CIU Cape

TIDMCIU

RNS Number : 6821E

Cape plc

11 April 2014

11 April 2014

Cape plc ('Cape' or the 'Company')

Mailing of Annual Report, Notice of Annual General Meeting

and Electronic Documents and Information Letter

Cape announces that its Annual Report and Accounts for the year ended 31 December 2013 (the "Annual Report"), the Notice of Annual General Meeting ("Notice of AGM"), Form of Proxy and a letter requesting the sending of documents and information by electronic means ("Electronic Documents and Information Letter") have been mailed to Ordinary Shareholders and the Scheme Shareholder (as defined in the Company's Articles of Association).

Pursuant to Listing Rule 9.6.1, the Annual Report, Notice of AGM, Form of Proxy and Electronic Documents and Information Letter have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do and can also be viewed on the Company's website at www.capeplc.com.

AGM Location

The Company's AGM will be held at 11.00am (BST) on Wednesday 14 May 2014 at the offices of Lawrence Graham LLP, 4 More London Riverside, London SE1 2AU, United Kingdom.

Additional Information

In accordance with Disclosure and Transparency Rule 6.3.5(2) (b), additional information is set out in the appendices to this announcement. This information is extracted in full unedited text from the Annual Report. References to page numbers are the respective page numbers in the Annual Report. This information should be read in conjunction with the Company's Preliminary Announcement issued on 19 March 2014 and is not a substitute for reading the full Annual Report.

Cape plc

Richard Allan

Company Secretary

Appendices:

Appendix 1: Directors' Responsibility Statement

The following directors' responsibility statement is extracted from the 2013 Annual Report (page 76).

Directors' responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. The directors are also responsible for the preparation of the Directors' remuneration report, which they have chosen to prepare, being under no obligation to do so under Jersey law. The directors are also responsible for the preparation of the Directors governance report under the Listing Rules.

Jersey company law requires the directors to prepare financial statements for each financial period in accordance with generally accepted accounting principles prescribed for the purposes of the law.

Under that law, the directors have prepared the group consolidated financial statements and the parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The financial statements are required by law to give a true and fair view of the state of affairs of the Company at the period end and also the profit or loss of the Company for the period then ended. In preparing those financial statements, the directors should:

   -      select suitable accounting policies and then apply them consistently; 
   -      make judgements and estimates that are reasonable and prudent; 

- state that the financial statements comply with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and,

- prepare the financial statements on the 'going concern' basis unless it is inappropriate to presume that the Company will continue in business, in which case there should be supporting assumptions or qualifications as necessary.

The directors are responsible for keeping proper accounting records which are sufficient to show and explain the Company's transactions and as such to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the law. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement under the Disclosure and Transparency Rules

Each of the current directors, whose names and functions are listed on page 62 confirms that, to the best of his knowledge:

- the consolidated financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and,

- the Directors' governance report (including the corporate governance report and the Audit Committee report ) on pages 60 to 89 and the Regional and Chief Financial Officer's reviews on pages 40 to 48 include a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face as set out in the risks and uncertainties review on pages 16 to 23.

Directors statement under the corporate governance code

The strategic report and this directors' governance report (including the remuneration report) were reviewed and approved by the Board on 18 March 2014. The Board confirms that, taken as a whole, these reports represent a fair, balanced and understandable report on the Group.

By order of the Board

Michael Speakman

Chief Financial Officer

18 March 2014

Appendix 2: Principal Risks & Uncertainties

The following description of the principal risks and uncertainties that the Company faces is extracted from the 2013 Annual Report (pages 16 to 23)

Risks and opportunities

Cape has a renewed focus on risk management. The Board is committed to enhance the Group's risk management capability.

Risk factors

Cape's performance and prospects may be affected by a number of risks and uncertainties that relate to the industries and the environments in which it undertakes its operations around the world. The Group is alive to the issue of risk and has systems and procedures in place across the Group to identify, assess and mitigate major business risk.

Each region and central function is required to undertake a formal review of risks which could impact its area of business. Identified significant risks and agreed mitigation are formally reviewed on a regular basis and are recorded in a standardised active risks register. The Group continues to develop its risk management systems and processes to ensure that our responses remain appropriate to the range of risks that we face. A number of the risks that Cape faces are also faced by other service providers and finding rigorous methods of mitigating such risks can generate competitive advantage. Where these apply, they are explained further on pages 18 to 23.

