010: £14.8m) from increased revenues of £236.8m (2010: £188.0m).  The Far East/Pacific Rim region continues to be our fastest growing region with annual revenues having grown by over £100m since the £131.3m reported in 2009.

 

As expected with several major construction projects in progress, revenues from construction support services grew by 37% at CER (39% at AER) to £145.4m (2010: £104.1m) whilst maintenance and shutdown support revenues were broadly neutral at £68.4m (2010: £62.2m).  Revenues from the commercial and residential access business in Australia reduced by 4% at CER (6% increase at AER) to £23.0m (2010: £21.7m) reflecting the closure of the Queensland hire and sale operations in the second half.

 

Onshore construction activities continued to be the main driver for growth with significant scaffolding and insulation works on Woodside's Pluto LNG project and the Exxon Singapore Parallel Train ("SPT") Olefins project.  On the Pluto LNG project, Cape continued to provide access services throughout the year and in the final quarter also provided 185 insulators to assist the client with the important completion and pre-commissioning phase of the project.  The SPT project continues to be our largest project manpower in both the region and globally with c1,600 men on the project at the year end.  In addition, Cape provided services on several other major construction projects across the region including:

 

·      Project Aurora ammonium nitrate plant in Queensland, Australia;

·      Wonthaggi desalinisation plant in Victoria, Australia; and

·      the Goro Nickel refinery in New Caledonia

 

Cape continued to provide onshore maintenance and shutdown support services at 19 onshore plants across the region.  The client portfolio includes Alcoa, BHP, BP, Exxon, Macquarie Generation, Minara and Nyrstar. 

 

Offshore, Cape has continued to grow its business winning contract awards at Kipper Tuna Turrum (off Victoria), the Angel and North Rankin platforms in the North West Shelf and the Kumul Marine Terminal, Papua New Guinea.  These awards were in addition to existing maintenance activities at Shell Malampaya and with ConocoPhillips at Bayu-Undan.  In April 2011, Cape announced the acquisition of Shoreguard Marine a provider of specialist coatings and anti-corrosion services predominantly to the Royal Australian Navy.  This business is based near Perth WA, but gives us the resources to provide the full range of offshore services across the region.

 

As anticipated, our Access Solutions business, which is entirely focused on commercial and residential construction markets in Australia, has continued to be impacted by the difficult regional market conditions.  In November 2011, we announced that we had exited from the commercial construction market in Queensland and would recognise a charge of £1.4m in respect of the closure costs at our hire and sales depot near Brisbane.

 

2012 Preview

 

Since January 2011, we saw FIDs on five major LNG export projects in Australia (QCLNG, GLNG, APLNG T1, Wheatstone and Ichthys).  The increasing demand for construction support services across the region including module fabrication in South East Asian shipyards and both onshore and offshore work in Australia, is expected to continue to drive growth in the medium term.  As previously mentioned the release of certain secured contracts remains slow but even in the absence of such work the region is expected to deliver c.10% revenue growth in 2012.

 



 

Gulf/Middle East Region

 

The Gulf/Middle East Region generated an adjusted EBITA of £31.0m (2010: £35.4m) and contributed 36% of Group adjusted EBITA (2010: 41%).  For Cape's services, 2011 was the second successive year of market contraction following the pre-GFC highs seen in 2009, with several major projects coming to completion in 2011.  The regional market for construction support services is now poised to recommence growth in 2012 with a raft of new downstream onshore project starts.

 

Full year revenues declined by 4.1% (CER: -1.0%) to £132.1m (2010: £137.7m) with the strong pick up in the second half almost recovering the -17.5% year on year revenue reduction seen in the first half.  We saw strong performances in Abu Dhabi and Saudi Arabia in the final quarter.  Although revenue growth returned in H2, as expected margins trended down with a second half operating margin reducing to 22.6% (H2 2010: 27.1%).

 

Construction support

 

Some 69% (2010: 65%) of revenues related to construction support activities, with Cape active on 46 (2010: 29) major construction projects in the region including significant works on the Karan Gas and National Chevron Philips (NCP) petrochemical projects in Saudi Arabia.  We have also continued on the large project for Oxy/GPS on the PDO facility in the South of Oman at Mukhaizna.

 

We were delighted to bring two landmark regional projects to a successful conclusion in 2011.  In Qatar we completed our three year involvement on the pioneering Shell Pearl GTL plant having expended nearly 3 million man hours over the project life with peak manpower of 500 men.  In Saudi Arabia we brought Saudi Kayan, the world's largest ethylene plant, to a successful conclusion in 2011 expending over 3.7 million man-hours on the project and with peak manpower of around 1,000.

 

The most active market for E&C bidding activities in the region is the UAE where packages were secured on the ADCO SAS development project, Borouge III, Habshan 5, Ruwais 4th NGL train, IGD project and the Fertil 2 Ammonia/ Urea expansion project.  These are all underway and will peak during 2012.  In Saudi Arabia, significant packages came out for bid on the Jubail Export Refinery Project.

 

We also returned to Iraq in 2011 carrying out asbestos surveys in BP's Rumaila oilfield.  Cape last worked in Iraq in 1991 having carried out numerous projects since our first involvement in the country in 1979.  With the market for onshore E&C work developing in Iraq, we have provided indicative pricing on several projects which could commence in late 2012 or most likely in 2013.

 

Maintenance and shutdown support

 

We continue to position ourselves to win recurring maintenance and shutdown work across the region. Cape maintained its maintenance portfolio to 75 sites (2010: 72 sites) with existing relationships across the region with clients including BAPCO, SABIC, SIPCHEM, Saudi Aramco, Qatargas and Rasgas.

 

Cape was awarded new term maintenance contracts in Bahrain for the Bapco refinery, to undertake painting and blasting services, and in Qatar with the renewal of  five year multi-discipline maintenance contract with Rasgas and  QVC.

 

The substantial shutdown work in 2011 occurred on Das Island (ADGAS) and at the Takreer Ruwais refinery in the UAE and at the Rasgas LNG and Dolphin gas processing facilities in Qatar.  We also successfully completed the largest ever shutdown in Bapco Bahrain during the first half of 2011.

 

2012 Preview

 

We expect the region to return to double digit growth in 2012 driven by project awards in the downstream sector.  The region's order book is now 35% higher than at the beginning of 2011 and some 77% of planned 2012 revenues have now been secured (2011: 65%). 

 

We continue to expect margins in the region to trend downwards in 2012 due to the competitive environment and the changing E&C contractor landscape.

 


 

 

CIS & North Africa Region

 

Revenues in our smallest region increased by 6.9% (CER: 9.6%) to £54.5m (2010: £51.0m) representing 7.5% of Group revenue.  Adjusted EBITA generation was strong with growth of 23.1% (CER: 26.9%) to £9.6m (2010: £7.8m). 

 

Some 93% (2010: 91%) of the region's revenues were derived from construction support activities with growth driven by the commencement of works at the GL3-Z LNG project in Arzew, Algeria and to a lesser extent increased activity in Kazakhstan.

 

As commented at the interim stage, the timing of the work releases on the Arzew LNG project has been considerably slower than expected with revenues in the year less than one-third of planned levels.  With the mechanical completion date being held, it has been necessary to increase our manpower on the project considerably.  At the year-end, Cape had over 900 men on this project.  In the final quarter of 2011, we moved our operational, commercial and financial management staff to Oran in Algeria and we continue to tender and win additional work in Algeria whilst investing in local recruitment and training.

 

In the CIS our activities last year were largely centred in Kazakhstan and Sakhalin.  In Kazakhstan our main activities were concentrated on the Island D offshore hook-up and at Karabatan (the offshore and onshore parts of the Kashagan project).  Our contracts at the Karachaganak 4th Train Development and the Facilities Construction in Atyrau River Port were successfully completed in the second half.

 

With demand for our services in Kazakhstan reducing as major activities on the current development phase of Kashagan and Karachaganak complete, the focus will switch to opportunities in Azerbaijan.  Our JV with SOCAR (State Oil Company of Azerbaijan) allowed us to enter the Azerbaijan market last year and, whilst initial set up and establishment costs have resulted in a loss of £0.6m (2010: £Nil), an early success was achieved with the award of the access contract for the West Chirag Platform topsides.  We expect further material bidding opportunities to arise in 2012.

 

In Sakhalin we successfully completed our works on the Odoptu project with Fluor in Q4.  Work continues on the Chayevo Expansion project and the only maintenance support services contract in the region at the Sakhalin II LNG Plant for Sakhalin Energy.

