TIDMCIU
RNS Number : 0794X
Cape plc
26 August 2015
Embargoed: 0700hrs, 26 August 2015
Cape plc
("Cape" or "the Group")
Interim Results
Cape plc, an international leader in the provision of critical
industrial services to the energy and natural resources
sectors,
announces its unaudited half-year results for the period ended 5
July 2015.
On track despite challenging market conditions
Financial summary
H1 2015(1) H1 2014(2) Change
Financial highlights:
Continuing operations:
Revenue GBP362.6m GBP320.3m +13.2%
Adjusted operating profit GBP24.9m GBP23.0m +8.3%
Adjusted operating profit margin 6.9% 7.2% (30bps)
Adjusted profit before tax GBP21.2m GBP20.2m +5.0%
Adjusted diluted earnings per
share 13.0p 12.8p +1.6%
Interim dividend per share 4.5p 4.5p -
Adjusted net debt GBP131.3m GBP132.0m (0.5%)
Statutory results:
Operating profit GBP22.6m GBP20.9m +8.1%
Profit before tax GBP17.4m GBP16.7m +4.2%
Diluted earnings per share 10.3p 10.3p -
(1 H1 2015 comprises 27 weeks of performance in comparison to
the 26 weeks in H1 2014 as detailed in note 2.)
(2 Restated for the reclassification of Kazakhstan to
discontinued operations as detailed in note 2.)
Highlights
-- Overall trading performance in line with expectation:
o UK, Europe & CIS region performed in line with
expectation, with weakness resulting from the impact of the low oil
price on the UK offshore market being offset by the benefits from
recent acquisitions
o MENA region performed ahead of expectation, driven by strong
operating margins across the region
o Asia Pacific region performed below expectation largely driven
by lower than expected volumes and aggressive pricing in the
Australian market
-- Order intake during the first half increased by 26% to GBP399m (H1 2014: GBP317m)
-- Order book GBP800m at period end (29 June 2014: GBP643m, 31 December 2014: GBP746m)
-- Revenue increased by 13% to GBP362.6m (H1 2014: GBP320.3m)
-- Adjusted operating profit increased by 8% to GBP24.9m (H1 2014: GBP23.0m) with adjusted operating margin decreasing by 30bps to 6.9%
-- Period-end adjusted net debt of GBP131.3m (29 June 2014: GBP132.0m, 31 December 2014: GBP101.0m), driven by the seasonality of the UK
power market and the acquisition of Redhall Engineering
Solutions Limited
-- Adjusted diluted earnings per share from continuing operations was 13.0p (H1 2014: 12.8p)
-- The Group has declared an interim dividend of 4.5p (H1 2014: 4.5p) per share
Commenting on the results, Joe Oatley, Chief Executive Officer
of Cape said:
"I am pleased to report results for the first half of the year
in line with expectation. Our balanced business and drive for
operational excellence has enabled us to achieve a robust
performance against a backdrop of mixed market conditions. We
anticipate that we will deliver a full year performance in line
with expectation and believe that our strategy leaves us well
placed to capitalise on the opportunities we see ahead of us."
Throughout this document, various management measures are used
and referred to as adjusted. These are defined and reconciled
within note 6 'Adjusted measures'.
Analyst meeting
The Group will be presenting to a meeting of analysts at 9.30am
today at the office of Buchanan, 107 Cheapside, London, EC2V 6DN.
The presentation will shortly be available on the Company's website
at:
www.capeplc.com/investors/financial-results-and-presentations.aspx
Enquiries
Cape plc
Joe Oatley, Chief Executive +44 (0) 1895 459
Officer 979
Michael Speakman, Chief Financial +44 (0) 1895 459
Officer 979
Buchanan
Bobby Morse, Ben Romney, +44 (0) 207 466
Helen Chan 5000
Forward looking statements
Any forward looking statements made in this document represent
the Board's best judgement 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 (www.capeplc.com), which is premium listed on the main
market of the London Stock Exchange, is an international leader in
the provision of critical industrial services principally to the
energy and natural resources sectors. Our multi-disciplinary
service offering includes access systems, insulation, specialist
coatings, passive fire protection, refractory linings,
environmental services, oil and gas storage tanks and heat
exchanger replacement and refurbishment.
Cape employs c. 17,500 people working across 21 countries and in
2014 reported revenue of GBP698.3 million.
INTERIM MANAGEMENT REVIEW
Summary
Cape is pleased to report that the Group has delivered an
overall trading performance for the first half of 2015 in line with
the Board's expectation. The focus for the remainder of the year is
to continue to make the revenue and capital investment required to
deliver our medium and long term growth strategy, whilst ensuring
the business is correctly sized and positioned for the current
economic climate that impacts our sector. The Board has declared an
unchanged interim dividend of 4.5p per share.
Order intake for the first half of 2015 increased by 26% to
GBP399 million (H1 2014: GBP317 million), primarily due to the
award of a two-year maintenance contract renewal with BP in the UK,
a five year contract award with ExxonMobil for multidisciplinary
services at Fawley, UK and a continued strong performance in the
MENA region. Pleasingly, the SOCAR-Cape joint venture also had a
successful start to 2015 with the award of three significant
contracts in Azerbaijan with an aggregate value of over $65 million
for the joint venture. Order intake remained subdued across the
Asia Pacific region with demand in the oil and gas sector impacted
by the low oil price and low commodity prices putting continued
pressure on the Australian mining sector.
The Group's order book was GBP800 million as at 5 July 2015 in
comparison to GBP746 million at 31 December 2014 and GBP643 million
at 29 June 2014. The reported order book excludes order book value
associated with joint ventures.
Group revenue from continuing operations increased by 13% to
GBP362.6 million (H1 2014: GBP320.3 million). Positive foreign
exchange movements accounted for 2% of this increase and
acquisitions accounted for 4%, with the underlying 7% increase
being largely driven by the ramp-up of volume on the Wheatstone
project in Western Australia.
Adjusted operating profit from continuing operations increased
to GBP24.9 million (H1 2014: GBP23.0 million) with adjusted
operating margin decreasing slightly to 6.9% (H1 2014: 7.2%).
The UK, Europe & CIS region performed in line with
expectation, with revenue slightly higher than prior year, offset
by reduced margins, largely due to increased pricing pressure in
the oil and gas market.
The MENA region performed very well, with an adjusted operating
margin of 16.8% (H1 2014: 13.0%) driven by strong trading
performances from all the major countries within the region. We
continued to make solid progress on the onerous contract in Qatar
and as at the end of June the project was 81% complete.
Productivity since then has been affected by adverse weather
conditions; nonetheless we continue to expect that the project will
be completed during the second half of 2015.
Although the Asia Pacific region delivered an improved
performance compared to prior year, this fell short of the Board's
expectation, largely due to a deterioration in market conditions in
the Australian mining sector and a slower than expected ramp-up of
volume on the Wheatstone project.
The Group achieved an adjusted operating cash inflow for the
first half of 2015 of GBP1.2 million (H1 2014: GBP2.7 million
outflow), with a working capital increase of GBP21.2 million which
is expected to reverse in the second half of the year. Adjusted net
debt of GBP131.3 million (H1 2014: GBP132.0 million, 31 December
2014: GBP101.0 million) has been impacted by the cash outflow of
dividends paid, the acquisition of Redhall Engineering Solutions
Limited ("RESL") and the investment in the SOCAR-Cape joint
venture.
Progress on strategy
Our focus on Operational Excellence continues in 2015 and
remains central to delivering both quality services to our
customers and consistent returns to our shareholders. This drive
for operational effectiveness and efficiency is even more critical
given the current challenging economic conditions in a number of
our markets. In light of these challenging markets, the Group has
already taken action to reduce overhead costs in both its UK and
Australian businesses in order to ensure they are appropriately
structured for the current level of demand.
An important element of the Group's strategy is to have a
balanced business both across a number of geographies and between
maintenance and construction project work. This diversity provides
a resilience to a downturn in any one sector or geography and has
allowed the Group to perform well despite the effects of the
weakness in oil and other commodity prices.
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A key element of the Group's strategy is to expand the range of
services we offer to our clients and we made further progress on
this with the acquisition of RESL in May 2015. RESL predominantly
operates in the process and downstream, oil and gas industries and
provides a range of maintenance services including specialist pipe
repair, tank repair and shutdown services. Following the
acquisition of Motherwell Bridge in 2014, we are now seeking to
deliver these services across our international footprint. Our
initial focus has been to deliver Motherwell Bridge's services into
the Middle Eastern market and we are now starting to gain traction
with an increasing volume of enquiries and bids from this region,
albeit progress has been slower than we had hoped.
We are continuing to make good progress on expanding our
geographical footprint and are in the process of establishing
operations in new countries in both Asia and the Middle East.
Financial overview
A summary income statement with explanatory discussion of each
of the key items is provided below:
GBPm unless otherwise stated H1 2015(1) H1 2014(2)
----------------------------------------- ----------- -----------
Continuing operations:
Revenue 362.6 320.3
Adjusted operating profit 24.9 23.0
Adjusted operating profit margin 6.9% 7.2%
Adjusted profit before tax 21.2 20.2
Adjusted diluted earnings per share 13.0p 12.8p
----------------------------------------- ----------- -----------
Revenue from continuing operations increased by 13% to GBP362.6
million (H1 2014: GBP320.3 million) of which 2% relates to foreign
exchange movements and 4% from acquisitions of Motherwell Bridge
and RESL. The underlying increase of 7% was largely driven by
increased volume in Australia from the ramp-up of activity levels
on the Wheatstone project, with both the UK, Europe & CIS, and
MENA regions delivering steady volumes compared to the prior
year.
Adjusted operating profit from continuing operations increased
to GBP24.9 million (H1 2014: GBP23.0 million) driven by:
-- a 7% benefit from a full half year of Motherwell Bridge and the 2015 acquisition of RESL
-- a 3% favourable impact of foreign exchange
-- a strong performance in MENA with operating margin increasing to 16.8% (H1 2014: 13.0%)
-- the benefit from the increased volume resulting from the
ramp-up of activity on the Wheatstone project
-- increased costs associated with the early completion of a
number of UK North Sea projects and lower margins on ongoing North
Sea maintenance work
-- reduced margins in Australia as a result of increased pricing pressure
-- central cost increase largely due to foreign exchange losses
and investment in compliance and controls
Adjusted diluted earnings per share from continuing operations
was 13.0 pence (H1 2014: 12.8 pence) on adjusted earnings
attributable to equity shareholders of GBP15.8 million (H1 2014:
GBP15.6 million).
