TIDMCIU
RNS Number : 0592Q
Cape plc
27 August 2014
Embargoed: 0700hrs, 27 August 2014
Cape plc
("Cape" or "the Group")
Interim results for the period ended 29 June 2014
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
29 June 2014.
"Trading in line with expectation and the Board expects a
stronger second half to 2014"
Financial summary
H1 2014 Restated Change
H1 2013
Financial highlights:
Continuing operations:
Revenue GBP322.3m GBP370.8m (13.1%)
Adjusted operating profit GBP23.4m GBP26.5m (11.7%)
Adjusted operating profit margin 7.3% 7.1% +20bps
Adjusted profit before tax GBP20.6m GBP23.6m (12.7%)
Adjusted diluted earnings per
share 12.9p 14.8p (12.8%)
Interim dividend per share 4.5p 4.5p
Adjusted net debt GBP132.0m GBP73.9m (78.6%)
Statutory results:
Operating profit GBP21.3m GBP10.6m +100.9%
Profit before tax GBP17.1m GBP6.1m +180.3%
Diluted earnings per share 10.7p 4.4p +143.2%
Highlights
-- Overall trading performance in line with expectation:
o UK, Europe & CIS region performed in line with
expectation
o MENA region performed ahead of expectation, with strong
results in all major countries
o Asia Pacific region had a slow start to year with subdued
activity in the Asia countries
-- Order intake during the first half increased by 33% to GBP317m (H1 2013: GBP239m)
-- Revenue decreased by 13% to GBP322.3m (H1 2013: GBP370.8m):
o Adverse foreign exchange movements accounted for 6% of the
decrease
o 3% benefit resulting from the Motherwell Bridge
acquisition
o Underlying reduction of 10% driven by the completion of a
number of significant construction projects during 2013
-- Adjusted operating profit decreased by 12% to GBP23.4m (H1
2013: GBP26.5m) with adjusted operating margin improving to
7.3%
-- Period-end adjusted net debt of GBP132.0m (H1 2013: GBP73.9m,
31 December 2013: GBP60.2m), impacted by the GBP37.6m acquisition
of Motherwell Bridge and a significant working capital outflow,
driven by the seasonality of the UK power market
-- Adjusted diluted earnings per share from continuing operations was 12.9p (H1 2013: 14.8p)
-- The Group has declared an interim dividend of 4.5p (H1 2013: 4.5p) per share
Commenting on the results, Joe Oatley, Chief Executive of Cape
said:
"I am pleased to be able to report that Cape has delivered a
first half result in line with expectation, demonstrating the
progress we have made in stabilising the Group, enabling us to now
move into the growth stage of our strategy. Market conditions
remain mixed with strong demand in the MENA region, but
construction activity remains subdued in many other parts of the
world. We anticipate a stronger second half as activity ramps up on
the Wheatstone LNG project in Australia, UK margins recover to
normal levels and the Group continues to benefit from the recent
acquisition of Motherwell Bridge.
Overall, the Board anticipates that the full year performance
will be in line with expectation and remains confident in the
future growth prospects of the Group."
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 459 979
Michael Speakman, Chief Financial Officer +44 (0) 1895 459 979
Rachel Amey, Director of Investor Relations +44 (0) 1895 459 965
Buchanan +44 (0) 207 466 5000
Bobby Morse, Ben Romney, Louise Mason
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
financial periods and corporate developments will depend on a
number of economic, competitive and other factors, some of which
will be outside the control of the Group. Such factors could cause
the Group's actual results for future periods to differ materially
from those expressed in any forward looking statements included in
this announcement.
About Cape:
Cape plc (www.capeplc.com), which is premium listed on the Main
Market of the London Stock Exchange, provides a range of
non-mechanical industrial services including access systems,
insulation, coatings, refractory linings and a range of specialist
services including environmental services, storage tank
construction and maintenance to both industrial plant operators and
major international engineering and construction companies.
INTERIM MANAGEMENT REVIEW
Summary
Cape is pleased to report that the Group has delivered an
overall trading performance for the first half of 2014 in line with
the Board's expectation. The focus for the remainder of the year is
to move the business forward by progressing with the growth stage
of our strategy whilst continuing to drive operational excellence
throughout the Group. The Directors have declared an interim
dividend of 4.5p (H1 2013: 4.5p) per share.
Order intake during the first half increased by 33% to GBP317m
(H1 2013: GBP239m) with the Motherwell Bridge acquisition and the
maintenance contract awarded in Hong Kong being two of the key
contributors to that growth. Order intake in the Middle East
remained strong with a broad spread of contracts being awarded in
the first half; order intake across the remainder of the Group was
subdued due largely to the timing of both major maintenance
contract renewals in the UK and the new construction projects in
both Asia Pacific and the CIS.
The Group's order book for continuing operations was GBP643m at
29 June 2014 in comparison to GBP648m at 31 December 2013 and
GBP593m at 30 June 2013. The Group's reported order book excludes
order book value associated with joint ventures.
Group revenue from continuing operations decreased by 13% to
GBP322.3m (H1 2013: GBP370.8m). Adverse foreign exchange movements
of 6% were partially offset by the 3% benefit from the Motherwell
Bridge acquisition, with the 10% underlying reduction resulting
from the completion of material construction projects in all three
regions.
Adjusted operating profit from continuing operations reduced to
GBP23.4m (H1 2013: GBP26.5m) with adjusted operating margin
improving to 7.3% (H1 2013: 7.1%).
The UK, Europe & CIS region performed in line with
expectation, with revenue lower than 2013 due primarily to the
completion of the Group's activities on the Kashagan project in
Kazakhstan.
The MENA region performed well, with strong performances from
all of the major countries within the region. The onerous contract
in Qatar continues to perform in line with the operational plan and
within the existing provision.
The Asia Pacific region has had relatively low volumes with
subdued construction activity in the Asian countries and continued
slow demand in Australia. The business completed a number of
significant construction contracts in 2013 with this volume yet to
be replaced with new construction projects. The Wheatstone project
in Australia has had minimal impact on the first half of 2014 with
mobilisation to site only starting to ramp up at the end of the
period; the Group's activities on the project are expected to
continue to increase throughout the second half of 2014 in line
with the requirements from the client.
The Group achieved an adjusted operating cash outflow of
GBP10.2m (H1 2013: GBP8.7m inflow, 31 December 2013: GBP49.7m
inflow) leading to a period-end adjusted net debt of GBP132.0m (H1
2013: GBP73.9m, 31 December 2013: GBP60.2m), impacted by a cash
outflow of GBP37.6m relating to the acquisition of Motherwell
Bridge. Excluding the acquisition, net debt was GBP94.4m, driven by
a GBP33.9m working capital outflow in the first half of the year.
The majority of this movement relates to the seasonal working
capital of the Group and is expected to largely reverse in the
second half.
Progress on strategy
The focus during 2013 on operational excellence and improved
controls has delivered a more stable business and as a result the
Group was able to enter the growth phase of our strategy during the
first half of 2014.
An important element of this growth strategy is to expand the
range of critical services we offer. The acquisition, in March
2014, of Motherwell Bridge, a leading provider of construction and
maintenance services for storage tanks, gasholders and heat
exchangers to the energy and steel markets, represents an important
first step in our goal of offering a broader range of more
specialist services to our clients. The integration of the business
is progressing well and it is performing in line with our
expectation. We are now focusing on expanding the Motherwell Bridge
capability around Cape's international footprint, in particular in
the Middle East and developing an integrated maintenance support
offering for targeted tank farm clients.
As part of this strategy to expand our service offering, we have
now formed Cape Specialist Services which will encompass our
growing range of specialist offerings, namely Motherwell Bridge,
York Linings and Cape Environmental Services, based in the UK. Cape
Specialist Services will sell across the Group's existing
geographical network and has already started to produce revenue
synergies through offering a full range of services to clients.
Financial overview
A summary income statement with explanatory discussion of each
of the key items is provided below.
GBPm unless otherwise stated Restated
H1 2014 H1 2013
--------------------------------------- -------- ---------
Continuing operations:
Revenue 322.3 370.8
Adjusted operating profit 23.4 26.5
Adjusted operating profit margin
(%) 7.3% 7.1%
Adjusted profit before tax 20.6 23.6
Adjusted diluted earnings per share 12.9p 14.8p
--------------------------------------- -------- ---------
As anticipated, revenue from continuing operations decreased by
13% to GBP322.3m (H1 2013: GBP370.8m) of which 6% relates to
foreign exchange movements, partially offset by a 3% benefit from
the Motherwell Bridge acquisition. The underlying reduction of 10%
was driven by the completion of several large construction projects
in 2013, in particular the Kashagan project in Kazakhstan, the
Arzew GNL3-Z plant in Algeria, the SPT project in Singapore and the
Kipper Tuna project in Australia. In addition, there were a number
of significant construction projects in the United Arab Emirates
(UAE) completed in 2013 which, as expected, have not been repeated
in 2014.