 

Broadening our service offering in the region was also a key objective last year and through our acquisition of York Linings we were able to tender our first refractory contract at the Kuibyshev refinery in Russia.  We also established an industrial cleaning division within the region.

 

 

2012 Preview

 

We expect stronger revenue growth in 2012 driven by increased activity in Algeria.  Whilst activity levels across the CIS countries should remain stable our short-term emphasis will move more to Azerbaijan as current work scopes complete in Kazakhstan later this year.

 

 

 

UK Region

 

The UK Region contributed 31.2% of Group adjusted EBITA (2010: 32.6%).  Adjusted EBITA decreased by £1.3m to £26.7m (2010: £28.0m) from revenues of £299.1m (2010: £273.4m).  Cape's services in the UK continue to be dominated by plant maintenance or production support activities.  

 

The positive impact of the region's strong revenue performance with growth of 9.4% was entirely offset by the reduction in the operating margin to 8.9% (2010: 10.2%) resulting from the £4.1m charge in relation to a one-off rig refurbishment contract which completed in the first week of January 2012.  Excluding this contract the region's EBITA margin remained largely unchanged at 10.3%.

 

Onshore revenues increased by 14% to £171.1m (2010: £149.7m) driven by higher levels of activity in the power generation sector in the second half.  Cape has a stronghold in the power generation sector being present on 23 out of 52 larger power stations (with > 500mw capacity).  In 2011 we saw higher levels of outage (shutdown) works from our core clients in this sector following a slowdown in 2010.  In addition, we continued with capital upgrade/project work with:

 

·      SABIC UK at its Teesside plant 'links and veins' remediation works;

·      ConocoPhillips at the Humber Oil refinery carrying out access for vessel refurbishment;

·      BAE Systems on the QEC aircraft carrier construction project; and

·      SSI on rejuvenation work at the Redcar steel plant.

 

Margins were in line with last year preserving good quality returns from the higher mix of shutdown and project activities and continued focus on manpower efficiency whilst maintaining the highest safety standards.

 

In July 2011, we successfully completed the acquisition of York Linings which provides refractory installation and maintenance services and complements Cape's existing service offering in the UK.  A strong performance in the five months post acquisition contributed EBITA of £1.7m from revenues of £8.7m.  Revenues are largely derived from one-off project works and significant projects undertaken in 2011 included the furnace and stoves overhaul at the Redcar Steel works for SSI and the FCCU (fluidized catalytic cracking unit) outage at the Lindsay Oil Refinery.

 

Offshore revenues reduced by 5% to £93.1m (2010: £97.6m) with the operational highlights being the successful commencement of work on:

 

·      four new BP assets (part of the BP UKCS Federal contract award);

·      the Netherlands Continental Shelf with Total E&P contract; and

·      a number of unmanned platforms for BHP in Liverpool Bay.

 

On 8 September 2011 we were pleased to announce the award of a three year contract from TOTAL E&P UK for fabric maintenance services at the Alwyn North, Dunbar, Elgin-Franklin and St Fergus assets.

 

We saw margins in the UKCS market come under pressure in 2011 with competitors discounting to gain market share.  With the corporate activity in the UKCS now behind us and increasing investment in the UKCS we see opportunities for growth.

 

Environmental services (Cape DBI) revenues remained flat at £26.2m (2010: £26.1m) with continued strong demand for our innovative offshore on-line cleaning solutions from clients including BP, Nexen, Shell and Apache.  Significant work was also undertaken at onshore facilities including BP Sullom Voe, Dow Corning at Barry and TATA steel at Port Talbot although activity levels remained broadly neutral across the petrochemical, refining and heavy industrial sectors.

Contract awards and renewals during 2011 included the three year call-off contract from Shell for offshore platform separator cleaning announced in February and term contracts with Dow Chemicals at Grangemouth, Scotland and Dow Corning at Barry, South Wales.

 

2012 Preview

 

We expect to see a continued modest increase in activity levels in 2012 over those seen last year.  Over 70% of planned 2012 revenues have now been secured (2011: 66%).  

 

The power generation sector is expected to generate a modest increase in shutdown and project works in 2012 and, whilst we expect nuclear decommissioning opportunities to become more visible in the second half, they are unlikely to contribute meaningfully until 2013.  Offshore, a full year contribution from the Total UK maintenance contract together with up-manning on our core activities for BP and new development works on the BP Andrew platform are expected to drive increased activity levels in 2012.  We will also benefit from a full year contribution from the York Linings acquisition.

 

Chief Financial Officer's Review

 

Revenue

 

Revenue increased by 11.1% to a record £722.5m in 2011 from £650.1m in 2010.  The increased revenue predominantly reflects organic growth (£50.6m), but also includes the benefit of the two acquisitions completed in the year (£10.5m) and a positive impact from currency translation (£11.3m).  

 

Three of Cape's four geographic regions contributed to underlying revenue growth with only the Gulf/Middle East Region reducing by a marginal 1.0% at CER.  As previously indicated, a return to revenue growth was anticipated in the second half and, as shown by the table below, the second half revenue performance has been strong with overall growth of 21.5% to £387.5m (2010: £318.8m).

 


UK

Gulf/ Middle East

Far East/ Pac Rim

CIS/ Med & North Africa

Total


£m

£m

£m

£m

£m

2010






First half

138.9

80.1

90.4

21.9

331.3

Second half

134.5

57.6

97.6

29.1

318.8

Total for the year

273.4

137.7

188.0

51.0

650.1







2011






First half

136.2

66.1

104.4

28.3

335.0

Second half

162.9

66.0

132.4

26.2

387.5

Total for the year

299.1

132.1

236.8

54.5

722.5

In 2011, the Group was contracted to work on 287 industrial assets onshore and offshore.  Revenue invoiced to the largest customer represented 9% of total revenue (2010: 9%) and the top 10 customers represented 35% of revenue in 2011 (2010: 35%).

Adjusted Operating Profit margins

The adjusted operating profit margin reduced to 10.9% (2010: 12.0%).  On 15 September 2011 the Group undertook an internal reorganisation as part of its strategy to support growth in our International operations in particular in the Far East/Pacific Rim Region.  In order to better facilitate this growth, we centralised certain operations and management to form a new IHQ with responsibilities which include the management and development of the Group's non-UK intellectual property.  As part of these arrangements, IHQ has entered into franchise agreements to support the Group's non-UK trading companies.  Consequently a franchise fee has been charged for the period since 15 September 2011 and reported in the operating profit for each operating segment.  The table below shows adjusted EBITA margin by region before the impact of the restructuring.


UK

Gulf/ Middle East

Far East/ Pac Rim


CIS/ Med & North Africa


Group after central costs

 


%

%

%


%


%

 

2010








 

First half

9.9%

24.7%

7.7%


15.1%


12.1%

 

Second half

10.6%

27.1%

8.0%


15.5%


12.0%

 

Total for the year

10.2%

25.7%

7.9%


15.3%


12.0%

 









 

2011








 

First half

9.4%

24.4%

8.7%


16.3%


11.5%

 

Second half

8.5%

22.6%

7.4%


19.1%


10.3%

 

Total for the year

8.9%

23.5%

8.0%


17.6%


10.9%

 









The Group's operating margin in the second half reduced to 10.3% driven by the expected softening of margins in the Gulf/Middle East Region, the impact of the one-off problem rig refurbishment contract in the UK Region and depot closure costs in Australia (both reported in the Group's IMS of 9 November 2011) and increased central costs.

Non-operating - Other items

 

Results for the year include non-operating other items of £7.5m (2010: £6.0m).  The total amount has been excluded from the adjusted profits and earnings to show the underlying performance of the business.  The non-operating other items in 2011 principally comprise the corporate expenses of £2.0m (2010: nil) incurred in H1 in relation to the move from AIM to the LSE's main market and the corporate restructuring together with Net Finance charges of £4.3m comprising:

 

·      the annual £4.0m (2010: £4.0m) non-cash charge relating to the unwinding of the discount on the long term IDC liability following the booking of the provision in 2009;

 

·      a £1.3m (2010: nil) charge representing the unamortised facility fees arising from the early cancellation of the Group's 2007 syndicated banking facility; and

 

·      Interest income on the IDC Scheme funds in the period of £1.0m (2010: £1.0m).

 

Finance charge

 

The net finance charge (excluding non-operating other items) reduced by 5.6% to £8.5m (2010: £9.0m) with interest cover (calculated by dividing adjusted operating profit by the adjusted finance costs) increasing to 9.1 times (2010: 8.6 times) This compares to the minimum of 3.0 times required by the covenant in Cape's unsecured £220m syndicated credit facility announced in January and with a maturity date of June 2015.