Regional review
The Group reports its financial results from a geographic
perspective under three reporting regions.
Revenue Adjusted operating Adjusted operating
(GBPm) profit profit margin
(GBPm) (%)
H1 2015(1) H1 2014(2) H1 2015(1) H1 2014(2) H1 2015(1) H1 2014(2)
------------------ ----------- ----------- ----------- ----------- ----------- -----------
Region
UK, Europe & CIS 194.9 79.3 15.7 15.8 8.1% 8.8%
MENA 95.4 89.1 16.0 11.6 16.8% 13.0%
Asia Pacific 72.3 51.9 2.0 1.4 2.8% 2.7%
Central costs - - (8.8) (5.8) n/a n/a
362.6 320.3 24.9 23.0 6.9% 7.2%
------------------ ----------- ----------- ----------- ----------- ----------- -----------
Throughout this document, various management measures are used
and referred to as adjusted. These are defined and reconciled
within note 6 'Adjusted measures'.
(1 H1 2015 comprises 27 weeks of performance in comparison to
the 26 weeks in H1 2014 as detailed in note 2.)
(2 Restated for the reclassification of Kazakhstan to
discontinued operations as detailed in note 2.)
UK, Europe & CIS
Market conditions
Market conditions across the UK, Europe & CIS region remain
mixed. The fall in the price of oil in the final quarter of 2014
has resulted in a significant impact on the North Sea market with
reduced project and refurbishment volumes and increased pricing
pressure in the maintenance market. Although the lower oil price
has also affected the volume of tank refurbishment, with several
projects being deferred, the downstream and petrochemical market
has remained robust in the UK and is anticipated to remain so in
the foreseeable future. As previously reported, the UK coal power
sector has weakened with the announcement of earlier than expected
closures of older coal fired generation assets and a resultant
downscaling of outage works on those assets.
The market in Azerbaijan remains robust with a number of large
projects currently underway and the region remains committed to
further oil and gas investment, as evidenced by Total's development
of the Absheron field scheduled to start in 2017 and BP's
commitment to three major field developments within the Caspian
region.
Results
Order intake grew strongly to GBP235 million, 53% ahead of prior
year (H1 2014: GBP154 million) largely driven by the two year BP
maintenance renewal announced in May 2015 and the five year
contract with ExxonMobil at the Fawley refinery announced in April
2015. Other important contract wins included a contract to
construct a new 60m diameter gasholder for Tata in Scunthorpe and
the renewal of a five year maintenance contract with Sakhalin
Energy Investment Company.
Revenue increased 9% to GBP194.9 million (H1 2014: GBP179.3
million) with a 7% benefit from the full period impact of the
Motherwell Bridge acquisition completed in March 2014 and the
acquisition of RESL completed in May 2015. The underlying increase
of 2% was largely driven by the phasing of project and shutdown
work in the UK onshore business.
The region continues to be predominantly maintenance based with
88% (H1 2014: 86%) of revenues derived from maintenance
markets.
Adjusted operating profit margin decreased to 8.1% (H1 2014:
8.8%) largely driven by costs associated with the early
demobilisation from a number of UK North Sea projects and pricing
pressure in the UK oil and gas sector. As previously reported, the
UK has taken steps to reduce overhead costs to ensure the business
is correctly sized for the current market, the cost impact of which
has affected the first half of the year but is expected to deliver
a benefit in the second half of the year.
Azerbaijan had a strong start to 2015 with the award of
significant project work through the SOCAR-Cape joint venture which
is expected to be worth in excess of $65 million; in line with our
accounting policy this is excluded from the Group order intake and
order book. The SOCAR-Cape joint venture is progressing well with a
significant increase in revenue in the first half of the year and a
small profit reported in the period.
The region received a number of awards during the first half of
2015 most notably being recognised by ExxonMobil with a Golden
Tiger award for Health and Safety performance and the Supplier of
the Year award from EDF in the UK.
Middle East & North Africa (MENA)
Market conditions
Overall demand for the Group's services within the MENA region
remains robust. The Kingdom of Saudi Arabia ("KSA") continues to be
the main driver for new construction demand, although the UAE,
Kuwait and Oman have all confirmed commitment to significant
capital investment over the medium term, predominantly focused on
the downstream oil and gas sector. Overall the maintenance market
across the region remains solid.
Results
Order intake grew strongly to GBP124 million, 27% ahead of prior
year (H1 2014: GBP98 million) driven by a number of maintenance
renewals in Qatar including a five year award from QNFS for RasGas
and a large number of smaller construction contract awards in KSA.
Bidding activities remain high with a number of opportunities for
both maintenance and construction contracts across the region.
Revenue increased 7% to GBP95.4 million (H1 2014: GBP89.1
million). The business benefited from a 9% favourable impact of
foreign exchange with the underlying decrease of 2% being driven by
a reduction of volume in construction work in UAE partially offset
by the increase in maintenance and shutdown activity in Qatar. KSA
revenue remained in line with prior year.
The drive to grow our maintenance business in the region
continues to deliver results with maintenance revenues growing
strongly to GBP48 million in the period (H1 2014: GBP36 million).
As a result, maintenance and shutdown volumes represented 50% of
regional revenue in the first half (H1 2014: 40%).
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Adjusted operating profit grew very strongly to GBP16.0 million,
a 38% increase on prior year (H1 2014: GBP11.6 million) with an 8%
favourable impact of foreign exchange and an underlying increase of
30% driven by a significant improvement in operating margin to
16.8% (H1 2014: 13.0%) which is expected to return to a more
normalised range of 12-13% in the second half of the year. The
three main countries within the region, KSA, UAE and Qatar, all
delivered improved operating margins compared to prior year with a
particularly strong trading performance in KSA resulting from the
completion of a number of contracts within the period. We continued
to make solid progress on the onerous contract in Qatar and as at
the end of June the project was 81% complete. Productivity since
then has been affected by adverse weather conditions; nonetheless
we continue to expect that the project will be completed during the
second half of 2015.
The Group has continued to be recognised in the region with a
number of awards including from Chevron Phillips in Qatar for
outstanding safety performance and Daelim's Award Shield for
achievement of 10 million man-hours without a lost time injury in
the Sadara MFC project.
Asia Pacific
Market conditions
Market conditions within the Asia Pacific region are weaker than
previously expected. Although demand from the LNG construction
market in Australia is increasing, this is at a slower pace than
had previously been anticipated and this increase is being offset
by a reduction in demand from the iron ore sector, accompanied by
severe pricing pressure. Construction activity in Asian yards of
modules for the Australian LNG industry is steady and this is
expected to continue through 2015.
Results
Order intake was subdued at only GBP40 million, 38% below prior
year (H1 2014: GBP65 million) as few new contracts were available
and the business was unable to secure the maintenance contract with
BHP for its iron ore sites in North West Australia due to severe
price competition from local competitors during the retendering
process.
Revenue increased by 39% to GBP72.3 million (H1 2014 GBP51.9
million), with 40% organic growth primarily due to the ramp-up of
the Wheatstone project marginally offset by a 1% reduction as a
result of unfavourable foreign exchange movement. Activity on the
Wheatstone project has increased at a slower rate than previously
anticipated due to the timing of work releases; however, activity
on the project is expected to ramp-up further in the second half of
2015 before reaching peak manning levels midway through 2016.
Within Asia, the business benefitted from increased volumes on LNG
module work in Thailand for the Inpex project and on the Bayu Undan
AIMS campaign.
Region operating profit increased by 43% compared to prior year
with an adjusted operating profit of GBP2.0 million (H1 2014:
GBP1.4 million). Of the movement, 10% was a result of favourable
foreign exchange impact with a resultant 33% of organic growth
largely driven by the volume increase with a small improvement in
operating margin to 2.8% (H1 2014: 2.7%). The region has
implemented overhead cost reductions to mitigate the effects of the
downturn in economic conditions in Australia. The majority of the
cost associated with this restructuring was expensed in the first
half of 2015 and the benefit is expected to be seen in the second
half of this year.
Outlook
Given the current order book cover for the remainder of 2015,
the Board anticipates that the full year performance will be in
line with expectation. A continued ramp-up of activity on the
Wheatstone project and a full six month contribution of the RESL
acquisition will offset continued weakness in the North Sea market
and a return to a more normalised margin in the MENA region.
The current market volatility continues to give uncertainty to
the outcome of 2016; however, the Board expects that demand is
likely to be similar to the current year with mixed market
conditions in the UK, and weakness in Asia Pacific offset by robust
demand in Azerbaijan and the MENA region. The Board continues to
believe that the strategy the Group is following will deliver
growth in the medium and long term.
Financial review
Revenue
Revenue from continuing operations increased by 13% to GBP362.6
million (H1 2014: GBP320.3 million). The elements contributing to
this increase include a combined 4% benefit from the acquisition of
RESL in May 2015 and reporting the full half year of Motherwell
Bridge results, a 2% favourable foreign exchange movement and the
underlying organic increase of 7%, primarily driven by the ramp-up
of the Wheatstone project.
In line with our strategy to increase maintenance revenue in
absolute terms, revenue from maintenance contracts increased to
GBP259 million or 71% of total revenue (H1 2014: GBP229 million or
71% of total revenue). Revenue invoiced to the largest client
represented 12% of total revenue (H1 2014: 16%) relating to
activities in all regions and the top 10 clients represented 44% of
revenue (H1 2014: 46%).
Adjusted operating profit
Adjusted operating profit from continuing operations increased
by 8% to GBP24.9 million (H1 2014: GBP23.0 million). The benefit of
Group wide revenue growth and strong margin performance in the MENA
region was more than offset by UK customer pricing pressures and an
increase in central costs largely due to foreign exchange
revaluation losses and investment in compliance and control.
Favourable translational foreign exchange movements accounted for a
3% growth in the adjusted operating profit from continuing
operations and there was a 7% combined benefit from the acquisition
of RESL in 2015 and reporting a full half year of Motherwell
Bridge.
Other items
Other items increased to GBP1.9 million (H1 2014: GBP1.3
million) comprising GBP0.2 million of Industrial Disease Claims
("IDC") costs (H1 2014: GBP0.1 million) and GBP1.7 million (H1
2014: GBP1.2 million) of post-acquisition charges, including
amortisation of acquired intangible assets relating to Motherwell
Bridge and RESL.
Share of post-tax profit from joint ventures
The post-tax profit of GBP0.1 million (H1 2014: GBPnil) is
attributable to the joint ventures in the UK, Europe & CIS
region.
