TIDMCIU
RNS Number : 6536C
Cape plc
19 March 2014
19 March 2014
Cape plc
("Cape" or the "Group")
Preliminary results for the twelve months to 31 December
2013
Cape plc, the international provider of critical support
services to the energy and mineral resources sectors, announces its
results for the twelve months ended 31 December 2013.
A year of consolidation, delivering an improved performance in
mixed market conditions
Financial summary
Audited 2013 2012
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Financial highlights
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Continuing operations:
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Adjusted revenue GBP697.1m GBP746.0m
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Adjusted operating profit GBP41.0m GBP27.7m
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Adjusted operating profit margin 5.9% 3.7%
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Adjusted profit before tax GBP35.5m GBP20.7m
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Adjusted diluted earnings per share 23.6p 12.7p
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Dividend for the year (per share) 14.0p 14.0p
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Adjusted net debt GBP60.2m GBP65.2m
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Statutory results
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Revenue GBP697.1m GBP737.0m
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Operating profit/(loss) GBP10.2m (GBP133.2m)
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Profit/(loss) before tax GBP0.2m (GBP143.2m)
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Loss per share (5.6p) (172.5p)
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Throughout this statement, various non-statutory measures are
used and referred as Adjusted, these are defined and reconciled to
their statutory equivalents in note 8, Adjusted measures. Certain
amounts do not correspond to the 2012 financial statements and
reflect the adjustments detailed in note 4, Prior period
restatements.
Highlights
-- Adjusted operating profit up 48% to GBP41.0m (2012: GBP27.7m)
-- Adjusted diluted earnings per share up 86% to 23.6p (2012: 12.7p)
-- Order intake at GBP625m (2012: GBP619m); order book at 31
December 2013 10% lower at GBP648m (31 December 2012: GBP720m)
-- Arzew project completed to revised plan and within the existing provision
-- Divestment of non-core operations and Performance Improvement Plan in Australia completed
-- Substantial progress on the first phase of strategy to
stabilise the operational performance of the business
-- GBP37.7m acquisition of Motherwell Bridge in Q1 2014
-- Operating cash flow up 20% to GBP49.7m (2012: GBP41.5m)
resulting in adjusted net debt of GBP60.2m (2012: GBP65.2m)
-- Full year dividend 14.0p (2012: 14.0p)
-- The Board is confident in the continued improvement in
operating performance and the future prospects of the Group
Commenting on the results, Joe Oatley, Chief Executive of Cape
said:
"Cape has delivered an improved set of results in 2013 against a
backdrop of mixed market conditions. We have made good progress on
operational improvement and established a robust control
environment across the Group. Whilst we will continue to improve
our operational efficiency and controls, we are now well positioned
to move into the growth phase of our strategy. The acquisition of
Motherwell Bridge, announced on 11 March 2014, represents good
early progress on this element of our strategy, extending the range
of critical industrial services we offer to our clients. We will
continue to pursue both organic and acquisitive growth and I am
confident that by combining this growth with our on-going focus on
operational excellence, Cape will deliver long-term value creation
to our shareholders."
Analyst meeting
The Group will be presenting to a meeting of analysts at 9.30 am
today. The presentation will be available on the company's website
later today at:
www.capeplc.com/investors/financial-results-and-presentations.aspx
Enquiries:
For more information contact:
Joe Oatley, Chief Executive, Cape plc
joe.oatley@capeplc.com
+44 (0)18 9545 9979
Michael Speakman, Chief Financial Officer, Cape plc
michael.speakman@capeplc.com
+44 (0)18 9545 9979
Rachel Amey, Director of Investor Relations, Cape plc
rachel.amey@capeplc.com
+44 (0)18 9545 9965
Bobby Morse, Ben Romney & Louise Mason, Buchanan
+44 (0)20 7466 5000
Forward looking statements
Any forward looking statements made in this document represent
the Board's best judgement as to what may occur in the future.
However, the Group's actual results for the current and future
fiscal periods and corporate developments will depend on a number
of economic, competitive and other factors, some of which will be
outside the control of the Group. Such factors could cause the
Group's actual results for future periods to differ materially from
those expressed in any forward-looking statements included in this
announcement.
About Cape:
Cape plc (www.capeplc.com), which is listed on the Main Market
of the London Stock Exchange, provides a range of critical
industrial services including access systems, insulation,
refractory linings, painting, coating, blasting, industrial
cleaning, training and assessment to industrial plant operators and
major international engineering and construction companies.
As a single-source provider, Cape is able to provide a range of
specialist multi-disciplinary services specifically tailored to
meet the needs of the client providing the most intelligent and
cost-efficient solutions for our clients' in-plant maintenance and
capital needs.
In the year ended 31 December 2013, Cape reported adjusted
revenue of GBP697.1 million. With scale and leading market
positions across its international footprint, Cape employs over
18,000 people around the world.
Chairman's statement
A platform for growth
2013 has been a year of consolidation for Cape. We set out to
stabilise the company after the challenges of 2012 and have
achieved that goal, delivering a steady performance against a
backdrop of mixed market conditions.
The financial turnaround since 2012 represents the foundation of
what we believe will be a strong future for Cape. We have made good
progress in executing the first phase of our strategy and actions
taken during the year have put in place a solid platform to support
future growth. Operational excellence has been a key element of
this phase and is being embedded in our culture. In 2014 we will
increase our focus on the growth phase of our strategy by
broadening our portfolio of critical industrial services, cementing
our customer relationships and through focused geographical
expansion. We have already taken our first steps towards this
growth strategy in 2014 with the acquisition of Motherwell Bridge,
a market leader in services for the oil and gas tank storage
market.
Enhanced management team
2013 marked the first full operating year of the new executive
management team which has implemented significant improvements in
the operating and control environment across the Group. As a next
step in the development of this team, Steve Connolly, previously
responsible for our UK, Europe and CIS region, was appointed as
Chief Operating Officer effective from January 2014. This
appointment will both ensure an efficient implementation of our new
operational processes across the Group and allow our Chief
Executive to focus on delivering the growth phase of our
strategy.
Improved risk management
The previously reported challenges in Algeria and Australia in
2012 have been addressed. Moving forward, we have strengthened our
risk assessment processes and sought to embed a more open and
transparent culture across the business. As already announced, we
identified a challenging project in Qatar in 2013 on which we took
an onerous contract provision. Although this was disappointing, it
is encouraging that our improved management and operational
controls enabled the issue to be identified early and remedial
action to be taken in a timely manner. Nevertheless, this serves to
emphasise the importance of our strategy of focusing on operational
excellence in order to deliver consistent performance.
Strong safety record
Cape has an uncompromising approach to health and safety and I
am pleased to report that our safety record remained at a high
standard during the year. The safety of our workforce is our
highest priority - our goal is zero harm. Our commitment to safety
has once again been recognised by our customers with a number of
accolades during the year, including 'Winner of the Safety Award
for Contractors' from BAPCO, and for the second year running 'HSE
Performer of the Year' from Borouge. We are extremely proud of our
safety record, and the dedication of all of our people in
sustaining an environment and culture that instils the critical
importance of safety in all our employees, whilst delivering a high
quality service to our clients. We believe that it is this
combination of safety and quality delivery that has enabled Cape to
forge a leading position in the market with strong relationships
with our blue-chip international client base.
Corporate governance
The Board remains committed to achieving the highest possible
standards of corporate governance as we believe compliance with
these standards is in the best interest of all our stakeholders.
Our commitment to this policy throughout the year has resulted in a
further strengthening of our governance and we will continue to
review and identify where, if necessary, improvements can be made
to ensure we maintain a best in class standard of transparency,
disclosure and across all other areas of corporate governance.
Dividend
We are recommending a final dividend for 2013 of 9.5 pence (H2
2012: 9.5 pence) reflecting our confidence in the delivery of our
strategy and the encouraging prospects for the Group. With the
interim dividend of 4.5 pence (H1 2012: 4.5 pence), this results in
a full-year dividend of 14.0 pence (2012: 14.0 pence). This is
subject to shareholders' approval at the Annual General Meeting on
14 May 2014 and the final dividend will be payable on 6 June 2014
to shareholders on the register as at 9 May 2014.
Conclusion
The operational challenges faced by Cape have been identified
and substantially addressed, putting the business on a stable
platform for future growth. We will continue to focus on improving
the operational effectiveness of the Group whilst entering the
growth phase of our strategy. This will enhance our competitiveness
and strengthen our position in our chosen markets. I would like to
thank all of Cape's employees for their continued efforts and
commitment to the much needed cultural and organisational change
achieved during the year.
Chief Executive's review
Overview
We have focused throughout 2013 on implementing the first phase
of our strategy to stabilise our business by driving operational
excellence across the Group. Although this phase is on-going, we
have made significant progress in installing operational rigour and
establishing a robust platform for future growth.
We delivered a much improved performance in 2013 with the UK
business continuing to deliver strongly, the Arzew project
completed in-line with the plan set out early in the year and a
successful implementation of the restructuring and performance
improvement of our Australian business, offsetting weaker market
conditions in CIS. It was disappointing that a strong year for our
Middle East and North Africa (MENA) business was negatively
affected by the previously announced provision for an onerous
contract in Qatar.
Whilst 2013 has been a year of consolidation, the Group has
identified a number of long-term growth opportunities and we are
now working hard to ensure that we are well positioned to capture
those opportunities.
Market conditions 2013
Market conditions were mixed across the Group's three regions as
a number of major new capital investment programmes in the oil and
gas and mining industries were delayed. As anticipated, this
resulted in lower activity levels of construction services in a
number of our markets. The volume of construction service contract
awards is expected to increase in late 2014 and 2015 as a number of
new oil and gas projects reach the stage of development where
Cape's services are required. Demand for maintenance services
remained steady.
Demand across the UK, Europe and CIS region was variable with
the UK market flat and a marked reduction in activity in Kazakhstan
as key projects completed early in the year and investment by our
clients in new projects was deferred. Activity levels were also
subdued in Sakhalin due to the timing of shutdown related
maintenance work. We anticipate that activity levels in Kazakhstan
and Azerbaijan will increase as we move through 2014, with major
project activity increasing into 2015.
Market conditions across the Middle East varied significantly
country by country with increasing investment in new downstream oil
and gas infrastructure in Saudi Arabia, but lower levels of
construction service work in Qatar and UAE. The maintenance market
remains robust across the region. Both the construction and
maintenance services markets have become more competitive with
domestic and overseas competitors targeting market share growth,
putting downward pressure on pricing.
The Asian construction services market has been subdued
throughout 2013, but is anticipated to grow over the medium to
long-term with a number of large oil and gas projects planned in
order to meet the growing demand for energy and industrial
expansion in the region. We have recently appointed a new Group
Business Development Director who will be based in the region and
will have a particular focus on securing a significant share of
this growth opportunity. The Australian market continued to have
weak demand from the mining and oil and gas maintenance sectors
throughout the year, but a number of the major LNG new build
projects are now moving forward. Whilst the opportunity to secure
construction work on a number of these LNG projects such as QCLNG,
GLNG and APLNG has been limited as the main contractors chose to
self-deliver many of the services Cape provide, over the medium and
long-term these facilities represent an opportunity for maintenance
support contracts.
2013 operating performance
Order intake during the year was marginally higher than the
previous year at GBP625 million (2012: GBP619 million), with a
significant contribution from the project awards on the Wheatstone
LNG project in Australia which in aggregate comprised approximately
GBP190 million of the total Group order intake.
Adjusted revenue from continuing operations was 7% lower than
the previous year driven by completion of a number of major
projects in the first half such as Kipper Tuna in Australian and
the SPT project in Singapore, and weak market conditions in
Kazakhstan and Asia Pacific, partly offset by growth in the Middle
East and UK offshore markets.
Adjusted operating profit grew by 48% to GBP41.0 million (2012:
GBP27.7 million) with solid performances from the UK, MENA and
Asian businesses offsetting weak performances from our Kazakhstan
and Australian businesses. The performance in Kazakhstan was driven
by a reduction in the size of the available market due to the
completion of the Kashagan Field Development project. The Group's
Australian business returned to profitability at the end of the
second half as the non-core divestments and Performance Improvement
Plan were successfully concluded.
Following a change in leadership on the Arzew project in Algeria
and implementation of improved operational processes and controls,
I am pleased to report that we completed our work on this contract
during 2013 in line with the revised plan and within the existing
provision.
The divestment of non-core operations in our Australian
business, a process which started in 2012, was essentially
completed in 2013. We also carried out a root-and-branch
restructuring of our remaining core industrial services business to
ensure it has an appropriate cost base for the future. This
restructuring reduced overhead cost by over 50% as we streamlined
the branch network and optimised the back-office functions. In
addition to the overhead reduction, the management team has focused
on improving the operating performance of existing contracts, thus
improving gross margins. The restructuring programme is now
complete and all major milestones have been met, leaving the
business on a sound footing for the future.
The MENA regional margin was negatively affected by a loss
provision taken against an onerous contract in Qatar. This project
had been bid and secured in early 2012 with operations commencing
in 2013. Whilst it is disappointing to report this issue, it was
encouraging that the new operating environment resulted in the
difficulties being identified early in the project lifecycle and
the necessary corrective actions being taken swiftly to contain the
losses on the project.
The Group achieved strong cash flow through tight management of
working capital and capital expenditure, with operating cash flow
of GBP49.7 million (2012: GBP41.5 million). As a result, year-end
adjusted net debt improved to GBP60.2 million (2012: GBP65.2
million) after having made an additional early payment into the IDC
fund of GBP6.0 million.