These factors and the other information contained in this Annual Report should be carefully considered. The following is a description of the risks that may affect some or all of our activities and which may affect the value of an investment in our securities. If any of the events described below occurs, the business, financial condition or results of operations of the Group could be adversely affected in a material way. Additional risks and uncertainties that the Group is unaware of or that it currently deems immaterial may in the future have a material adverse effect on the Group's business, results of operations and financial condition.

Committees of the Board

Details of the Board and its committees can be found in the Directors' Report and the Directors' Remuneration Report on pages 62 to 89.

Effective risk management

The effective identification, reporting and management of risk is critical to the success of Cape. In light of the operational, commercial and control issues that arose during 2012 and 2013, actions continue to be taken to ensure the following systematic approach is applied across the Group.

Identifying key risks

- To consistently apply the same methodology of identifying risk at project, operation, business unit and Group level.

Analysing risks and controls

- Risks are evaluated to establish financial and non-financial impacts, the likelihood of occurrence and the root cause. This results in a prioritised register of risks, against which we then review the nature, adequacy and appropriateness of our current controls to mitigate these risks.

Determining management actions

- If new, different or additional risks are identified or if additional controls are required, these are developed and appropriate responsibilities to discharge are assigned. Investment related risks are identified and assessed before key investment decisions are made.

Reporting and monitoring

- Emerging risks are identified, reported and reviewed on an ongoing basis, with particular focus on capturing emerging risk and monitoring all changing risk during monthly business reviews. Management is responsible for monitoring the effectiveness of controls and progress of actions taken to mitigate our key risks; this is supported through the Group's internal audit programme. The results of the risk management process are reported to the Audit Committee at least every six months.

Further details of the Group's internal control and risk management processes can be found in the Directors' governance report on pages 60 and 89.

2012 events and the Operational Excellence Programme

The identification of events during 2012, such as significant losses on a small number of major projects; inadequate forecasting in light of deteriorating project performance and trading conditions, poor control of fixed assets, and inconsistent Group-wide application of accounting policies; has demonstrated that, in certain instances, the control environment was insufficiently robust either in the identification, the escalation or the timely management and mitigation of such control failures.

Operational Excellence Programme

In response to these events, in 2013 the Group initiated an Operational Excellence Programme, tasked with identifying the key issues preventing consistently high operational performance and addressing them by identifying best practice and then standardising and rolling out those best practices to all parts of the Group. This programme made good progress in 2013 and will continue in 2014 and beyond.

The Operational Excellence Programme has three goals. Firstly, to develop and provide operational management with the best available tools and procedures to manage and monitor operational activities, particularly large projects. Secondly, through improved recruitment, training and management development, provide the whole Group with a pool of operational management with the practical and leadership skills necessary to consistently manage our current and foreseeable operations and projects. Thirdly, to codify best practice and ensure it is operated consistently across all activities and geographies.

Risk category

External risks

Global political, security and economic conditions

Description and potential impact

Operating activities may be affected by factors outside the Group's control. These include geo-political events, such as tensions in the Middle East or CIS, government actions or inactions, climatic conditions, unusual or unexpected geological occurrences, environmental hazards, industrial conditions, technical failures, labour disputes, delays in construction, availability of materials or parts and shipping, import or customs delays.

Changes in the political or security environment in existing and new territories may result in Cape, or its clients, losing commercial or legal protections, facing security threats or being less able to control their operations.

Evolution in 2013

Incidence and severity of geopolitical and economic instability has increased in some locations (ME/Gulf) and reduced in others (end of Algeria project). The net impact is broadly neutral.

Regional management teams have been strengthened with new managers (regional director changes, commercial and HR directors in ME) that are more attuned to such risks.

Mitigation

These external factors are normally likely to affect a specific location, client relationship or a single contract. Cape's business is diverse by geography, number of client sites, range of services and exposure to industries or sectors. This portfolio diversification reduces the impact of Cape's overall exposure to individual risks and uncertainties. Where specific risks are identified, measures are taken in a proportional manner to reduce or eliminate them to an acceptable level or orchestrate a withdrawal from the activity in question.

Cape's policy is to avoid a concentration of activity in markets/regions which it assesses as high risk.

Risk is mitigated by a strong senior management presence in each region and particularly where risks are identified, regions operate in close communication with central management. Along with the OE initiative to improve training of managers and to encourage and facilitate the sharing of relevant experiences and knowledge between peers.

General counsel is regularly engaged to ensure compliance with local legislation and to advise managers on actual or potential changes in legal or regulatory framework.