 

Taxation

 

The tax charge on profits excluding non-operating other items and joint ventures, of £13.7m (2010: £14.6m) represents an average tax rate of 19.5% (2010: 21.1%).  The tax rate decrease of 1.6% in the year predominantly reflects a reduction in the UK Corporation Tax rate, Group restructuring and changes in mix of geographic source of profit generation.

 

 

Tax paid in the period reduced by £5.1m to £6.4m (2010: £11.5m).  Cash tax payments were significantly lower than the Group's P&L charge due to the utilisation of losses in the UK and Far East/Pacific Rim regions.  In the Gulf/Middle East Region payments also reduced reflecting the lower tax rates in Qatar as well as the changes in mix of geographic source of pre tax profits.  The Group seeks to mitigate the burden of taxation in a responsible manner to enhance its competitive position on a global basis while managing its relationships with tax authorities on the basis of full disclosure.

 

Earnings per share

 

Adjusted diluted earnings per share were 43.8p (2010: 42.6p) and basic earnings per share were 40.2p (2010: 42.6p).  The diluted weighted number of shares increased to 122.3 million compared with 120.8 million in 2010.

 

Dividend

 

Taking account of the 2011 financial results, current market conditions and the underlying prospects of the Group, the Directors are proposing a final dividend for 2011 of 9.5p (2010: 8.0p) per share.  This is a 18.8% increase on the final dividend last year.  Together with the interim dividend of 4.5p per share paid on 7 October 2011, the total dividend for the year will be 14.0p per share, an increase of 16.7% on the dividend paid for the prior year (2010: 12p).

Subject to shareholders' approval at the Annual General Meeting on 16 May 2012 the final dividend will be payable on 8 June 2012 to shareholders on the register as at 11 May 2012.

Acquisitions

 

Two bolt-on acquisitions were made in 2011 Shoreguard Pty Limited in Australia and York Linings in the UK for a total combined cash consideration of £4.3m.  Additional deferred consideration of £2.8m may become payable subject to the businesses achieving set performance targets.  The businesses contributed revenue and operating profit before intangible amortisation and acquisition related costs of £10.5m and £2.0m.

 

 

Operating and free cash flow

 

Operating cash flow reduced to £32.7m, primarily due to a working capital outflow in 2011 of £43.6m, compared to a £1.8m inflow in 2010.  The working capital movement is partly attributable to the return to revenue growth in the second half of 2011 and also the investment requirements on four major projects.

 

As a consequence, the Group's free cash flow of £19.6m was down £48.4m from 2010.  After payment of dividends, acquisition cash outflow of £4.3m and payment of non-operating other items of £5.1m, the Group's net cash outflow was £6.3m. The summary cash flow for the year was as follows:


 

 

2011

£m


 

 

2010

£m

 

EBITDA

(Increase) / Decrease in working capital*

 

96.3

(43.6)


 

96.7

1.8

Net capital expenditure

(20.0)


(11.6)

Operating cash flow

32.7


86.9





Operating cash flow to operating profit**

42%


111%





Net interest

(6.7)


(7.4)

Tax

(6.4)


(11.5)

Free cash flow

19.6


68.0

Dividends

(18.0)


(6.0)

Acquisitions

(4.3)


-

Refinancing and Listing costs

Other movements in net debt

Movement in net debt

Opening net debt

Closing net debt

(5.1)

1.5

(6.3)

(52.9)

(59.2)


-

(1.3)

60.7

(113.6)

(52.9)

 

*At average rates

**Before non-operating other items

 

 

As expected the Asset Replacement Ratio (calculated by dividing gross capex spend by the depreciation charge) increased to 119% (2010: 71%) reflecting higher levels of investment in growth capex this year.

Financing and bank facilities

The Group's adjusted net debt, increased year on year by £6.3m to £59.2m (2010: £52.9m) including finance lease obligations of £3.9m (2010: £10.3m).  Balance sheet gearing increased to 14.6% (2010: 14.3%).  The ratio of net debt to annualised adjusted EBITDA has remained at 0.6 times (2010: 0.6 times).

As referred to above, our £220 million syndicated banking facility is in place until June 2015 and we remain able to service our medium term requirements without further need for financing.

Increase in working capital

 

Investment in trade and other receivables and inventories increased by £65.6m to £244.5m (2010: £178.9m) partially offset by an increase in trade and other payables of £22.5m to £122.8m (2010: £100.3m) giving an increase in net working capital of £43.1m (at balance sheet rates) to £121.7m.  With the revenue growth in H2, and based upon Cape's typical level of investment in receivables and inventories of 100 days, the excess level of working capital investment equates to £32.2m as shown by the table below.

 


 

2011

£m


 

2010

£m

 

 

 

 

2009

£m

H2 Revenue annualised

 

Expected investment in receivables and inventories of 100 days

775.0

 

212.3


637.6

 

174.7


647.0

 

177.3

Actual investment

244.5


178.9


173.3

Excess investment

32.2


4.2


(4.0)

 

This excess investment at the year-end has principally arisen from Cape's activities on four major projects across the Group where delayed receipts from customers or initial purchases of materials and set up costs have resulted in extended working capital levels.  

 

Provision for estimated future asbestos related liabilities and IDC Scheme funds

 

The discounted post-tax provision held increased to £62.4m (2010: £59.6m) reflecting the unwinding of the discount of £4.0m in the year (2010: £4.0m) and the £2.0m (2010: £2.2m) of cash settlements made in the period.

 

The ring-fenced IDC Scheme funds reduced by £1.5m (2010: £2.2m reduction) comprising cash settlements and costs paid to claimants of £2.0m (2010: £2.2m) with interest income received of £0.5m (2010: nil).  Interest accrued of £0.5m (2010: £1.0m) is shown as finance income other items in the income statement.

 

Currencies in 2011

 

Nearly all operating costs are matched with corresponding revenues of the same currency and as such there is very little transactional currency risk in the Group.  Currency translation had a 1% adverse impact on the results for the year principally due to weakening of the US dollar which was offset by the strengthening of the Australian dollar.

 

In 2011, some 21.4% of revenues were negotiated in US Dollar or US Dollar pegged currencies and 24.2% in Australian dollar.  The following significant exchange rates applied during the year:

 


Average rate

Closing rate



2011

2010

2011

2010

US dollar


1.60

1.55

1.55

1.57

Australian dollar


1.54

1.69

1.52

1.53

 

Treasury Policies

 

Cape has a centralised Treasury function whose objectives are to monitor and manage the financial risks of the Group and to ensure that sufficient liquidity is available to meet the requirements of the business.  Group Treasury is not a profit centre and operates within a framework of policies and procedures.  All hedging is carried out centrally and speculative trading is specifically prohibited by Group Treasury policy.

 

Pensions

 

The Defined Benefit Pension Scheme had a net surplus of £16.2m as at 31 December 2011 (2010: £13.2m) and continues to be restricted to nil in the accounts under IFRIC 14.

 

Shareholders' equity

 

The Group's net shareholders' equity at the end of the year was £406.1m (2010: £368.8m) which has increased as a result of retained earnings and beneficial foreign exchange movements partially offset by the dividend distribution.

 

Impacted by the loss making contract in the UK and the increased working capital investment and capital expenditure, our key performance metric of Return on Managed Assets (ROMA) reduced to 27.8% ahead of our minimum target level of 25%. Return on Capital Employed (ROCE) also reduced to 17.7% (2010: 19.5%).  The underlying ROMA and ROCE excluding the loss making contract were 29.2% and 18.6% respectively.