Strategic delivery
Last year we established our new Group strategy which consists
of two phases: the first to stabilise the business and establish
our platform for growth; and the second to grow and optimise the
business. We have made substantial progress on the implementation
of the first phase by focusing on operational excellence and our
aim is to lead our industry in operational efficiency and
performance. This creates value both for our clients by delivering
our services safely, on-time, to cost and quality, and for our
shareholders by delivering more reliable earnings.
We set out three key goals for our Operational Excellence
programme: to attract, retain and develop the best people; to
simplify and standardise our business systems and processes; and to
ensure that knowledge and best practice are shared around the
Group. We have made good progress on all three of these goals. High
quality management is a scarce resource in our industry and our
long-term success is dependent upon being able to develop our
people so that they can perform to the best of their ability. We
are committed to investing in our people and have introduced a
broad range of management development programmes across the Group
which cover all levels of management from supervisors and new
graduates through to the senior executives. The first cohort has
started on each of these programmes during the year.
We now have an easy to use, common management system that
defines and captures all of the key operational processes for the
Cape Group. This system means we have consistent operating policies
and processes throughout the Group. We are also implementing a
standardised project delivery process and an industry leading site
management system that enables us to both manage our work
effectively and share key performance information with clients.
We have made early progress on enhancing our relationships with
a number of our key clients through initiatives such as "Voice of
the Customer" where we engage with key decision makers of our
clients in a structured way to ensure we understand their concerns
and requirements. We have decided to delay the development of our
global key account management system to ensure we fully understand
the needs of our major clients, for whom local delivery and
relationships can often be more important than global ones. Our
long-term ambition remains to be the primary supplier of critical
industrial services to our key clients.
Whilst continuing our drive for operational excellence remains a
key priority for the Group, we are now progressing into the second
phase of our strategy; to deliver growth through a combination of
broadening our service portfolio and targeted geographic expansion.
Our initial focus has been to ensure that we secure the key
opportunities in our existing markets. Whilst a number of our
larger opportunities have been subject to delay, we have been
successful in winning contracts in our target areas of Australia,
Saudi Arabia and Azerbaijan. Looking forward to 2014, we will
continue to drive growth through a combination of capturing
opportunities in our existing markets such as Australia, CIS and
parts of the Middle East, expanding our service offering through
the addition of related specialist services and extending our
geographical reach in a selected way.
Of equal importance to the process improvements we are making is
the cultural change that we are driving across the Group. We have
defined our core values that describe the behaviours that we are
striving to instil across the Group. Driving cultural change
through these values will be a key element to ensuring we can
sustain a high level of performance over the long-term.
Acquisition
In line with our strategy to broaden our portfolio of related
critical industrial services, on 11 March 2014 we announced the
acquisition of Motherwell Bridge, a leading provider of storage
tanks, gasholders and heat exchangers to the energy and steel
markets. Motherwell Bridge has tremendous expertise, reputation and
brand recognition in the oil and gas storage tank market, including
a market leading position in the UK and we expect to accelerate
Motherwell Bridge's overseas growth through Cape's international
footprint. By combining the strengths of Cape and Motherwell Bridge
we are uniquely qualified to provide a complete tank maintenance
solution to clients in the oil and gas market.
Organisation and people
I am delighted to have appointed Steve Connolly as Chief
Operating Officer, effective from 1 January 2014. Steve was
previously responsible for the UK, Europe & CIS region and will
be focused on both the day to day management of the business and
the implementation of our Operational Excellence programme
throughout the Group.
Cape has over 18,000 people working across 21 countries and
every employee acts as an ambassador for the company wherever they
go. We will continue to build on our reputation for being a great
employer and we are committed to both providing development for our
people and ensuring their wellbeing. I would like to thank all of
our employees for the commitment and dedication they have shown to
the company over the past year.
Safety
Cape is a people business and we often work in hazardous
environments where our employees are exposed to potential dangers
to their health and safety. Ensuring the safety of our people is
our highest priority and everyone within the Group has
responsibility for not only their own safety, but also that of
their colleagues. We have put increased energy into improving our
safety culture and performance during 2013 and I am pleased to see
that improvement demonstrated in a significant fall in our accident
and injury rates compared to 2012. Nonetheless, we continue to
strive to improve our safety performance towards a goal of zero
harm which remains at the heart of everything we do at Cape.
Outlook
2013 was a year of consolidation for Cape where our focus has
been on stabilising the business. We made good progress on our
objectives for 2013 and enter 2014 with a stable platform for
future growth. Improved operational performance drove enhanced
margins and we expect that trend to continue in 2014. Order intake
was marginally higher than the prior year but continued to be
subdued, in part due to a slowdown in some of our key markets such
as CIS and Asia and in part due to the timing of key long-term
maintenance contract renewals. As a result, we entered 2014 with an
order book of GBP648 million, 10% lower than at the equivalent
point in the previous year (31 December 2012: GBP720 million). At
current rates, foreign exchange effects represent a material
headwind to the Group.
We expect market conditions in the UK, Europe and CIS region to
be variable with flat demand from the UK and a slight increase in
activity towards the end of 2014 within the CIS. We anticipate that
the UK business will feel the effect of increasing competition,
but, with a continued focus on efficiency improvement and the
on-going development of our joint venture activities in Kazakhstan
and Azerbaijan, we are targeting to deliver an improvement in
operating margin for the region compared to 2013.
Market conditions in the MENA region are expected to remain
mixed through 2014 with increased demand in countries such as Saudi
Arabia offsetting a reduction in demand in UAE and lower
construction market activity in Qatar. We expect competition to
continue to exert downward pressure on pricing, but that the Group
will be able to mitigate the effect of this through improvements in
operating efficiency.
Improved market conditions in the Asia Pacific region, largely
driven by increased demand from the LNG projects in Australia,
combined with the successful restructuring of our Australian
business, are expected to deliver a significant improvement in the
performance of this business with both top-line growth and
improvement in operating margins.
Beyond 2014 we expect to see improvement in market conditions
across the Group with the emergence of the nuclear new build
program in the UK, a number of major projects in Asia, growth in
new construction activity in the CIS and continued development of
the Middle Eastern market.
The long-term demand for the Group's services is expected to
continue to grow, driven by increasing investment in both the oil
and gas and power industries. Through our strategy of delivering
growth through a combination of focused expansion into new
geographies and extension of the range of critical industrial
services we provide for our clients, we believe Cape can deliver a
long-term growth rate above that of our core markets. The Board is
confident in the continued improvement of operating performance and
in the future prospects of the Group.
Joe Oatley
Chief Executive
Business review
UK, Europe and CIS
(GBPm) 2013 2012 Growth
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Order intake(1) 228 274 (16.8)%
Order book(1) 320 453 (29.6)%
Adjusted revenue 361.1 367.2 (1.7)%
Adjusted operating profit 31.9 40.0 (20.3)%
Adjusted operating profit
margin 8.8% 10.9% (210bps)
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(1) Excludes value in respect of joint ventures
Order intake was GBP228 million, 17% lower than prior year
(2012: GBP274 million), reflecting the timing of major long-term
maintenance contract renewals in the UK and low levels of
construction activity in Kazakhstan. As a result of the subdued
order intake, the order book shortened with key UK maintenance
contract renewals expected in late 2014 and early 2015. The
business secured key multidisciplinary service contract renewals
with Total E&P in the Netherlands and Eggborough Power Station,
a key environmental services contract at Sullom Voe as well as a
number of scope extensions on existing contracts across both the UK
onshore and offshore market segments.
Adjusted revenue for the region, which represented 52% of the
Group's 2013 revenue, fell slightly to GBP361.1 million (2012:
GBP367.2 million) largely driven by lower activity in Kazakhstan,
where our work on the Kashagan Field Development Experimental Phase
project completed in the period. This was partially offset by the
expansion of the region's fabric maintenance and campaign work in
the UK Continental Shelf.
The UK business continued to deliver industry-leading levels of
service to its clients both onshore and offshore including BP,
Total, EDF and SABIC. It maintained its market leading position in
the UK onshore market segment winning awards at the EDF Energy
Nuclear Generation Challenge for 'Contract Partner Safety',
'Contract Partner Quality' and 'Outstanding Collaboration'. In
addition, the UK business won the CIPD 'People Management Award for
Innovation', further recognition of Cape's commitment to its people
through its development programmes.
Kazakhstan and Azerbaijan represent strong growth opportunities
for the Group as these countries continue to invest heavily in the
development of their oil and gas resources with combined investment
in new oil and gas infrastructure over the medium term anticipated
to be in excess of US$150 billion. The Group's joint venture with
State Oil Company of the Azerbaijan Republic (SOCAR) secured an
important maintenance contract in the period and Cape has made a
significant investment in the establishment and development of this
business. There is a substantial pipeline of opportunities
available in Azerbaijan and we are continuing to work with SOCAR to
achieve a satisfactory resolution of the commercial and financing
arrangements of the joint venture in order to access those
opportunities.
The business continues to be largely maintenance driven with 84%
of revenues (2012: 80%) derived from maintenance and shutdown
activities. Looking forward, it is expected that the proportion of
revenue derived from new construction activity over the longer term
will rise, supported by the new build power generation sector in
the UK and new oil and gas infrastructure investment in Kazakhstan
and Azerbaijan.
The Adjusted operating profit margin decreased from 10.9% to
8.8% driven by both a change in mix, with lower volumes in
Kazakhstan and Sakhalin offset by increased volumes in the lower
margin UK offshore market sector, and reduction in the margin in
the Kazakhstan business as the Kashagan Field Development
Experimental Phase project was completed early in the period.
As a result of the lower margins, Adjusted operating profit
decreased by 20% to GBP31.9 million (2012: GBP40.0 million) with
all of this reduction attributable to the CIS.
Middle East and North Africa (MENA)
(GBPm) 2013 2012(1) Growth
---------------------------------- ------ -------- --------
Order intake 161 135 19.2%
Order book 98 140 (30.0)%
Adjusted revenue 202.8 163.3 24.2%
Adjusted operating profit/(loss) 19.8 - -
Adjusted operating profit 9.8% - 980bps
margin
---------------------------------- ------ -------- --------
(1) Excludes discontinued operation in India
Order intake grew by 19% compared to prior year to GBP161
million (2012: GBP135 million). The growth in order intake was
largely due to a strong performance from Saudi Arabia with
increasing demand for construction services for new oil and gas
projects in the country. This strong order intake in Saudi Arabia
offset a relatively weak order intake performance in Qatar and UAE
where there were few significant new oil and gas construction
project awards. The business was successful in securing a
significant multidisciplinary services contract on the Rabigh II
petrochemical complex being constructed on the west coast of Saudi
Arabia and won further important contracts with customers such as
SADARA, BAE Systems, GS engineering, Hyundai, Technip, Vale and
Occidental.
The MENA region, which represented 29% of the Group's 2013
revenue, achieved record revenue of GBP202.8 million (2012:
GBP163.3 million), 24% higher than 2012. Revenue in each of Cape's
largest countries in the region, Saudi Arabia, UAE, and Qatar, grew
compared to the previous year. In the UAE growth was driven by
increased activity as works were completed on a number of large
projects including the NGL4 plant where the business provided
multidisciplinary services on the construction of train 4, and the
Borouge III petrochemical plant where we are delivering insulation
services for the project to expand production capacity. Growth in
Saudi Arabia was particularly strong, driven by a range of new
construction projects as the country ramps up investment in
downstream oil and gas facilities.
Whilst the proportion of revenue from new construction grew to
67% of total revenue for the region (2012: 63%), largely driven by
the high volume of new construction projects in UAE and Saudi
Arabia, the business continued to develop its maintenance business,
growing maintenance and shutdown volumes by 11% compared to prior
year. The business achieved particularly strong performance from
maintenance contracts in Qatar with successful completion of
shutdown work with Ras Gas, Qatar Gas and Dolphin Energy.
The business successfully achieved the revised plan for the
completion of the Arzew GNL3-Z LNG plant in Algeria within the
GBP19.8 million loss provision that had been taken in 2012 with
cash receipts from the client within the agreed commercial terms.
During the second half of 2013 a project was identified in Qatar
that was not performing to expectations. The project had been bid
and secured in early 2012, but on-site work did not commence until
2013. The underperformance was identified early in the project life
cycle and the necessary corrective actions have been taken swiftly
to minimise future losses on this contract.
Adjusted operating profit margin improved substantially compared
to prior year to 9.8% (2012: Nil), with substantial effects from
the loss provisions taken on the Arzew project in 2012 and on the
Qatar project in 2013. Excluding the effects of these two projects,
the underlying business delivered a substantial improvement in
performance compared to prior year with both better operating
margins and higher volumes. The business continues to experience
increasingly competitive market conditions which are exerting
downward pressure on pricing. The effect of this pressure is
expected to be mitigated by the Group's drive for improved
operational efficiency through the Operational Excellence
programme.
Asia Pacific
(GBPm) 2013 2012 Growth
--------------------------- ------ ------ --------
Order intake(1) 236 210 12.4%
Order book(1) 230 127 81.7%
Adjusted revenue 133.2 215.5 (38.2)%
Adjusted operating profit 1.5 1.2 25.0%
Adjusted operating profit
margin 1.1% 0.6% 50bps
--------------------------- ------ ------ --------
(1) For continuing businesses
The business achieved strong growth in order intake of GBP236
million, 12% higher than prior year (2012: GBP210 million) of which
organic growth contributed 25%, partly offset by a 12% reduction
from the effect of adverse currency movement. The main contributor
to this performance was the securing of the strategically important
contracts for the Wheatstone LNG project in Western Australia which
contributed approximately GBP190 million of the total order intake
for the region. The Chevron-operated Wheatstone Project is one of
Australia's largest resource projects. Located in Western
Australia, the project will consist of two LNG trains with a
combined capacity of 8.9 million tonnes per annum and a domestic
gas plant. This is the Group's largest ever construction contract
award on a single site and underscores Cape's considerable LNG
construction experience and expertise. The project is expected to
mobilise during 2014 and extend over the following three years. The
maintenance market in Australia remained subdued with little new
contracting activity. The business also secured the main access
contract for the LNG modules being fabricated in Thailand for the
Ichthys LNG project in Australia.