Exceptional items
Exceptional items total GBP0.4 million (H1 2014: GBP0.8 million)
and comprise transaction costs relating to acquisitions.
Operating profit
Operating profit from continuing operations was GBP22.6 million
(H1 2014: GBP20.9 million) comprising an adjusted operating profit
of GBP24.9 million (H1 2014: GBP23.0 million) less other items of
GBP1.9 million (H1 2014: GBP1.3 million) and exceptional items of
GBP0.4 million (H1 2014: GBP0.8 million).
Finance costs
Net finance costs increased to GBP5.2 million (H1 2014: GBP4.2
million) including a GBP1.7 million (H1 2014: GBP1.7 million)
non-cash charge relating to the unwinding of the discount on the
long-term IDC provision, interest income on the IDC scheme funds in
the period of GBP0.2 million (H1 2014: GBP0.3 million) and interest
income on the defined benefit pension assets of GBP0.2 million (H1
2014: GBP0.4 million).
Adjusted finance costs increased to GBP3.9 million (H1 2014:
GBP3.2 million) with interest cover (calculated by dividing
adjusted operating profit by the adjusted finance costs) marginally
decreasing to 6.4 times (H1 2014: 7.2 times).
Profit before tax
Profit before tax from continuing operations was GBP17.4 million
(H1 2014: GBP16.7 million) reflecting an operating profit of
GBP22.6 million (H1 2014: GBP20.9 million) less net finance costs
of GBP5.2 million (H1 2014: GBP4.2 million).
Taxation
The tax charge on business performance profit before tax was
GBP4.5 million (H1 2014: GBP3.9 million) equating to an effective
tax rate of 21%.
Discontinued operations
The result from discontinued operations in the first half of
2015 is GBPnil. The prior period result relates to the termination
of operations in Kazakhstan and India.
Earnings per share
For continuing operations adjusted diluted earnings per share
were 13.0p (H1 2014: 12.8p) and adjusted basic earnings per share
were 13.0p (H1 2014: 13.0p). For total operations the basic
earnings per share were 10.3p (H1 2014: 10.4p). The diluted
weighted number of shares decreased to 121.1 million (H1 2014:
122.6 million).
Dividend
Taking account of these financial results, current market
conditions and the underlying prospects of the Group, an interim
dividend of 4.5p per share, in line with the 2014 interim dividend
(H1 2014: 4.5p), was approved by the Board on 25 August 2015. The
dividend will be payable on 9 October 2015 to shareholders on the
register as at 11 September 2015.
Adjusted operating and free cash flow(1)
GBPm Full year
H1 2015(2) H1 2014(3) 2014
Unaudited Unaudited Audited
------------------------------------------------------- ------------ ------------ ---------
Adjusted operating profit 24.9 23.0 52.1
Depreciation 7.9 6.9 18.1
------------------------------------------------------- ------------ ------------ ---------
Adjusted EBITDA 32.8 29.9 70.2
Non-cash items/disposal (3.3) (0.2) (3.9)
Increase in working capital * (21.2) (25.9) (18.2)
Net capital expenditure (7.1) (6.5) (14.1)
------------------------------------------------------- ------------ ------------ ---------
Adjusted operating cash flow 1.2 (2.7) 34.0
Adjusted operating cash flow to adjusted operating
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profit 4.8% (11.7%) 65.3%
Net interest paid (3.1) (2.9) (6.4)
Tax paid (3.9) (3.5) (8.4)
------------------------------------------------------- ------------ ------------ ---------
Free cash flow (5.8) (9.1) 19.2
Dividends paid (including non-controlling interests) (11.5) (11.5) (16.9)
Acquisition (including settlement of debt and
working capital) (6.2) (37.6) (36.9)
Investment in SOCAR-Cape joint venture (5.2) (5.4) (3.6)
Transfers between restricted funds 0.3 - -
Cash generated/(used) in discontinued operations 0.5 (0.6) 5.9
Other movements in adjusted net debt (2.4) (7.6) (8.5)
------------------------------------------------------- ------------ ------------ ---------
Movement in adjusted net debt (30.3) (71.8) (40.8)
------------------------------------------------------- ------------ ------------ ---------
Opening adjusted net debt (101.0) (60.2) (60.2)
Closing adjusted net debt (131.3) (132.0) (101.0)
------------------------------------------------------- ------------ ------------ ---------
(* At average rates)
(1 The Interim Condensed Consolidated Cash Flow Statement is
available within the primary statements of this document, and is
supported by note 17 of these interim results.)
(2) (H1 2015 comprises 27 weeks of performance in comparison to
the 26 weeks in H1 2014 as detailed in note 2.)
(3) (Restated for the reclassification of Kazakhstan to
discontinued operations as detailed in note 2 and the presentation
of the investment in SOCAR-Cape joint venture.)
Working capital
Investment in trade and other receivables and inventories
increased by GBP32.3 million to GBP247.6 million (31 December 2014:
GBP215.3 million) although slightly offset by an increase in trade
and other payables of GBP4.3 million to GBP128.6 million (31
December 2014: GBP124.3m) resulting in an overall increase in net
working capital of GBP28.0 million (at balance sheet rates) to
GBP119.0 million. Key drivers to the working capital increase
are:
-- seasonality of the UK power industry, which is expected to
reverse in the second half of the year
-- acquired working capital from RESL
-- investment in the joint venture with SOCAR
-- increased working capital investment in the MENA region
Capital expenditure
Gross capital expenditure was GBP7.4 million (H1 2014: GBP7.1
million) reflecting the continuation of the UK system scaffold
investment programme as well as expenditure in the MENA and Asia
Pacific regions to meet project scaffold demand. The Asset
Replacement Ratio (calculated by dividing gross capital expenditure
spend by the depreciation charge) decreased to 94% (H1 2014:
103%).
Acquisition
As previously announced, on 13 May 2015 the Group acquired RESL
for an enterprise valuation of GBP6.2 million including debt of
GBP5.3 million and a working capital contribution of GBP0.7
million. The business predominantly operates in the process and
downstream, oil and gas industries and provides a range of
maintenance services including specialist pipe repair, tank repair
and shutdown services. The provisional fair value of net
liabilities acquired was GBP2.1 million and goodwill of GBP2.3
million has been recognised on acquisition, as detailed in note 14.
The goodwill of GBP2.3 million arising from the acquisition is
attributable to the value of the assembled workforce, expected
synergies and other benefits arising from combining the RESL
operations into the Group.
Financing
The Group's adjusted net debt decreased by GBP0.7 million at 5
July 2015 to GBP131.3 million compared to the same period in the
prior year (29 June 2014: GBP132.0 million) including finance lease
obligations of GBP2.9 million (29 June 2014: GBP2.2 million). This
includes the total cash outflow of GBP6.2 million on the
acquisition of RESL as well as a GBP2.4 million prepayment of
banking fees relating to the banking facility entered into in
February 2014 (29 June 2014: GBP3.2 million). Balance sheet
gearing, excluding ring-fenced IDC Scheme funds, increased to 103%
(31 December 2014: 79%; 29 June 2014: 101%).
Provision for pensions
The defined benefit pension scheme had a net surplus of GBP12.2
million as at 5 July 2015 (H1 2014: GBP16.9 million) and continues
to be restricted to GBPnil in the accounts under IFRIC 14. The
agreed monthly contribution rate has been maintained at
GBP14,600.
Provision for estimated future asbestos related liabilities and
IDC Scheme funds
The discounted provision decreased to GBP96.4 million (31
December 2014: GBP98.2 million) reflecting the unwinding of the
discount of GBP1.7 million in the half year (H1 2014: GBP1.7
million) and GBP3.5 million (H1 2014: GBP3.5 million) utilised in
the period.
The ring-fenced IDC Scheme funds reduced by GBP2.4 million (H1
2014: GBP1.9 million reduction) comprising cash settlements and
costs paid to scheme claimants of GBP2.6 million (H1 2014: GBP2.0
million) with cash interest received of GBP0.2 million (H1 2014:
GBP0.1 million) of which GBP0.2 million (H1 2014: GBP0.1 million)
relates to income interest in the period, shown as finance income
other items in the Condensed Consolidated Income Statement.
Other provisions
Other provisions have fallen from GBP20.6 million at 31 December
2014 to GBP16.8 million as at 5 July 2015 as a result of
acquisitions of GBP0.6 million offset by utilisations of GBP2.8
million, net releases to income statement of GBP1.5 million and
foreign exchange of GBP0.1 million.
Related parties
As at 5 July 2015, there was a balance of GBP11.5 million (H1
2014: GBP5.4 million; 31 December 2014: GBP6.4 million) owed by
joint ventures.
Currencies
Nearly all operating costs are matched with corresponding
revenues of the same currency and as such there is little
transactional currency risk in the Group. Currency translation had
a 2% favourable impact on revenue for the half year, due to
weakening of the UK pound against the US dollar having a greater
effect than the strengthening of the UK pound against the
Australian dollar.
The following significant exchange rates applied during the half
year:
H1 2015 H1 2014
Closing Average Closing Average
----- -------- -------- -------- --------
AUD 2.05 2.00 1.81 1.84
USD 1.56 1.53 1.70 1.67
----- -------- -------- -------- --------
Principal risks
Cape operates globally in the energy and natural resources
sectors and in varied geographic markets. Cape's performance and
prospects may be affected by risks and uncertainties in relation to
the industries and the environments in which it undertakes its
operations around the world. Those risks range from external
geopolitical, economic and market risks to operational risks
including HSE, contracting, project execution and generic financial
risks. The price of oil has remained low in 2015; the Group has
assessed this risk and will continue to monitor the situation
closely and respond with mitigating actions as appropriate.
There is uncertainty associated with the future level of
asbestos related industrial disease claims and of the costs arising
from such claims. The risks relating to industrial disease claims
are described in more detail in notes 4(iii) Estimates and 19 to
the interim condensed consolidated financial statements.
The Group is alert to the challenges of managing risk and has
systems and procedures in place across the Group to identify,
assess and mitigate major business risks. As part of the long term,
strategic Operational Excellence programme the Group continues to
improve its detailed process of project risk identification and
mitigation from contract tender through to project completion.
The Directors have reviewed risk and related controls at the
half year, which included a review of the risk profile of the
operations acquired through the RESL acquisition. The Directors
consider that the nature of the principal risks and uncertainties
which may have a material effect on the Group's performance in the
second half of the year is unchanged from those detailed on pages
16 to 23 of the 2014 Annual Report.