 

 

Richard Bingham

Chief Financial Officer

 

6 March 2012

 

 

 

 

 

 

 

 

Unaudited consolidated income statement

for the year ended 31 December 2011

 














Year ended

31 December 2011

Year ended

31 December 2010

 

 

Continuing operations

Notes




Before other items £m

Other items £m

Total

 £m

Before other items £m

Other items £m

Total £m

 

Revenue

2




722.5

-

722.5

650.1

-

650.1

 












 












 

Operating profit before other items

2




78.5

-

78.5

78.2

-

78.2

 

Amortisation of intangible assets





-

(0.8)

(0.8)

-

(2.6)

(2.6)

 

Corporate expenses(a)





-

(2.0)

(2.0)

-

-

-

 

Industrial disease costs





-

(0.4)

(0.4)

-

(0.4)

(0.4)

 

Operating profit

2




78.5

(3.2)

75.3

78.2

(3.0)

75.2

 












 

Share of post tax losses from joint ventures





(0.6)

-

(0.6)

(0.1)

-

(0.1)

 

Total operating profit





77.9

(3.2)

74.7

78.1

(3.0)

75.1

 












 

Finance income(b)

4




0.1

1.0

1.1

0.1

1.0

1.1

 

Finance costs (c)

4




(8.6)

(5.3)

(13.9)

(9.1)

(4.0)

(13.1)

 

Profit before tax





69.4

(7.5)

61.9

69.1

(6.0)

63.1

 












 

Income tax (expense)/credit

5




(13.7)

1.5

(12.2)

(14.6)

3.8

(10.8)

 

Profit from continuing operations





55.7

(6.0)

49.7

54.5

(2.2)

52.3

 












 

Discontinued operations









 

Profit from discontinued operations

       




-

-

-

0.3

-

0.3

 












 

Profit for the period





55.7

(6.0)

49.7

54.8

(2.2)

52.6

 












 












 

Attributable to:











 

Owners of Cape plc



47.4



49.5

 

Non-controlling interests


2.3



3.1

 




49.7



52.6

 












 

Earnings per share for profit attributable to the owners of Cape plc

 






 

From continuing and discontinued operations











 

Basic

6


45.3p

40.2p

44.2p


42.6p

 

Diluted

6




43.8p


38.8p

42.6p


41.0p

 












 

 

(a) Relates wholly to expenses incurred as a result of the return to the full list and corporate restructure.

(b) Includes £1.0m (2010: £1.0m) of Scheme interest as shown in note 4.

(c)Includes £4.0m (2010: £4.0m) unwind of discount in respect of IDC provision and £1.3m (2010: £nil) unamortised facility fee as shown in note 4.

 

 

 

 

Unaudited consolidated statement of comprehensive income

for the year ended 31 December 2011

 

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Profit for the year

 

 

 

 

 

49.7

52.6

Other comprehensive income:

 

 

 

 

 


 

Currency translation differences

 

 

 

 

 

0.7

50.7

Cash flow hedges - fair value gains

 

 

 

 

 

2.0

0.3

Net investment hedges - fair value gains/(losses)

 

 

 

 

 

0.1

(0.6)

Deferred tax movements

 

 

 

 

 

-

0.9

Actuarial gain recognised in the pension scheme

 

 

 

 

 

1.9

1.7

Movement in restriction of retirement benefit asset in accordance with IFRIC 14

 

 

 

 

 

(2.7)

(2.5)

Other comprehensive income for the year, net of tax

 

 

 

 

 

2.0

50.5

Total comprehensive income

 

 

 

 

 

51.7

103.1

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of Cape plc

 

 

 

 

 

49.2

100.2

Non-controlling interests

 

 

 

 

 

2.5

2.9

 

 

 

 

 

 

51.7

103.1

 

 

 

Unaudited consolidated balance sheet

at 31 December 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

Notes

£m

£m

Non-current assets

 

 

 

 

 

 

 

Intangible assets

 

 

 

 

7

246.7

241.5

Property, plant and equipment

 

 

 

 

8

160.8

154.3

Investments accounted for using equity method

 

 

 

 

 

0.1

0.1

Deferred tax asset

 

 

 

 

 

44.3

43.2

 

 

 

 

 

 

451.9

439.1

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

 

 

 

 

9.9

8.8

Trade and other receivables

 

 

 

 

 

234.6

170.1

Cash - IDC(c) Scheme funds (restricted)

 

 

 

 

 

30.1

31.6

Cash and cash equivalents

 

 

 

 

 

69.6

95.8

 

 

 

 

 

 

344.2

306.3

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Borrowings

 

 

 

 

 

(2.6)

(34.4)

Derivative financial instruments

 

 

 

 

 

(2.2)

(4.1)

Trade and other payables

 

 

 

 

 

(122.8)

(100.3)

Current income tax liabilities

 

 

 

 

 

(17.3)

(13.1)

 

 

 

 

 

 

(144.9)

(151.9)

Net current assets

 

 

 

 

 

199.3

154.4

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

 

 

 

 

 

(126.2)

(114.3)

Retirement benefit obligations

 

 

 

 

 

(7.8)

(6.6)

Deferred tax liabilities

 

 

 

 

 

(19.7)

(16.8)

IDC(c) provision

 

 

 

 

 

(83.2)

(81.7)

Other provisions

 

 

 

 

 

(8.2)

(5.3)

 

 

 

 

 

 

(245.1)

(224.7)

Net assets

 

 

 

 

 

406.1

368.8

 

 

 

 

 

 

 

 

Equity attributable to owners of Cape plc

 

 

 

 

 

 

 

Share capital

 

 

 

 

11

29.7

29.2

Share premium account

 

 

 

 

 

0.5

10.8

Special reserve

 

 

 

 

 

1.0

1.0

Other reserves(d) 

 

 

 

 

 

11.0

(3.0)

Translation reserve

 

 

 

 

 

115.6

115.1

Retained earnings

 

 

 

 

 

244.5

211.1

Total equity attributable to owners of Cape plc

 

 

 

 

 

402.3

364.2

Non-controlling interests

 

 

 

 

 

3.8

4.6

Total equity

 

 

 

 

 

406.1

368.8

 

          (c)   IDC refers to the Industrial Disease Claims which are funded using the Scheme cash.

 (d)  Reclassification of share premium of Old Cape due to changes in composition of the entity - refer to note 1.2 for details.

 

 

 



 

Unaudited consolidated statement of changes in equity

at 31 December 2011

 


Share Capital

Share premium account

Special Reserve*

Retained Earnings

Translation reserve

Other reserves**

Total

Non-controlling interests

  Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

 At 1 January 2010

33.3

9.2

1.0

160.6

64.2

(3.6)

264.7

3.0

267.7

Comprehensive income:










Profit for the year

-

-

-

49.5

-

-

49.5

3.1

52.6

Other comprehensive income:










Currency translation differences

-

-

-

-

50.9

-

50.9

(0.2)

50.7

Cash flow hedges - fair value gains in year

-

-

-

-

-

0.3

0.3

-

0.3

Net investment hedges - fair value losses in year

-

-

-

-

-

(0.6)

(0.6)

-

(0.6)

Deferred tax on hedges/options

-

-

-

-

-

0.9

0.9

-

0.9

Actuarial gain recognised in the pension scheme

-

-

-

1.7

-

-

1.7

-

1.7

Movement in restriction of retirement benefit asset in accordance with IFRIC 14

-

-

-

(2.5)

-

-

(2.5)

-

(2.5)

Total other comprehensive (expense)/income

-

-

-

(0.8)

50.9

0.6

50.7

(0.2)

50.5

Total comprehensive income for the year ended 31 December 2010

-

-

-

48.7

50.9

0.6

100.2

2.9

103.1

Transactions with owners:










Cancellation of deferred shares

(4.3)

-

-

4.3

-

-

-

-

-

Dividends

-

-

-

(4.7)

-

-

(4.7)

-

(4.7)

Dividend paid to non-controlling interest

-

-

-

-

-

-

-

(1.3)

(1.3)

Share options










- proceeds from shares issued

0.2

1.6

-

-

-

-

1.8

-

1.8

- value of employee services

-

-

-

2.2

-

-

2.2

-

2.2


(4.1)

1.6

-

1.8

-

-

(0.7)

(1.3)

(2.0)

At 31 December 2010

29.2

10.8

1.0

211.1

115.1

(3.0)

364.2

4.6

368.8

At 1 January 2011

29.2

10.8

1.0

211.1

115.1

(3.0)

364.2

4.6

368.8

Comprehensive income:










Profit for the period

-

-

-

47.4

-

-

47.4

2.3

49.7

Other comprehensive income:










Currency translation differences

-

-

-

-

0.5

-

0.5

0.2

0.7

Cash flow hedges - fair value gains in period

-

-

-

-

-

2.0

2.0

-

2.0

Net investment hedges - fair value losses in period

-

-

-

-

-

0.1

0.1

-

0.1

Deferred tax on hedges/options

-

-

-

-

-

-

-

-

-

Actuarial gain recognised in the pension scheme

-

-

-

1.9

-

-

1.9

-

1.9

Movement in restriction of retirement benefit asset in accordance with IFRIC 14

-

-

-

(2.7)

-

-

(2.7)

-

(2.7)

Total other comprehensive (expense)/income

-

-

-

(0.8)

0.5

2.1

1.8

0.2

2.0

Total comprehensive income for the year ended 31 December 2011

-

-

 -

46.6

0.5

2.1

49.2

2.5

51.7

Transactions with owners:










Dividends

-

-

-

(14.7)

-

-

(14.7)

-

(14.7)

Dividend paid to non-controlling interest

-

-

-

-

-

-

-

(3.3)

(3.3)

Share options










- proceeds from shares issued

0.5

1.6

-

-

-

-

2.1

-

2.1

- value of employee services

-

-

-

1.5

-

-

1.5

-

1.5

Reclassification on group reconstruction***

-

595.7

-

(607.6)

-

11.9

-

-

-

Capital reduction***

-

(607.6)

-

607.6

-

-

-

-

-


0.5

(10.3)

-

(13.2)

-

11.9

(11.1)

(3.3)

(14.4)

At 31 December 2011

29.7

0.5

1.0

244.5

115.6

11.0

402.3

3.8

406.1

 

* The Special Reserve was created in 2007 by court order upon cancellation of the share premium and retained earnings. The Special Reserve is undistributable and restrictions exist over its use.