Revenue from continuing operations decreased 38% to GBP133.2
million (2012: GBP215.5 million). The reduction in revenue was
driven by a slowdown in the construction services market across the
region with the major projects in Singapore and Australia
completing in the first half of 2013 and not being replaced by any
significant new construction service work. As a result of this, the
proportion of revenue derived from new construction activities
reduced to 46% of total regional revenue (2012: 70%). Revenue from
maintenance activities increased by 12% to GBP72.5 million (2012:
GBP64.8 million) despite weak market conditions as the business put
increased focus on expanding this area.
Following the divestment of non-core operations in our
Australian business, a process which started in 2012 and was
essentially completed in 2013, we also implemented a performance
improvement plan for the remaining core industrial services
business. This plan involved a rationalisation of our branch
network to key strategic locations, streamlining our overhead
structure and offshoring back office functions to the Group's
facility in Manila, Philippines. In addition to the overhead
reduction, the management team has focused on improving the
operating performance of existing contracts whilst targeting key
project awards. This restructuring programme is now complete and
all major milestones have been met with the business returning to
profitability during the final quarter of 2013. The business is now
on a sound footing for the future and is expected to generate
profit during 2014 as it gains the full year benefit of the
restructuring programme and an increase in volume from the
Wheatstone LNG project during the second half of the year.
Operational completion of the SPT project was achieved in the
first-half of 2013 and we resolved all outstanding commercial
issues with the client to close the final account in the second
half of the year with all outstanding payments received in the
period.
Adjusted operating profit margin improved slightly to 1.1%
(2012: 0.6%) as we began to see the effects of the turnaround in
our Australian business toward the end of the year. This improved
margin offset the volume reduction in the region, resulting in an
25% increase in operating profit for 2013 to GBP1.5 million (2012:
GBP1.2 million). We anticipate that margins will continue to
improve through 2014 as we enjoy the effects of both increased
volume and the full-year effect of the improvement in our
Australian business.
Chief Financial Officer's review
A summary income statement with explanatory discussion of the
key items is provided below:
GBPm 2013 2012
--------------------------- ------- --------
Adjusted revenue 697.1 746.0
Adjusted operating profit 41.0 27.7
Adjusted operating profit
margin (%) 5.9% 3.7%
Other Items (15.3) (10.5)
Exceptional items (15.5) (150.4)
Operating profit/(loss) 10.2 (133.2)
--------------------------- ------- --------
Adjusted revenue
Adjusted revenue from continuing operations decreased overall by
7% to GBP697.1 million (2012: GBP746.0 million) driven by lower
activity levels in the Asia Pacific, notably Australia, which were
partially offset by strong volume growth in the MENA region. The
organic volume decrease in revenue of 5% was compounded by the
effect of currency translation which reduced the adjusted revenue
by a further 1%.
Adjusted revenue was 12% down in the second half compared to the
first half of the year driven by a number of major projects
completing in the first half, including Kipper Tuna (Australia),
Kashagan Field Development (Kazakhstan), Arzew (Algeria) and the
SPT project in Singapore.
Revenue split by half and full year and geography
GBPm UK, Europe MENA Asia Pacific Total
and CIS
--------- ----------- ------ ------------- ------
2013
H1 184.8 109.5 76.8 371.1
H2 176.3 93.3 56.4 326.0
--------- ----------- ------ ------------- ------
FY 2013 361.1 202.8 133.2 697.1
--------- ----------- ------ ------------- ------
2012
H1 174.3 76.7 108.7 359.7
H2 192.9 86.6 106.8 386.3
--------- ----------- ------ ------------- ------
FY 2012 367.2 163.3 215.5 746.0
--------- ----------- ------ ------------- ------
Adjusted revenue from continuing operations derived from
maintenance contracts was GBP442.1 million (63%) (2012: GBP418.7
million, 56%) and adjusted revenue from construction support
services projects was GBP255.0 million (37%) (2012: GBP327.3
million, 44%).
Cape's largest client represented 11% of total Adjusted revenue
in 2013 (2012: 11%), relating to activities in the UK and CIS and
Asia Pacific regions. The Group's top 10 clients represented 38% of
adjusted revenue (2012: 40%).
Adjusted operating profit
Adjusted operating profit from continuing operations increased
to GBP41.0 million (2012: GBP27.7 million) reflecting the strong
growth in MENA, the benefit of the divestments and profit
improvement plan in Australia, the comparative benefit of the Arzew
provision in the previous year, offset by weaker market conditions
in Kazakhstan and the requirement to provide against an
operationally problematic legacy contract in Qatar.
We concluded the significant contracts in Singapore and Algeria
in the year and have recovered the working capital invested in them
according to the respective contractual terms. Head office costs
were marginally lower at GBP12.2 million (2012: GBP12.4 million) as
increased investment in the Operational Excellence programme was
offset by savings in other central activities.
Other items
Other items increased to GBP15.3 million (2012: GBP10.5 million)
relating, in the year, entirely to IDC costs.
Exceptional items
The charge for Exceptional items of GBP15.5 million (2012:
GBP150.4 million) consists entirely of the performance improvement
programme initiated in Australia in the first half of the year,
with GBP7.9 million non-cash relating to the impairment of assets,
GBP2.5 million relating to the future liability associated with
onerous leases and the balance to the cash cost of restructuring.
This programme has been essentially completed and has generated the
anticipated gains in operational performance. There was no new
exceptional charge in the second half of the year.
Operating profit
Operating profit for continuing operations was GBP10.2 million
(2012: operating loss of GBP133.2 million) reflecting an Adjusted
operating profit of GBP41.0 million (2012: GBP27.7 million), Other
items of GBP15.3 million (2012: GBP10.5 million), and Exceptional
items of GBP15.5 million (2012: GBP150.4 million).
Finance costs
Net finance costs amounted to GBP10.0 million (2012: GBP10.0
million) reflecting the annual GBP4.0 million (2012: GBP4.0
million) non-cash charge relating to the unwinding of the discount
on the long-term IDC liability, the GBP1.2 million non-cash charge
relating to the unamortised fees relating to the previous facility,
and interest income in the IDC scheme funds in the period of GBP0.7
million (2012: GBP1.0 million).
Adjusted finance costs reduced to GBP6.3 million (2012: GBP7.6
million) with interest cover (calculated by dividing adjusted
operating profit by the adjusted finance costs) increasing to 6.5
times (2012: 3.6 times). This compares to the minimum of 3.0 times
required by the covenant in Cape's old unsecured GBP220 million
revolving credit facility as at 31 December 2013 which has been
replaced with the recently announced GBP295 million revolving
credit facility.
Taxation
The tax charge on Adjusted profit before tax excluding
Exceptional and Other items, discontinued operations and joint
ventures was GBP7.2 million (2012: GBP3.7 million) representing an
average tax rate of 20.3% (2012: 17.9%). The increase compared to
the previous year predominately relates to a change in the mix of
source of profit generation. The cash tax paid during the period
was GBP9.4 million (2012: GBP11.9 million) which is slightly higher
than the current year charge due to some advance payments made on
account.
Discontinued operations
As part of the review of the Australian operations the Group
announced in November 2012 its intention to divest its residential
and commercial scaffolding business in Melbourne and Perth, and the
stand alone blasting and painting workshop in Perth. The two
divestments in Perth were completed during 2013; the Melbourne
disposal is well advanced and will complete during Q1 2014. In the
period the Board also decided to discontinue the Group's activities
in India and Japan. The combined revenue of these operations
totalled GBP8.6 million (2012: GBP24.8 million) with losses after
tax of GBP4.8 million (2012: GBP42.6 million) including a tax
credit of GBP0.8 million (2012: GBP9.2 million).
Earnings per share
For continuing operations the Adjusted diluted earnings per
share (EPS) was 23.6 pence (2012: 12.7 pence) and Adjusted basic
earnings per share was 23.8 pence (2012: 12.9 pence). The diluted
weighted average number of share increased to 122.0 million (2012:
120.9 million).
Dividend
Taking account of the 2013 financial results, current market
conditions and the underlying prospects of the Group, the Board is
proposing a final dividend for 2013 of 9.5 pence (2012: 9.5 pence)
per share [in line with] the 2012 final dividend. In addition to
the interim dividend of 4.5 pence per share (2012: 4.5 pence) paid
on11 October 2013, the total dividend for the year will be 14.0
pence per share (2012: 14.0 pence) subject to shareholders'
approval at the annual general meeting on 14 May 2014 the final
dividend will be payable on 6 June 2014 to shareholders on the
register as at 9 May 2014.
Acquisition of Motherwell Bridge
Cape announced its acquisition of UK based Motherwell Bridge, a
leading provider of storage tanks, gasholders and heat exchangers
to the energy and steel markets, on 11 March 2014. The total
consideration for the acquisition amounted to GBP37.7 million on a
cash free, debt free basis, comprising of an initial cash
consideration of GBP34.0 million, acquired debt of GBP0.9 million,
deferred consideration of GBP1.3 million contingent on a key
contract win and up to GBP1.5 million related to future
performance. The acquisition will be funded from the Group's
existing debt facilities and is expected to be earnings enhancing
in the current financial year ending 31 December 2014.
Motherwell Bridge, headquartered in Lanarkshire, Scotland, is
recognised internationally as a leader in the specialist storage
tank market. The business has an excellent global brand reputation
and has historically delivered a significant number of storage
tanks around the world. In addition, Motherwell Bridge also
provides and maintains gasholders for the global steel industry,
and maintains and refurbishes heat exchangers primarily in the UK
continental shelf. Motherwell Bridge has a strong management team,
all of whom will remain with the business post acquisition.
Motherwell Bridge employs approximately 300 people, primarily
located in the UK. For the year ending 31 December 2012, Motherwell
Bridge generated EBITA of GBP4.8 million on revenue of GBP34.6
million.
Operating and free cash flow
2013 2012
(GBPm) (GBPm)
------------------------------- --------- ---------
Adjusted operating profit 41.0 27.7
Depreciation and amortisation
- continuing operations 17.8 15.0
Adjusted EBITDA 58.8 42.7
------------------------------- --------- ---------
Provisions and non-cash
items (3.4) (3.6)
Decrease/(increase) in
working capital* 9.8 11.9
Net capital expenditure (15.5) (9.5)
------------------------------- --------- ---------
Operating cash flow 49.7 41.5
Operating cash flow to
operating profit 121% 150%
Net interest (6.1) (7.9)
Tax (9.4) (11.9)
Free cash flow 34.2 21.7
------------------------------- --------- ---------
Dividends paid (17.7) (18.9)
Acquisition** - (5.3)
Transfer to restricted (6.0) -
cash
Discontinued operations (5.6) (3.9)
Other movements in adjusted
net debt 0.1 0.4
Movement in adjusted
net debt 5.0 (6.0)
------------------------------- --------- ---------
Opening adjusted net
debt (65.2) (59.2)
Closing adjusted net
debt (60.2) (65.2)
------------------------------- --------- ---------
* At average rates
** 2012 includes GBP4.3m relating to current year acquisitions
and GBP1.0m deferred consideration on prior year acquisitions.
Working capital
Trade and other receivables and inventories decreased by GBP56.1
million to GBP182.8 million (2012: GBP238.9 million) which along
with a decrease in trade and other payables of GBP42.0 million to
GBP109.1 million (2012: GBP151.1 million) resulted in an overall
decrease in net working capital of GBP14.1 million (at balance
sheet rates) to GBP73.7 million. Working capital, as expected,
reduced by GBP42.4 million in the second half of 2013. A very
strong year end performance in the UK, the realisation of working
capital from Arzew and the SPT contract and decreased volumes in
Australia all contributed to the overall Group performance.
Capital expenditure
The Group continues to manage its capital expenditure carefully
whilst investing in upgrading and replacing equipment where
appropriate. The Asset Replacement Ratio (calculated by dividing
gross capex spend by the depreciation charge) increased to 100%
(2012: 65%).
Financing and banking facilities
The Group's adjusted net debt decreased year on year by GBP5.0
million to GBP60.2 million (2012: GBP65.2 million) including
finance lease obligations of GBP0.2 million (2012: GBP0.5 million).
Balance sheet gearing, excluding ring-fenced IDC scheme funds,
increased marginally to 45.2% (2012: 38.3%).
The ratio of adjusted net debt to adjusted EBITDA decreased to
1.0 times (2012: 1.5 times). A reconciliation of Adjusted net debt
and Adjusted EBITDA can be found in Note 8, Adjusted measures.
On 12 February 2014 the Group agreed a refinancing of its
banking facilities. The new facility of GBP295 million has been
arranged with eight banks, broadening the Group's lender base and
developing potential for growth in the future, and in anticipation
of that, the facility incorporates a GBP50 million accordion
feature. The new facility expires in April 2018.
Provision for pension
The defined benefit pension schemes had a net surplus of GBP15.8
million as at 31 December 2013 (2012: GBP15.3 million) that
continues to be restricted to nil in the accounts under IFRIC 14.
The Trustees are currently overseeing the completion of the
triennial valuations for both UK schemes.
IDC
The triennial actuarial valuation of the provision relating to
historical asbestos liabilities was completed as at 31 December
2013, the results of which have been included in the financial
results for the year. The valuation benefited from both a
statistically larger claim population on which to base the
actuarial projection and also improvements in the analytical
process.