Going concern
After making the appropriate 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 interim condensed consolidated financial
statements.
Joe Oatley Michael Speakman
Chief Executive Officer Chief Financial Officer
25 August 2015 25 August 2015
Statement of Directors' Responsibilities
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The Interim Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Interim Report in accordance with the Disclosure and
Transparency Rules ("DTR") of the United Kingdom's Financial
Conduct Authority ("FCA"). The DTR require that the accounting
policies and presentation applied to the half yearly figures must
be consistent with those applied in the latest published annual
accounts, except where the accounting policies and presentation are
to be changed in the subsequent annual accounts, in which case the
new accounting policies and presentation should be followed, and
the changes and the reasons for the changes should be disclosed in
the Interim report, unless the United Kingdom's FCA agrees
otherwise.
The Directors confirm that to the best of their knowledge the
condensed set of financial statements, which have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting' as adopted by the European Union give a true
and fair view of the assets, liabilities, financial position and
profit and loss of the Group, as required by DTR 4.2.2 and in
particular include a fair review of:
-- the important events that have occurred during the half of
the financial year and their impact on the interim condensed
consolidated set of financial statements as required by DTR
4.2.7R;
-- the principal risks and uncertainties for the remaining half
of the year as required by DTR 4.2.7R; and
-- related party transactions that have taken place in the first
half of the current financial year and changes in the related party
transactions described in the previous annual report that have
materially affected the financial position or performance of the
Group during the first half of the current financial year as
required by DTR 4.2.8R.
The Directors of Cape plc are listed in the Group's Annual
Report and Accounts. During the current year Samantha Tough and
Steve Good were appointed as directors, on 1 January and 6 July
respectively, Brendan Connolly did not stand for re-election at the
AGM and left the Board on 12 May and Leslie Van de Walle has
resigned as a director with effect from 26 August 2015.
For and on behalf of the Board of Directors.
Joe Oatley Michael Speakman
Chief Executive Officer Chief Financial Officer
25 August 2015 25 August 2015
Independent review report to Cape plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
period ended 5 July 2015 which comprises the Interim Condensed
Consolidated Income Statement, Interim Condensed Consolidated
Statement of Comprehensive Income, Interim Condensed Consolidated
Statement of Financial Position, Interim Condensed Consolidated
Statement of Changes in Equity, Interim Condensed Consolidated Cash
Flow Statement and related notes 1 to 20. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the period ended 5 July
2015 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
25 August 2015
Reading
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 5 JULY 2015
27 weeks ended 5 July 26 weeks ended 29 June
2015 2014(1)
Unaudited Unaudited
Restated
Exceptional Restated Exceptional
Business and other Business and other Restated
performance items Total performance items Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing
operations 362.6 - 362.6 320.3 - 320.3
Operating profit before
other items 24.8 - 24.8 23.0 - 23.0
Other items 7a - (1.9) (1.9) - (1.3) (1.3)
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Operating profit/(loss)
before exceptional items 24.8 (1.9) 22.9 23.0 (1.3) 21.7
Share of post-tax result
of joint ventures 0.1 - 0.1 - - -
Exceptional items 7b - (0.4) (0.4) - (0.8) (0.8)
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Operating profit/(loss) 24.9 (2.3) 22.6 23.0 (2.1) 20.9
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Finance income 9 0.2 0.2 0.4 0.4 0.3 0.7
Finance costs 9 (3.9) (1.7) (5.6) (3.2) (1.7) (4.9)
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Net finance costs (3.7) (1.5) (5.2) (2.8) (1.4) (4.2)
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Profit/(loss) before
tax 21.2 (3.8) 17.4 20.2 (3.5) 16.7
Income tax (expense)/credit 10 (4.5) 0.4 (4.1) (3.9) 0.7 (3.2)
Profit/(loss) from
continuing
operations 16.7 (3.4) 13.3 16.3 (2.8) 13.5
(Loss) from discontinued
operations 8 - - - (0.3) - (0.3)
Profit/(loss) for the
period 16.7 (3.4) 13.3 16.0 (2.8) 13.2
Attributable to:
Owners of Cape plc 12.4 12.6
Non-controlling interests 0.9 0.6
----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
13.3 13.2
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----------------------------- ------- ------------- ------------ -------- ------------- ------------- ---------
Earnings per share attributable to the owners of Cape plc
Pence Pence
Pence Pence
------------------- ----- --------------------- ---------------------------------- --------------- ----------
Basic
Continuing
operations 13.0 10.3 13.0 10.7
Discontinued
operations - - (0.3) (0.3)
------------------- ----- --------------------- ---------------------------------- --------------- ----------
Total operations 11 13.0 10.3 12.7 10.4
------------------- ----- --------------------- ---------------------------------- --------------- ----------
Diluted
Continuing
operations 13.0 10.3 12.8 10.5
Discontinued
operations - - (0.3) (0.2)
------------------- ----- --------------------- ---------------------------------- --------------- ----------
Total operations 11 13.0 10.3 12.5 10.3
------------------- ----- --------------------- ---------------------------------- --------------- ----------
(1) Restated for the reclassification of Kazakhstan to
discontinued operations as detailed in note 2.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE PERIOD ENDED 5 JULY 2015
27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
Unaudited Unaudited
GBPm GBPm
--------------------------------------------------------------------------------- --------------- ---------------
Profit for the period 13.3 13.2
Other comprehensive (expense):
Other comprehensive (expense) to be reclassified to profit or loss in subsequent
periods:
Currency translation differences (3.1) (4.4)
Net other comprehensive (expense) to be reclassified to profit or loss in
subsequent periods (3.1) (4.4)
---------------------------------------------------------------------------------- --------------- ---------------
Other comprehensive income/(expense) not to be reclassified to profit or loss in
subsequent
periods:
Re-measurement of defined benefit pension plan (0.1) 0.5
Movement in restriction of retirement benefit asset in accordance with IFRIC 14 (0.2) (0.9)
Net other comprehensive (expense) not to be reclassified to profit or loss in
subsequent periods (0.3) (0.4)
---------------------------------------------------------------------------------- --------------- ---------------
Other comprehensive (expense) (3.4) (4.8)
---------------------------------------------------------------------------------- --------------- ---------------
Total comprehensive income 9.9 8.4
---------------------------------------------------------------------------------- --------------- ---------------
Attributable to:
Owners of Cape plc 9.0 7.9
Non-controlling interests 0.9 0.5
---------------------------------------------------------------------------------- --------------- ---------------
9.9 8.4
--------------------------------------------------------------------------------- --------------- ---------------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
FOR THE PERIOD ENDED 5 JULY 2015
29 June
5 July 2014(1)
2015 31 December 2014 Restated
Unaudited Audited Unaudited
Note GBPm GBPm GBPm
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Assets
Non-current assets
Intangible assets 150.6 148.1 156.4
Investment property 2.0 2.0 2.0
Property, plant and equipment 76.3 77.3 80.5
Investments accounted for using the equity method - - 0.4
Derivative financial assets 0.1 0.2 -
Deferred tax asset 23.3 24.3 25.4
Restricted deposits 9.0 9.0 9.0
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total non-current assets 261.3 260.9 273.7
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Current assets
Inventories 13.3 15.0 17.7
Trade and other receivables 234.3 200.3 212.3
Cash and cash equivalents 57.7 78.0 53.9
Restricted deposits 18.2 20.9 20.4
Assets directly associated with disposal group held for sale 1.3 2.6 0.8
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total current assets 324.8 316.8 305.1
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total assets 586.1 577.7 578.8
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Equity
Share capital 16 30.3 30.3 30.3
Share premium account 1.0 1.0 1.0
Special reserve 1.0 1.0 1.0
Other reserves 9.5 9.5 9.3
Translation reserve 93.2 96.3 92.3
Retained losses (11.8) (13.4) (6.2)
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Equity attributable to equity holders of the parent 123.2 124.7 127.7
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Non-controlling interests 3.7 2.8 3.1
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total equity 126.9 127.5 130.8
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Liabilities
Non-current liabilities
Borrowings 186.9 177.1 180.5
Retirement benefit obligations 13.4 12.4 10.1
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Deferred tax liabilities 7.4 7.5 9.4
Provision for industrial disease claims 91.0 93.5 86.7
Other provisions 2.7 2.9 2.6
Total non-current liabilities 301.4 293.4 289.3
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Current liabilities
Borrowings 0.1 - 2.2
Derivative financial instruments 0.1 0.2 0.4
Trade and other payables 128.6 124.3 120.7
Current income tax liabilities 7.7 7.6 7.3
Provision for industrial disease claims 5.4 4.7 5.8
Other provisions 14.1 17.7 21.7
Liabilities directly associated with disposal group held for sale 1.8 2.3 0.6
Total current liabilities 157.8 156.8 158.7
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total liabilities 459.2 450.2 448.0
------------------------------------------------------------------ ------- ---------- ----------------- ----------
Total equity and liabilities 586.1 577.7 578.8
------------------------------------------------------------------ ------- ---------- ----------------- ----------
(1) Restated for the reclassification of liabilities directly
associated with disposal group held for sale as detailed in note
2.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE PERIOD ENDED 5 JULY 2015
Share Total
Share premium Special Other Translation Retained attributable Non-controlling Total
capital account reserve reserves reserve earnings/(losses) to parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2015
audited 30.3 1.0 1.0 9.5 96.3 (13.4) 124.7 2.8 127.5
------------------- ------- ------- ------- -------- ----------- ----------------- ---------------- --------------- ------
Comprehensive
income:
Profit for the
period - - - - - 12.4 12.4 0.9 13.3
Other
comprehensive
income/(expense):
Currency
translation
differences - - - - (3.1) - (3.1) - (3.1)
Re-measurement of
defined
benefit pension
plan - - - - - (0.1) (0.1) - (0.1)
Movement in
restriction
of retirement
benefit asset
in accordance
with IFRIC
14 - - - - - (0.2) (0.2) - (0.2)
------------------- ------- ------- ------- -------- ----------- ----------------- ---------------- --------------- ------
Total
comprehensive
income/(expense)
for the period - - - - (3.1) 12.1 9.0 0.9 9.9
Transactions with
owners
Dividends - - - - - (11.5) (11.5) - (11.5)
Share options
- value of
employee services - - - - - 1.0 1.0 - 1.0
- - - - - (10.5) (10.5) - (10.5)
------------------- ------- ------- ------- -------- ----------- ----------------- ---------------- --------------- ------
At 5 July 2015
unaudited 30.3 1.0 1.0 9.5 93.2 (11.8) 123.2 3.7 126.9
------------------- ------- ------- ------- -------- ----------- ----------------- ---------------- --------------- ------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE PERIOD ENDED 29 JUNE 2014