We monitor carefully any changes in political regimes that might impact on our business. Cape has an in-house Head of Security, who is responsible for security coordination in higher risk territories and we have expanded our use of specialist consultancies to perform background research, advise us and when necessary, provide protection.

Opportunities

Existing and potential risks often differ between regions within a country and the specific locations where Cape staff work are kept under regular review.

Opportunities could exist if perceptions of risk differ from the reality.

Market risks

Key client dependency

Description and potential impact

Losing certain key clients could have an adverse effect on Cape's revenues.

The majority of Cape's clients are either in, or are directly or indirectly dependent upon, the energy and natural resources sectors. A proportion of Cape's earnings therefore depend on stable long-term energy demand particularly for oil, gas and electricity.

Evolution in 2013

Client dependency is essentially unchanged in 2013.

Management have become increasingly focused on the importance of client responsiveness and developing multiple level relationships.

Mitigation

Cape's top 10 clients accounted for 38% of Group revenues in 2013 (2012: 40%), with the largest customer accounting for 11% of Group revenues (2012: 11%). Cape has a broad customer base, with circa 105 clients (2012: 104) clients each contributing more than GBP1 million to annual revenue. Cape seeks to maintain a stable and balanced customer profile.

Cape has developed long-standing relationships with clients, based on service quality, reliability and safety. These relationships are at multiple levels from site supervisors to senior management. Strong 'client responsive' relationships support revenue retention and growth through ongoing contract award and renewal.

Opportunities

Strong customer relationships based on consistent high service levels produce opportunities to cross sell both additional services and into new locations.

Key market dependency

Description and potential impact

Cyclical downturns could lead to declines in demand for Cape's services.

Evolution in 2013

Key market dependency is essentially unchanged in 2013.

Mitigation

In most existing markets Cape has a relatively small market share.

Most contracts cover a multi-year engagement and are for work of a long-term nature. Cape, therefore, has limited exposure to fluctuations in the spot price of any one energy product, or its short-term demand.

Cape is firmly positioned in the downstream energy infrastructure, power generation and later cycle production markets. These markets are less impacted by cyclical downturns than upstream, exploration segments. In some industries, there is a counter-cyclical effect with extra maintenance (outages) required on off-line assets, when demand falls or spot prices decline.

Opportunities

Cape's wide range of essential services ensures it can serve clients' needs through the lifecycle of the production asset, whether related to installation, maintenance, extension of life or decommissioning.

Health, Safety and Environmental (HSE) risks

Achievement of HSE excellence

Inherent site dangers

Description and potential impact

Many clients have sites that have inherent dangers with associated health and safety risks (offshore platforms, refineries, and power stations).

Failure to maintain the highest HSE standards on-site could result in injury to our employees or others involved in site operations.

Failure to deliver HSE excellence could result in a material loss of clients and/or damage to Cape's reputation and the environment.

Evolution in 2013

During 2013 as part of the OE project, the Cape CMS system, which is a Cape-wide set of operating and HSEQ instructions, was reviewed, redesigned and is being moved onto a user friendly IT platform that will be securely accessible from all sites worldwide.

For further details of safety awards see the Corporate and Social Responsibility ('CSR') report on page 49.

Mitigation

Cape values its excellent reputation for safety and HSE related matters around the world. Cape's investment in systems and resources, with around 455 people (2012: 455) in full-time HSE roles across the Group, continues to deliver a superior performance in accidents, working days lost and environmental incidents (further details are set out in the CSR on pages 49 to 57).

Occupational health and safety performance continues to be in the upper quartile of comparable companies, with a Total Recordable Incident Rate (TRIR) of 0.92 per million hours worked (2012: 1.656 per million) for the Group as a whole.

Through both its training centres and on-site training courses, Cape invests a considerable amount in improving staff skills. This helps retain key staff through regular progression, helps reduce skills shortages and improves safety performance.

Opportunities

Demonstration of an excellent HSE performance is increasingly becoming a pre-qualification requirement for most large oil, gas, mineral and power generation tenders.

Skills shortages and HR risks

Recruitment, development and retention of key managers, supervisors or skilled employees

Description and potential impact

The loss of key managers, supervisors or skilled employees, may adversely affect Cape's business. Cape's ability to successfully operate and grow the business is largely dependent on its ability to attract and retain high-quality personnel. An inability to attract and retain well-qualified and skilled personnel could materially adversely affect Cape's business, operating results or financial condition.

The lack of capacity, capability or competence of Cape managers would have a significant adverse impact on the business.