The overall pattern of claims experienced in the three years
since the time of the last full valuation has not changed
significantly from the expectations established at that time. The
actuarial range of reasonable estimates has been assessed by the
independent actuaries as being between GBP89 million and GBP123
million. The valuation incorporates the Board's latest judgements
on technical and economic assumptions as well as the impact of
changes in case law and certain management actions to reduce legal
costs associated with claims.
The discounted provision increased to GBP94.3 million (2012:
GBP79.9 million) reflecting an unwinding of the discount of GBP4.0
million in the year (2012: GBP4.0 million), GBP3.8 million cash
settlements during the year (2012: GBP4.4 million) and a charge in
the period of GBP14.2 million (2012: GBPnil) reflecting the changes
noted above. The level of cash settlements remains broadly in line
with historic cash payments. The ring-fenced IDC scheme funds
increased to GBP31.3 million (2012: GBP27.4 million) benefitting
from a cash injection of GBP6.0 million from the Group's funds,
interest received of GBP1.0 million (2012: GBP1.1 million), offset
by the cash settlements on scheme claims in the year of GBP3.1
million (2012: GBP3.8 million).
Currencies
Nearly all operating costs are matched with corresponding
revenues of the same currency and as such there is very little
transactional currency risk in the Group. Currency translation had
a small positive impact on the results for the year, principally
due to weakening of the Australian dollar which was partly offset
by the strengthening of the US dollar across the year.
In 2013, 35.1% (2012: 23.4%) of Adjusted revenues were
contracted in US dollars or US pegged currencies and 11.6% (2012:
18.7%) in Australian dollars.
The following significant exchange rates applied during this
year:
2013 2012
Closing Average Closing Average
AUD 1.85 1.63 1.57 1.53
USD 1.66 1.57 1.63 1.59
Treasury policies
Cape has a centralised Treasury function whose objectives are to
monitor and manage the financial risks of the Group and to ensure
that sufficient liquidity is available to meet the requirements of
the business. Group Treasury is not a profit centre and operates
within a framework of policies and procedures. All hedging is
carried out centrally and speculative trading is specifically
prohibited by Group Treasury policy.
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 industry and the environments in which it undertakes its
operations around the world. Those risks range from external
geopolitical, economic and market risks to operational risks
including HSE, contracting, project execution and generic financial
risks.
The 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. The Directors have
reviewed the principal risks and uncertainties and are satisfied
that they are relevant. The Group continues to improve its process
of project risk identification and mitigation from tender through
to project completion. A full review of the Group's principal risks
and uncertainties will be available in the 2013 Annual Report.
Michael Speakman
Chief Financial Officer
Condensed Consolidated Income Statement
for the year ended 31 December 2013
2013 2012
Restated* Restated* Restated*
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Business Exceptional Business Exceptional
performance and other performance and other Total
Note GBPm items GBPm Total GBPm GBPm items GBPm GBPm
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Revenue from
continuing
operations 4 697.1 - 697.1 746.0 (9.0) 737.0
Operating profit
before other
items 40.5 - 40.5 27.6 - 27.6
Other items 9a - (15.3) (15.3) - (10.5) (10.5)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Operating
profit/(loss)
before
exceptional
items 5 40.5 (15.3) 25.2 27.6 (10.5) 17.1
Share of
post-tax result
of joint
ventures 0.5 - 0.5 0.1 - 0.1
Exceptional
items 9b - (15.5) (15.5) - (150.4) (150.4)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Operating
profit/(loss) 5 41.0 (30.8) 10.2 27.7 (160.9) (133.2)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Finance income 11 0.8 0.7 1.5 0.6 1.0 1.6
Finance costs 11 (6.3) (5.2) (11.5) (7.6) (4.0) (11.6)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Net finance
costs (5.5) (4.5) (10.0) (7.0) (3.0) (10.0)
Profit/(loss)
before tax 35.5 (35.3) 0.2 20.7 (163.9) (143.2)
Income tax 12 (7.2) 4.5 (2.7) (3.7) (15.5) (19.2)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Profit/(loss)
from continuing
operations 28.3 (30.8) (2.5) 17.0 (179.4) (162.4)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Loss from
discontinued
operations 10 (4.8) - (4.8) (3.4) (39.2) (42.6)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Profit/(loss)
for the year 23.5 (30.8) (7.3) 13.6 (218.6) (205.0)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Attributable to:
Owners of Cape
plc (6.8) (206.6)
Non-controlling
interests (0.5) 1.6
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
(7.3) (205.0)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Earnings per share attributable to the owners of Cape plc
Pence Pence Pence Pence
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Basic
Continuing
operations 23.8 (1.6) 12.9 (136.9)
Discontinued
operations (3.9) (4.0) (2.9) (35.6)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Total operations 19.9 (5.6) 10.0 (172.5)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Diluted
Continuing
operations 23.6 (1.6) 12.7 (136.9)
Discontinued
operations (3.9) (4.0) (2.8) (35.6)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
Total operations 19.7 (5.6) 9.9 (172.5)
----------------- ----- --------------- --------------- ----------- ---------------- --------------- ----------
*Certain amounts shown here do not correspond to the 2012
financial statements and reflect the adjustments detailed in note
4.
Condensed Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013
2013 2012
----------------------------------------------------------------------------------------------- --------- ----------
Restated*
----------------------------------------------------------------------------------------------- --------- ----------
GBPm GBPm
----------------------------------------------------------------------------------------------- --------- ----------
Loss for the year (7.3) (205.0)
Other comprehensive (expense)/income:
Other comprehensive (expense)/income to be reclassified to profit or loss in subsequent
periods:
Currency translation differences (11.1) (7.8)
Tax effect - -
----------------------------------------------------------------------------------------------- --------- ----------
(11.1) (7.8)
Cash flow hedges - fair value gains 0.1 0.8
Tax effect (0.6) (0.8)
----------------------------------------------------------------------------------------------- --------- ----------
(0.5) -
Net other comprehensive (expense)/income to be reclassified to profit or loss in subsequent
periods (11.6) (7.8)
Other comprehensive (expense)/income not to be reclassified to profit or loss in subsequent
periods:
Re-measurement of defined benefit pension plan (0.5) (1.2)
Tax effect - -
----------------------------------------------------------------------------------------------- --------- ----------
(0.5) (1.2)
Movement in restriction of retirement benefit asset in accordance with IFRIC 14 (0.5) 0.6
Tax effect - -
----------------------------------------------------------------------------------------------- --------- ----------
(0.5) (0.6)
Tax effect on share options (0.2) (1.9)
----------------------------------------------------------------------------------------------- --------- ----------
Net other comprehensive (expense)/income not to be reclassified to profit or loss in
subsequent
periods (1.2) (2.5)
Other comprehensive expense for the year (12.8) (10.3)
----------------------------------------------------------------------------------------------- --------- ----------
Total comprehensive expense for the year (20.1) (215.3)
----------------------------------------------------------------------------------------------- --------- ----------
Attributable to:
Owners of Cape plc (19.7) (216.9)
Non-controlling interests (0.4) 1.6
----------------------------------------------------------------------------------------------- --------- ----------
(20.1) (215.3)
----------------------------------------------------------------------------------------------- --------- ----------
*Certain amounts shown here do not correspond to the 2012
financial statements and reflect the adjustments detailed in note
4.
Condensed Consolidated Statement of Financial Position
at 31 December 2013
2013 2012 As at 1 January 2012
-------------------------------------------------------- ----- ------ ---------- ---------------------
Restated* Restated*
-------------------------------------------------------- ----- ------ ---------- ---------------------
Note GBPm GBPm GBPm
-------------------------------------------------------- ----- ------ ---------- ---------------------
Assets
Non-current assets
Intangible assets 15 113.9 117.2 246.7
Investment property 2.0 2.0 2.0
Property, plant and equipment 16 81.3 91.3 158.8
Investments accounted for using the equity method 0.7 0.2 0.1
Deferred tax assets 24.2 21.5 44.3
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total non-current assets 222.1 232.2 451.9
-------------------------------------------------------- ----- ------ ---------- ---------------------
Current assets
Inventories 12.7 20.2 9.9
Trade and other receivables 170.1 218.7 234.6
Cash and cash equivalents (including restricted funds) 104.9 100.2 99.7
Assets of disposal group classified as held for sale 3.7 11.4 -
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total current assets 291.4 350.5 344.2
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total assets 513.5 582.7 796.1
-------------------------------------------------------- ----- ------ ---------- ---------------------
Equity
Share capital 18 30.3 30.3 29.7
Share premium account 1.0 0.9 0.5
Special reserve 1.0 1.0 1.0
Other reserves 9.3 10.0 11.9
Translation reserve 96.6 107.8 115.6
Retained earnings (7.6) 16.5 241.6
-------------------------------------------------------- ----- ------ ---------- ---------------------
Equity attributable to equity holders of the parent 130.6 166.5 400.3
-------------------------------------------------------- ----- ------ ---------- ---------------------
Non-controlling interests 2.6 3.8 4.3
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total equity 133.2 170.3 404.6
-------------------------------------------------------- ----- ------ ---------- ---------------------
Liabilities
Non-current liabilities
Borrowings 133.5 135.7 126.2
Retirement benefit obligations 9.5 8.2 7.8
Deferred tax liabilities 4.7 6.5 19.7
IDC provision 88.3 75.9 83.2
Other provisions 0.7 4.5 10.0
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total non-current liabilities 236.7 230.8 246.9
-------------------------------------------------------- ----- ------ ---------- ---------------------
Current liabilities
Borrowings 0.3 0.3 2.6
Derivative financial instruments 0.6 1.1 2.2
Trade and other payables 109.1 151.1 122.5
Current income tax liabilities 7.1 8.3 17.3
IDC provision 17 6.0 4.0 -
Other provisions 17 20.5 16.8 -
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total current liabilities 143.6 181.6 144.6
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total liabilities 380.3 412.4 391.5
-------------------------------------------------------- ----- ------ ---------- ---------------------
Total equity and liabilities 513.5 582.7 796.1
-------------------------------------------------------- ----- ------ ---------- ---------------------
*Certain amounts shown here do not correspond to the 2012
financial statements and reflect the adjustments detailed in note
4.
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 December 2013
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 30.3 0.9 1.0 10.0 107.8 16.5 166.5 3.8 170.3
------------------- -------- -------- -------- --------- ------------ --------- ------------- ---------------- ---------
Loss for the year - - - - - (6.8) (6.8) (0.5) (7.3)
Other
comprehensive
(expense)/income:
Currency
translation
differences - - - - (11.2) - (11.2) 0.1 (11.1)
Cash flow hedges
- fair value
gains - - - 0.1 - - 0.1 - 0.1
Deferred tax on
hedges/options - - - (0.8) - - (0.8) - (0.8)
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 - - - - - (0.5) (0.5) - (0.5)
Total
comprehensive
income/(expense)
for the year - - - (0.7) (11.2) (7.8) (19.7) (0.4) (20.1)
------------------- -------- -------- -------- --------- ------------ --------- ------------- ---------------- ---------
Transactions with
owners
Dividends - - - - - (16.9) (16.9) (0.8) (17.7)
Share options: - - - - - 0.6
- value of
employee
services - - - - - 0.6 0.6 - 0.6
- proceeds of
shares
issued - 0.1 - - - - 0.1 - 0.1
- 0.1 - - - (16.3) (16.2) (0.8) (17.0)
------------------- -------- -------- -------- --------- ------------ --------- ------------- ---------------- ---------
At 31 December
2013 30.3 1.0 1.0 9.3 96.6 (7.6) 130.6 2.6 133.2
------------------- -------- -------- -------- --------- ------------ --------- ------------- ---------------- ---------
for the year ended 31 December 2012 Restated*
Share Total Non-controlling
Share premium Special Other Translation Retained attributable interests Total
capital account reserve reserves reserve earnings to parent GBPm equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
At 1 January 2012
(restated*) 29.7 0.5 1.0 11.9 115.6 241.6 400.3 4.3 404.6
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
(Loss)/profit for
the year - - - - - (206.6) (206.6) 1.6 (205.0)
Other
comprehensive
(expense)/income:
Currency
translation
differences - - - (7.8) - (7.8) - (7.8)
Cash flow hedges
- fair value
gains - - - 0.8 - - 0.8 - 0.8
Deferred tax on
hedges/options - - - (2.7) - - (2.7) - (2.7)
Re-measurement of
defined benefit
pension
plan - - - - - (1.2) (1.2) - (1.2)
Movement in
restriction
of retirement
benefit
asset in
accordance
with IFRIC 14 - - - - - 0.6 0.6 - 0.6
Total
comprehensive
(expense)/income
for the year - - - (1.9) (7.8) (207.2) (216.9) 1.6 (215.3)
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
Transactions with
owners
Dividends - - - - (16.8) (16.8) (2.1) (18.9)
Share options
- proceeds/(costs)
of shares issued 0.6 0.4 - - - (0.7) 0.3 - 0.3
- value of
employee
services - - - - - (0.4) (0.4) - (0.4)
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
0.6 0.4 - - - (17.9) (16.9) (2.1) (19.0)
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
At 31 December
2012 30.3 0.9 1.0 10.0 107.8 16.5 166.5 3.8 170.3
------------------- --------- -------- --------- ---------- ------------- ---------- ------------- ---------------- ----------
*Certain amounts shown here do not correspond to the 2012
financial statements and reflect the adjustments detailed in note
4.