Share Retained Total
Share premium Special Other Translation earnings/ attributable Non-controlling Total
capital account reserve reserves reserve (losses) to parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2014
audited 30.3 1.0 1.0 9.3 96.6 (7.6) 130.6 2.6 133.2
------------------- ------- ------- ------- -------- ----------- --------- ---------------- --------------- --------
Comprehensive
income:
Profit for the
period - - - - - 12.6 12.6 0.6 13.2
Other
comprehensive
income/(expense):
Currency
translation
differences - - - - (4.3) - (4.3) (0.1) (4.4)
Re-measurement of
defined
benefit pension
plan - - - - - 0.5 0.5 - 0.5
Movement in
restriction of
retirement
benefit asset
in accordance
with IFRIC
14 - - - - - (0.9) (0.9) - (0.9)
------------------- ------- ------- ------- -------- ----------- --------- ---------------- --------------- --------
Total
comprehensive
income/(expense)
for the period - - - - (4.3) 12.2 7.9 0.5 8.4
Transactions with
owners
Dividends - - - - - (11.5) (11.5) - (11.5)
Share options
- value of
employee services - - - - - 0.7 0.7 - 0.7
- - - - - (10.8) (10.8) - (10.8)
------------------- ------- ------- ------- -------- ----------- --------- ---------------- --------------- --------
At 29 June 2014
unaudited 30.3 1.0 1.0 9.3 92.3 (6.2) 127.7 3.1 130.8
------------------- ------- ------- ------- -------- ----------- --------- ---------------- --------------- --------
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 5 JULY 2015
26 weeks Year ended
27 weeks ended 31 December
ended 29 June 2014(1) 2014(2)
5 July 2015 Restated Restated
Unaudited Unaudited Audited
Note GBPm GBPm GBPm
Operating activities
Cash generated from operating activities
- continuing operations 17 5.3 3.0 44.0
Interest received 0.4 - 0.8
Interest paid (3.5) (2.9) (7.2)
Tax paid (3.9) (3.5) (8.4)
--------------------------------------------- ----- -------------- ----------------- -------------
Net cash flows (used in)/from operating
activities - continuing operations (1.7) (3.4) 29.2
--------------------------------------------- ----- -------------- ----------------- -------------
Net cash flows from/(used in) operating
activities - discontinued operations 17 0.5 (4.1) 1.3
--------------------------------------------- ----- -------------- ----------------- -------------
Net cash flows (used in)/from operating
activities (1.2) (7.5) 30.5
--------------------------------------------- ----- -------------- ----------------- -------------
Investing activities
Continuing operations
Proceeds from sale of property, plant
and equipment 13 0.3 0.6 1.3
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Purchase of property, plant and equipment 13 (7.4) (7.1) (15.3)
Purchase of intangibles - - (0.1)
Transfer of restricted funds 0.3 - -
Loans (to) joint ventures (5.2) (5.4) (3.6)
Acquisition of subsidiaries net of
cash acquired 14 (0.2) (33.3) (30.2)
Cash paid into escrow for deferred
consideration - - (2.1)
--------------------------------------------- ----- -------------- ----------------- -------------
Net cash (used in) investing activities
- continuing operations (12.2) (45.2) (50.0)
--------------------------------------------- ----- -------------- ----------------- -------------
Discontinued operations
Proceeds from sales of assets held
for sale - 3.5 3.6
--------------------------------------------- ----- -------------- ----------------- -------------
Net cash realised from investing activities
- discontinued operations - 3.5 3.6
Financing activities
Continuing operations
Repayment of facilities (5.3) (130.6) (130.6)
Drawing on borrowings - - 167.9
Movements on revolving facility 10.3 172.9 -
Finance lease principal payments - (0.2) (0.1)
Dividends paid to shareholders 12 (11.5) (11.5) (16.9)
Net cash flows (used in)/from financing
activities - continuing operations (6.5) 30.6 20.3
Net cash flows (used in)/from financing - - -
activities - discontinued operations
--------------------------------------------- ----- -------------- ----------------- -------------
Net foreign exchange difference (0.4) (1.1) -
--------------------------------------------- ----- -------------- ----------------- -------------
Net (decrease)/increase in cash and
cash equivalents (20.3) (19.7) 4.4
Cash and cash equivalents at beginning
of period 78.0 73.6 73.6
--------------------------------------------- ----- -------------- ----------------- -------------
Cash and cash equivalents at end of
period 57.7 53.9 78.0
--------------------------------------------- ----- -------------- ----------------- -------------
(1) Restated for the reclassification of Kazakhstan to
discontinued operations and the presentation of cash flows relating
to acquisition
related costs and loans to joint ventures as detailed in note
2.
(2) Restated for the presentation of cash flows relating to
loans to joint ventures as detailed in note 2.
Notes to the Financial Statements
1. Corporate information
The interim condensed consolidated financial statements of Cape
plc and its subsidiaries, collectively 'the Group' for the period
ended 5 July 2015 were authorised for issue in accordance with a
resolution of the Directors on 25 August 2015.
Cape plc, 'the Company' or 'the Parent', is a limited company
incorporated in Jersey and domiciled in Singapore and Jersey whose
shares are publicly traded on the London Stock Exchange. The
registered office is located at 47 Esplanade, St Helier, Jersey JE1
0BD. The Group is principally engaged in the provision of critical
industrial services focused on the energy and natural resource
sectors.
2. Basis of preparation
The interim condensed consolidated financial statements for the
period ended 5 July 2015 have been prepared in accordance with IAS
34, 'Interim Financial Reporting', as adopted by the European Union
and the Disclosure and Transparency Rules of the Financial Conduct
Authority. The interim condensed consolidated financial statements
for the period ended 5 July 2015 includes one extra week of
performance in comparison to the prior period ended 29 June 2014.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual financial statements for the year ended 31 December
2014 which are prepared in accordance with IFRS, as adopted by the
European Union.
The accounting policies and methods of computation adopted in
preparation of the Group's interim condensed consolidated financial
statements are the same as those followed in the preparation of the
Group's annual consolidated financial statements for the year ended
31 December 2014, except for the adoption of new standards and
interpretations effective as of 1 January 2015.
Adoption of new standards and interpretations
Several new standards and amendments apply for the first time in
2015, however they do not have a significant impact on the annual
financial statements of the Group or the interim condensed
consolidated financial statements of the Group. These new standards
and amendments are listed below:
- Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
- Annual Improvements to IFRSs 2010-2012 Cycle
- Annual Improvements to IFRSs 2011-2013 Cycle
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
Restatement of prior year comparatives
As a result of the discontinuation of operations in Kazakhstan
during 2014, the prior period figures for the period ended 29 June
2014 in the interim condensed consolidated income statement and the
interim condensed consolidated cash flow statement have been
restated, together with any associated notes. The comparative
amounts in the interim condensed statement of financial position as
at 29 June 2014 have been restated to reflect GBP0.6m liabilities
previously netted within assets directly associated with disposal
group held for sale.
The comparative amounts in the interim condensed consolidated
cash flow statement for the periods ended 29 June 2014 and 31
December 2014 have been restated to include loans to joint ventures
of GBP5.4 million (31 December 2014: GBP3.6 million) within
investing activities. The comparative amounts for the period ended
29 June 2014 has also been restated to exclude acquisition related
costs of GBP0.8 million from the prior period cash flows.
Estimates
The preparation of the interim condensed consolidated 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 interim condensed consolidated financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were in line with those that applied to the
Group's annual audited consolidated financial statements for the
year ended 31 December 2014.
Foreign exchange
The Group is exposed to foreign currency risk in two key
currencies. The movements in exchange rates for these two
currencies are detailed below:
27 weeks 26 weeks Year ended
ended ended 31 December
5 July 2015 29 June 2014 2014
Closing Average Closing Average Closing Average
----- --------- -------- -------- -------- -------- --------
AUD 2.05 2.00 1.81 1.84 1.91 1.83
----- --------- -------- -------- -------- -------- --------
USD 1.56 1.53 1.70 1.67 1.56 1.65
----- --------- -------- -------- -------- -------- --------
3. Cape specific accounting measures
To be able to provide readers with clear, meaningful and
consistent presentation of financial performance, the Group
reflects its underlying financial results in the 'business
performance' column within the interim condensed consolidated
income statement. Business performance excludes 'Other items' and
'Exceptional items', which are considered non-operational in their
nature and which are reported separately in a different column
within the interim condensed consolidated income statement.
Other items
Other items are those items which the Directors believe are
relevant to the understanding of the result for period and which
are excluded from the adjusted measures. Other items include
administration expenses, financial incomes and financial costs
associated with industrial disease claims and certain
post-acquisition charges, including amortisation of acquired
intangibles arising from business combinations.
Exceptional items
Exceptional items are those items which are of a non-recurring
nature and, in the judgement of the Directors, need to be disclosed
separately by virtue of their nature, size or incidence. Items
which may be considered exceptional in nature include significant
write-downs of goodwill and other assets, significant changes in
asset values as a result of changes in accounting estimates and
restructuring costs.
4. Critical accounting estimates and judgements
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Certain of the Group's accounting policies require critical
accounting estimates that involve subjective judgements and the use
of assumptions, some of which may relate to matters that are
inherently uncertain and susceptible to change.
Judgements
Areas of judgement that have the most significant effect on the
amounts recognised in the interim condensed consolidated financial
statements are:
(i) Revenue recognition and assessment of long term contract
performance
The Group generally accounts for long term construction
contracts using the percentage of completion method as performance
of the contract progresses. This method requires judgement to
determine accurate estimates of the extent of progress towards
contract completion and may involve estimates of the total contract
costs, remaining costs to completion, total revenues, contract
risks and other judgements.
(ii) Carrying value of property, plant and equipment
Assessing whether property, plant and equipment may be impaired
requires a review for indicators of impairment and, where such
indicators exist, an estimate of the asset's recoverable amount by
reference to value in use. Management are required to exercise
significant judgement in reviewing for and identifying asset
indicators of impairment and subsequently calculating value in
use.
(iii) Trade and other receivables
The Group provides for likely non-recovery of receivables to the
extent that the carrying value is less than the present value of
expected future cash flows. Assessing the value of the provision
requires significant management judgement and review of individual
receivables based upon individual customer creditworthiness,
current economic trends and analysis of historical bad debts.