Adjusted operating profit from continuing operations decreased
to GBP23.4m (H1 2013: GBP26.5m) driven by:
-- a flow through of the reduced revenue
-- a 4% adverse impact of foreign exchange
-- a 6% benefit of the Motherwell Bridge acquisition
-- a reduction in the UK margin primarily driven by the mix of
work with lower volume of emergent work on some onshore sites
-- the benefit of the improved margin in the Asia Pacific region and
-- an increase in central costs reflecting investment in the
Operational Excellence programme and stronger commercial
management.
Adjusted diluted earnings per share from continuing operations
was 12.9p (H1 2013: 14.8p) arising from adjusted earnings
attributable to equity shareholders of GBP15.9m (H1 2013:
GBP18.0m).
Regional review
The Group reports its financial results from a geographic
perspective under three reporting regions.
Adjusted operating Adjusted operating
Revenue profit profit margin
(GBPm) (GBPm) (%)
Restated Restated Restated
Half-year ended H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013
------------------ -------- --------- -------------- --------------- --------------- ---------------
Region
UK, Europe & CIS 181.3 184.8 16.2 18.2 8.9% 9.8%
MENA 89.1 109.5 11.6 14.6 13.0% 13.3%
Asia Pacific 51.9 76.5 1.4 (1.2) 2.7% (1.6%)
Central costs - - (5.8) (5.1) n/a n/a
322.3 370.8 23.4 26.5 7.3% 7.1%
------------------ -------- --------- -------------- --------------- --------------- ---------------
Throughout this document, various management measures are used
and referred to as adjusted. These are defined and reconciled
within note 6 'Adjusted Measures'.
UK, Europe & CIS
Market conditions
The UK market continues to be steady, driven by the demand for
maintenance to existing and ageing infrastructure with customers
focused on plant availability and increasing operational
efficiencies. Outage volumes across the UK during 2014 are
anticipated to be slightly higher than 2013, offsetting a reduction
in emergent works in the Onshore UK market. A number of clients are
now committed to upgrade and life extension projects for existing
assets which will continue to drive demand for the Group's services
in the short and medium term. Demand is increasing in Azerbaijan
with work starting on both the Sangachal and Shah Deniz 2 projects
but construction activity levels remain low in Kazakhstan with the
timing of the major new projects uncertain.
Results
Order intake remained subdued at GBP154m, 29% higher than the
prior year (H1 2013: GBP119m) with the increase primarily driven by
the acquisition of Motherwell Bridge, which has been included in
the order intake for the first time. Tendering activity is high in
the UK with a number of significant maintenance contracts currently
being bid. The business secured a number of important contracts in
the first half, including an extension to the current Perenco
contract as well as work on the Andrew Area Development project for
BP.
Revenue decreased 2% to GBP181.3m (H1 2013: GBP184.8m) with a 2%
negative impact of foreign exchange being mitigated by a 6% benefit
from the Motherwell Bridge acquisition. The underlying reduction of
6% is predominantly due to the previously announced low levels of
activity in Kazakhstan following the completion of the Group's
activity on the Kashagan project during 2013.
The region continues to be predominantly maintenance based, with
86% (H1 2013: 83%) of revenues derived from the maintenance
markets.
Adjusted operating profit margin decreased to 8.9% (H1 2013:
9.8%) due to the relative mix of work across the region, in
particular the decreased activity in the higher margin CIS
countries and a reduction in the UK margin primarily driven by a
lower volume of emergent work on some onshore sites. As a result,
adjusted operating profit reduced by 11% to GBP16.2m (H1 2013:
GBP18.2m). Operating margins in the UK business are anticipated to
recover in the second half of the year to historical normal
levels.
We have made substantial progress with the joint venture with
SOCAR in Azerbaijan and as such are investing to support the
capital expenditure requirements for specific projects. The joint
venture continued to expand its activities on the BP Fabric
Maintenance contract that was secured in 2013 and has also started
mobilising for a number of key construction contracts in the
country.
During the first half of 2014, we were delighted that Cape UK
was awarded two safety awards from SABIC for work on the Teeside
plant. The European Environmental Health, Safety and Security
(EHSS) 'Gold Award 2013' for safety performance was achieved
through the accomplishments of Cape's site teams and the award for
'Best Overall European EHSS Awareness programme 2013' was
specifically achieved for our programme of management interventions
and visibility throughout 2013.
Middle East & North Africa (MENA)
Market conditions
The region continues to show strong demand for the Group's
services; however, the market remains very competitive with
continued pricing pressure, in particular on the major construction
projects. The construction market remains buoyant in the Kingdom of
Saudi Arabia (KSA) withmajor projects such as the Jizan refinery
and terminal and Rabigh II petrochemical plant moving forward with
awards having being made to the EPC companies for the majority of
the main packages of work. Construction in both Qatar and the UAE
is subdued with demand for maintenance work in both countries
remaining robust. The construction markets in Oman and Kuwait are
showing early signs of activity with new refinery and petrochemical
projects moving forward.
Results
Order intake was 5% ahead of the prior year at GBP98m (H1 2013:
GBP93m) with a number of significant multi-year maintenance
contracts secured in Qatar. The order intake in the region
continues to be made up of a broad spread of relatively low value
contracts, reducing the dependence of the business on any one
contract.
Revenue was 19% lower than the very strong first half 2013
performance at GBP89.1m (H1 2013: GBP109.5m). 7% of this decrease
is foreign exchange related with the 12% underlying reduction
driven by the completion of construction projects in 2013 in
particular the Arzew project in Algeria and a number of
construction projects in the UAE. Revenues were ahead of
expectation in all of the key geographies in the region.
Following the completion of a number of construction projects in
2013, the revenue derived from construction has returned to more
normal volumes and represented 58% of total regional revenue (H1
2013: 68%). The Group continues to focus on extending the provision
of maintenance support services with a small growth compared to the
levels attained in 2013 with GBP36m of revenues derived from
maintenance services (H1 2013: GBP35m).
Adjusted operating profit decreased 21% to GBP11.6m (H1 2013:
GBP14.6m) largely as a result of the reduction in revenue with
adjusted operating profit margin remaining strong at 13.0% (H1
2013: 13.3%).
The onerous contract in Qatar continues to perform in line with
the operational plan and within the existing provision.
Cape has continued to be recognised for its safety record in the
region with awards from a number of clients, across all countries
in the region, including the Yanbu Aramco Sinopec Refining Company
in the KSA for Cape's contribution to 15 million safe man hours
without a Lost Time Incident (LTI) and on the Borouge 3 site, in
the UAE, we received the Certificate of Appreciation from the
Technimont and Samsung Engineering joint venture.
Asia Pacific
Market conditions
Market conditions within the Asia Pacific region remain mixed.
Demand for new construction projects in Asia has continued to be
low throughout the first half of 2014; however, there are early
signs of a forthcoming increase in selected geographies with a
number of refinery and petrochemical projects moving toward EPC
awards. Within the Australian market, LNG project demand is
increasing but demand from other sectors remains subdued.
Results
Order intake was significantly higher than prior year at GBP65m
(H1 2013: GBP27m), with the growth largely driven by the award of a
three year maintenance contract in Hong Kong, as announced in April
2014.
As anticipated, revenue decreased by 32% to GBP51.9m (H1 2013:
GBP76.5m). Of the decrease, 15% was a result of adverse impact of
foreign exchange with the 17% organic decline driven by the
completion of a number of significant projects in the region during
2013, including the SPT project in Singapore and Kipper Tuna in
Australia, which have not yet been replaced by new activity. The
Wheatstone project in Australia has had minimal impact on the first
half of 2014 with mobilisation to site only starting to ramp up at
the end of the period; the Group's activities on the project are
expected to continue to increase throughout the second half of 2014
in line with the requirements from the client.
The region has moved from a loss making position in 2013 to
profitability in 2014 with an adjusted operating profit margin of
2.7%, resulting in adjusted operating profit increasing to GBP1.4m
(H1 2013: adjusted operating loss GBP1.2m). The margin improvement
is in part due to the performance improvement measures in Australia
that were taken in 2013 as well as a strong performance in Thailand
in 2014 on both modules for the Ichthys project and shutdown
work.
In concert with the improved financial performance in Australia,
the business has also achieved a significant improvement in safety
performance, recording 12 months' Lost Time Accident free in May
2014 and securing contractor of the month from Alcoa across both
their Wagerup and Pinjarra sites. The business also secured the
Innovative Safety Award from CLP in Hong Kong.
Outlook
The near term order book remains strong and the Board
anticipates that the full year performance will be in line with
expectation. It is anticipated that the Group will deliver a
stronger performance in the second half of 2014, driven by the ramp
up of activity on the Wheatstone project, a full six months of
Motherwell Bridge and a recovery in the UK margin, partly offset by
a reduction in activity in the MENA region due to the phasing of
workload in that region.
The demand for Cape's services is expected to increase over the
medium term with a number of significant refining and petrochemical
projects expected to move forward during 2015 and beyond in both
the Group's existing geographical footprint and emerging markets
that the Group is targeting for expansion of its global activities.
With the combination of this increasing demand for the Group's
services and opportunities for market share gain through both
improved operational performance and the development of our global
specialist services offerings, the Board remains confident in the
medium and long term growth prospects of the Group.