Condensed Consolidated Cash Flow Statement
for the year ended 31 December 2013
2013 2012
----------------------------------------------------------------------- ----- ------- ----------
Restated*
----------------------------------------------------------------------- ----- ------- ----------
Note GBPm GBPm
----------------------------------------------------------------------- ----- ------- ----------
Operating activities
Cash generated from operating activities - continuing operations 19 57.0 52.7
Interest received 0.3 0.2
Interest paid (6.3) (8.2)
Tax paid (9.4) (11.9)
----------------------------------------------------------------------- ----- ------- ----------
Net cash flows from operating activities - continuing operations 41.6 32.8
----------------------------------------------------------------------- ----- ------- ----------
Net cash flows from operating activities - discontinued operations (5.6) (3.8)
----------------------------------------------------------------------- ----- ------- ----------
Net cash flows from operating activities 36.0 29.0
----------------------------------------------------------------------- ----- ------- ----------
Investing activities
Continuing operations
Proceeds from sales of property, plant and equipment 2.2 1.3
Purchases of property, plant and equipment (17.7) (10.8)
Transfer of restricted funds (6.0)
Acquisition of subsidiaries net of cash acquired - (5.3)
----------------------------------------------------------------------- ----- ------- ----------
Net cash used in investing activities - continuing operations (21.5) (14.8)
----------------------------------------------------------------------- ----- ------- ----------
Discontinued operations
Proceeds from sales of assets held for disposal 6.9 -
----------------------------------------------------------------------- ----- ------- ----------
Net cash realised from investing activities - discontinued operations 6.9 -
----------------------------------------------------------------------- ----- ------- ----------
Financing activities
Continuing operations
Net proceeds from the issue of ordinary share capital 0.1 0.4
Movement on revolving facility (2.0) 12.6
Drawing on borrowings 2.3 -
Finance lease principal payments (0.3) (3.4)
Dividends paid to shareholders (16.9) (16.8)
Dividends paid to non-controlling interests (0.8) (2.1)
----------------------------------------------------------------------- ----- ------- ----------
Net cash flows used in financing activities - continuing operations (17.6) (9.3)
Net cash flows used in financing activities - discontinued operations - -
----------------------------------------------------------------------- ----- ------- ----------
Net foreign exchange difference (3.0) (1.7)
----------------------------------------------------------------------- ----- ------- ----------
Net increase in cash and cash equivalents 0.8 3.2
Cash and cash equivalents at 1 January 72.8 69.6
----------------------------------------------------------------------- ----- ------- ----------
Cash and cash equivalents at 31 December 73.6 72.8
----------------------------------------------------------------------- ----- ------- ----------
*Certain amounts shown here do not correspond to the 2012
financial statements and reflect the adjustments detailed in note
4.
Notes to the Condensed Consolidated Financial Statements
1. General information
The Group has prepared its condensed consolidated financial
statements for the year to 31 December 2013 in accordance with the
Companies (Jersey) Law 1991 and International Financial Reporting
Standards ("IFRS") as adopted by the European Union. These
statements do not constitute accounts prepared for the purposes of
Article 105 of the Companies (Jersey) Law 1991.
The comparative financial information is based on the statutory
accounts to 31 December 2012 which have been delivered to the
Jersey Financial Services Commission. The report of the auditors on
those accounts was unqualified.
The preliminary announcement for the year ending 31 December
2013 was approved by the Board of Directors on 18 March 2014.
Copies of this preliminary report will be available from the
offices of Cape plc, 47 Esplanade, St Helier, Jersey, JE1 0BD and
on the Group's website at www.capeplc.com. Legislation in Jersey
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
2. Basis of preparation
The unaudited Condensed Consolidated Financial Statements for
the twelve months ended 31 December 2013 has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Services Authority.
2.1 Changes to segmental reporting in 2013
For management and reporting purposes, the Group is organised
into regions, which are representative of its principal activities.
In order to reflect recent organisational and management changes,
with effect from 1 January 2013, the Group reports the following
three regional segments in a manner consistent with the revised
internal reporting provided to the Chief Operating Decision Maker
('CODM').
-- UK, Europe & CIS region which encompasses the existing
'UK' business, and 'Europe and the CIS' where Europe (formerly
called Mediterranean) and CIS were formerly part of the 'CIS,
Mediterranean & North Africa' region.
-- Middle East and North Africa (MENA) region which encompasses
the former 'Gulf/Middle East' region and 'North Africa', which was
formerly part of the 'CIS, Mediterranean & North Africa'
region.
-- Far East/Pacific Rim region remains unchanged. This
encompasses the onshore and offshore businesses in Asia and
Australia.
2.2 Discontinued operations
The Group classifies an asset or disposal group as a
discontinued operation when it has been either disposed of or
classified as held for sale; or it represents a single major line
of business or geographical area of operation or is part of a
coordinated plan for disposal.
In the period an asset or disposal group has been disposed of,
or is classified as held for sale, the results of the operation are
reported as discontinued operations in the current and prior
periods.
2.3 Other adjustments
The Group identified a number of prior period adjustments during
the year resulting in a restatement of the comparative period in
the 2013 financial statements.
The impact of the prior year adjustments on the 2012 results,
which have been categorised as: discontinued operations, deferred
tax provisions, employee benefits, reclassifications and other, is
shown in note 4.
The effect of the restatement on the loss per share was to
increase it by 4.9 pence in 2012.
2.4 Accounting policies
The accounting policies and methods of computation adopted in
the preparation of the Condensed Consolidated Financial Statements
are consistent with those followed in the preparation of the
Group's annual audited Consolidated Financial Statements, which are
available on the Group's website at www.capeplc.com.
2.5 Going concern basis
After making enquiries, the Directors have reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in preparing
its Condensed Consolidated Financial Statements.
3. New and amended standards adopted by the Group
Adoption of new and current standards
During the period the Group adopted a number of interpretations
and amendments to Accounting Standards including IAS 19 "Employee
Benefits" (Revised), none of which had a material impact on the
Condensed Consolidated Financial Statements of the Group. The Group
has not early adopted any other standard interpretation or
amendment that has been issued but is not yet effective.
IFRS 13 Fair Value Measurement
The Group is aware of the requirements under IFRS 13 'Fair Value
Measurement' which aims to improve consistency and reduce
complexity by providing a precise definition of fair value and a
single source of fair value measurement and disclosure requirements
for use across IFRS. There is no material difference between the
fair value and carrying amounts of the Group's financial assets and
liabilities because the amount of financial assets and liabilities
carried at fair value is immaterial and as such not deemed it
necessary to disclose this separately. The Group's position with
regard to fair value is visible on the face of the Condensed
Consolidated Statement of Comprehensive Income.
IAS 1 Presentation of Items of Other Comprehensive Income -
Amendments to IAS 1
The amendments to IAS 1 introduce a grouping of items presented
in Other Comprehensive Income (OCI). Items that could be
reclassified (or recycled) to profit or loss at a future point in
time (e.g., net gain on hedge of net investment, exchange
differences on translation of foreign operations, net movement on
cash flow hedges and net loss or gain on available-for-sale
financial assets) now have to be presented separately from items
that will never be reclassified (e.g., actuarial gains and losses
on defined benefit plans and revaluation of land and buildings).
The amendment affected presentation only and had no impact on the
Group's financial position or performance.
IAS 19 Employee Benefits (Revised 2011) (IAS 19R)
With effect from 1 January 2013 the Group has implemented the
amendments to the accounting standard IAS 19 "Employee Benefits" in
relation to its UK defined benefit pension plans. The impact on the
Group has been to calculate the expected return on plan assets
using the same interest rate that is used to discount the plan
liabilities.
The Group's reported results and financial position have been
restated as a result of the adoption of the revised standard IAS 19
(2011). Previously the Group reported net interest from its pension
plans in operating profit. Following the implementation of the
revised standard, net interest from pension plans is reported in
finance income. Prior periods have been restated accordingly.
The impact on the Condensed Consolidated Income Statement was as
follows. For the financial year ended 31 December 2012, the impact
of the revised standard was to increase finance income by GBP0.1m.
In addition, operating profit decreased by GBP0.4m with a
corresponding increase of GBP0.5m in finance income. In the
Condensed Consolidated Statement of Changes in Equity the actuarial
loss recognised on the pension plans increased by GBP0.1 million.
The implementation of IAS 19 has had no effect on the prior year
Condensed Consolidated Balance Sheets or Condensed Consolidated
Cash Flow Statements.
There are no IFRSs or IFRIC interpretations that are effective
for the first time for the current financial year that have had a
material impact on the Financial Statements of the Group for the
year ended 31 December 2012.
4. Prior period restatements
The Group identified a number of prior period adjustments during
the year resulting in a restatement of the comparative period in
the 2013 financial statements. The prior year restatements are in
the following categories:
Discontinued operations
During the year the Directors decided to discontinue activities
in India and Japan. The results from these operations have been
classified within discontinued operations in the consolidated
income statement both in the current year and, by way of prior
period restatement, in the prior year.
Employee benefits
The Group applied IAS 19 (Revised) retrospectively in the
current period in accordance with the transitional provisions set
out in the revised standard. The interest cost and expected return
on defined benefit pension plan assets used in the previous version
of IAS19 are replaced with net interest amount under IAS 10
(Revised), with restatement of prior period information.
Additionally, liabilities have been 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.
Reclassifications
Reclassifications between financial statement line items
reported in the prior year have been made to reflect correct
presentation. The most significant items are 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.
De-recognition of tax losses
Tax assets largely representing UK losses arising from
non-trading activities have been derecognised on the basis that
they have 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 year adjustment has been made.
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
The impact of the prior period adjustments on the previously
reported 2012 results, showing the financial statements line items
affected, is included in note 4. The effect of the restatement was
to increase the basic loss per share attributable to Cape
shareholders by 4.9 pence in 2012.
As reported Discontinued Employee Restated
2012 operations Tax losses Reclassifications benefits Other 2012
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Consolidated income statement
------------------------------- --------------- ----------- ------------------ --------------- ------- ---------
Revenue 740.4 (3.7) - - - 0.3 737.0
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Operating profit
before other
items 31.7 1.0 - - (1.7) (3.4) 27.6
Other items (10.5) - - - - - (10.5)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Operating profit
before
Exceptional
items 21.2 1.0 - - (1.7) (3.4) 17.1
Share of
post-tax losses
from joint
operations (0.2) - - - - 0.3 0.1
Exceptional
items (150.4) - - - - - (150.4)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Operating loss (129.4) 1.0 - - (1.7) (3.1) (133.2)
Finance income 1.2 - - 0.4 - 1.6
Finance costs (11.9) 0.1 - - - 0.2 (11.6)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Net finance
costs (10.7) 0.1 - - 0.4 0.2 (10.0)
Loss before tax (140.1) 1.1 - - (1.3) (2.9) (143.2)
Income tax
expense (16.9) (0.4) (2.3) - - 0.4 (19.2)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Loss from
continuing
operations (157.0) 0.7 (2.3) - (1.3) (2.5) (162.4)
Loss from
discontinued
operations (42.0) (0.6) - - - - (42.6)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Loss for the
year (199.0) 0.1 (2.3) - (1.3) (2.5) (205.0)
Attributable to:
Owners of Cape
plc (200.8) 0.1 (2.3) - (1.3) (2.3) (206.6)
Non-controlling
interests 1.8 - - - - (0.2) 1.6
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
(199.0) 0.1 (2.3) - (1.3) (2.5) (205.0)
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Earnings per Pence Pence Pence Pence Pence Pence Pence
share
----------------- ------------ --------------- ----------- ------------------ --------------- ------- ---------
Basic
Continuing
operations (132.6) 0.6 (1.9) - (1.1) (1.9) (136.9)
Discontinued
operations (35.1) (0.5) - - - - (35.6)
Basic
(loss)/earnings
per share (167.7) 0.1 (1.9) - (1.1) (1.9) (172.5)
Diluted
Continuing
operations (132.6) 0.6 (1.9) - (1.1) (1.9) (136.9)
Discontinued
operations (35.1) (0.5) - - - - (35.6)
Basic
(loss)/earnings
per share (167.7) 0.1 (1.9) - (1.1) (1.9) (172.5)
Adjusted Earnings per share
------------------------------- --------------- ----------- ------------------ --------------- ------- ---------
Basic
Continuing
operations 16.4 0.6 (1.1) - (1.1) (1.9) 12.9
Discontinued
operations (2.3) (0.5) (0.1) - - - (2.9)
Basic
(loss)/earnings
per share 14.1 0.1 (1.2) - (1.1) (1.9) 10.0
Diluted
Continuing
operations 16.3 0.5 (1.1) - (1.1) (1.9) 12.7
Discontinued
operations (2.3) (0.4) (0.1) - - - (2.8)
Basic
(loss)/earnings
per share 14.0 0.1 (1.2) - (1.1) (1.9) 9.9
Consolidated statement of financial position
-------------------------------------------------------------- ---- -------- -------- -------- -------- --------
Non-current assets
Intangible assets 117.2 - - - - - 117.2
Investment property 2.0 - - - - - 2.0
Property, plant and equipment 91.8 - - - - (0.5) 91.3
Investments accounted for using the equity method 0.2 - - - - - 0.2
Deferred tax asset 20.6 - - - - 0.9 21.5
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total non-current assets 231.8 - - - - 0.4 232.2
Current assets
Inventories 14.1 - - 6.1 - - 20.2
Trade and other receivables 225.5 - - (6.8) - - 218.7
Cash - Industrial Disease Claims restricted funds 27.4 - - - - - 27.4
Cash and cash equivalents 72.8 - - - - - 72.8
Assets of disposal group classified as held for
sale 11.4 - - - - - 11.4
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total current assets 351.2 - - (0.7) - - 350.5
Total assets 583.0 - - (0.7) - 0.4 582.7
Equity and liabilities
Share capital 30.3 - - - - - 30.3
Share premium account 0.9 - - - - - 0.9
Special reserve 1.0 - - - - - 1.0
Other reserves 9.3 - - 0.8 - (0.1) 10.0
Translation reserve 107.8 - - - - - 107.8
Retained earnings 25.2 - (2.3) (0.8) (1.3) (4.3) 16.5
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total equity attributable to owners of Cape plc 174.5 - (2.3) - (1.3) (4.4) 166.5
Non-controlling interests 3.5 - - - - 0.3 3.8
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total equity 178.0 - (2.3) - (1.3) (4.1) 170.3
Non-current liabilities
Borrowings 137.7 - - (2.0) - - 135.7
Retirement benefit obligations 8.2 - - - - - 8.2
Deferred tax 6.4 - 0.2 - - (0.1) 6.5
Industrial Disease Claims provision 82.8 - - (6.9) - - 75.9
Other provisions 2.5 - - - - 2.0 4.5
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total non-current liabilities 237.6 - 0.2 (8.9) - 1.9 230.8
Current liabilities
Borrowings 0.3 - - - - - 0.3
Derivative financial instruments 1.1 - - - - - 1.1
Trade and other payables 143.0 - - 4.7 1.3 2.1 151.1
Current tax liabilities 5.7 - 2.1 - - 0.5 8.3
Industrial Disease Claims provision - - - 4.0 - - 4.0
Other provisions 17.3 - - (0.5) - - 16.8
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total current liabilities 167.4 - 2.1 8.2 1.3 2.6 181.6
Total liabilities 405.0 - 2.3 (0.7) 1.3 4.5 412.4
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
Total equity and liabilities 583.0 - - (0.7) - 0.4 582.7
---------------------------------------------------- -------- ---- -------- -------- -------- -------- --------
5. 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 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.