** Other reserves relates to hedging reserves held in respect of cashflow and net investment hedges.

*** Refer to note 1.2 for details of changes in composition of the entity.


Unaudited consolidated statement of cash flows

for the year ended 31 December 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

Notes

£m

£m

Cash flows from operating activities

 

 

 

 

 

 

 

Cash generated from operations

 

 

 

 

9

49.6

98.5

Interest received

 

 

 

 

 

-

0.1

Interest paid

 

 

 

 

 

(6.7)

(8.3)

Tax paid

 

 

 

 

 

(6.4)

(11.5)

Net cash inflow from operating activities

 

 

 

 

 

36.5

78.8

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Proceeds from sale of property, plant and equipment

 

 

 

 

8

0.4

0.3

Purchase of property, plant and equipment

 

 

 

 

8

(20.4)

(11.9)

Acquisition of subsidiaries

 

 

 

 

7

(4.3)

-

 

 

 

 

 

(24.3)

(11.6)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Net proceeds from issue of ordinary shares

 

 

 

 

 

2.1

1.8

Corporate expenses

 

 

 

 

 

(2.0)

-

Movement on revolving facility

 

 

 

 

10

(3.6)

3.6

Finance lease principal payments

 

 

 

 

 

(6.8)

(6.1)

Dividends paid to Company shareholders

 

 

 

 

 

(14.7)

(4.7)

Repayment of borrowings

 

 

 

 

10

(10.0)

(34.3)

Dividend paid to non-controlling interests

 

 

 

 

 

(3.3)

(1.3)

Net cash used in financing activities

 

 

 

 

 

(38.3)

(41.0)

 

 

 

 

 

 

 

 

Exchange (losses)/gains on cash, cash equivalents

 

 

 

 

 

(0.1)

3.3

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash, cash equivalents

 

 

 

 

10

(26.2)

29.5

Cash, cash equivalents at beginning of year

 

 

 

 

 

95.8

66.3

Cash, cash equivalents at end of year

 

 

 

 

 

69.6

95.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

1.1. Basis of preparation

The consolidated financial statements have been prepared in accordance with the Companies Act 2006, International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union in response to the IAS regulation (EC 1606/2002). The consolidated financial statements have been prepared under the historical cost convention as modified to include revaluation of certain financial assets and financial liabilities (including derivative instruments) at fair value through the profit and loss and held at fair value as described below.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

 

The preliminary results for the year ended 31 December 2011 are unaudited. The financial information set out in the announcement does not constitute the Company's IFRS statutory accounts for the years ended 31 December 2011 or 31 December 2010 as defined by Section 434 of the Companies Act 2006.   

 

The financial information for the year ended 31 December 2010 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.

 

1.2 Changes in composition of the entity

On 17 June 2011, pursuant to a Scheme of Arrangement under Part 26 of the Companies Act 2006, a new parent company was introduced which is now called Cape plc (the "Company").  The previous parent company has been renamed as Cape Intermediate Holdings plc ("Old Cape").

 

Immediately after the Scheme of Arrangement became effective the Company had the same business and operations as Old Cape. The consolidated assets and liabilities of the Company immediately after the effective date of the Scheme of Arrangement are the same as the consolidated assets and liabilities of Old Cape immediately before.

 

The introduction of a new holding company constitutes a group reconstruction and has been accounted for using merger accounting principles. As a result, the financial statements are shown as if the new group had always been in existence. The statement of changes in equity shows that the net impact of the changes to the composition of the entity is that the share premium of Old Cape on 17 June 2011 has been reclassified to other reserves. The details of movements in share capital are shown in note 11.

 

The Company is incorporated in Jersey under the Companies (Jersey) Law 1991 and is headquartered in Singapore.

 

1.3 Going concern basis

After making enquiries, the Directors have reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

 

1.4 Accounting policies

The same accounting policies and methods of computation are followed in the preliminary announcement as the latest published audited accounts, which are available on the Company's website at www.capeplc.com.

 

There is no financial impact on this condensed consolidated financial report of the new standards, amendments and interpretations that are in issue and mandatory for the financial year end to 31 December 2011:

- IAS 24 (revised) 'Related party disclosures' (effective 1 January 2011)

- Amendments IAS 32 Financial instruments: Presentation on classification of rights issues (effective 1 February 2010)

- Amendment to IFRS 1, First time adoption on financial instrument disclosures (effective 1 July 2010)

- Annual improvements 2010 (effective 1 January 2011)

- Amendment to IFRIC 14, 'Pre-payments of a Minimum Funding Requirement' (effective January 2011)

- IFRIC 19, 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010)

The Group has decided not to early adopt any standards which are not yet effective, but available for early adoption.

 

1.5 Estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing these consolidated financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2010.

 

 

2. Segment information

Management has determined the operating segments based on the reports reviewed by the Group Board (Chief Operating Decision Maker) that are used to make strategic decisions. The Board considers the business from a geographic perspective.
The profit measure used by the Chief Operating Decision Maker in its review is total operating profit.

 

The segment information for the year ended 31 December 2011 is as follows:

 

 

 

United

Gulf/Middle

CIS, Med

Far East/

Central

 

 

 

Kingdom

East

& NA

Pacific Rim

Costs*

Group

2011

 

£m

£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

 

 

Revenue

 

299.1

132.1

54.5

236.8

-

722.5

Operating profit/(loss) before other items

 

26.7

28.8

9.3

15.2

(1.5)

78.5

Amortisation of intangible assets

 

(0.2)

-

-

(0.6)

-

(0.8)

Corporate expenses

 

-

-

-

-

(2.0)

(2.0)

IDC costs

 

-

-

-

-

(0.4)

(0.4)

Operating profit/(loss)

 

26.5

28.8

9.3

14.6

(3.9)

75.3

Share of post tax loss of joint ventures

 

-

-

(0.6)

-

-

(0.6)

Total operating profit/(loss)

 

26.5

28.8

8.7

14.6

(3.9)

74.7

Finance income

 

 

 

 

 

 

1.1

Finance costs

 

 

 

 

 

 

(13.9)

Profit before tax

 

 

 

 

 

 

61.9

Taxation

 

 

 

 

 

 

(12.2)

Profit from continuing operations

 

 

 

 

 

 

49.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of Cape plc

 

 

 

 

 

 

47.4

Non-controlling interests

 

 

 

 

 

 

2.3

 

 

 

 

 

 

 

49.7

* Included in central costs is a credit with respect to franchise fees charged to group companies. Please see adjusted measures (note 3) for adjusted operating profit/(loss) pre franchise fees.

 

There were no significant inter-segment sales.

 

 

 

United

Gulf/Middle

CIS, Med

Far East/

Central

 

 

 

Kingdom

East

& NA

Pacific Rim

Costs

Group

2010

 

£m

£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

 

 

Revenue

 

273.4

137.7

51.0

188.0

-

650.1

Operating profit/(loss) before other items

 

28.0

35.4

7.8

14.8

(7.8)

78.2

Amortisation of intangible assets

 

(0.3)

-

-

(2.3)

-

(2.6)

IDC costs

 

-

-

-

-

(0.4)

(0.4)

Operating profit/(loss)

 

27.7

35.4

7.8

12.5

(8.2)

75.2

Share of post tax profits of joint ventures

 

-

-

(0.1)

-

-

(0.1)

Total operating profit/(loss)

 

27.7

35.4

7.7

12.5

(8.2)

75.1

Finance income

 

 

 

 

 

 

1.1

Finance costs

 

 

 

 

 

 

(13.1)

Profit before tax

 

 

 

 

 

 

63.1

Taxation

 

 

 

 

 

 

(10.8)

Profit from continuing operations

 

 

 

 

 

 

52.3

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

Profit attributable to discontinued operations

 

 

 

 

 

 

0.3

Profit for the year

 

 

 

 

 

 

52.6

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of Cape plc

 

 

 

 

 

 

49.5

Non-controlling interests

 

 

 

 

 

 

3.1

 

 

 

 

 

 

 

52.6

       

 

 

There were no significant inter-segment sales.