Financial review
Revenue
Revenue from continuing operations decreased by 13% to GBP322.3m
(H1 2013: GBP370.8m). Movement in foreign exchange rates had a
negative impact of 6% that was partially mitigated by the 3%
contribution from the Motherwell Bridge acquisition. The underlying
organic reduction of 10% was primarily driven by the conclusion of
large construction projects in each of our three regions during
2013.
Revenue from continuing operations derived from maintenance
contracts increased to GBP229m or 71% of the total (H1 2013:
GBP216m or 58% of the total) and revenue derived from construction
support projects reduced to GBP93m or 29% of the total (H1 2013:
GBP155m or 42% of the total) reflecting the completion of the
projects referred to above. Revenue invoiced to the largest client
represented 16% of total revenue (H1 2013: 11%) relating to
activities in all regions and the top 10 clients represented 46% of
revenue (H1 2013: 40%).
Adjusted operating profit
Adjusted operating profit from continuing operations decreased
by 12% to GBP23.4m (H1 2013: GBP26.5m). Adverse translational
foreign exchange movements account for 4%, offset by a 6% benefit
from the Motherwell Bridge acquisition. The underlying reduction of
14% is predominantly a flow through of the reduced revenue
resulting from the completion of construction projects across all
regions. Overall margins have improved slightly with the benefit of
the improved margin in the Asia Pacific region offsetting the
reduction in the UK margin.
Other items
Other items increased to GBP1.3m (H1 2013: GBP0.3m) comprising
of GBP0.1m of IDC costs (H1 2013: GBP0.3m) and GBP1.2m (H1 2013:
nil) of post-acquisition charges, related to Motherwell Bridge,
including amortisation of acquired intangible assets.
Share of post-tax profit from joint ventures
The post-tax profit of GBP0.1m is attributable to the joint
ventures in the CIS region.
Exceptional items
Exceptional items total GBP0.8m (H1 2013: GBP15.6m) and comprise
transaction costs relating to the acquisition of Motherwell Bridge.
Prior period exceptional items related to the rationalisation of
the Australian business.
Operating profit
Operating profit for continuing operations was GBP21.3m (H1
2013: GBP10.6m) reflecting an adjusted operating profit of GBP23.4m
(H1 2013: GBP26.5m) less Other items of GBP1.3m (H1 2013: GBP0.3m)
and Exceptional items of GBP0.8m (H1 2013: GBP15.6m).
Finance costs
Net finance costs reduced to GBP4.2m (H1 2013: GBP4.5m)
including a GBP1.7m (H1 2013: GBP2.0m) 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 GBP0.3m
(H1 2013: GBP0.4m) and interest income on the defined benefit
pension of GBP0.4m (H1 2013: GBP0.4m).
Adjusted finance costs reduced to GBP3.2m (H1 2013: GBP3.3m)
with interest cover (calculated by dividing adjusted operating
profit by the adjusted finance costs) marginally decreasing to 7.3
times (H1 2013: 8.0 times).
Profit before tax
Profit before tax for continuing operations was GBP17.1m (H1
2013: GBP6.1m) reflecting an operating profit of GBP21.3m (H1 2013:
GBP10.6m) less net finance costs of GBP4.2m (H1 2013: GBP4.5m).
Taxation
The tax charge on profit before tax for the Business Performance
was GBP4.1m (H1 2013: GBP5.0m).
Discontinued operations
Discontinued operations in the first half of 2014 relate to the
termination of operations in India. Prior year results also include
the impact of exiting Japan and the disposal of certain businesses
following the restructure of Australian operations.
Earnings per share
For continuing operations adjusted diluted earnings per share
were 12.9p (H1 2013: 14.8p) and adjusted basic earnings per share
were 13.1p (H1 2013: 14.9p). For total operations the basic
earnings per share were 10.4p (H1 2013: 2.1p). The diluted weighted
number of shares increased to 122.6 million (H1 2013: 121.7
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 2013 interim dividend
(H1 2013: 4.5p), was approved by the Board on 26 August 2014. The
dividend will be payable on 10 October 2014 to shareholders on the
register as at 12 September 2014.
Adjusted operating and free cash flow(1)
GBPm Half-year ended
Half-year ended 30 June Year ended
29 June 2013 31 December
2014 Restated 2013
Unaudited Unaudited Audited
------------------------------------------------------- ----------------- --------------- -------------
Adjusted operating profit 23.4 26.5 41.0
Depreciation 7.0 8.9 17.8
------------------------------------------------------- ----------------- --------------- -------------
Adjusted EBITDA 30.4 35.4 58.8
Non-cash items/disposal (0.2) (1.4) (3.4)
(Increase)/decrease in working capital * (33.9) (16.0) 9.8
Net capital expenditure (6.5) (9.3) (15.5)
------------------------------------------------------- ----------------- --------------- -------------
Adjusted operating cash flow (10.2) 8.7 49.7
Adjusted operating cash flow to adjusted EBITDA (34%) 25% 85%
Net interest paid (2.9) (3.5) (6.1)
Tax paid (3.7) (3.0) (9.4)
------------------------------------------------------- ----------------- --------------- -------------
Free cash flow (16.8) 2.2 34.2
Dividends paid (including non-controlling interests) (11.5) (11.5) (17.7)
Acquisition (including payment of subsidiary (37.6) - -
loan of GBP3.5m)
Transfer to restricted cash - - (6.0)
Cash generated/(used) in discontinued operations 1.7 0.6 (5.6)
Other movements in adjusted net debt (7.6) - 0.1
------------------------------------------------------- ----------------- --------------- -------------
Movement in adjusted net debt (71.8) (8.7) 5.0
------------------------------------------------------- ----------------- --------------- -------------
Opening adjusted net debt (60.2) (65.2) (65.2)
Closing adjusted net debt (132.0) (73.9) (60.2)
------------------------------------------------------- ----------------- --------------- -------------
* 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.
The GBP33.9m working capital outflow in the first half of 2014
is the key factor in the adjusted operating cash outflow of
GBP10.2m (H1 2013: GBP8.7m inflow).
Working capital
Investment in trade and other receivables and inventories
increased by GBP47.2m to GBP230.0m (31 December 2013: GBP182.8m)
although slightly offset by an increase in trade and other payables
of GBP11.6m to GBP120.7m (31 December2013: GBP109.1m) resulting in
an overall increase in net working capital of GBP35.6m (at balance
sheet rates) to GBP109.3m. Key drivers to the working capital
increase are:
-- Seasonality of the UK power industry, has led to an increased
working capital investment, this is expected to reverse in the
second half
-- investment in the Wheatstone project
-- acquired working capital from Motherwell Bridge
-- investment in the joint venture with SOCAR
Capital expenditure
Gross capital expenditure was GBP7.1m (H1 2013: GBP9.3m)
reflecting the continuation of the UK system scaffold investment
programme as well as expenditure related to the Wheatstone project.
The Asset Replacement Ratio (calculated by dividing gross capital
expenditure spend by the depreciation charge) decreased to 101% (H1
2013: 105%).
Acquisition
As announced, in March 2014 the Group acquired Motherwell Bridge
Limited, a leading provider of construction and maintenance
services for storage tanks, gasholders and heat exchangers to the
energy and steel markets. Purchase consideration of GBP37.6m, was
made up of cash of GBP34.1m and debt of GBP3.5m. The provisional
fair value of net assets acquired was GBP12.9m and goodwill of
GBP19.9m has been recognised on acquisition, as detailed in note
14. The goodwill of GBP19.9m arising from the acquisition is
attributable to the acquired business model and the expected
synergies arising from combining the operations into the Group.
Financing
The Group's adjusted net debt increased by GBP58.1m to GBP132.0m
compared to the same period in the prior year (H1 2013: GBP73.9m)
including finance lease obligations of GBP2.1m (H1 2013: GBP0.4m).
This includes the GBP37.6m acquisition of Motherwell Bridge as well
as a GBP3.2m prepayment of banking fees relating to the banking
facility entered into in February 2014 (H1 2013: nil). Balance
sheet gearing, excluding ring-fenced IDC Scheme funds, increased to
101% (31 December 2013: 45%; 30 June 2013: 44%).
Provision for pensions
The defined benefit pension scheme had a net surplus of GBP16.9m
as at 29 June 2014 (H1 2013: GBP15.7m) and continues to be
restricted to nil in the accounts under IFRIC 14. The triennial
valuation is now complete with the agreed monthly contribution rate
maintained at GBP14,600.
Provision for estimated future asbestos related liabilities and
IDC Scheme funds
The discounted provision decreased to GBP92.5m (31 December
2013: GBP94.3m) reflecting the unwinding of the discount of GBP1.7m
in the half year (H1 2013: GBP2.0m) and the GBP3.5m (H1 2013:
GBP2.3m) of settlements made in the period.
The ring-fenced IDC Scheme funds reduced by GBP1.9m (H1 2013:
GBP0.9m reduction) comprising cash settlements and costs paid to
scheme claimants of GBP2.0m (H1 2013: GBP1.6m) with cash interest
received of GBP0.1m (H1 2013: GBP0.7m) of which GBP0.1m (H1 2013:
GBP0.4m) relates to income interest in the period, shown as finance
income other items in the Condensed Consolidated Income
Statement.