a) Other items
Other items are those items which the directors believe are
relevant to the understanding of the results for the year and which
are excluded from the adjusted measures. Included in Other items
are costs associated with industrial disease claims and in 2012
contract claims, where revenue had previously been accrued without
the agreement of the customer. Customer claims are now only
recognised when the claim is accepted by the customer.
b) Exceptional items
Exceptional items are those items which are of a non-recurring
nature and, in the judgement of the directors, need to be disclosed
separately by virtue of their nature, size or incidence. Items
which may be considered exceptional in nature include significant
write-downs of goodwill and other assets, significant changes in
asset values as a result of changes in accounting estimates and
Group restructuring costs.
6. Significant judgements and estimates
Certain of the Group's accounting policies described in note 2
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.
a) Judgements
Areas of judgement that have the most significant effect on the
amounts recognised in the 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.
During 2012 reduced revenue and operating margin in Australia
highlighted an impairment indicator which, under IAS 36 triggered
an impairment review of scaffold comparing the recoverable amount,
determined from a basis of value in use, against the carrying
amount. The impairment review resulted in an impairment charge of
GBP13.0 million during 2012. A reorganisation of the Australia
business during 2013 required a write down of property, plant and
equipment to value in use and giving rise to a charge to profit of
GBP4.2m.
(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. The
value of trade receivables at 31 December 2013 is GBP119.4 million
(2012: GBP158.8 million) and the provision is GBP11.0 million
(2012: GBP8.3 million).
(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. The carrying amount of deferred tax assets
at 31 December 2013 is GBP24.2 million (2012: GBP21.5 million).
b) 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. A provision for onerous contracts
of GBP8.9 million (2012: GBP5.4 million) is recorded at 31 December
2013.
(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.
The carrying amount of goodwill at 31 December 2013 was GBP113.7m
(2012: GBP117.1m). There was no goodwill impairment recognised
during 2013. An impairment charge of GBP129.8 million was
recognised in 2012 on writing down goodwill held in the Australian
cash-generating unit to its recoverable amount.
(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 as at 31 December 2013
based on advice from independent professional actuaries. The amount
of the provision is based on historic patterns of claim numbers and
monetary settlements as well as published tables of projected
disease incidence. Key assumptions made in assessing the
appropriate level of provision include the period over which future
claims can be expected, the rate at which claims will be filed, the
rate of successful resolution as well as future trends in both
compensation payments and legal costs. The value of the provision
at 31 December 2013 is GBP94.3million (2012: GBP79.9 million) and
the range of reasonable estimate determined as being between GBP89
million and GBP123 million.
(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.
7. Segment information
Management has determined the operating segments based on the
reports reviewed by the Board (Chief Operating Decision Maker
'CODM') that are used to make strategic decisions. The CODM
considers the business from a geographic perspective. As set out in
note 2 under 'Basis of preparation', with effect from 1 January
2013 the Group reports three regional segments. The main profit
measure used by the CODM in its review is adjusted operating
profit.
The segment information for the year ended 31 December 2013 is
as follows:
Group
2013 UK, Europe & CIS GBPm MENA GBPm Asia Pacific GBPm Central GBPm GBPm
--------------------------------------- ---------------------- ---------- ------------------ ------------- ------
Continuing operations
Adjusted revenue 361.1 202.8 133.2 - 697.1
Adjusted operating profit/(loss)
before joint ventures 32.5 15.1 (3.8) (3.3) 40.5
Share of post-tax profit from joint
ventures 0.2 - 0.3 - 0.5
--------------------------------------- ---------------------- ---------- ------------------ ------------- ------
Adjusted operating profit/(loss) 32.7 15.1 (3.5) (3.3) 41.0
--------------------------------------- ---------------------- ---------- ------------------ ------------- ------
Group
2012 UK, Europe & CIS GBPm MENA GBPm Asia Pacific GBPm Central GBPm GBPm
-------------------------------------- ---------------------- ---------- ------------------ ------------- -------
Continuing operations
Adjusted revenue 367.2 163.3 215.5 - 746.0
Adjusted operating profit/(loss)
before joint ventures 39.4 (5.5) (8.7) 2.4 27.6
Share of post-tax profit from joint
ventures - - 0.1 - 0.1
-------------------------------------- ---------------------- ---------- ------------------ ------------- -------
Adjusted operating profit/(loss) 39.4 (5.5) (8.6) 2.4 27.7
-------------------------------------- ---------------------- ---------- ------------------ ------------- -------
Segmental Adjusted operating profit/(loss) in the table above is
shown after charging franchise fees. Adjusted operating profit
before franchise fees is set out in note 7.
There were no significant sales between segments in either
year.
Other segment items included in the consolidated income
statement are as follows:
Group
2013 UK, Europe & CIS GBPm MENA GBPm Asia Pacific GBPm Central GBPm GBPm
-------------- ---------------------- ---------- ------------------ ------------- ------
Depreciation 6.4 6.7 4.6 - 17.7
Amortisation 0.1 - - - 0.1
-------------- ---------------------- ---------- ------------------ ------------- ------
Group
2012 UK, Europe & CIS GBPm MENA GBPm Asia Pacific GBPm Central GBPm GBPm
-------------- ---------------------- ---------- ------------------ ------------- ------
Depreciation 5.0 4.4 5.4 0.2 15.0
Amortisation 0.1 - 0.2 - 0.3
-------------- ---------------------- ---------- ------------------ ------------- ------
The geographical origin of adjusted revenue based on location of
the entity is analysed as follows:
2013 2012
GBPm GBPm
--------------------------------------------- ------ ------
Continuing operations:
United Kingdom 325.1 314.7
Australia 79.7 140.0
Abu Dhabi 59.4 55.7
Qatar 58.4 43.6
Saudi Arabia 54.8 35.9
Rest of the world 119.7 156.1
--------------------------------------------- ------ ------
Adjusted revenue from continuing operations 697.1 746.0
--------------------------------------------- ------ ------
Discontinued operations 8.6 24.9
--------------------------------------------- ------ ------
Total adjusted revenue 705.7 770.9
--------------------------------------------- ------ ------
The Performance review section in this Annual Report provides an
analysis of adjusted revenues between maintenance support services
(being services to plant operators to assist with their maintenance
and production support activities) and construction support
services (being services to engineering and contracting companies
to support major construction projects). This split in customer
base and revenue does not represent an operating segment as
multi-discipline services are provided to all customers and as such
the segmental analysis is only presented by geographic
segments.
Adjusted revenue from continuing operations derived from
maintenance support services was GBP442 million (63%) (2012: GBP419
million (56%) and adjusted revenue derived from construction
support projects was GBP255 million (37%) (2012: GBP327 million
(44%).
Revenue from the largest client represented 11% of total
Adjusted revenue (2012: 11%) relating to activity across all
geographic segments and the top 10 clients represented 38% of
Adjusted revenue (2012: 40%).
The segment assets and liabilities at 31 December 2013 and
capital expenditure for the year are as follows:
UK, Europe Asia Central
& CIS MENA Pacific Unallocated Group
2013 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- ------ --------- -------- ------------ -------
Assets - continuing 119.9 161.0 99.3 0.5 129.1 509.8
Assets - discontinued - - 3.7 - - 3.7
----------------------------------- ----------- ------ --------- -------- ------------ -------
Total assets 119.9 161.0 103.0 0.5 129.1 513.5
----------------------------------- ----------- ------ --------- -------- ------------ -------
Non-current assets included
in total assets
Goodwill and intangibles -
continuing 24.9 47.1 41.9 - - 113.9
Other - continuing 26.2 27.7 30.0 0.1 24.2 108.2
----------------------------------- ----------- ------ --------- -------- ------------ -------
Total - continuing 51.1 74.8 71.9 0.1 24.2 222.1
Non-current assets - discontinued - - - - - -
Total non-current assets 51.1 74.8 71.9 0.1 24.2 222.1
----------------------------------- ----------- ------ --------- -------- ------------ -------
Liabilities - continuing 46.2 64.1 26.2 97.7 146.1 380.3
Liabilities - discontinued - - - - - -
----------------------------------- ----------- ------ --------- -------- ------------ -------
Total liabilities 46.2 64.1 26.2 97.7 146.1 380.3
----------------------------------- ----------- ------ --------- -------- ------------ -------
Capital expenditure - property,
plant and equipment 7.2 8.5 1.8 0.2 - 17.7
----------------------------------- ----------- ------ --------- -------- ------------ -------
The segment assets and liabilities at 31 December 2012 and
capital expenditure for the year are as follows:
UK, Europe Asia Central
& CIS MENA Pacific Unallocated Group
2012 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----------- ------ --------- -------- ------------ ------
Assets - continuing 124.4 163.5 157.2 2.7 121.5 569.3
Assets - discontinued 2.0 - 11.4 - - 13.4
--------------------------------- ----------- ------ --------- -------- ------------ ------
Total assets 126.4 163.5 168.6 2.7 121.5 582.7
--------------------------------- ----------- ------ --------- -------- ------------ ------
Non-current assets included
in total assets
Goodwill and intangibles -
continuing 24.9 47.1 45.2 - - 117.2
Other - continuing 18.6 29.9 45.1 - 21.3 115.0
--------------------------------- ----------- ------ --------- -------- ------------ ------
Total - continuing 43.5 77.0 90.3 - 21.2 232.2
Discontinued - - - - - -
--------------------------------- ----------- ------ --------- -------- ------------ ------
Total non-current assets 43.7 77.0 90.3 - 21.2 232.2
--------------------------------- ----------- ------ --------- -------- ------------ ------
Liabilities - continuing 54.5 60.7 58.0 76.9 151.8 401.9
Liabilities - discontinued 4.9 - 5.6 - - 10.5
--------------------------------- ----------- ------ --------- -------- ------------ ------
Total liabilities 59.4 60.7 63.6 76.9 151.8 412.4
--------------------------------- ----------- ------ --------- -------- ------------ ------
Capital expenditure - property,
plant and equipment 3.5 4.4 2.5 0.2 - 10.6
--------------------------------- ----------- ------ --------- -------- ------------ ------
Segment assets consist primarily of property, plant and
equipment, investments, intangible assets, inventories and trade
and other receivables. Segment liabilities comprise operating
liabilities.