 



Segment information (continued)

Other segment items included in the income statement are as follows:

 




2011






2010





United

Gulf/Middle

CIS, Med

Far East/

Central


United

Gulf/Middle

CIS, Med

Far East/

Central



Kingdom

East

& NA

Pacific Rim

Costs

Group

Kingdom

East

& NA

Pacific Rim

Costs

Group


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Depreciation

3.8

4.7

2.1

6.9

-

17.5

3.8

5.1

2.0

6.5

-

17.4

Amortisation

0.2

-

-

0.6

-

0.8

0.3

-

-

2.3

-

2.6

 

The Group operates in the following geographic areas:

 

Revenue (based on location of the entity)

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Continuing operations:

 

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

299.1

273.4

Gulf/Middle East

 

 

 

 

 

132.1

137.7

CIS, Med & NA

 

 

 

 

 

54.5

51.0

- Australia

 

 

 

 

 

190.4

134.3

- Other Far East/Pacific Rim

 

 

 

 

 

46.4

53.7

Total Far East/Pacific Rim

 

 

 

 

 

236.8

188.0

Central

 

 

 

 

 

-

-

Total

 

 

 

 

 

722.5

650.1

 

Segment assets consist primarily of property, plant and equipment, investments, intangible assets, inventories and trade and other receivables. Unallocated assets comprise deferred taxation and cash.

 

Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as taxation and borrowings including related hedging transactions.

 

The segment assets and liabilities at 31 December 2011 and capital expenditure for the year then ended are as follows:

 

 

 

Gulf/

 

 

 

 

 

 

United

Middle

CIS, Med

Far East/

Central

 

 

 

Kingdom

East

& NA

Pacific Rim

Costs

Unallocated

Group

 

£m

£m

£m

£m

£m

£m

£m

Assets - continuing

92.6

139.4

39.7

361.5

47.0

113.9

794.1

Assets - discontinued

2.0

-

-

-

-

-

2.0

Total assets

94.6

139.4

39.7

361.5

47.0

113.9

796.1

Non-current assets included

 

 

 

 

 

 

 

within total assets are as follows:

 

 

 

 

 

 

 

Continuing

28.5

74.2

15.3

275.4

12.2

44.3

449.9

Discontinued

2.0

-

-

-

-

-

2.0

Total non-current assets

30.5

74.2

15.3

275.4

12.2

44.3

451.9

 

 

 

 

 

 

 

 

Liabilities - continuing

42.0

39.4

9.6

40.8

89.1

168.0

388.9

Liabilities - discontinued

1.1

-

-

-

-

-

1.1

Total liabilities

43.1

39.4

9.6

40.8

89.1

168.0

390.0

Capital expenditure

 

 

 

 

 

 

 

- property, plant and equipment

4.5

6.5

0.9

8.9

-

-

20.8

 

 

 

 

 

 

 

Assets

Liabilities

 

 

 

 

 

 

£m

£m

Segment assets/liabilities

 

 

 

 

 

682.2

222.0

Unallocated:

 

 

 

 

 

 

 

- Deferred tax

 

 

 

 

 

44.3

19.7

- Current tax

 

 

 

 

 

-

17.3

- Cash

 

 

 

 

 

69.6

-

- Current borrowings

 

 

 

 

 

-

3.9

- Non-current borrowings

 

 

 

 

 

-

124.9

- Derivatives

 

 

 

 

 

-

2.2

Total assets/liabilities

 

 

 

 

 

796.1

390.0

 



Segment information (continued)

The segment assets and liabilities at 31 December 2010 and capital expenditure for the year then ended are as follows:

 

 

 

Gulf/

 

 

 

 

 

 

United

Middle

CIS, Med

Far East/

Central

 

 

 

Kingdom

East

& NA

Pacific Rim

Costs

Unallocated

Group

 

£m

£m

£m

£m

£m

£m

£m

Assets - continuing

78.2

129.8

33.4

317.0

46.0

139.0

743.5

Assets - discontinued

2.0

-

-

-

-

-

2.0

Total assets

80.2

129.8

33.4

317.0

46.0

139.0

745.5

Non-current assets included

 

 

 

 

 

 

 

within total assets are as follows:

 

 

 

 

 

 

 

Continuing

25.7

72.8

16.5

266.8

12.2

43.2

437.2

Discontinued

2.0

-

-

-

-

-

2.0

Total non-current assets

27.7

72.8

16.5

266.8

12.2

43.2

439.2

 

 

 

 

 

 

 

 

Liabilities - continuing

27.7

34.4

10.5

30.8

89.5

182.7

375.6

Liabilities - discontinued

1.1

-

-

-

-

-

1.1

Total liabilities

28.8

34.4

10.5

30.8

89.5

182.7

376.7

7Capital expenditure

 

 

 

 

 

 

 

- property, plant and equipment

1.6

4.3

2.0

4.5

-

-

12.4

Capital expenditure

 

 

 

 

 

 

 

- intangible assets

-

-

-

-

-

-

-

 

Segment assets and liabilities are reconciled to the Group assets and liabilities as follows:

 

 

 

 

 

 

 

Assets

Liabilities

 

 

 

 

 

 

£m

£m

Segment assets/liabilities

 

 

 

 

 

606.5

194.0

Unallocated:

 

 

 

 

 

 

 

- Deferred tax

 

 

 

 

 

43.2

16.8

- Current tax

 

 

 

 

 

-

13.1

- Cash

 

 

 

 

 

95.8

-

- Current borrowings

 

 

 

 

 

-

34.4

- Non-current borrowings

 

 

 

 

 

-

114.3

- Derivatives

 

 

 

 

 

-

4.1

Total assets/liabilities

 

 

 

 

 

745.5

376.7

 

The Group's non current assets in the following geographic areas:

 

 

Non-Current assets (based on location of the assets)*

 

 

 

 

Goodwill and intangibles

Other

 

 

 

 

2011

2010

2011

2010

 

 

 

 

£m

£m

£m

£m

Operations:

 

 

 

 

 

 

 

United Kingdom

 

 

 

6.7

4.2

23.8

23.4

Gulf/Middle East

 

 

 

47.3

47.3

26.9

25.5

CIS, Med & NA

 

 

 

6.1

6.1

9.2

10.4

- Australia

 

 

 

153.9

151.2

84.8

82.8

- Other Far East/ Pacific Rim

 

 

 

20.5

20.5

16.2

12.3

Total Far East/ Pacific Rim

 

 

 

174.4

171.7

101.0

95.1

Unallocated*

 

 

 

-

-

44.3

43.2

Central

 

 

 

12.2

12.2

-

-

Total

 

 

 

246.7

241.5

205.2

197.7

 

*Unallocated includes financial instruments, deferred tax assets and post employment benefits only.

 

In the Operating Review section of the 2011 Report & Accounts we refer to and quantify the split in the customer base into Construction Support (being E&C companies to assist with construction projects) and Maintenance (being plant operators to assist with their maintenance and production support activities) the services we provide are the same for both client groups. 

 

The revenue in 2011 derived from Construction Support customers was £309m (43%) (2010: £247m (38%)) and the revenue derived from Maintenance was £387m (54%) (2010: £364m (56%)).  The balance of revenue £27m (2010: £39m) consists of other work types, such as (dry) hire and sale of scaffold equipment and sale of insulation materials. 