(iv) Tax
The Group recognises deferred tax assets on all applicable
temporary differences where it is probable that future taxable
profits will be available for utilisation. This requires management
to make judgements and assumptions regarding the amount of deferred
tax that can be recognised based on the magnitude and likelihood of
future taxable profits.
The Group has a number of uncertain tax positions that are yet
to be resolved. Provisions have been made where it is probable an
economic outflow will be required to settle an obligation and where
the amount can be reliably estimated. The Board believes no further
provision or disclosure is required in respect of these uncertain
positions.
(v) Defined benefit pension plans
The cost and the obligation of the Group's defined benefit
pension plans are based on a number of selection assumptions; these
include the discount rate, inflation rate, salary growth, longevity
and expected return on the assets of the plans. Differences arising
from actual experience or future changes in assumptions will be
reflected in future periods.
Estimates
The key assumptions affected by future uncertainty that have a
significant risk of causing material adjustment to the carrying
value of assets and liabilities within the next financial year
are:
(i) Onerous contracts
Provision is made for future losses on long term contracts where
it is considered that the contract costs are likely to exceed
revenues in future years. Estimating future losses involves
assumptions of contract performance targets and likely levels of
future cost escalation over time.
(ii) Impairment of goodwill
Goodwill is tested at least annually for impairment. This
requires estimation of the value in use of the cash-generating
units to which the goodwill is allocated. Calculation of value in
use requires estimation of expected future cash flows from each of
the cash-generating units and also to determine a suitable discount
rate to calculate the present value of those cash flows.
4. Critical accounting estimates and judgements (continued)
(iii) Provision for industrial disease claims
To the extent that such costs can be reliably estimated, a
provision has been made for the costs which the Group is expected
to incur in respect of lodged and future industrial disease claims
for which the Board believes the Group to be liable arising on
alleged exposure to previously manufactured asbestos products. The
most recent full actuarial valuation was performed in 2013 and the
next full valuation is scheduled to be completed to 31 December
2016. The amount of the provision is based on historic patterns of
claim numbers and monetary settlements as well as published tables
of projected disease incidence. Key assumptions made in assessing
the appropriate level of provision include the period over which
future claims can be expected, the nature of claims received, the
rate at which claims will be filed, the rate of successful
resolution as well as future trends in both compensation payments
and legal costs. Management monitors claims received on an ongoing
basis and any other factors which would require a change to the
assumptions or trigger a full actuarial review in the current
year.
(iv) Income tax
Group entities can be subject to routine tax audits and also a
process whereby tax computations are discussed and agreed with the
appropriate authorities. Whilst the ultimate outcome of such tax
audits and discussions cannot be determined with certainty,
management estimates the level of required tax provisions on the
basis of professional advice and the nature of current discussions
with the tax authority concerned.
5. Segment information
The following tables represent revenue and profit information
for the Group's operating segments for the period ended 5 July 2015
and 29 June 2014 respectively:
27 weeks ended 5 July 2015
UK, Europe Asia
& CIS MENA Pacific Central Group
GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 194.9 95.4 72.3 - 362.6
Adjusted operating profit/(loss)
before joint ventures 15.5 14.3 (0.2) (4.8) 24.8
Share of post-tax profit from
joint ventures 0.1 - - - 0.1
---------------------------------- ---------- ------ -------- --------- -------
Adjusted operating profit/(loss) 15.6 14.3 (0.2) (4.8) 24.9
---------------------------------- ---------- ------ -------- --------- -------
Other items (1.9)
Exceptional items (0.4)
Net finance costs (5.2)
---------------------------------- ---------- ------ -------- --------- -------
Profit before tax 17.4
---------------------------------- ---------- ------ -------- --------- -------
26 weeks ended 29 June 2014
Restated
UK, Europe Asia
& CIS MENA Pacific Central Group
GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 179.3 89.1 51.9 - 320.3
Adjusted operating profit/(loss)
before joint ventures 15.8 9.2 (1.0) (1.0) 23.0
Share of post-tax profit from - - - - -
joint ventures
--------------------------------- ---------- ------ -------- --------- -------
Adjusted operating profit/(loss) 15.8 9.2 (1.0) (1.0) 23.0
---------------------------------- ---------- ------ -------- --------- -------
Other items (1.3)
Exceptional items (0.8)
Net finance costs (4.2)
---------------------------------- ---------- ------ -------- --------- -------
Profit before tax 16.7
---------------------------------- ---------- ------ -------- --------- -------
Segmental adjusted operating profit/(loss) in the table above is
shown after charging franchise fees. Adjusted operating
profit/(loss) before franchise fees is set out in note 6.
5. Segment information (continued)
Other segment items included in the interim condensed
consolidated income statement for the period ended 5 July 2015
were:
UK, Europe
& CIS Asia Pacific
GBPm MENA GBPm Central Group
GBPm GBPm GBPm
-------------- ----------- -------------- --------------- ---------- --------
Depreciation 2.6 3.3 2.0 - 7.9
Amortisation 1.6 - - - 1.6
--------------- ----------- -------------- --------------- ---------- --------
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Other segment items included in the interim condensed
consolidated income statement for the period ended 29 June 2014
were:
UK, Europe
& CIS Asia
GBPm MENA Pacific Central Group
Restated GBPm GBPm GBPm GBPm
-------------------------------------------------- ----------- ------- ---------- ---------- --------
Depreciation (excluding discontinued operations) 2.3 3.0 1.6 - 6.9
Amortisation 1.1 - - - 1.1
--------------------------------------------------- ----------- ------- ---------- ---------- --------
The following table presents assets and liabilities from the
Group's operating segments as at 5 July 2015 and 31 December 2014,
respectively:
UK, Disposal
Europe Asia group
& CIS MENA Pacific Central held for Unallocated Group
sale
5 July 2015 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---- -------- ------- --------- --------- ---------- ------------- --------------
Assets 205.0 165.3 92.3 13.9 1.3 108.3 586.1
Liabilities - continuing (73.2) (51.8) (19.8) (113.2) (1.8) (199.2) (459.0) (0.2)
Liabilities - discontinued - (0.2) - - - -
----------------------------------- -------- ------- --------- --------- ---------- ------------- --------------
Total liabilities (73.2) (52.0) (19.8) (113.2) (1.8) (199.2) (459.2)
----------------------------------- -------- ------- --------- --------- ---------- ------------- --------------
UK, Disposal
Europe Asia group
& CIS MENA Pacific Central held for Unallocated Group
sale
31 December 2014 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---- -------- ------- --------- --------- ---------- ------------- --------------
Assets 120.8 115.6 82.3 124.0 2.6 132.4 577.7
Liabilities - continuing (59.2) (55.1) (27.4) (115.7) (2.3) (190.2) (449.9)
Liabilities - discontinued - (0.3) - - - - (0.3)
----------------------------------- -------- ------- --------- --------- ---------- ------------- --------------
Total liabilities (59.2) (55.4) (27.4) (115.7) (2.3) (190.2) (450.2)
----------------------------------- -------- ------- --------- --------- ---------- ------------- --------------
6. Adjusted measures
The Group seeks to present a measure of underlying performance
which is not impacted by other items or exceptional items, both
considered non-operational in nature. These measures are described
as 'adjusted' and are used by management to measure and monitor
performance. Other items and exceptional items have been excluded
from the adjusted measures:
26 weeks ended
29 June 2014 Restated
27 weeks ended GBPm
5 July 2015
GBPm
Continuing operations:
Profit before tax 17.4 16.7
Other items 1.9 1.3
Exceptional items 0.4 0.8
Interest income on restricted deposits (0.2) (0.3)
Unwind of discount on provision for industrial disease claims 1.7 1.7
Adjusted profit before tax 21.2 20.2
-------------------------------------------------------------- ----------------- ---------------------------
Operating profit 22.6 20.9
Other items 1.9 1.3
Exceptional items 0.4 0.8
Adjusted operating profit 24.9 23.0
-------------------------------------------------------------- ----------------- ---------------------------
Adjusted operating profit margin % 6.9% 7.2%
-------------------------------------------------------------- ----------------- ---------------------------
Adjusted operating profit 24.9 23.0
Depreciation - continuing operations 7.9 6.9
-------------------------------------------------------------- ----------------- ---------------------------
Adjusted EBITDA 32.8 29.9
-------------------------------------------------------------- ----------------- ---------------------------
Finance costs (5.6) (4.9)
Unwind of discount on provision for industrial
disease claims 1.7 1.7
Adjusted finance costs (3.9) (3.2)
-------------------------------------------------- ---- ---- ----------------- -----------------------------
31 December 2014
5 July 2015 GBPm
GBPm
------------------------------------------------- ---------- ----------------- ---------------------------
Net debt 102.1 69.2
Unamortised borrowing arrangement costs 2.4 2.9
Restricted deposits 27.2 29.9
Less: cash transferred to assets of disposal group
held for sale (0.4) (1.0)
Adjusted net debt 131.3 101.0
-------------------------------------------------------------- ----------------- ---------------------------
Certain central operations and management are based in the
Group's International Headquarters ("IHQ") in Singapore with
responsibility for management and development of non-UK
intellectual property. Franchise agreements facilitate the charging
of franchise fees from IHQ to the Group's non-UK trading businesses
with such costs being reported through segment operating
profit.