Unallocated assets and liabilities comprise:
2013 2012
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
------------------------ ------- ------------ ------- ------------
Deferred tax 24.2 4.7 21.5 6.5
Current tax - 7.1 - 8.3
Cash 73.6 - 72.8 -
Restricted funds 31.3 - 27.4 -
Current borrowings - 0.3 - 0.3
Non-current borrowings - 133.5 - 135.7
Derivatives - 0.6 - 1.1
Total unallocated 129.1 146.2 121.7 151.9
------------------------ ------- ------------ ------- ------------
8. Adjusted measures
The Group seeks to present a measure of underlying performance
which is not impacted by exceptional 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:
2013 2012
GBPm GBPm
--------------------------------------------------------------- ------- --------
Profit/(loss) before tax 0.2 (143.2)
Other items (see note 9a) 15.3 10.5
Exceptional items (see note 9b) 15.5 150.4
Interest income on restricted funds (0.7) (1.0)
Unwind of discount on provision for industrial disease claims 4.0 4.0
Write off of unamortised borrowing arrangement costs 1.2 -
--------------------------------------------------------------- ------- --------
Adjusted profit before tax 35.5 20.7
--------------------------------------------------------------- ------- --------
Operating profit/(loss) 10.2 (133.2)
Other items (see note 9a) 15.3 10.5
Exceptional items (see note 9b) 15.5 150.4
--------------------------------------------------------------- ------- --------
Adjusted operating profit 41.0 27.7
--------------------------------------------------------------- ------- --------
Adjusted operating profit margin 5.9% 3.7%
--------------------------------------------------------------- ------- --------
Adjusted operating profit 41.0 27.7
Depreciation and amortisation - continuing operations 17.8 15.0
--------------------------------------------------------------- ------- --------
Adjusted EBITDA 58.8 42.7
--------------------------------------------------------------- ------- --------
Revenue 697.1 737.0
Contract claims - 9.0
--------------------------------------------------------------- ------- --------
Adjusted revenue 697.1 746.0
--------------------------------------------------------------- ------- --------
Net debt 28.9 35.8
Unamortised borrowing arrangement costs - 2.0
Restricted funds 31.3 27.4
--------------------------------------------------------------- ------- --------
Adjusted net debt 60.2 65.2
--------------------------------------------------------------- ------- --------
Finance costs (11.5) (11.6)
Unwind of discount on provision for industrial disease claims 4.0 4.0
Write off of unamortised borrowing arrangement costs 1.2 -
--------------------------------------------------------------- ------- --------
Adjusted finance costs (6.3) (7.6)
--------------------------------------------------------------- ------- --------
In 2011 the Group centralised certain operations and management
functions under a new International Headquarters ('IHQ') to better
support growth across its international operations. IHQ
responsibilities include the management and development of the
Group's non-UK intellectual property and, as part of these
arrangements, IHQ entered into franchise agreements to support the
Group's non-UK trading companies. The segmental Adjusted operating
profit before franchise fee charges is as follows:
UK, Europe & CIS MENA Asia Pacific Central Costs
2013 GBPm GBPm GBPm GBPm Group GBPm
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted revenue 361.1 202.8 133.2 - 697.1
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted operating profit/(loss) before joint
ventures 31.7 19.8 1.2 (12.2) 40.5
Share of post-tax result of joint ventures 0.2 - 0.3 - 0.5
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted operating profit/(loss) 31.9 19.8 1.5 (12.2) 41.0
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
UK, Europe & CIS MENA Asia Pacific Central Costs
2012 GBPm GBPm GBPm GBPm Group GBPm
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted revenue 367.2 163.3 215.5 - 746.0
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted operating profit/(loss) before joint
ventures 40.0 (1.1) 1.1 (12.4) 27.6
Share of post-tax result of joint ventures - - 0.1 - 0.1
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
Adjusted operating profit/(loss) 40.0 (1.1) 1.2 (12.4) 27.7
----------------------------------------------- ----------------- ------ ------------- -------------- -----------
9.(a) Other items
2013 2012
GBPm GBPm
------------------------------------------------------------- ------ ------
Continuing operations
In revenue
Contract claims - 9.0
In operating profit
Amortisation of intangibles - 0.3
Actuarial charge to provision for industrial disease claims 14.3 -
Other industrial disease claims expenses 1.0 1.2
------------------------------------------------------------- ------ ------
Other items included within operating profit 15.3 10.5
------------------------------------------------------------- ------ ------
9.(b) Exceptional items
2013 2012
GBPm GBPm
------------------------------------------------------------------------------- ------ ------
Continuing operations
Impairments on non-current assets in Australia
Goodwill - 110.7
Property, plant and equipment 4.2 13.0
Other changes in accounting estimates
Standardisation of receivables provisioning methodology - 2.2
Assessment of other non-current assets 1.8 16.6
Other 9.5 7.9
------------------------------------------------------------------------------- ------ ------
Exceptional items from continuing operations included within operating profit 15.5 150.4
------------------------------------------------------------------------------- ------ ------
During 2012 impairment testing on goodwill within the Australia
cash-generating unit resulted in an impairment charge of GBP129.8m,
allocated between continuing operations and discontinued
operations.
The charge arising on the assessment of other non-current assets
relates to provisions made against the carrying value of certain
scaffold assets held outside of the Australia business.
'Other' primarily comprises restructuring costs including
onerous leases and the write off of irrecoverable current
assets.
10. Discontinued operations
Analysis of the result of discontinued operations and the result
recognised on the re-measurement of assets of the disposal group is
as follows:
2013 2012
GBPm GBPm
-------------------------------------------------------------------- ------- -------
Revenue 8.6 24.8
Expenses (14.2) (29.8)
-------------------------------------------------------------------- ------- -------
Loss before tax of discontinued operations (5.6) (5.0)
Deferred income tax credit 0.8 1.6
-------------------------------------------------------------------- ------- -------
Loss after tax of discontinued operations before Exceptional items (4.8) (3.4)
Exceptional items
Goodwill on Australian CGU - (19.1)
Property, plant and equipment - (17.4)
Disposal costs - (7.6)
Other - (2.7)
Deferred tax credit on Exceptional items - 7.6
-------------------------------------------------------------------- ------- -------
Loss after tax of discontinued operations (4.8) (42.6)
-------------------------------------------------------------------- ------- -------
Discontinued operations relate to the termination of operations
in India and Japan and the disposal of certain businesses following
the restructuring of the Australian operations.
The assets of the disposal group classified as held for sale of
GBP3.7 million at 31 December 2013 were all part of the disposal
group assets of GBP11.4 million at 31 December 2012.
11. Finance income and costs
2013 2012
GBPm GBPm
--------------------------------------------------------------- ------- -------
Interest income
Short-term bank deposits - 0.2
Interest on pension assets 0.8 0.4
Interest on restricted funds 0.7 1.0
Finance income 1.5 1.6
--------------------------------------------------------------- ------- -------
Interest expense
Bank borrowings (6.3) (7.4)
Finance leases - (0.2)
Unwind of discount on provision for industrial disease claims (4.0) (4.0)
Write off of unamortised borrowing arrangement costs (1.2) -
--------------------------------------------------------------- ------- -------
Finance costs (11.5) (11.6)
--------------------------------------------------------------- ------- -------
Net finance costs (10.0) (10.0)
--------------------------------------------------------------- ------- -------
12. Income tax
2013 2012
GBPm GBPm
--------------------------------------- ------ ------
Current tax
Overseas 6.7 8.5
Adjustments in respect of prior years 2.2 (5.4)
Deferred tax
Overseas (5.4) 11.5
Adjustments in respect of prior years (0.8) 4.6
--------------------------------------- ------ ------
Income tax expense 2.7 19.2
--------------------------------------- ------ ------
The difference between the actual tax charge and the charge that
would have arisen using Jersey's standard corporation tax rate of
0% (2012: 0%) is explained in the table below:
2013 2012 GBPm
GBPm
----------------------------------------------------------------------------------- ------ ----------
Profit/(loss) before tax 0.2 (143.2)
Tax calculated at the standard rate of corporation tax in Jersey of 0% (2012: 0%) - -
Adjustments in respect of prior year 1.4 (0.8)
Adjustments in respect of overseas tax rates (2.0) (40.8)
Tax losses not recognised 0.4 0.7
Expenses non-deductible 3.3 1.1
Income not taxable (1.4) (0.8)
Exceptional items
Impairment of goodwill - 33.2
Derecognised losses - 25.9
Change in tax rates 1.0 0.7
----------------------------------------------------------------------------------- ------ ----------
Tax charge 2.7 19.2
----------------------------------------------------------------------------------- ------ ----------
Factors affecting current and future tax charges
The Group has worldwide operations and 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.
13. Earnings per ordinary share
Basic earnings per share ('EPS') for the year equals the loss
after tax attributable to the Company's ordinary shareholders of
GBP6.8 million (2012: loss of GBP206.6 million) divided by the
weighted average number of issued ordinary shares of 120,825,623
(2012: 119,808,799).
When the Group makes a profit, diluted EPS equals the profit
attributable to the Company's ordinary shareholders divided by the
diluted weighted average number of issued ordinary shares. When the
Group makes a loss, diluted EPS equals the loss attributable to the
Company's ordinary shareholders divided by the basic (undiluted)
weighted average number of issued ordinary shares. This ensures
that EPS on losses is shown in full and not diluted by unexercised
share options or awards.
Share options and awards are considered dilutive when the
average share price during the year is higher than the average
exercise price of the option or award.
2013 2012
Shares Shares
------------------------------------------------------ ------------ ------------
Basic weighted average number of shares 120,825,623 119,808,799
Adjustments:
Weighted average number of outstanding share options 1,109,048 1,088,764
------------------------------------------------------ ------------ ------------
Diluted weighted average number of shares 121,934,671 120,897,563
------------------------------------------------------ ------------ ------------
The basic weighted average number of shares excludes shares that
the Company holds in an employee benefit trust. The weighted
average number of shares held in the trust during the year was
266,653 (2012: 418,574).
2013 2012
------------------ --------------------
Earnings EPS Earnings EPS
GBPm pence GBPm pence
------------------------------------------------------------- --------- ------- --------- ---------
Basic loss per share
Continuing operations (2.0) (1.6) (164.0) (136.9)
Discontinued operations (4.8) (4.0) (42.6) (35.6)
------------------------------------------------------------- --------- ------- --------- ---------
Basic loss per share (6.8) (5.6) (206.6) (172.5)
------------------------------------------------------------- --------- ------- --------- ---------
Diluted (loss)/earnings per share
Continuing operations (2.0) (1.6) (164.0) (136.9)
Discontinued operations (4.8) (4.0) (42.6) (35.6)
------------------------------------------------------------- --------- ------- --------- ---------
Diluted (loss)/earnings per share (6.8) (5.6) (206.6) (172.5)
------------------------------------------------------------- --------- ------- --------- ---------
Adjusted basic earnings per share - continuing operations
Loss from continuing operations (2.0) (1.6) (164.0) (136.9)
Amortisation of intangibles - - 0.3 0.3
Non recurring costs - - 9.0 7.5
Exceptional items 15.5 12.7 150.4 125.5
Industrial disease related costs and interest income 18.6 15.4 4.2 3.5
Write off of unamortised borrowing arrangement costs 1.2 1.0 - -
Tax effect of adjusting items (4.5) (3.7) 15.5 13.0
------------------------------------------------------------- --------- ------- --------- ---------
Adjusted basic earnings per share 28.8 23.8 15.4 12.9
------------------------------------------------------------- --------- ------- --------- ---------
Adjusted diluted earnings per share - continuing operations
Earnings from continuing operations (2.0) (1.6) (164.0) (135.7)
Amortisation of intangibles - - 0.3 0.3
Non recurring costs - - 9.0 7.4
Exceptional items 15.5 12.7 150.4 124.4
Industrial disease related costs and interest income 18.6 15.2 4.2 3.5
Write off of unamortised borrowing arrangement costs 1.2 1.0 - -
Tax effect of adjusting items (4.5) (3.7) 15.5 12.8
------------------------------------------------------------- --------- ------- --------- ---------
Adjusted diluted earnings per share 28.8 23.6 15.4 12.7
------------------------------------------------------------- --------- ------- --------- ---------
The adjusted earnings per share calculations have been
calculated after excluding the impact of amortisation of
intangibles, non-recurring costs, Exceptional items, industrial
disease claims related costs, interest income and the tax impact of
these items. Options are dilutive at the level of adjusted profit
from continuing operations and so, in accordance with IAS 33, have
been treated as dilutive for the purpose of adjusted diluted
earnings per share.
14. Dividends per share
An interim dividend was paid in October 2013 amounting to 4.5
pence per share (2012: 4.5 pence per share). Interim dividends are
recognised when paid. A final dividend in respect of the year ended
31 December 2013, of 9.5 pence per share amounting to GBP11.5
million, is to be proposed at the Annual General Meeting convened
for Wednesday 14 May 2014 making a total dividend of 14.0 pence per
share for the year (2012: 14.0 pence per share).
These consolidated financial statements do not reflect this
final dividend payable.
15. Intangible assets
Goodwill Other Total
GBPm GBPm GBPm
-------------------------- --------- ------ --------
Cost
At 1 January 2012 246.4 10.4 256.8
Additions 3.1 0.1 3.2
Impairments (129.8) - (129.8)
Exchange adjustments (2.6) - (2.6)
-------------------------- --------- ------ --------
At 31 December 2012 117.1 10.5 127.6
Additions - 0.1 0.1
Disposals - (3.9) (3.9)
Exchange adjustments (3.4) (1.0) (4.4)
-------------------------- --------- ------ --------
At 31 December 2013 113.7 5.7 119.4
-------------------------- --------- ------ --------
Accumulated amortisation
At 1 January 2012 - 10.1 10.1
Amortisation charge - 0.3 0.3
At 31 December 2012 - 10.4 10.4
Amortisation charge - 0.1 0.1
Disposals - (3.9) (3.9)
Exchange adjustments - (1.1) (1.1)
At 31 December 2013 - 5.5 5.5
-------------------------- --------- ------ --------
Net book amount:
At 1 January 2012 246.4 0.3 246.7
At 31 December 2012 117.1 0.1 117.2
-------------------------- --------- ------ --------
At 31 December 2013 113.7 0.2 113.9
-------------------------- --------- ------ --------
Amortisation of GBP0.1 million (2012: GBP0.3 million) has been
charged to the Consolidated Income Statement.
Impairment tests for goodwill
As required by IAS 36 - Impairment of assets, the Group tests
goodwill for impairment on an annual basis. The recoverable amounts
of each CGU is based on a value in use calculation.
Each CGU's value in use was calculated by taking the Group's
five year cash flow forecasts and then applying a long-term growth
rate to the periods beyond the fifth year, discounted back using a
pre-tax discount rate. These present values were then compared to
the combined carrying value of the CGU's assets (goodwill,
intangible assets and property, plant and equipment). The key
assumptions used in preparing the discounted cash flows were as
follows:
EBITDA and cash flow projections
EBITDA and capital expenditure in the five year forecast
commenced with the most recently approved annual budget, years two
to five were prepared on a country by country basis by considering
past performance, long-term market share and estimates of market
growth by sector. All cash flows associated with future capital
expenditure that would enhance the performance of the CGU's were
then removed from the discounted cash flows.
Discount rate
The discount rate reflects the estimated post-tax rate of return
that would be expected from a rational investor over the period of
the forecast, which is then adjusted to a pre-tax discount rate by
reference to the Group's five year cash tax forecast. The post-tax
discount rate was calculated using the Capital Asset Pricing Model
approach, with the risk free rate based on UK Government gilts, the
beta derived via weekly observations over a five year period and
the risk premium based on a consistent long-term average return on
shares. Adjustments were then made to the discount rate of each CGU
to reflect different risks associated with those CGU's (both
specific risk premiums and in respect of local risk free rates).