 

 

 

 

3. Adjusted measures

 

The Company seeks to present a measure of underlying performance which is not impacted by exceptional items or items considered non-operational in nature. These measures are described as 'adjusted' and are used by management to measure and monitor performance. The following other items have been excluded from the adjusted measures:

- industrial disease related costs, income and restricted cash

- amortisation of intangible assets acquired in a business combination

- exceptional items

- corporate expenses

- unamortised facility fee



Year ended

31 December

2011

Year ended 31 December

2010

 



£m

£m





Profit  before tax


61.9

63.1

IDC costs


0.4

0.4

IDC interest income


(1.0)

(1.0)

IDC unwind of provision


4.0

4.0

Unamortised facility fee


1.3

-

Corporate expenses


2.0

-

Amortisation of intangibles


0.8

2.6

Adjusted profit before tax


69.4

69.1





Total operating profit


74.7

75.1

Amortisation of intangibles


0.8

2.6

Corporate expenses


2.0

-

IDC costs


0.4

0.4

Share of post tax losses from joint ventures


0.6

0.1

Adjusted operating profit


78.5

78.2

Adjusted operating profit margin


10.9%

12.0%





Net debt


(29.1)

(21.3)

Restricted cash


(30.1)

(31.6)

Adjusted net debt


(59.2)

(52.9)





Finance cost


(13.9)

(13.1)

IDC unwind of provision


4.0

4.0

Unamortised facility fee


1.3

-

Adjusted finance cost


(8.6)

(9.1)

 

 

 

 

United

Gulf/Middle

CIS, Med

Far East/

Central

 

 

 

Kingdom

East

& NA

Pacific Rim

Costs

Group

2011 Segmental profits pre franchise fee

 

£m

£m

£m

£m

£m

£m

Operating profit/(loss) before other items

 

26.7

31.0

9.6

18.9

(7.7)

78.5

 

On 15 September 2011 the Group undertook an internal reorganisation as part of its strategy to support growth in our International operations in particular in the Far East/Pacific Rim Region. In order to better facilitate this growth, we centralised certain operations and management to form a new International Head Quarters (IHQ) with responsibilities which include the management and development of the Group's non-UK intellectual property.  As part of these arrangements, IHQ has entered into franchise agreements to support the Group's non-UK trading companies.  Consequently a franchise fee has been charged for the period since 15 September 2011 and reported in the operating profit for each operating segment.

 

 

 

 

 

 

Year ended

31 December

2011

Year ended 31December

2010

 



£m

£m

Return on managed assets (ROMA)

Adjusted operating profit


78.5

78.2

Managed assets


282.5

232.9

ROMA%


27.8%

33.6%

Managed assets calculated as the sum of property, plant and equipment and working capital.

 

Return on capital employed (ROCE)

Adjusted operating profit


78.5

78.2

Capital employed


465.3

421.7

ROCE%


17.7%

19.5%

Capital employed calculated as the average of opening and closing shareholders funds excluding net debt.

 

4. Finance income and costs

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Interest income:

 

 

 

 

 

 

 

- Short-term bank deposits

 

 

 

 

 

0.1

0.1

- Interest on Scheme funds

 

 

 

 

 

1.0

1.0

Finance income

 

 

 

 

 

1.1

1.1

Interest expense:

 

 

 

 

 

 

 

- Bank borrowings

 

 

 

 

 

(8.0)

(8.1)

- Finance leases

 

 

 

 

 

(0.6)

(1.0)

- Other

 

 

 

 

 

-

-

- IDC unwind of provision

 

 

 

 

 

(4.0)

(4.0)

- Unamortised facility fee

 

 

 

 

 

(1.3)

-

Finance costs

 

 

 

 

 

(13.9)

(13.1)

Net finance costs

 

 

 

 

 

(12.8)

(12.0)

 

5. Income tax expense

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Current tax

 

 

 

 

 

 

 

-       UK

-       Overseas

-       Adjustments in respect of prior years

 

Deferred tax

-       UK

-       Overseas

-       Adjustments in respect of prior years

 

 

 

 

 

1.9

 9.6

(1.1)

 

 

2.2

0.5

(0.9)

2.9

7.6

2.1

 

 

0.3

(0.3)

(1.8)

 

 

 

 

 

 

12.2

10.8

 

The tax charge on the Group's profit before tax differs from the theoretical amount that would arise using the UK standard corporation tax rate applicable to profits of the consolidated entities as follows:

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Profit before tax (pre share of post tax losses from joint ventures)

 

 

 

 

 

62.5

63.2

Tax calculated at the standard rate of corporation tax in the UK of 26.5% (2010: 28%)

 

 

 

 

 

16.6

 

17.7

Adjustments to tax in respect of prior year

 

 

 

 

 

(2.0)

0.3

Adjustments in respect of overseas tax rates

 

 

 

 

 

(4.8)

(7.5)

Tax losses not recognised

 

 

 

 

 

0.2

0.2

Expenses non-deductible

 

 

 

 

 

1.3

0.3

Income not taxable

 

 

 

 

 

(0.8)

(0.8)

Double tax relief

 

 

 

 

 

-

(0.2)

Change in tax rates

 

 

 

 

 

1.7

0.8

Tax charge

 

 

 

 

 

12.2

10.8

 

6. Earnings per ordinary share

The basic earnings per share calculation for the year ended 31 December 2011 is based on the profit after tax attributable to ordinary shareholders of £47.4m (2010: profit of £49.5m) divided by the weighted average number of ordinary 25 pence shares of 117,884,516 (2010: 116,268,784).

 

The diluted earnings per share calculation for the year ended 31 December 2011 is based on the profit after tax of £47.4m (2010: £49.5m) divided by the diluted weighted average number of ordinary 25 pence shares of 122,286,759 (2010: 120,819,330).

 

Share options and awards are considered potentially dilutive as the average share price during the year was above the average exercise prices.

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

Shares

Shares

Basic weighted average number of shares

 

 

 

 

 

117,884,516

116,268,784

Adjustments:

 

 

 

 

 

 

 

Weighted average number of outstanding share options

 

 

 

 

 

4,402,243

4,550,546

Diluted weighted average number of shares

 

 

 

 

 

122,286,759

120,819,330

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

 

 

 

 

Earnings

EPS

Earnings

EPS

 

 

 

 

£m

Pence

£m

pence

Basic earnings per share

 

 

 

 

 

Continuing operations

 

 

 

47.4

40.2

49.2

42.3

Discontinued operations

 

 

 

-

-

0.3

0.3

Basic earnings per share

 

 

 

47.4

40.2

49.5

42.6

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

Continuing operations

 

 

 

47.4

38.8

49.2

40.7

Discontinued operations

 

 

 

-

-

0.3

0.3

Diluted earnings per share

 

 

 

47.4

38.8

49.5

41.0

 

 

 

 

 

 

Adjusted basic earnings per share

 

 

 

 

 

 

 

Earnings from continuing operations

 

 

 

47.4

40.2

49.2

42.3

Amortisation of intangibles

 

 

 

0.8

0.7

2.6

2.3

Non recurring costs

 

 

 

3.3

2.8

-

-

IDC related costs and interest income

 

 

 

3.4

2.9

3.4

2.9

Tax effect of adjusting items

 

 

 

(1.5)

(1.3)

(3.8)

(3.3)

Adjusted basic earnings per share

 

 

 

53.4

45.3

51.4

44.2

 

 

 

 

 

 

Adjusted diluted earnings per share

 

 

 

 

 

 

 

Earnings from continuing operations

 

 

 

47.4

38.8

49.2

40.7

Amortisation of intangibles

 

 

 

0.8

0.7

2.6

2.2

Non recurring costs

 

 

 

3.3

2.7

-

-

IDC related costs and interest income

 

 

 

3.4

2.8

3.4

2.8

Tax effect of adjusting items

 

 

 

(1.5)

(1.2)

(3.8)

(3.1)

Adjusted diluted earnings per share

 

 

 

53.4

43.8

51.4

42.6

 

The adjusted earnings per share calculations have been calculated after excluding the impact of amortisation of intangibles, non-recurring costs (comprising corporate expenses of £2.0m and unamortised facility fee of £1.3m), IDC related costs, interest income and the tax impact of these items.

 

Options are dilutive at the profit from continuing operations level and so, in accordance with IAS 33, have been treated as dilutive for the purpose of diluted earnings per share.

 

 

7. Business acquisitions

 

During the year ended 31 December 2011 the Group acquired the entire share capital of York Linings Holdings Limited and the trade and assets of Shoreguard Pty Ltd.

 

Summary of acquisition values

 

 

Shoreguard

£m

York Linings

£m

Total

£m

Total consideration

2.6

5.0

7.6

Fair value of assets acquired

0.1

2.6

2.7

Goodwill

2.5

2.4

4.9

 

Cash flows relating to acquisitions

Purchase consideration

0.3

4.0

4.3

Cash flow relating to acquisitions

0.3

4.0

4.3

 

 

From the date of acquisition to 31 December 2011, the acquisitions contributed £10.5m to revenue and £2.0m to profit before tax. If Cape had acquired these businesses at the beginning of the financial year, the acquisitions would have contributed £17.0m to revenue and £2.1m to profit before taxation.