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 6% adverse impact on revenue for the half year, due to
strengthening of the UK pound.
The following significant exchange rates applied during the
half-year:
H1 2014 H1 2013
Closing Average Closing Average
----- -------- -------- -------- --------
AUD 1.81 1.84 1.66 1.54
USD 1.70 1.67 1.52 1.55
----- -------- -------- -------- --------
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. In relation to geopolitical events, the Directors are
monitoring European/Russian oil and gas sanctions developments, and
currently consider that they will not have a significant
impact.
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 Motherwell Bridge 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 2013 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 Condensed Consolidated Financial Statements.
Joe Oatley Michael Speakman
Chief Executive Chief Financial Officer
26 August 2014 26 August 2014
Statement of Directors' Responsibilities
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 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 as listed in the Cape plc Annual
Report for 31 December 2013.
For and on behalf of the Board of Directors.
Joe Oatley Michael Speakman
Chief Executive Chief Financial Officer
26 August 2014 26 August 2014
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 29 June 2014 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Statement of Changes in Equity,
Condensed Consolidated Cash Flow Statement and related notes 1 to
21. 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 29 June
2014 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
26 August 2014
Reading
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 29 JUNE 2014
Period ended 29 June 2014 Period ended 30 June
Unaudited 2013(1)
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 322.3 - 322.3 370.8 - 370.8
Operating profit before
other items 23.3 - 23.3 26.4 - 26.4
Other items 7 - (1.3) (1.3) - (0.3) (0.3)
Operating profit/(loss)
before exceptional items 23.3 (1.3) 22.0 26.4 (0.3) 26.1
Share of post-tax result
of joint ventures 0.1 - 0.1 0.1 - 0.1
Exceptional items 7 - (0.8) (0.8) - (15.6) (15.6)
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
Operating profit/(loss) 23.4 (2.1) 21.3 26.5 (15.9) 10.6
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
Finance income 9 0.4 0.3 0.7 0.4 0.4 0.8
Finance costs 9 (3.2) (1.7) (4.9) (3.3) (2.0) (5.3)
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
Net finance costs (2.8) (1.4) (4.2) (2.9) (1.6) (4.5)
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
Profit/(loss) before
tax 20.6 (3.5) 17.1 23.6 (17.5) 6.1
Income tax (expense)/credit 10 (4.1) 0.7 (3.4) (5.0) 4.9 (0.1)
Profit/(loss) from continuing
operations 16.5 (2.8) 13.7 18.6 (12.6) 6.0
Loss from discontinued
operations 8 (0.5) - (0.5) (2.9) - (2.9)
Profit/(loss) for the
period 16.0 (2.8) 13.2 15.7 (12.6) 3.1
Attributable to:
Owners of Cape plc 12.6 2.5
Non-controlling interests 0.6 0.6
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
13.2 3.1
------------------------------- ------- ------------- ------------ ------ ------------- ------------- ---------
Earnings per share attributable to the owners of Cape plc
Pence Pence
Pence Pence
------------------------- ----- --------------------- ---------------------------------- ------------ --------
Basic
Continuing operations 13.1 10.8 14.9 4.5
Discontinued operations (0.4) (0.4) (2.4) (2.4)
------------------------- ----- --------------------- ---------------------------------- ------------ --------
Total operations 11 12.7 10.4 12.5 2.1
------------------------- ----- --------------------- ---------------------------------- ------------ --------
Diluted
Continuing operations 12.9 10.7 14.8 4.4
Discontinued operations (0.4) (0.4) (2.4) (2.4)
------------------------- ----- --------------------- ---------------------------------- ------------ --------
Total operations 11 12.5 10.3 12.4 2.0
------------------------- ----- --------------------- ---------------------------------- ------------ --------
(1) Restated for the adjustments detailed in note 21.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE PERIOD ENDED 29 JUNE 2014
Period ended Period ended
29 June 2014 30 June 2013(1)
Unaudited Restated Unaudited
GBPm GBPm
--------------------------------------------------------------------------------- -------------- -------------------
Profit for the period 13.2 3.1
Other comprehensive (expense)/income:
Other comprehensive (expense)/income to be reclassified to profit or loss in
subsequent periods:
Currency translation differences (4.4) 5.8
(4.4) 5.8
Cash flow hedges - fair value (loss) - (0.4)
Net other comprehensive (expense)/income to be reclassified to profit/(loss) in
subsequent
periods (4.4) 5.4
--------------------------------------------------------------------------------- -------------- -------------------
Other comprehensive (expense)/income not to be reclassified to profit or loss in
subsequent
periods:
Re-measurement of defined benefit pension plan 0.5 1.8
Movement in restriction of retirement benefit asset in accordance with IFRIC 14 (0.9) (2.2)
Net other comprehensive (expense) not to be reclassified to (loss) in subsequent
periods (0.4) (0.4)
--------------------------------------------------------------------------------- -------------- -------------------
Other comprehensive (expense)/income (4.8) 5.0
--------------------------------------------------------------------------------- -------------- -------------------
Total comprehensive income 8.4 8.1
--------------------------------------------------------------------------------- -------------- -------------------
Attributable to:
Owners of Cape plc 7.9 7.2
Non-controlling interests 0.5 0.9
--------------------------------------------------------------------------------- -------------- -------------------
8.4 8.1
--------------------------------------------------------------------------------- -------------- -------------------
(1) Restated for the adjustments detailed in note 21.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
FOR THE PERIOD ENDED 29 JUNE 2014
29 June 30 June
2014 31 December 2013(1) 2013(1)
Unaudited Restated Audited Restated Unaudited
Note GBPm GBPm GBPm
------------------------------------------------------ ------- ---------- -------------------- -------------------
Assets
Non-current assets
Property, plant and equipment 80.5 81.3 84.7
Investment property 2.0 2.0 2.0
Intangible assets 156.4 113.9 116.2
Investments accounted for using the equity method 0.4 0.7 0.6
Restricted deposits 9.0 9.0 16.5
Deferred tax asset 25.4 24.2 27.2
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total non-current assets 273.7 231.1 247.2
------------------------------------------------------ ------- ---------- -------------------- -------------------
Current assets
Inventories 17.7 12.7 16.8
Trade and other receivables 212.3 170.1 227.5
Cash and cash equivalents 53.9 73.6 62.3
Restricted short term funds 20.4 22.3 10.0
Assets of disposal group classified as held for sale 0.2 3.7 6.0
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total current assets 304.5 282.4 322.6
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total assets 578.2 513.5 569.8
------------------------------------------------------ ------- ---------- -------------------- -------------------
Equity
Share capital 16 30.3 30.3 30.3
Share premium account 1.0 1.0 0.9
Special reserve 1.0 1.0 1.0
Other reserves 9.3 9.3 10.1
Translation reserve 92.3 96.6 113.3
Retained earnings (6.2) (7.6) 7.0
------------------------------------------------------ ------- ---------- -------------------- -------------------
Equity attributable to equity holders of the parent 127.7 130.6 162.6
------------------------------------------------------ ------- ---------- -------------------- -------------------
Non-controlling interests 3.1 2.6 4.7
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total equity 130.8 133.2 167.3
------------------------------------------------------ ------- ---------- -------------------- -------------------
Liabilities
Non-current liabilities
Borrowings 180.5 133.5 132.7
Retirement benefit obligations 10.1 9.5 9.4
Deferred tax liabilities 9.4 4.7 6.7
Provision for industrial disease claims 86.7 88.3 75.5
Other provisions 2.6 0.7 3.2
Total non-current liabilities 289.3 236.7 227.5
------------------------------------------------------ ------- ---------- -------------------- -------------------
Current liabilities
Borrowings 2.2 0.3 1.9
Derivative financial instruments 0.4 0.6 0.8
Trade and other payables 120.7 109.1 133.1
Current income tax liabilities 7.3 7.1 10.4
Provision for industrial disease claims 5.8 6.0 4.0
Other provisions 21.7 20.5 24.8
Total current liabilities 158.1 143.6 175.0
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total liabilities 447.4 380.3 402.5
------------------------------------------------------ ------- ---------- -------------------- -------------------
Total equity and liabilities 578.2 513.5 569.8
------------------------------------------------------ ------- ---------- -------------------- -------------------
(1) Restated for the adjustments detailed in note 21.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE PERIOD ENDED 29 JUNE 2014
Share Total
Share premium Special Other Translation Retained attributable Non-controlling Total
capital account reserve reserves reserve earnings 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:
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
- proceeds from shares - - - - - - - - -
issued
- 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 STATEMENT OF CHANGES IN
EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013 RESTATED
Share Total
Share premium Special Other Translation Retained attributable Non-controlling Total
capital account reserve reserves reserve earnings to parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2013
audited
(restated)(1) 30.3 0.9 1.0 10.0 107.8 16.5 166.5 3.8 170.3
------------------ ------- ------- ------- -------- ----------- -------- ---------------- --------------- --------
Comprehensive
income:
Profit for the
period - - - - - 2.5 2.5 0.6 3.1
Other
comprehensive
income:
Currency
translation
differences - - - - 5.5 - 5.5 0.3 5.8
Cash flow hedges
- fair value
gain in period - - - 0.1 - (0.5) (0.4) - (0.4)
Re-measurement of
defined
benefit pension
plan - - - - - 1.8 1.8 - 1.8
Movement in
restriction of
retirement
benefit asset in
accordance with
IAS 19 - - - - - (2.2) (2.2) - (2.2)
------------------ ------- ------- ------- -------- ----------- -------- ---------------- --------------- --------
Total
comprehensive
income/(expense)
for the period - - - 0.1 5.5 1.6 7.2 0.9 8.1
Transactions with
owners
Dividends - - - - - (11.5) (11.5) - (11.5)
Share options -
- proceeds from - - - - - - - - -
shares issued
- value of
employee
services - - - - - 0.4 0.4 - 0.4
- - - - - (11.1) (11.1) - (11.1)
------------------ ------- ------- ------- -------- ----------- -------- ---------------- --------------- --------
At 30 June 2013
unaudited
(restated)(1) 30.3 0.9 1.0 10.1 113.3 7.0 162.6 4.7 167.3
------------------ ------- ------- ------- -------- ----------- -------- ---------------- --------------- --------
(1) Restated for the adjustments detailed in note 21.