Evolution in 2013

OE and other initiatives to attract, retain and develop key staff started in 2013 and will continue into 2014 including:

   -    Standardisation of corporate recruitment and other HR processes 
   -    Enhanced remuneration review processes and long term incentive plan 
   -    Improved staff performance review and management development processes 
   -    Introduction of matrix management and cross business training 

- Appointment of Asia based COO to review, supervise and motivate staff in the more remote locations

Mitigation

Cape's regionalised organisational structure provides considerable management autonomy and opportunity for supervisors and managers to develop within the business. This has both advantages and risks, so to gain the advantages, while mitigating the risks, the Group is taking the following steps:

- The Future Leaders Programme was introduced to provide managers with the skills to effectively perform their roles and progress in the organisation. The Cape Management Training Scheme has been introduced to provide a regular pipeline of talent for key management roles across the Group. Annual performance appraisals are conducted to assess executives' performance and to discuss career goals. All these processes have been reviewed and improved in 2013.

- In 2013 the OE initiative undertook to improve the strength and depth of management talent at key levels within the business by assessing needs and resources and then introducing training and other procedures to improve the capability, capacity and competences needed for the businesses today and in the years ahead.

- Senior executive remuneration is reviewed against market data provided by specialist remuneration consultants to ensure awards are competitive. Long-term incentive plans are in place to encourage the retention of the key management group.

Opportunities

Retaining talented staff and engendering long term loyalty has many advantages to both Cape and staff, including:

   -    Reduced recruitment fees and basic training cost. 
   -    Retention of knowledge and skill 
   -    Efficiency improvements. 
   -    Growth of discipline and industry specialisms. 
   -    Establishment of a core of in-house trainers. 
   -    Internal career development paths and opportunities. 
   -    Improved operational robustness, staff cover and succession paths. 

Contract acceptance risk

Terms and conditions risk

Contract bidding and estimating risk

Description and potential impact

Cape could sign up to contract terms and conditions exposing the Group to excessive financial risks and potential cost overruns.

Due to errors in the accurate determination, scope and poor estimates or changes in on-site circumstances, Cape may not be able to recover all costs incurred resulting in an adverse financial performance.

Evolution in 2013

An experienced General counsel was appointed this year. He is responsible for ensuring group-wide compliance in new contract negotiations and is currently conducting a review to reassess the risks in existing contracts.

Mitigation

Cape's policy is to avoid lump sum or fixed rate contracts, with the large majority of contracts being cost reimbursable or at scheduled rates. To ensure this applies, contract acceptance authorisation procedures and controls have continued to be strengthened over the last 2 years. The Group has also introduced a system of 'Peer review' for significant and material projects.

The Group seeks to avoid the acceptance of liabilities that are unquantifiable or for which we could not reasonably be regarded as responsible, including design responsibility, customer or other party delays, liquidated damages, direct and indirect consequential losses. The adequacy of insurance covers is reassessed annually.

Opportunities

Improved contract acceptance management will have a beneficial effect on long term margin.

Operational risk

Operational and project performance risk

Description and potential impact

Actual project performance may differ materially from 'as bid' or forecast performance.

The Group's financial performance could be significantly affected by the operational performance of a relatively small number of large contracts.

Evolution in 2013

During the year the 'cost to complete' review identified an onerous contract, primarily because extra costs incurred by Cape could not be passed on to the client. The losses were identified at an early stage and where possible a number of corrective management actions were taken to re-engineer costs and so mitigate the losses.

Appointment of an Asia based COO to regularly review and supervise the more remote projects and businesses.

Mitigation

The Group has a strong track record of successful project execution which reflects a practical and client focused approach to both construction and maintenance project management. In response to certain construction project performance issues during 2012, the 'operational excellence' initiative commenced. Some OE benefits were evident in 2013, but they will largely impact 2014 and future years, and include:

- A professional approach to contract bidding and contract management, including in-house training of project managers to gain APM professional qualifications.

- Recognition of project management as a key competence within Cape, and a focus on managing the resource Cape-wide.

- Development of a project management toolkit for new projects, including a standardised project planning and delivery system and a site IT system with standardised KPIs.

- Initiating standardised, detailed, regular reviews of projects and cost to complete calculations in all businesses, with risk based escalation and overriding Regional and Central reviews.

- Access from all sites to the redesigned user friendly Cape-wide set of operating instructions (CMS).

Opportunities

Improved project management will improve the consistency of project execution, which will improve customer perception and so have a beneficial effect on long term margin.