 

Acquisition related costs of £0.2m have been charged to administration expenses in the consolidated Income Statement for the year ended 31 December 2011.

 

York Linings Holdings Limited

On 29th July 2011, the Group acquired 100% of the share capital of York Linings Holdings Limited, and the wholly owned subsidiary York Linings International Ltd (York Linings), a market leader in the design and installation of refractory linings to large industrial assets both in the United Kingdom and internationally in the Gulf / Middle East and CIS regions.

 

York Linings contributed revenues of £8.7m and a net profit, after interest of £1.7m to the Group for the period from 29 July 2011 to 31 December 2011.    If the acquisition had occurred on 1 January 2011, York Linings would have contributed revenues of £14.7m and a net profit, after interest of £1.8m.

 

Details of net assets acquired and goodwill are as follows:

 

 

 

 

 

 

 

Fair value

 

 

 

 

 

 

£m

Property, plant and equipment

 

 

 

 

 

0.5

Current assets

 

 

 

 

 

3.3

Non-current liabilities

 

 

 

 

 

(1.2)

Net assets acquired

 

 

 

 

 

2.6

Goodwill on current year acquisitions

 

 

 

 

 

2.4

Total consideration

 

 

 

 

 

 

Cash paid during year- current year acquisitions

 

 

 

 

 

4.0

Contingent consideration-  current year acquisitions

 

 

 

 

 

1.0

Total consideration

 

 

 

 

 

5.0

 

 

Shoreguard Pty Limited

On 14th April 2011, the Group acquired the trade and assets of Shoreguard Pty Ltd (Australia) for an initial consideration of £0.3m and assumed liabilities to the value of £0.4m.

There will be a contingent consideration obligation which will be calculated based on the estimated performance of the business over the first four years of ownership.  This has been estimated as £1.8m.

 

 

8. Property, plant and equipment

During the year ended 31 December 2011, the Group acquired assets with a cost of £20.8m (2010: £12.4m) and received proceeds from asset sales of £0.4m (2010: £0.3m) giving net capital expenditure of £20.4m (2010: £12.1m). The capital expenditure of £20.4m (2010: £11.9m) shown in the cash flow statement represents the actual cash outflow and therefore excludes purchases funded through finance leases of £0.4m (2010: £0.5m).

 

9. Cash generated from operations

 

(a) Reconciliation of Group operating profit to net operating cash flow from operating activities

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Cash flows from operating activities

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

Operating profit for the year

 

 

 

 

 

75.3

75.2

Depreciation

 

 

 

 

 

17.5

17.4

Amortisation of intangibles

 

 

 

 

 

0.8

2.6

Corporate expenses

 

 

 

 

 

2.0

-

Share option charge

 

 

 

 

 

1.5

2.2

Loss on sale of property, plant and equipment

 

 

 

 

 

0.2

0.1

Difference between pension charge and cash contributions

 

 

 

 

 

(0.9)

(0.7)

Share of loss of joint ventures

 

 

 

 

 

(0.6)

(0.1)

(Increase)/decrease in inventories

 

 

 

 

 

(1.1)

3.9

(Increase)/decrease in trade and other receivables

 

 

 

 

 

(61.6)

0.2

Increase/(decrease) in trade and other payables

 

 

 

 

 

19.1

(2.3)

Bank refinancing fee

 

 

 

 

 

(3.1)

-

Increase/(decrease) in provisions (excluding deferred tax)

 

 

 

 

 

0.1

(0.4)

Industrial disease costs paid

 

 

 

 

 

0.4

0.4

Cash generated from continuing operations

 

 

 

 

 

49.6

98.5

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

Profit for the year

 

 

 

 

 

-

0.4

Decrease in provisions

 

 

 

 

 

-

(0.4)

Cash outflow from discontinued operations

 

 

 

 

 

-

-

Cash generated from operating activities

 

 

 

 

 

49.6

98.5

 

In the statement of cash flows, proceeds from sale of property, plant and equipment comprise:

 

 

 

 

 

 

 

2011

2010

 

 

 

 

 

 

£m

£m

Net book amount

 

 

 

 

 

0.6

0.4

Loss on disposal of property, plant and equipment

 

 

 

 

 

(0.2)

(0.1)

Proceeds from disposal of property, plant and equipment

 

 

 

 

 

0.4

0.3

 

(b) Analysis of cash flows relating to restricted funds*


2011

£m

2010

£m

At 1 January

31.6

33.8

Payment of Scheme creditors

(2.0)

(2.2)

Operating costs

-

-

Interest received

0.5

-

At 31 December

30.1

31.6

 

*   Restricted funds relate to scheme cash which is used to fund Industrial Disease Claims.

 

 

 

 

 

10. Reconciliation of net cash flow to movement in net debt (excluding IDC Scheme funds)(e)

 

 

 

 

2011

£m

2010

£m

Net (decrease)/increase in cash and cash equivalents

 

 

(26.2)

29.5

Repayment of borrowings

 

 

10.0

34.3

Movement in obligations under finance leases

 

 

6.4

5.5

Additional drawing on revolving facility

 

 

3.6

(3.6)

Other movements in net debt during the year

 

 

(0.1)

(5.0)

Movements in net (debt)/cash during the year

 

 

(6.3)

60.7

Net debt (excluding IDC Scheme funds)(e) - opening

 

 

(52.9)

(113.6)

Net debt (excluding IDC Scheme funds)(e) - closing

 

 

(59.2)

(52.9)

 

 (e)  Net debt (excluding IDC Scheme funds) is calculated by deducting current and non-current borrowings from cash and cash equivalents.

 

11. Share capital

 

 Issued and fully paid

31 December

2011

Number

31 December 2011

£m

31 December 2010

Number

31 December 2010

£m

Ordinary shares of 25p each





At 1 January Old Cape

        116,944,996

29.2

116,029,082

29.0

Exercise of share options

1,044,744

0.3

915,914

0.2

At 17 June 2011

117,989,740

29.5

-

-






Cancellation of Old Cape shares

(117,989,740)

(29.5)

-

-

Issue of shares in New Cape

     117,989,740

29.5

-

-

Exercise of share options

642,148

0.2

-

-

At 31 December

118,631,888

29.7

116,944,996

29.2






Deferred shares of 1p each





At 1 January  Old Cape

-

-

431,906,031

4.3

Purchased for cancellation

-

-

(431,906,031)

(4.3)

At 31 December

-

-

-

-






plc Scheme share





At 1 January Old Cape

1

-

1

-

At 17 June 2011

1

-

-

-

Consolidation of Old Cape scheme share

(1)

-

-

-

Issue of scheme share in New Cape

1

-

-

-

At 31 December


29.7


29.2

 

On 17 June 2011, pursuant to a Scheme of Arrangement under Part 26 of the Companies Act 2006, a new Jersey incorporated parent company of the Group was introduced called Cape plc (the "Company").  The previous UK incorporated parent company, formerly known as Cape plc, has been renamed as Cape Intermediate Holdings plc ("Old Cape"). On the Scheme Record Date of 17 June 2011, all the issued ordinary shares of 25 pence each in Old Cape were cancelled in consideration for the issue of the same number of new ordinary shares in Old Cape to the Company, and one ordinary share of 25 pence each in the Company was allotted to shareholders for each ordinary share held by them in Old Cape.

 

Deferred shares

The holders held no dividend rights, redemption entitlement or voting rights. On a winding up the holders were entitled to repayment of capital only after ordinary shareholders had received £100 for each ordinary share. Following approval by shareholders on 20 May 2010, the deferred shares were purchased for an aggregate consideration of £1 and cancelled on 20 August 2010.

 

plc Scheme Share

The plc Scheme Share is held by the Law Debenture Trust Corporation plc on behalf of the Scheme creditors.

The rights attaching to the share are designed to ensure that Scheme assets are only used to settle Scheme claims and ancillary costs and do not confer any right to receive a distribution or return of surplus capital save that the holder will have the right to require the Company to redeem the share at par value on or at any time after the termination of the Scheme.

The share carries two votes for every vote which the holders of the other classes of shares in issue are entitled to exercise on any resolution proposed during the life of the Scheme to engage in certain activities specified in the Company's Articles of Association.

The Company will not be permitted to engage in certain activities specified in the Company's Articles of Association without the prior consent of the holder of the share.

 


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