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 29 JUNE 2014
Period ended
Period ended 30 June Year ended
29 June 2013(1) 31 December
2014 Restated 2013
Unaudited Unaudited Audited
Note GBPm GBPm GBPm
Operating activities
Cash (absorbed by) /generated from
operating activities - continuing operations 17 (3.7) 15.7 57.0
Interest received - - 0.3
Interest paid (2.9) (3.5) (6.3)
Tax paid (3.7) (3.0) (9.4)
----------------------------------------------- ----- ------------- ------------- -------------
Net cash flows from operating activities
- continuing operations (10.3) 9.2 41.6
----------------------------------------------- ----- ------------- ------------- -------------
Net cash flows from operating activities
- discontinued operations 17 (1.8) 0.6 (5.6)
----------------------------------------------- ----- ------------- ------------- -------------
Net cash flows from operating activities (12.1) 9.8 36.0
----------------------------------------------- ----- ------------- ------------- -------------
Investing activities
Continuing operations
Proceeds from sale of property, plant
and equipment 13 0.6 - 2.2
Purchase of property, plant and equipment 13 (7.1) (9.3) (17.7)
Transfer of restricted funds - - (6.0)
Acquisition of subsidiaries net of
cash acquired 14 (34.1) - -
----------------------------------------------- ----- ------------- ------------- -------------
Net cash used in investing activities
- continuing operations (40.6) (9.3) (21.5)
----------------------------------------------- ----- ------------- ------------- -------------
Discontinued operations
Proceeds from sales of assets held
for disposal 3.5 - 6.9
----------------------------------------------- ----- ------------- ------------- -------------
Net cash realised from investing activities
- discontinued operations 3.5 - 6.9
Financing activities
Continuing operations
Net proceeds from issue of ordinary
share capital - - 0.1
Drawing on borrowings - - 2.3
Repayment of borrowings (130.6) - -
Movements on loans 172.9 (1.6) (2.0)
Finance lease principal payments (0.2) (0.2) (0.3)
Dividends paid to shareholders 12 (11.5) (11.5) (16.9)
Dividend paid to non-controlling interests - - (0.8)
----------------------------------------------- ----- ------------- ------------- -------------
Net cash flows (used in)/from financing
activities - continuing operations 30.6 (13.3) (17.6)
Net cash flows (used in)/from financing - - -
activities - discontinued operations
----------------------------------------------- ----- ------------- ------------- -------------
Net foreign exchange difference (1.1) 2.3 (3.0)
----------------------------------------------- ----- ------------- ------------- -------------
Net (decrease)/increase in cash and
cash equivalents (19.7) (10.5) 0.8
Cash and cash equivalents at beginning
of period 73.6 72.8 72.8
----------------------------------------------- ----- ------------- ------------- -------------
Cash and cash equivalents at end of
period 53.9 62.3 73.6
----------------------------------------------- ----- ------------- ------------- -------------
(1) Restated for the adjustments detailed in note 21.
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 29 June 2014 were authorised for issue in accordance with a
resolution of the Directors on 26 August 2014.
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 29 June 2014 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
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 2013 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 2013, except for the adoption of new standards and
interpretations effective as of 1 January 2014.
Adoption of new standards and interpretations
Several new standards and amendments apply for the first time in
2014, 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:
- Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
- Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
- Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39
- Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36
- IFRIC 21 'Levies'
The Group has not yet early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
Restatement of prior year comparatives
In the Group's 2013 consolidated annual financial statements, a
number of adjustments were made to the previously reported
comparative amounts reported as at 31 December 2012. In this
report, where necessary, these items have been restated in the
appropriate period within the 2013 financial year resulting in
changes to certain comparatives at 30 June 2013. Principally, these
items relate to certain line item reclassifications, the
de-recognition of tax losses and other items including the
recognition of liabilities arising from legal disputes and a change
to the profit and carrying values attributable to non-controlling
interests. Additionally, comparative amounts at 30 June 2013 and 31
December 2013 reported as restricted fund cash amounts have been
correctly reclassified to current and non-current restricted fund
deposits.
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 annual financial statements for
the year ended 31 December 2013.
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:
Period Period Year
ended ended ended
29 June 30 June 31 December
2014 2013 2013
Closing Average Closing Average Closing Average
----- --------- -------- -------- -------- -------- --------
AUD 1.81 1.84 1.66 1.54 1.85 1.63
----- --------- -------- -------- -------- -------- --------
USD 1.70 1.67 1.52 1.55 1.66 1.57
----- --------- -------- -------- -------- -------- --------
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 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 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,
transaction costs arising on business acquisitions and
restructuring costs.
4. Critical accounting estimates and judgements
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 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) Deferred tax assets
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.
(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.
(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
arising on alleged exposure to previously manufactured asbestos
products. The provision has been determined based on advice from
independent professional actuaries. The amount of the provision is
based on
4. Critical accounting estimates and judgements (continued)
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
rate at which claims will be filed, the rate of successful
resolution as well as future trends in both compensation payments
and legal costs.
(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 29 June
2014 and 30 June 2013, respectively:
Period ended 29 June 2014
UK, Europe Asia
& CIS MENA Pacific Central Group
GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 181.3 89.1 51.9 - 322.3
Adjusted operating profit/(loss)
before joint ventures 16.1 9.2 (1.0) (1.0) 23.3
Share of post-tax profit from joint
ventures 0.1 - - - 0.1
------------------------------------ ---------- ------ -------- --------- -------
Adjusted operating profit/(loss) 16.2 9.2 (1.0) (1.0) 23.4
------------------------------------ ---------- ------ -------- --------- -------
Other items (1.3)
Exceptional items (0.8)
Net finance costs (4.2)
------------------------------------ ---------- ------ -------- --------- -------
Profit before tax 17.1
------------------------------------ ---------- ------ -------- --------- -------
Period ended 30 June 2013
UK, Europe Asia
& CIS MENA Pacific Central Group
GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 184.8 109.5 76.5 - 370.8
Adjusted operating profit/(loss)
before joint ventures 19.1 12.4 (3.7) (1.4) 26.4
Share of post-tax profit from joint
ventures - - 0.1 - 0.1
------------------------------------ ---------- ------ -------- --------- -------
Adjusted operating profit/(loss) 19.1 12.4 (3.6) (1.4) 26.5
------------------------------------ ---------- ------ -------- --------- -------
Other items (0.3)
Exceptional items (15.6)
Net finance costs (4.5)
------------------------------------ ---------- ------ -------- --------- -------
Profit before tax 6.1
------------------------------------ ---------- ------ -------- --------- -------
Other segment items included in the interim condensed
consolidated income statement for the period ended 29 June 2014
were:
UK, Europe Asia Pacific
& CIS MENA GBPm Central Group
GBPm GBPm GBPm GBPm
-------------- ----------- --------------------- ------------- ---------- --------
Depreciation 2.4 3.0 1.6 - 7.0
Amortisation 1.1 - - - 1.1
-------------- ----------- --------------------- ------------- ---------- --------
Other segment items included in the interim condensed
consolidated income statement for the period ended 30 June 2013
were:
UK, Europe Asia
& CIS MENA Pacific Central Group
GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------- --------- ---------- --------
Depreciation 2.7 3.4 2.8 - 8.9
Amortisation - - - - -
-------------- ----------- ------- --------- ---------- --------
5. Segment information (continued)
The following table presents assets and liabilities from the
Group's operating segments as at 29 June 2014 and 30 June 2013,
respectively:
UK, Europe
& CIS MENA Asia Pacific Discontinued
Central Operations Unallocated Group
29 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ --------- -------------- ----------- ------------------ --------------- ----------
Assets 208.8 159.7 98.5 1.7 0.8 108.7 578.2
Liabilities (70.3) (51.8) (19.1) (108.3) (0.6) (197.3) (447.4)
--------------------------- ------------ --------- -------------- ----------- ------------------ --------------- ----------
UK, Europe Asia Pacific Discontinued
& CIS MENA Central Operations Unallocated Group
30 June 2013 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ --------- -------------- ----------- ------------------ --------------- ----------
Assets 128.5 184.6 113.9 17.8 8.0 117.0 569.8
Liabilities (62.4) (62.6) (39.6) (83.1) (0.9) (153.9) (402.5)
--------------------------- ------------ --------- -------------- ----------- ------------------ --------------- ----------
6. Adjusted measures
The Group seeks to present a measure of underlying performance
which is not impacted by exceptional items or other 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:
Year ended
Period ended Period ended 31 December 2013
Continuing operations: 29 June 2014 30 June 2013 GBPm
GBPm GBPm
Profit before tax 17.1 6.1 0.2
Other items 1.3 0.3 15.3
Exceptional items 0.8 15.6 15.5
Interest income on restricted funds (0.3) (0.4) (0.7)
Unwind of discount on provision for industrial disease
claims 1.7 2.0 4.0
Write off of unamortised borrowing arrangement costs - - 1.2
Adjusted profit before tax 20.6 23.6 35.5
---------------------------------------------------------- --------------- ------------------ ---------------------
Operating profit 21.3 10.6 10.2
Other items 1.3 0.3 15.3
Exceptional items 0.8 15.6 15.5
Adjusted operating profit 23.4 26.5 41.0
---------------------------------------------------------- --------------- ------------------ ---------------------
Adjusted operating profit margin % 7.3% 7.1% 5.9%
---------------------------------------------------------- --------------- ------------------ ---------------------
Adjusted operating profit 23.4 26.5 41.0
Depreciation - continuing operations 7.0 8.9 17.8
---------------------------------------------------------- --------------- ------------------ ---------------------
Adjusted EBITDA 30.4 35.4 58.8
---------------------------------------------------------- --------------- ------------------ ---------------------
Net debt (99.4) (45.8) (28.9)
Unamortised borrowing arrangement costs (3.2) (1.6) -
Restricted funds (includes restricted cash) (29.4) (26.5) (31.3)
Adjusted net debt (132.0) (73.9) (60.2)
---------------------------------------------------------- --------------- ------------------ ---------------------
6. Adjusted measures (continued)
Finance costs (4.9) (5.3) (11.5)
Unwind of discount on provision for industrial disease
claims 1.7 2.0 4.0
Exceptional write off unamortised borrowing arrangement
costs - - 1.2
Adjusted finance costs (3.2) (3.3) (6.3)
---------------------------------------------------------- --------------- ------------------ ---------------------
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.