6. Adjusted measures (continued)
The segment adjusted operating profit before franchise fees both
before and after inclusion of the share of profit/(loss) from joint
ventures is as follows:
26 weeks
27 weeks ended ended
5 July 2015 29 June 2014
Restated
Adjusted Adjusted
operating operating
Adjusted profit/(loss) Adjusted profit/(loss)
operating before joint operating before joint
profit/(loss) ventures profit/(loss) ventures
GBPm GBPm GBPm GBPm
UK, Europe & CIS 15.7 15.6 15.8 15.8
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MENA 16.0 16.0 11.6 11.6
Asia Pacific 2.0 2.0 1.4 1.4
Central (8.8) (8.8) (5.8) (5.8)
---------------------- ------------------ ------------------ ------------------ ------------------
Adjusted operating
profit 24.9 24.8 23.0 23.0
---------------------- ------------------ ------------------ ------------------ ------------------
7. Other items and exceptional items
a) Other items
27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
GBPm GBPm
Continuing operations
------------------------------------------------------------------------ --------------------------- ---------------
In operating profit:
Amortisation of intangibles arising on business acquisitions 1.6 1.1
Post-acquisition management compensation 0.1 0.1
Industrial disease claims - other expenses 0.2 0.1
------------------------------------------------------------------------ --------------------------- ---------------
Other items from continuing operations included within operating profit 1.9 1.3
======================================================================== =========================== ===============
b) Exceptional items
27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
GBPm GBPm
Continuing operations
------------------------------------------------------------------------ --------------------------- ---------------
Acquisition related costs (note 14) 0.4 0.8
Exceptional items from continuing operations included within operating
profit 0.4 0.8
======================================================================== =========================== ===============
8. Discontinued operations
Analysis of the result of discontinued operations is as
follows:
Discontinued operations 27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
GBPm Restated
GBPm
---------------------------------------------------------------------------- ---- ----------------- ---------------
Revenue - 2.3
Expenses - (2.6)
---------------------------------------------------------------------------------- ---------------- ---------------
Loss before tax of discontinued operations - (0.3)
Deferred income tax (charge) - (0.1)
Share of post-tax result of discontinued joint venture - 0.1
---------------------------------------------------------------------------- ---- ----------------- ---------------
Loss after tax of discontinued operations before exceptional and other items - (0.3)
---------------------------------------------------------------------------------- ---------------- ---------------
Following the termination of operations in Kazakhstan in 2014,
discontinued operations for the comparative period have been
restated. The previously reported 2014 discontinued revenue of
GBP0.4 million, expenses of GBP1.0 million and income tax credit of
GBP0.1 million related to India.
9. Finance income and costs
27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
GBPm GBPm
------------------------------------------------------------------ -------------------- ---------------
Interest income:
- Interest on pension assets 0.2 0.4
- Interest on restricted deposits 0.2 0.3
------------------------------------------------------------------- ------------------- ---------------
Finance income 0.4 0.7
------------------------------------------------------------------- ------------------- ---------------
Interest expense:
- Bank borrowings (3.8) (3.1)
- Finance leases (0.1) (0.1)
- Unwind of discount on provision for industrial claims disease (1.7) (1.7)
Finance costs (5.6) (4.9)
------------------------------------------------------------------- ------------------- ---------------
Net finance costs (5.2) (4.2)
------------------------------------------------------------------- ------------------- ---------------
10. Income tax
The Group's effective tax rate on its business performance of
21% (H1 2014: 19%) is calculated using the tax rate that would be
applicable to the expected total annual earnings. The income tax
expense for the period increased by GBP0.9m to GBP4.1m (H1 2014:
GBP3.2m) due to an increase in profits and a change in the
geographic mix of profits.
Factors affecting current and future tax charges
Profits arising in the Company for the 2015 year of assessment
will be subject to Jersey tax at the standard corporate income tax
rate of 0%.
As a Group involved in worldwide operations, Cape is subject to
several factors that may affect future tax charges, principally the
levels and mix of profitability in different jurisdictions, tax
rates imposed and tax regime reforms. Legislation has been enacted
in the UK to reduce the standard rate of corporation tax to 20%
from 1 April 2015.
Further, the UK government has announced legislation setting the
standard rate of corporation tax at 19% for the years starting 1
April 2017, 2018 and 2019 and at 18% for the year starting 1 April
2020. These rates were not substantively enacted at the balance
sheet date and, as such, have not been incorporated into the
deferred tax calculations. These further reductions in the tax rate
will affect both the future current and deferred tax charge of the
Group.
11. Earnings per ordinary share
The basic earnings per share calculation for the half-year ended
5 July 2015 is based on the profit attributable to equity
shareholders of GBP12.4 million (H1 2014: GBP12.6 million) divided
by the weighted average number of 25p ordinary shares of
121,072,777 (H1 2014: 121,007,720).
The diluted earnings per share calculation for the half-year
ended 5 July 2015 is based on the profit attributable to equity
shareholders of GBP12.4 million (H1 2014: GBP12.6 million) divided
by the diluted weighted average number of 25p ordinary shares of
121,072,777 (H1 2014: diluted weighted average of 122,597,387).
Share options and awards are considered dilutive when the average
share price during the period is higher than the average exercise
price of the option or award and attainment of attaching
performance criteria can be determined with appropriate certainty.
The options and awards in the current period are not considered
dilutive.
Period ended Period ended
5 July 2015 29 June 2014
Unaudited Unaudited
Number of shares Number of shares
Basic weighted average number of shares 121,072,777 121,007,720
Adjustments:
Weighted average number of outstanding share options - 1,589,667
------------------------------------------------------- ------------------------ ------------------------
Diluted weighted average number of shares 121,072,777 122,597,387
-------------------------------------------------------- ------------------------ ------------------------
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11. Earnings per ordinary share (continued)
26 weeks ended
27 weeks ended 29 June 2014
5 July 2015 Restated
Earnings EPS Earnings EPS
GBPm pence GBPm pence
------ ---------- ------ --------- -----
Basic earnings per share
Continuing operations 12.4 10.3 12.9 10.7
Discontinued
operations - - (0.3) (0.3)
Basic earnings per share 12.4 10.3 12.6 10.4
------------------------------------------ ------ ---------- ------ --------- -----
Diluted earnings per share
Continuing operations 12.4 10.3 12.9 10.5
Discontinued
operations - - (0.3) (0.2)
Diluted earnings per share 12.4 10.3 12.6 10.3
---------------------------------------------- ----- ---------- ------ --------- -----
Adjusted basic earnings per share - continuing
operations
Earnings from continuing operations 12.4 10.3 12.9 10.7
Amortisation of intangibles arising
on business acquisitions (note
7a) 1.6 1.3 1.1 0.9
Post-acquisition management compensation
(note 7a) 0.1 - 0.1 0.1
Industrial disease claims - other
expenses (note 7a) 0.2 0.2 0.1 0.1
Industrial disease claims - finance
income and costs (note 9) 1.5 1.2 1.4 1.2
Exceptional items (note 7b) 0.4 0.3 0.8 0.7
Tax effect of adjusting items (0.4) (0.3) (0.8) (0.7)
Adjusted basic earnings per share 15.8 13.0 15.6 13.0
---------------------------------------------- ----- ---------- ------ --------- -----
Adjusted diluted earnings per share - continuing
operations
Earnings from continuing operations 12.4 10.3 12.9 10.5
Amortisation of intangibles arising
on business acquisitions (note
7a) 1.6 1.3 1.1 0.9
Post-acquisition management compensation
(note 7a) 0.1 - 0.1 0.1
Industrial disease claims - other
expenses (note 7a) 0.2 0.2 0.1 0.1
Industrial disease claims - finance
income and costs (note 9) 1.5 1.2 1.4 1.2
Exceptional items (note 7b) 0.4 0.3 0.8 0.7
Tax effect of adjusting items (0.4) (0.3) (0.8) (0.7)
---------------------------------------------- ----- --------- -----
Adjusted diluted earnings
per share 15.8 13.0 15.6 12.8
------------------------------------------ ------ ---------- ------ --------- -----
The adjusted earnings per share calculations have been
calculated after excluding the impact of other items and
exceptional items (note 7), finance income and costs associated
with industrial disease claims (note 9) and the tax impact of these
items. Options are dilutive at the level of adjusted profit from
continuing operations level. If options are dilutive, then in
accordance with IAS 33, these are treated as dilutive for the
purpose of adjusted diluted earnings per share. The options and
awards in the current period are not dilutive.
12. Dividend
A final dividend in respect of the year ended 31 December 2014
of 9.5 pence per share, amounting to GBP11.5 million, was paid in
the period ended 5 July 2015.
An interim dividend of 4.5 pence (H1 2014: 4.5 pence) per share,
in line with the 2014 interim dividend, was approved by the Board
on 25 August 2015. The dividend will be payable on 9 October 2015
to shareholders on the register as at 11 September 2015.
13. Property, plant and equipment
During the period ended 5 July 2015, the Group acquired assets
with a cost of GBP7.4 million (H1 2014: GBP7.1 million) and
received proceeds from asset sales of GBP0.3 million (H1 2014:
GBP0.6 million) arising from assets with a carrying amount of
GBP0.2 million (H1 2014: GBP0.6 million). Net capital expenditure
of GBP7.1 million (H1 2014: GBP6.5 million) shown in the cash flow
statement represents the actual cash outflow and therefore excludes
purchases funded through finance leases.
Capital expenditure contracted for at the balance sheet date but
not yet incurred:
Period ended Period ended Year ended
5 July 2015 29 June 2014 31 December 2014
GBPm GBPm GBPm
Property, plant and equipment 2.7 2.6 2.9
------------------------------ ------------- -------------- ------------------
14. Acquisitions
On 13 May 2015, the Group acquired 100% of the voting shares of
Redhall Engineering Solutions Limited ("RESL"), a UK incorporated
entity that provides a range of maintenance services including
specialist pipe repair, tank repair and shutdown services to the
process and downstream oil and gas industries.
The Group acquired the business to supplement both its product
portfolio and customer base. The acquisition has been accounted for
using the acquisition method.
The provisional fair value of the identifiable assets and
liabilities of the acquired entity as at the date of acquisition
were:
Fair value recognised
on acquisition(1)
GBPm
-------------------------------------------------- ----------------------
Assets
Property, plant and equipment 0.6
Trade and other receivables 6.9
Deferred tax asset 0.4
Intangible assets 3.1
-------------------------------------------------- ----------------------
11.0
-------------------------------------------------- ----------------------
Liabilities
Trade and other payables (6.6)
Provision (0.6)
Borrowings (5.3)
Deferred tax liabilities (0.6)
(13.1)
-------------------------------------------------- ----------------------
Total identifiable net liabilities at fair value (2.1)
Goodwill arising on acquisition 2.3
-------------------------------------------------- ----------------------
Purchase consideration transferred 0.2
-------------------------------------------------- ----------------------
Analysis of cash flows on acquisition:
Purchase consideration 0.2
Settlement of debt 5.3
Working capital contribution 0.7
Total cash outflow 6.2
-------------------------------------------------- ----------------------
(1) This fair value balance sheet is provisional given the
limited time since acquisition.
The provisional acquired intangible assets comprise customer
related intangibles of GBP3.1 million. At the date of acquisition,
both the gross contractual value and the fair value of receivables
was GBP6.9 million.
The interim consolidated financial statements include the
results of RESL from the date of acquisition, contributing GBP7.7
million of revenue and GBP0.6 million to the Group's net profit
before tax. Had the acquisition taken place on 1 January 2015,
revenue from continuing operations would have been GBP372.6 million
and profit before tax from continuing operations for the period
would have been GBP17.7 million.