The pre-tax discount rates applied are set out in the table
below.
Long-term growth rates
Long-term growth rates were also applied to each CGU separately.
Considerations to derive the growth rates included long-term GDP
growth and projected growth rates in the supply and demand for
energy. The long-term growth rates applied are also set out
below.
The assumptions used in the value in use calculations were as
follows:
Goodwill Discount Long-term Headroom
GBPm rate growth GBPm
rate
UK 18.7 12.8% 2.7% 281.1
CIS 6.1 13.0% 2.7% 46.8
MENA 47.1 15.0% 2.7% 138.0
Australia 20.6 14.6% 2.7% 18.8
Asia 21.2 14.3% 2.7% 49.8
--------- ---------
113.7 534.5
Sensitivities
The table below discloses what changes in the key assumptions
would cause the carrying value of the CGU's to exceed their
recoverable amounts:
Discount Long-term
rate growth
to reach rate to
impairment reach impairment
UK 104.2% n/a
CIS 63.3% n/a
MENA 40.4% n/a
Australia 19.5% (8.4%)
Asia 38.5% n/a
Sensitivities were also applied to the five year EBITDA compound
annual growth rates, again there was sufficient headroom in each of
the CGU's with flat or negative growth rates still providing
headroom.
*n/a - level of headroom is so significant, it is not
practicable to calculate.
16. Property, plant and equipment
During the year ended 31 December 2013, the Group acquired
assets with a cost of GBP17.7 million (2012: GBP10.8 million) and
received proceeds from asset sales of GBP2.2 million (2012: GBP1.3
million) as shown in the consolidated cash flow statement
representing the actual cash outflow.
Land and
buildings Fixtures and fittings Plant and machinery Total
GBPm GBPm GBPm GBPm
----------------------------------------------- ----------- ------------------------ -------------------- -------
Cost
At 1 January 2012 25.6 9.6 228.9 264.1
Exchange adjustments (0.5) (0.2) (4.9) (5.6)
Additions 1.3 0.5 8.8 10.6
Assets transferred to disposal group (6.3) (0.5) (28.3) (35.1)
Reclassification of inventory to fixed assets - - 2.1 2.1
Disposals - (0.1) (15.1) (15.2)
----------------------------------------------- ----------- ------------------------ -------------------- -------
At 31 December 2012 20.1 9.3 191.5 220.9
Exchange adjustments (0.7) (0.4) (11.9) (13.0)
Additions 2.5 0.8 14.4 17.7
Disposals (2.1) (0.3) (26.6) (29.0)
----------------------------------------------- ----------- ------------------------ -------------------- -------
At 31 December 2013 19.8 9.4 167.4 196.6
----------------------------------------------- ----------- ------------------------ -------------------- -------
Accumulated depreciation
At 1 January 2012 5.9 7.9 91.5 105.3
Exchange adjustments (0.2) (0.2) (2.3) (2.7)
Charge for the year 1.2 0.7 14.3 16.2
Assets transferred to disposal group (3.1) (0.5) (20.1) (23.7)
Impairments 1.2 - 38.9 40.1
Disposals - - (5.6) (5.6)
----------------------------------------------- ----------- ------------------------ -------------------- -------
At 31 December 2012 5.0 7.9 116.7 129.6
Exchange adjustments (0.4) (0.3) (6.9) (7.6)
Charge for the year 1.0 0.8 15.9 17.7
Disposals (1.2) (0.3) (22.9) (24.4)
----------------------------------------------- ----------- ------------------------ -------------------- -------
At 31 December 2013 4.4 8.1 102.8 115.3
----------------------------------------------- ----------- ------------------------ -------------------- -------
Net book amount
At 1 January 2012 19.7 1.7 137.4 158.8
At 31 December 2012 15.1 1.4 74.8 91.3
----------------------------------------------- ----------- ------------------------ -------------------- -------
At 31 December 2013 15.4 1.3 64.6 81.3
----------------------------------------------- ----------- ------------------------ -------------------- -------
Depreciation expense of GBP17.7 million (2012: GBP16.2 million)
has been charged to cost of sales in the consolidated income
statement.
Exchange adjustments relate to the translation of assets held by
foreign operations into the presentation currency.
The Group leases plant and machinery under finance lease
agreements. At 31 December 2013 the net carrying amount of plant
and machinery held under finance lease was GBP1.4 million (2012:
GBP4.5 million).
17. Provisions
Legal Other Total Total
Onerous contracts Industrial disease claims Group
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------------------ ------ ------ ------- -------------------------- -------
At 1 January 2013 5.4 6.4 9.5 21.3 79.9 101.2
Utilised (2.7) - (8.1) (10.8) (3.8) (14.6)
Charged to the income statement 7.3 0.6 5.3 13.2 14.2 27.4
Discount unwind - - - - 4.0 4.0
Released to the income statement (1.1) - (1.4) (2.5) - (2.5)
At 31 December 2013 8.9 7.0 5.3 21.2 94.3 115.5
---------------------------------- ------------------ ------ ------ ------- -------------------------- -------
2013
Current provisions 8.9 7.0 4.6 20.5 6.0 26.5
Non-current provisions - - 0.7 0.7 88.3 89.0
8.9 7.0 5.3 21.2 94.3 115.5
---------------------------------- ------------------ ------ ------ ------- -------------------------- -------
2012
Current provisions 5.4 6.4 5.0 16.8 4.0 20.8
Non-current provisions - - 4.5 4.5 75.9 80.4
5.4 6.4 9.5 21.3 79.9 101.2
------------------------ ---- ---- ---- ----- ----- ------
Onerous contracts
Provision is made for onerous contracts where it is considered
that the contract costs are likely to exceed revenues in future
years.
Legal
The Group is involved in a number of legal and other disputes,
including notification of possible claims. The directors, having
considered the facts and circumstances of each item, including
legal advice where appropriate have established provisions to cover
the costs of future settlement.
Other
Other provisions comprise various other provisions including
disposal costs on businesses being divested, restructuring
provisions, property related provisions and contingent
consideration on acquisitions.
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 from alleged exposure to previously manufactured asbestos
products. The provision has been determined as at 31 December 2013
based on advice from independent actuaries. The provision for
industrial disease claims is discounted at 3.75% (2011: 5%) being
the appropriate risk free rate over the term of the
liabilities.
There is uncertainty associated with the future level of
asbestos related industrial disease claims and of the costs arising
from such claims. There can be no guarantee that the assumptions
used to estimate the provision will result in an accurate
prediction of the actual costs that may be incurred. 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.
The directors anticipate that, assuming no material
deterioration in trading performance, the Group will (i) be able to
sufficiently fund its subsidiary Cape Claims Services Limited to
satisfy all claims that will be settled under the Scheme of
Arrangement and (ii) be sufficiently funded to satisfy all other UK
claims settled outside of the Scheme of Arrangement.
18. Share capital and reserves
2013 2012
Number 2013 Number of 2012
Ordinary shares of 25p each of shares GBPm shares GBPm
---------------------------------------------------------------- ------------ ------ ------------ ------
Authorised 200,000,000 50.0 200,000,000 50.0
Issued and fully paid:
At 1 January 121,068,690 30.3 118,631,888 29.7
Issue of shares 7,437 - 14,927 -
Exercise of share options 27,810 - 2,421,875 0.6
---------------------------------------------------------------- ------------ ------ ------------ ------
At 31 December 121,103,937 30.3 121,068,690 30.3
---------------------------------------------------------------- ------------ ------ ------------ ------
plc Scheme share
---------------------------------------------------------------- ------------ ------ ------------ ------
Authorised, issued and fully paid at 1 January and 31 December 1 - 1 -
---------------------------------------------------------------- ------------ ------ ------------ ------
As at 31 December 2013, 225,630 (2012: 347,444) shares were held
in an employee benefit trust.
Special Reserve
The Special Reserve was created in 2008 by court order upon
cancellation of the share premium and retained earnings. The
Special Reserve is not distributable and restrictions exist over
its use.
Translation Reserve
The translation reserve comprises all foreign currency
differences arising from the translation of financial statements of
foreign operations.
Other reserves
Other reserves relates to hedging reserves held in respect of
cash flow and net investment hedges.
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.
19. Cash generated from operations
a) Reconciliation of Group profit/(loss) before tax to cash
generated from continuing and discontinued operations
2013 2012
GBPm GBPm
---------------------------------------------------------- ------- --------
Cash flows from operating activities
Continuing operations
Profit/(loss) before tax 0.2 (143.2)
Finance costs - net 10.0 11.0
Share of post-tax result of joint ventures (0.5) 0.2
Other items 9.3 8.7
Exceptional items 11.2 150.4
Share option (credit)/charge 0.6 (0.4)
Depreciation and amortisation 17.8 15.0
Difference between pension charge and cash contributions 0.9 (0.2)
(Profit)/loss on sale of property, plant and equipment 0.5 0.3
Decrease/(increase) in inventories 7.3 (7.4)
Decrease/(increase) in trade and other receivables 36.3 (2.9)
(Decrease)/increase in trade and other payables (33.9) 24.9
(Decrease)/increase in provisions (2.7) (3.7)
---------------------------------------------------------- ------- --------
Cash generated from continuing operations 57.0 52.7
---------------------------------------------------------- ------- --------
Discontinued operations
Loss before tax (5.6) (51.8)
Exceptional items - 46.8
Depreciation - 1.2
---------------------------------------------------------- ------- --------
Cash used in discontinued operations (5.6) (3.8)
---------------------------------------------------------- ------- --------
In the consolidated cash flow statement, proceeds from sale of
property, plant and equipment comprise:
2013 2012
GBPm GBPm
---------------------------------------------------------- ------ ------
Net book amount 2.7 1.1
Gain/(loss) on disposal of property, plant and equipment (0.5) 0.2
---------------------------------------------------------- ------ ------
Proceeds from disposal of property, plant and equipment 2.2 1.3
---------------------------------------------------------- ------ ------
b) Analysis of cash flows relating to restricted funds
2013 2012
GBPm GBPm
----------------------------- ------ ------
At 1 January 27.4 30.1
Payment of Scheme creditors (3.1) (3.8)
Interest received 1.0 1.1
Receipt of funds 6.0 -
----------------------------- ------ ------
At 31 December 31.3 27.4
----------------------------- ------ ------
Restricted funds relate to scheme cash which is used to fund
industrial disease claims.
20. Reconciliation of net cash flow to movement in net debt
(excluding restricted funds)
2013 2012
GBPm GBPm
-------------------------------------------------------- ------- -------
Net increase in cash and cash equivalents 0.8 3.2
Movement in obligations under finance leases 0.3 3.4
Repayment/(draw) on revolving facility 2.0 (12.6)
Drawing on borrowings (2.3) -
Foreign exchange movements 4.2 -
Movements in adjusted net debt during the year 5.0 (6.0)
Adjusted net debt excluding restricted funds - opening (65.2) (59.2)
-------------------------------------------------------- ------- -------
Adjusted net debt excluding restricted funds - closing (60.2) (65.2)
-------------------------------------------------------- ------- -------
Adjusted net debt excluding restricted funds is calculated by
deducting current and non-current borrowings from cash and cash
equivalents.
21. Contingent liabilities
The provision for industrial disease claims has determined as at
31 December 2013 based on advice from independent actuaries. As
reported in note 28 'Provisions', the value of the provision is
GBP94.3m (2012: GBP79.9m) and the actuarial range of reasonable
estimates assessed at the date of the statement of financial
position date is between GBP89 million and GBP123 million. 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.
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. At 31 December 2013 the Group's bank facilities relating to
the issue of bonds, guarantees and letters of credit amounted to
GBP45.1million (2012: GBP47.0 million).
22. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Other related
party transactions are disclosed below.
As at the year-end there was a balance of GBP3.4 million (2012:
GBP1.8 million) owed by joint ventures. These amounts are
unsecured, have no fixed date of repayment and are repayable on
demand. Amounts owed by joint ventures are assessed for
recoverability and, where necessary, provide for in line with
normal commercial transactions. Revenue with joint ventures in 2013
was GBP17.8 million (2012: GBP12.4 million).
23. Post balance sheet events
On 11 February 2014 the Group entered into a new financing
agreement with a syndicate of eight banks comprising existing
syndicate members of Barclays Bank plc, Lloyds Bank plc and HSBC
Bank plc and a number of new lenders, Abbey National Treasury
Services plc, AIB Group (UK) plc, DNB Bank ASA, ICBC (London) plc,
and National Westminster Bank plc. The agreement is for a GBP295
million revolving credit facility and a GBP50 million accordion
facility until April 2018 and replaces the existing GBP200 million
and AUD$30 million facilities that were due to expire in June
2015.
On 11 March 2014, the Group announced the acquisition of 100% of
the voting shares of Motherwell Bridge Limited, headquartered in
Scotland, a leading supplier of storage tanks, gasholders and heat
exchangers to the energy and steel markets. Purchase consideration
of GBP37.7m, was made up of cash of GBP34.0 million, debt of GBP0.9
million and deferred consideration of up to GBP2.8 million
contingent upon future business performance. Revenue for the year
ended 31 December 2012 was GBP34.6 million with earnings before
interest, tax and amortisation of GBP4.8 million and gross assets
at that date of GBP42.4 million. The investment is expected to be
earnings enhancing in the first full year of Group ownership.
Additional disclosures required under IFRS 13 are not possible at
this time given the proximity of the acquisition to the date of
completing this report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DMGMFVLRGDZG
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