The adjusted operating profit before franchise fees both before
and after inclusion of the share of profit / (loss) from joint
ventures is as follows:
Period ended Period ended
29 June 2014 30 June 2013
Adjusted Adjusted
operating operating
profit/(loss) Adjusted profit/(loss)
Adjusted operating before joint operating before joint
profit/(loss) ventures profit/(loss) ventures
GBPm GBPm GBPm GBPm
UK, Europe & CIS 16.2 16.1 18.2 18.2
MENA 11.6 11.6 14.6 14.6
Asia Pacific 1.4 1.4 (1.2) (1.3)
Central (5.8) (5.8) (5.1) (5.1)
--------------------------------------- --------------------- -------------- --- --------------- --------------
Adjusted operating profit 23.4 23.3 26.5 26.4
--------------------------------------- --------------------- -------------- --- --------------- --------------
7. Other items and exceptional items
Other items
Period ended 29 June 2014 Period ended
GBPm 30 June 2013
GBPm
-------------------------------------------------------------- -------------------------------------- --------------
Continuing operations
In operating profit
Amortisation of intangibles arising on business 1.1 -
acquisitions
Post-acquisition deferred consideration charges 0.1 -
-------------------------------------------------------------- -------------------------------------- --------------
Other industrial disease claims expenses 0.1 0.3
Other items from continuing operations included within
operating profit 1.3 0.3
============================================================== ====================================== ==============
Exceptional items
Period ended Period ended
29 June 2014 30 June
GBPm 2013
GBPm
------------------------------------------------------- ----------------- -------------
Continuing operations
Assessment of value of assets - 7.9
Onerous leases - 2.5
Transaction costs on business acquisition 0.8 -
Other - 5.2
------------------------------------------------------- ----------------- -------------
Exceptional items from continuing operations included
within operating profit 0.8 15.6
------------------------------------------------------- ----------------- -------------
8. Discontinued operations
Analysis of the result of discontinued operations and the result
recognised on the re-measurement of assets and liabilities of the
disposal group are as follows:
Period ended Period ended
29 June 2014 30 June 2013
GBPm GBPm
Revenue 0.4 7.5
Loss before tax of discontinued operations (0.6) (3.8)
Income tax credit 0.1 0.9
---------------------------------------------------- ------------ --------------
Loss after tax on discontinued operations (0.5) (2.9)
---------------------------------------------------- ------------ --------------
Discontinued operations relate to the termination of operations
in India and Japan and the disposal of certain businesses following
the restructure of Australian operations.
9. Finance income and costs
Period ended Period ended
29 June 2014 30 June 2013
GBPm GBPm
--------------------------------------------------------------- -------------- --------------
Finance income
Interest on pension assets 0.4 0.4
--------------------------------------------------------------- -------------- --------------
Reported in business performance 0.4 0.4
Interest on restricted funds 0.3 0.4
--------------------------------------------------------------- -------------- --------------
Finance income 0.7 0.8
--------------------------------------------------------------- -------------- --------------
Finance costs
Bank borrowings (3.1) (3.3)
Finance leases (0.1) -
Reported in business performance (3.2) (3.3)
Unwind of discount on provision for industrial claims disease (1.7) (2.0)
Finance costs (4.9) (5.3)
--------------------------------------------------------------- -------------- --------------
Net finance costs (4.2) (4.5)
--------------------------------------------------------------- -------------- --------------
10. Income tax
The Group's effective tax rate on its business performance of
20% (H1 2013: 21%) 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 GBP3.3m to GBP3.4m (H1 2013:
GBP0.1m) due to an increase in profits.
Factors affecting current and future tax charges
Profits arising in the Company for the 2014 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 21%
with effect from 1 April 2014 and to 20% from 1 April 2015.
Consequently, the Group will only recognise the impact of the
rate change which is substantively enacted at the date of the
statement of financial position, this being 21%. The further
reduction in 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
29 June 2014 is based on the profit attributable to equity
shareholders of GBP12.6m (H1 2013: GBP2.5m) divided by the weighted
average number of 25p ordinary shares of 121,007,720 (H1 2013:
120,777,029).
The diluted earnings per share calculation for the half-year
ended 29 June 2014 is based on the profit attributable to equity
shareholders of GBP12.6m (H1 2013: GBP2.5m) divided by the diluted
weighted average number of 25p ordinary shares of 122,597,387 (H1
2013: diluted weighted average of 121,665,983). Share options and
awards are considered potentially dilutive as the average share
price during the period was above the average exercise prices.
Period ended Period ended
29 June 2014 30 June 2013
Unaudited Unaudited
Number of shares Number of shares
Basic weighted average number of shares 121,007,720 120,777,029
Adjustments:
Weighted average number of outstanding share options 1,589,667 888,954
------------------------------------------------------ ------------------------ ------------------------
Diluted weighted average number of shares 122,597,387 121,665,983
------------------------------------------------------ ------------------------ ------------------------
Period ended Period ended
29 June 2014 30 June 2013
Earnings EPS Earnings EPS
GBPm pence GBPm pence
--------------- ------ ------------ -------
Basic earnings per share
Continuing operations 13.1 10.8 5.4 4.5
Discontinued
operations (0.5) (0.4) (2.9) (2.4)
Basic earnings per share 12.6 10.4 2.5 2.1
-------------------------------------- --------------- ------ ------------ -------
Diluted earnings per share
Continuing operations 13.1 10.7 5.4 4.4
Discontinued
operations (0.5) (0.4) (2.9) (2.4)
Diluted earnings per share 12.6 10.3 2.5 2.0
-------------------------------------- --------------- ------ ------------ -------
Adjusted basic earnings per share - continuing
operations
Earnings from continuing
operations 13.1 10.8 5.4 4.5
Other items 1.3 1.1 0.3 0.2
Exceptional items 0.8 0.7 15.6 12.9
IDC finance income and
costs 1.4 1.1 1.6 1.3
Tax effect of adjusting
items (0.7) (0.6) (4.9) (4.0)
Adjusted basic earnings
per share 15.9 13.1 18.0 14.9
-------------------------------------- --------------- ------ ------------ -------
Adjusted diluted earnings per share - continuing
operations
Earnings from continuing
operations 13.1 10.7 5.4 4.4
Other items 1.3 1.1 0.3 0.2
Exceptional items 0.8 0.7 15.6 12.9
IDC finance income and
costs 1.4 1.0 1.6 1.3
Tax effect of adjusting
items (0.7) (0.6) (4.9) (4.0)
-------------------------------------- ------------ -------
Adjusted diluted earnings
per share 15.9 12.9 18.0 14.8
-------------------------------------- --------------- ------ ------------ -------
The adjusted earnings per share calculations have been
calculated after excluding the impact of other items and
exceptional items (note 7), financial 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 and so, in accordance with IAS 33, have
been treated as dilutive for the purpose of adjusted diluted
earnings per share.