Investment and asset integrity risks

Unacceptable return on assets or investments

Description and potential impact

Failure to achieve satisfactory returns on assets, acquisitions, joint ventures, partnership arrangements and other investments.

Inadequate management and financial controls leading to loss of operational control, loss of assets, loss of financial data or loss of the integrity of data.

Evolution in 2013

An experienced General counsel and Company Secretary appointed this year will improve the in-house legal advice available for strategic investment structuring, during investment negotiations and the governance over existing investments.

Detailed mobile asset control processes have been tightened, with further tightening planned for 2014.

Mitigation

Cape carries out detailed assessments and reviews of existing and potential acquisition, joint venture, partnership arrangements and other investments including internal legal and financial diligence, with external support when appropriate.

To assess and to help mitigate these risks Cape has high quality and experienced legal, commercial, operations, finance, acquisitions, internal audit, tax and treasury teams that operate at Group level and across the regions.

Opportunities

An increasingly professional approach to investment decision-making, management and control will add value by improving the return on capital employed.

Inadequate visibility or reporting over operations or assets

Description and potential impact

Disparate and old IT systems across much of Cape are a risk to management and financial control and prevent management at all levels from optimising performance.

Evolution in 2013

A Chief Information Officer (CIO) was appointed in 2013, tasked with co-ordinating infrastructure, improving the robustness of business systems generally and specifically the Group's ERP provision.

Mitigation

Work has commenced within the OE project, on the scoping out of a uniform ERP system that will link with existing site systems for eventual worldwide implementation.

UK and ME IT has been moved to professionally hosted data centres that operate to robust internationally recognised security and DR standards.

Opportunities

A uniform ERP system will significantly improve management's visibility of operations and financial results.

Compliance and business conduct risks

Breach of applicable laws and regulations

Business integrity and ethical conduct risk

Failure to obtain/renew key licences and permits

Failure to manage key relationships

Description and potential impact

Breach of applicable laws and regulations including tax, anti-bribery and anti-corruption, competition and business conduct laws and failure to file necessary statutory and regulatory returns. Failure to renew key operating licences and permits, including asbestos removal and waste transfer licences. Failure to manage key corporate relationships including those with key customers, joint venture partners, investors, the Scheme shareholder and scheme trustee directors, banking consortium and pensions trustees.

Evolution in 2013

A new General counsel was appointed to focus on compliance, legal risk management and business integrity and ethics. The newly appointed COO's role includes a focus on strategic management of key contracts and customers. The new executive management team has built strong relationships with all key stakeholders.

Mitigation

To assess and manage these corporate risks Cape has high quality and experienced finance, investor relations, corporate, internal audit, tax, treasury, legal and compliance teams that operate at Group level and across the regions. Continued strengthening of key customers account management along with customer needs and satisfaction reviews. Completion of the refinancing has provided increased certainty and stability in the Group's financing and banking relationships.

Opportunities

Good legal compliance and improved corporate relationships will increase certainty and stability, allowing management focus to shift towards strategic business development and growth.

IDC provision adequacy risks

Material underestimate of the IDC funding requirement

Description and potential impact

Failure to properly quantify future cash flows related to industrial disease claims and changes in the external claims environment (including changes in the law and judicial processes).

Evolution in 2013

The 2013 triennial scheme valuation (carried out by external actuaries) was undertaken using the Group's cumulative claims history and updated economic assumptions.

Mitigation

The court-approved 2006 Scheme of Arrangement protects the interests of future IDC claimants whilst at the same time protecting the Group from the impact of extreme adverse changes in the claims environment.

Opportunities

The Group is proactively managing the IDC claims process to ensure a fair and speedy response to industrial disease claimants whilst seeking to minimise the erosion of scheme funds through payment of excessive claimant and defendant legal costs.

General financial risks

Foreign exchange and interest rate exposure

Description and potential impact

Financial risks including foreign exchange, interest rate risk, credit risk, liquidity risk, capital management and financial derivatives are described further in note 25 to the consolidated financial statements.

Evolution in 2013

No significant change.

Mitigation

To assess and mitigate these risks, Cape has high-quality and experienced finance personnel both centrally and in operations addressing the activities of finance, internal audit, tax and treasury.

Appendix 3: Related party transactions

Details of directors' emoluments are shown in note 37 'Related party transactions' to the consolidated financial statements and in the Directors' Remuneration Report on pages 84 to 89.

There have been no material transactions with the Company and other related parties during the year.

This information is provided by RNS

The company news service from the London Stock Exchange

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