The goodwill recognised on the acquisition is attributable to
the value of the assembled workforce, expected synergies and other
benefits arising from combining the RESL operations into the Group.
The goodwill is not deductible for income tax purposes.
14. Acquisitions (continued)
Acquisition related costs of GBP0.4 million have been charged to
exceptional items through continuing operations. Amortisation of
intangible assets acquired as part of the transaction of GBP0.1
million has been charged to other items through continuing
operations.
15. Financial instruments
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Details of financial instruments, other than cash and short term
deposits, held by the Group as at 5 July 2015 are set out
below.
Other financial
Loans and Fair value through income liabilities at
receivables statement amortised cost Total
5 July 2015 GBPm GBPm GBPm GBPm
------------------------------------ ------------- ----------------------------------- ---------------- --------
Assets per the consolidated statement of financial
position
Trade and other receivables
(excluding prepayments) 227.0 - - 227.0
Derivative financial instruments - 0.1 - 0.1
227.0 0.1 - 227.1
------------------------------------ ------------- ----------------------------------- ---------------- --------
Liabilities per the consolidated statement of
financial position
Borrowings (excluding finance lease
liabilities) - - (184.0) (184.0)
Finance lease liabilities - - (3.0) (3.0)
Derivative financial instruments - (0.1) - (0.1)
Trade and other payables (excluding
statutory liabilities) - - (105.7) (105.7)
------------------------------------ ------------- ----------------------------------- ---------------- --------
- (0.1) (292.7) (292.8)
------------------------------------ ------------- ----------------------------------- ---------------- --------
Details of financial instruments, other than cash and short term
deposits, held by the Group as at 31 December 2014 are set out
below.
Other financial
Fair value through income liabilities at
Loans and receivables statement amortised cost Total
31 December 2014 GBPm GBPm GBPm GBPm
----------------------------- ---------------------- ----------------------------- ---------------- --------
Assets per the consolidated statement of financial
position
Trade and other receivables
(excluding prepayments) 196.2 - - 196.2
Derivative financial
instruments - 0.2 - 0.2
196.2 0.2 - 196.4
----------------------------- ---------------------- ----------------------------- ---------------- --------
Liabilities per the consolidated statement of
financial position
Borrowings (excluding
finance lease liabilities) - - (174.9) (174.9)
Finance lease liabilities - - (2.2) (2.2)
Derivative financial
instruments - (0.2) - (0.2)
Trade and other payables
(excluding statutory
liabilities) - - (106.0) (106.0)
----------------------------- ---------------------- ----------------------------- ---------------- --------
- (0.2) (283.1) (283.3)
----------------------------- ---------------------- ----------------------------- ---------------- --------
The fair values of short term deposits, loans and other
borrowings with a maturity of less than one year are assumed to
approximate to their book values. In the case of the bank loans and
other borrowings due in more than one year, the fair value of
financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market
interest rate available to the Group for similar financial
instruments. The fair value of the interest rate swaps (cash flow
hedges) are calculated using quoted prices in active markets for
identical assets and liabilities.
The following table provides the fair value measurement
hierarchy of the Group's assets and liabilities.
Recurring fair value measurements:
Quoted prices in active Significant other Significant unobservable
markets observable inputs inputs
(Level 1) (Level 2) (Level 3)
5 July 2015 GBPm GBPm GBPm
---------------------------- ----------------------------- --------------------------- ----------------------------
Assets and liabilities
measured at fair value:
Assets directly associated
with disposal group held
for sale - - 1.3
Liabilities directly
associated with disposal
group held for sale - - (1.8)
Derivative financial - (0.1) -
liabilities
Derivative financial assets - 0.1 -
- - (0.5)
---------------------------------------------------------- --------------------------- ----------------------------
Assets and liabilities for
which fair values are
disclosed:
Investment property - - 2.8
Bank loans - (180.4) -
---------------------------- ----------------------------- --------------------------- ----------------------------
- (180.4) 2.8
---------------------------------------------------------- --------------------------- ----------------------------
15. Financial instruments (continued)
Quoted prices in active Significant other Significant unobservable
markets observable inputs inputs
(Level 1) (Level 2) (Level 3)
31 December 2014 GBPm GBPm GBPm
-------------------------- --------------------------- ------------------------- --------------------------
Assets and liabilities
measured at fair value:
Assets directly associated
with disposal group held
for sale - - 0.3
Derivative financial - (0.2) -
liabilities
Derivative financial - 0.2 -
assets
- - 0.3
--------------------------- -------------------------- ------------------------- ----------------------------
Assets and liabilities for
which fair values are
disclosed:
Investment property - - 2.8
Bank loans - (170.4) -
--------------------------- -------------------------- ------------------------- ----------------------------
- (170.4) 2.8
--------------------------- -------------------------- ------------------------- ----------------------------
The fair value of the investment property is based upon a
valuation as at 31 December 2014 performed by an accredited
independent valuer, who is a specialist in valuing investment
properties. Fair values of the Group's interest-bearing borrowings
and loans are determined by using a DCF method with a discount rate
that reflects the issuer's borrowing rate as at the end of the
reporting period.
There have been no transfers between Level 1 and Level 2 during
the period.
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Reconciliation of recurring fair value measurements included
within significant unobservable inputs (Level 3):
31 December 2014 Sales Settlements 5 July 2015
GBPm GBPm GBPm GBPm
--------------------------------------------------------------------- -------- ------------ ------------
Assets/(liabilities) directly associated with disposal group
held for sale:
Assets 2.6 (1.3) - 1.3
Liabilities (2.3) - 0.5 (1.8)
Net assets/(liabilities) 0.3 (1.3) 0.5 (0.5)
------------------------------------------------------------- ------- -------- ------------ --------------
16. Share capital
5 July 2015 29 June 2014 31 December 2014
Issued and fully paid Number GBPm Number GBPm Number GBPm
----------------------------- ------------- ----- -------------- ----- --------------- -----
Ordinary shares of 25p each
At 1 January 121,103,937 30.3 121,103,937 30.3 121,103,937 30.3
Issue of shares - - - - - -
Exercise of share options - - - - - -
----------------------------- ------------- ----- -------------- ----- --------------- -----
At period end 121,103,937 30.3 121,103,937 30.3 121,103,937 30.3
----------------------------- ------------- ----- -------------- ----- --------------- -----
plc Scheme Share
At period end 1 - 1 - 1 -
----------------------------- ------------- ----- -------------- ----- --------------- -----
As at 5 July 2015, 31,160 (29 June 2014: 44,342) shares were
held in an employee benefit trust.
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.
17. Cash generated from operations
26 weeks ended
27 weeks ended 29 June 2014(1)
5 July 2015 Restated
GBPm GBPm
--------------------------------------------------------- ---------------- -------------------
Cash flows from operating activities
Continuing operations
Profit before tax 17.4 16.7
Finance costs - net 5.2 4.2
Share of post-tax (profit) from joint ventures (0.1) -
Other non-cash movements (1.3) (1.0)
Payments made on behalf of IDC scheme (0.9) -
Share option charge 1.0 0.7
Depreciation and amortisation 9.5 8.0
Difference between pension charge and cash contributions 0.8 0.9
Decrease/(increase) in inventories 1.6 (4.3)
(Increase) in trade and other receivables (34.9) (25.2)
Increase in trade and other payables 11.3 3.6
(Decrease) in provisions (4.2) (0.6)
(Gain) on sale of property, plant and equipment (0.1) -
Cash generated from continuing operations 5.3 3.0
--------------------------------------------------------- ---------------- -------------------
Discontinued operations
--------------------------------------------------------- ---------------- -------------------
(Loss) before tax - (0.3)
(Increase) in trade and other receivables - (2.6)
Tax paid - (0.2)
Depreciation - 0.1
Movement in provisions 0.5 (1.1)
Cash generated from/(used in) discontinued operations 0.5 (4.1)
--------------------------------------------------------- ---------------- -------------------
(1) Restated for the reclassification of Kazakhstan to
discontinued operations and the presentation of cash flows relating
to acquisition
related costs and loans to joint ventures as detailed in note
2.
18. Reconciliation of net cash flow to movement in adjusted net
debt
27 weeks ended 26 weeks ended
5 July 2015 29 June 2014
Total operations GBPm GBPm
---------------------------------------------------- -------------- --------------
Net (decrease) in cash and cash equivalents (20.3) (19.7)
Net (increase) on revolving facility (10.3) (47.0)
Net (increase) in unamortised borrowing arrangement
costs - (3.2)
Net (increase) in obligations under finance leases - (1.9)
Finance leases and borrowings on acquisition (0.5) -
Foreign exchange movements 1.5 -
Movement in cash in disposal group held for sale (0.7) -
Movement in adjusted net debt during the period (30.3) (71.8)
Adjusted net debt(1) - opening (101.0) (60.2)
---------------------------------------------------- -------------- --------------
Adjusted net debt(1) - closing (131.3) (132.0)
---------------------------------------------------- -------------- --------------
(1) Adjusted net debt excludes restricted funds used to settle
industrial disease claims.
19. Industrial disease claim provision and contingent
liabilities
The Board considers that the provision for industrial disease
claims as at 5 July 2015 captures all expected material industrial
disease scheme liabilities for which the Board believes the Group
to be liable at the balance sheet date. The Group continues to
receive claims, from both individuals and insurance companies, in
connection with historical alleged exposure to asbestos. Where
claims are determined to have merit, the costs are provided for and
claims are settled; otherwise, claims are defended. Recently the
Group has received a number of product liability claims. The Board
is of the opinion that such claims are without merit and they are
being vigorously defended.
As legal precedent in the area of industrial disease claims
continues to evolve, new developments and new types of claims,
including the product liability claims referred to above, give rise
to uncertainty in both the future level of asbestos-related disease
claims and of the legal and other costs arising from such claims.
If any such claim were to be successful, it might lead to future
claims against the Group which could result in a significant
additional liability.
The Group has contingent liabilities in respect of guarantees
and bonds entered into in the normal course of business, in respect
of which no loss is expected. The Group is required to issue trade
finance instruments to certain customers; these include tender
bonds, performance bonds, retention bonds, advance payment bonds
and standby letters of credit. As at 5 July 2015, the Group's bank
facilities relating to the issue of bonds, guarantees and letters
of credit amounted to GBP52.6 million (H1 2014: GBP59.9
million).
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