12. Dividend
An interim dividend of 4.5p (H1 2013: 4.5p) per share, in line
with the 2013 interim dividend, was approved by the Board on 26
August 2014. The dividend will be payable on 10 October 2014 to
shareholders on the register as at 12 September 2014.
13. Property, plant and equipment
During the period ended 29 June 2014, the Group acquired assets
with a cost of GBP7.1m (H1 2013: GBP9.3m) and received proceeds
from asset sales of GBP0.6m (H1 2013: GBPnil) arising from assets
with a carrying amount of GBP0.6m (H1 2013: GBP2.0m). Net capital
expenditure of GBP6.5m (H1 2013: GBP9.3m) 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
29 June 2014 30 June 2013 31 December 2013
GBPm GBPm GBPm
Property, plant and equipment 2.6 4.0 1.1
------------------------------ -------------- -------------- ------------------
14. Acquisitions
On 10 March 2014 the Group acquired 100% of the voting shares of
Motherwell Bridge Limited, a UK incorporated and headquartered
leading provider of construction and maintenance for storage tanks,
gasholders and heat exchangers to the energy and steel markets. The
Group acquired the Motherwell Bridge business to broaden 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 Motherwell Bridge as at the date of acquisition
were:
Fair value recognised on acquisition(1)
GBPm
----------------------------------------------------------------------- ---------------------------------------------
Assets
Property, plant and equipment 2.3
Cash 2.6
Trade receivables 9.7
Inventories 1.3
Deferred tax asset 0.9
Intangible assets 23.2
----------------------------------------------------------------------- ---------------------------------------------
40.0
----------------------------------------------------------------------- ---------------------------------------------
Liabilities
Trade payables (10.9)
Current income tax (0.4)
Borrowings (5.7)
Deferred tax liabilities (4.6)
Provision for liabilities (5.5)
----------------------------------------------------------------------- ---------------------------------------------
(27.1)
----------------------------------------------------------------------- ---------------------------------------------
Total identifiable net assets at fair value 12.9
Goodwill arising on acquisition 19.9
----------------------------------------------------------------------- ---------------------------------------------
Purchase consideration transferred 32.8
----------------------------------------------------------------------- ---------------------------------------------
Analysis of cash flows on acquisition:
Cash paid 32.8
Cash paid into escrow for deferred consideration 3.1
Transaction costs on acquisition 0.8
Net cash acquired with the subsidiary (included in cash flows from
investing activities) (2.6)
Net cash outflows 34.1
----------------------------------------------------------------------- ---------------------------------------------
(1) This fair value balance sheet is provisional given the
limited time since acquisition.
Deferred consideration contingent upon future contract and
profit performance was determined to have nil fair value at the
date of acquisition.
14. Acquisitions (continued)
The provisional acquired intangible assets comprise trademarks
of GBP6.8m, supply agreements of GBP2.6m and other customer related
intangibles of GBP13.8m. At the date of acquisition the gross
contractual value of receivables was GBP10.0m, with a fair value of
GBP9.7m, reflecting the risk of non-settlement.
The interim consolidated financial statements include the
results of Motherwell Bridge from the date of acquisition,
contributing GBP11.3m of revenue and GBP1.7m to the Group's net
profit before tax. Had the acquisition taken place on 1 January
2014, revenue from continuing operations would have been GBP329.5m
and operating profit from continuing operations for the period
would have been GBP22.0m.
The goodwill recognised on the acquisition is primarily
attributable to the expected synergies and other benefits arising
from combining the Motherwell Bridge operations into the Group. The
goodwill is not deductible for income tax purposes.
Transaction costs of GBP0.8m have been charged to exceptional
items through continuing operations. Amortisation of intangible
assets acquired as part of the transaction of GBP1.1m has been
charged to other items through continuing operations.
15. Financial instruments
Details of financial instruments, other than cash and short term
deposits, held by the Group as at 29 June 2014 are set out
below.
Other financial
Loans and liabilities at
receivables Fair value through income statement amortised cost Total
29 June 2014 GBPm GBPm GBPm GBPm
------------------------------------- ------------- ------------------------------------ ---------------- --------
Assets per the consolidated statement of financial
position
Trade and other receivables
(excluding prepayments) 201.7 - - 201.7
201.7 - - 201.7
------------------------------------- ------------- ------------------------------------ ---------------- --------
Liabilities per the consolidated statement of
financial position
Borrowings (excluding finance lease
liabilities) - - (180.5) (180.5)
Finance lease liabilities - - (2.2) (2.2)
Derivative financial instruments - (0.4) - (0.4)
Trade and other payables (excluding
statutory liabilities) - - (103.6) (103.6)
------------------------------------- ------------- ------------------------------------ ---------------- --------
- (0.4) (286.3) (286.7)
------------------------------------- ------------- ------------------------------------ ---------------- --------
Details of financial instruments, other than cash and short term
deposits, held by the Group as at 31 December 2013 are set out
below.
Other financial
Loans and Fair value through liabilities at
receivables income statement amortised cost Total
31 December 2013 GBPm GBPm GBPm GBPm
----------------------------------------- --------------------- -------------------- ---------------- --------
Assets per the consolidated statement of financial position
Trade and other receivables
(excluding prepayments) 163.0 - - 163.0
163.0 - - 163.0
---------------------------------- ---------------------------- -------------------- ---------------- --------
Liabilities per the consolidated statement of financial
position
Borrowings (excluding finance
lease liabilities) - - (133.6) (133.6)
Finance lease liabilities - - (0.2) (0.2)
Derivative financial instruments - (0.6) - (0.6)
Trade and other payables
(excluding statutory
liabilities) - - (93.2) (93.2)
---------------------------------- ---------------------------- -------------------- ---------------- --------
- (0.6) (227.0) (227.6)
---------------------------------- ---------------------------- -------------------- ---------------- --------
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.
15. Financial instruments(continued)
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)
At 29 June 2014 GBPm GBPm GBPm
---------------------------- ----------------------------- --------------------------- ----------------------------
Assets and liabilities
measured at fair value
Discontinued operation
(note 8) - - 0.2
Derivative financial - (0.4) -
liabilities
- (0.4) 0.2
---------------------------------------------------------- --------------------------- ----------------------------
Assets and liabilities for -
which fair values are
disclosed
Investment property - - 2.8
Bank loans - (163.7) -
---------------------------- ----------------------------- --------------------------- ----------------------------
- (163.7) 2.8
---------------------------------------------------------- --------------------------- ----------------------------
Quoted prices in active Significant other Significant
markets observable inputs unobservable inputs
(Level 1) (Level 2) (Level 3)
At 31 December 2013 GBPm GBPm GBPm
---------------------------------- ------------------------- ----------------------- ------------------------
Assets and liabilities measured at
fair value
Discontinued operation (note 8) - - 3.7
Derivative financial liabilities - (0.6) -
- (0.6) 3.7
----------------------------------- ------------------------ ----------------------- ------------------------
Assets and liabilities for which
fair values are disclosed
Investment property - - 2.8
Bank loans - (133.4) -
----------------------------------- ------------------------ ----------------------- ------------------------
- (133.4) 2.8
----------------------------------- ------------------------ ----------------------- ------------------------
There have been no transfers between Level 1 and Level 2 during
the period.
The fair value of the investment property is based upon a
valuation as at 31 December 2013 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.
16. Share capital
29 June 2014 30 June 2013 31 December 2013
Issued and fully paid Number GBPm Number GBPm Number GBPm
----------------------------- ------------ ----- ------------ ----- ------------ -----
Ordinary shares of 25p each
At 1 January 121,103,937 30.3 121,068,690 30.3 121,068,690 30.3
Issue of shares - - 7,437 - 7,437 -
Exercise of share options - - 27,810 - 27,810 -
----------------------------- ------------ ----- ------------ ----- ------------ -----
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 29 June 2014, 44,342 (30 June 2013: 251,793) 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
Period ended Period ended
29 June 2014 30 June 2013
GBPm GBPm
--------------------------------------------------------- ------------- ----------------
Cash flows from operating activities
Continuing operations
Profit before tax 17.1 6.1
Finance costs - net 4.2 4.5
Share of post-tax (profit) from joint ventures (0.1) (0.1)
Other non-cash movements (0.9) -
Exceptional items 0.8 15.6
Share option charge 0.7 0.4
Depreciation and amortisation 8.1 8.9
Difference between pension charge and cash contributions 0.9 -
(Increase)/decrease in inventories (4.3) 4.1
(Increase) in trade and other receivables (33.2) (1.7)
Increase/(decrease) in trade and other payables 3.6 (18.4)
(Decrease) in provisions (0.6) (3.7)
Cash (used in)/generated from continuing operations (3.7) 15.7
--------------------------------------------------------- ------------- ----------------
Discontinued operations
--------------------------------------------------------- ------------- ----------------
Loss before tax (0.6) (3.8)
Cash generated from assets held for sale - 4.4
Movement in provisions (1.2) -
Cash (used in)/generated from discontinued operations (1.8) 0.6
--------------------------------------------------------- ------------- ----------------
18. Reconciliation of net cash flow to movement in adjusted net
debt
Period ended Period ended
29 June 2014 30 June 2013
Total operations GBPm GBPm
----------------------------------------------------- ------------- -------------
Net (decrease) in cash and cash equivalents (19.7) (10.5)
Net (increase)/decrease on revolving facility (47.0) 1.2
Net (increase)/decrease in unamortised borrowing
arrangement costs (3.2) 0.4
Net (increase)/decrease in obligations under finance
leases (1.9) 0.2
Movement in adjusted net debt during the period (71.8) (8.7)
Adjusted net debt(1) - opening (60.2) (65.2)
----------------------------------------------------- ------------- -------------
Adjusted net debt(1) - closing (132.0) (73.9)
----------------------------------------------------- ------------- -------------
(1) Adjusted net debt excludes restricted funds used to settle
industrial disease claims.
19. Contingent liabilities
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 29 June 2014, the Group's bank
facilities relating to the issue of bonds, guarantees and letters
of credit amounted to GBP59.9m (H1 2013: GBP41.6m).
The provision for industrial disease claims has been determined
based on advice from independent actuaries as at 31 December 2013.
There is uncertainty associated with the future level of asbestos
related industrial disease claims and of the costs arising from
such claims. As such, the provision may be subject to potentially
material revisions from time to time if new information becomes
available as a result of future events.
Further to an incident that occurred on a client's site during
2012 that tragically resulted in the fatality of a Cape employee,
the Health and Safety Executive notified Cape Industrial Services
Limited, the employing company, in early 2014 of their decision
that legal proceedings should commence. At the date of the
statement of financial position no amounts have been provided in
respect of this matter.
20. Related parties
As at 29 June 2014, there was a balance of GBP5.4m (H1 2013:
GBP3.3m; 31 December 2013: GBP3.4m) owed by joint ventures. Revenue
generated from joint ventures in the first half of 2014 was
GBP10.1m (H1 2013: GBP8.9m; 31 December 2013: GBP17.8m).
21. Prior period restatements
The consolidated statement of financial position reported in the
Group financial statements at 31 December 2013 has been restated to
reflect the correct classification of current asset restricted
funds of GBP22.3m and deposits held for more than 12 months of
GBP9.0m as restricted fund non-current deposits.
In the Group's 2013 consolidated annual financial statements a
number of adjustments were made to the previously reported
comparative amounts reported as at 31 December 2012 in the
following areas:
De-recognition of tax losses
Tax assets largely representing UK losses arising from
non-trading activities were derecognised on the basis that they had
no economic benefit to the Group as it is unlikely that they can be
offset against trading profits. As there would have been no future
economic benefit associated with the losses in previous years, a
prior period restatement was made.
Reclassifications
Reclassifications between financial statement line items
reported in the prior period were made to reflect correct
presentation. The most significant items were in respect of the
presentation of the provision for industrial disease claims,
including an offset of associated insurance receivables and
recognition of the current portion of the liability as well as
separate disclosure of work in progress within inventories.
During the second half of 2013 the Directors decided to
discontinue activities in Japan. The results from these operations
have been classified within discontinued operations in the
condensed consolidated income statement both in the current period
and, by way of prior period restatement, in the prior period.
Employee benefits
Liabilities were established in the statement of financial
position with charges made to prior period results to reflect
contractual and legal obligations owing to employees in the Asia
Pacific region.
21. Prior period restatements (continued)
Other items
Other items include recognition of liabilities on legal dispute
and trading expenses that were not recognised at the time of the
prior period statement of financial position as well as a change in
the profit and carrying values attributable to non-controlled
interests.
Where necessary, these items have been restated in the
appropriate period within the 2013 financial year resulting in
changes to certain comparatives at 30 June 2013, as set out in the
following table. Included within 'reclassifications' category below
is the correct classification of restricted funds of GBP10.0m and
restricted fund non-current deposits of GBP16.5m.
H1 2013
Financial Employee Other adjustments H1 2013
Statements Tax losses Reclassification benefits GBPm Restated
GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Condensed Consolidated Statement of
Financial position
Assets
Non-current assets
Property, plant and
equipment 85.3 - - - (0.6) 84.7
Investment property 2.0 - - - - 2.0
Intangible assets 116.2 - - - - 116.2
Investments accounted for
using
the equity method 0.6 - - - - 0.6
Restricted deposits - - 16.5 - - 16.5
Deferred tax asset 26.6 (0.2) - - 0.8 27.2
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total non-current assets 230.7 (0.2) 16.5 - 0.2 247.2
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Current assets -
Inventories 9.6 - 7.2 - - 16.8
Trade and other
receivables 236.7 - (9.2) - - 227.5
Cash and cash equivalents 62.3 - - - - 62.3
Restricted funds 26.5 - (16.5) - - 10.0
Assets of disposal group
classified
as held for sale 6.0 - - - - 6.0
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total current assets 341.1 - (18.5) - - 322.6
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total assets 571.8 (0.2) (2.0) - 0.2 569.8
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Equity
Share capital 30.3 - - - - 30.3
Share premium account 0.9 - - - - 0.9
Share capital 1.0 - - - - 1.0
Other reserves 9.4 - 0.9 - (0.2) 10.1
Translation reserve 113.3 - - - - 113.3
Retained earnings 12.6 (2.9) (0.9) (0.1) (1.7) 7.0
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Equity attributable to
equity
holders of the parent 167.5 (2.9) - (0.1) (1.9) 162.6
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Non-controlling interests 4.3 - - - 0.4 4.7
Total Equity 171.8 (2.9) - (0.1) (1.5) 167.3
Liabilities
Non-current liabilities
Borrowings 134.3 - (1.6) - - 132.7
Retirement benefit
obligations 9.4 - - - - 9.4
Deferred tax liabilities 6.9 - - - (0.2) 6.7
IDC provision 82.5 - (7.0) - - 75.5
Other provisions 1.2 - - - 2.0 3.2
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total non-current
liabilities 234.3 - (8.6) - 1.8 227.5
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Borrowings 1.9 - - - - 1.9
Derivative financial
instruments 1.0 - (0.2) - - 0.8
Trade and other payables 130.2 - 3.3 0.1 (0.5) 133.1
Current income tax
liabilities 7.3 2.7 - - 0.4 10.4
IDC provision - - 4.0 - - 4.0
Other provisions 25.3 - (0.5) - - 24.8
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total current liabilities 165.7 2.7 6.6 0.1 (0.1) 175.0
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total liabilities 400.0 2.7 (2.0) 0.1 1.7 402.5
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
Total equity and
liabilities 571.8 (0.2) (2.0) - 0.2 569.8
-------------------------- ----------- ------------ ------------------ ---------- ------------------- ----------
21. Prior period
restatements
(continued)
H1 2013
Financial Employee Other adjustments H1 2013
Statements Tax losses Reclassification benefits GBPm Restated
GBPm GBPm GBPm GBPm GBPm
Condensed Consolidated
Income
Statement
Revenue 371.1 - - - (0.3) 370.8
Operating profit before
other
items 24.7 - 0.4 - 1.3 26.4
Other items (0.3) - - - - (0.3)
Operating profit before
exceptional
items 24.4 - 0.4 - 1.3 26.1
Share of post-tax result
of
joint ventures 0.1 - - - - 0.1
Exceptional items (15.6) - - - - (15.6)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Operating profit 8.9 - 0.4 - 1.3 10.6
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Finance income 0.8 - - - - 0.8
Finance costs (5.5) - - - 0.2 (5.3)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Net Finance costs (4.7) - - - 0.2 (4.5)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Profit before tax 4.2 - 0.4 - 1.5 6.1
Income tax credit /
(expense) 0.3 - - - (0.4) (0.1)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Profit from continuing
operations 4.5 - 0.4 - 1.1 6.0
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Loss from discontinued
operations (2.5) - (0.4) - - (2.9)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Profit for the period 2.0 - - - 1.1 3.1
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Earnings per share Pence Pence Pence Pence Pence Pence
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Basic
Continuing operations 3.3 - 0.3 - 0.9 4.5
Discontinued operations (2.1) - (0.3) - - (2.4)
Total operations 1.2 - - - 0.9 2.1
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Diluted - -
Continuing operations 3.2 - 0.3 - 0.9 4.4
Discontinued operations (2.0) - (0.3) - (0.1) (2.4)
Total operation 1.2 - - - 0.8 2.0
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Adjusted earnings per Pence Pence Pence Pence Pence Pence
share
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Basic
Continuing operations 13.7 - 0.3 - 0.9 14.9
Discontinued operations (2.1) - (0.3) - - (2.4)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Total operations 11.6 - - - 0.9 12.5
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
- -
Diluted - -
Continuing operations 13.6 - 0.3 - 0.9 14.8
Discontinued operations (2.0) - (0.3) - (0.1) (2.4)
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
Total operations 11.6 - - - 0.8 12.4
------------------------ ------------ ------------ ------------------ ---------- -------------------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGZRVVLGDZM
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