TIDMCIU
RNS Number : 2165S
Cape plc
16 March 2016
16 March 2016
Cape plc
("Cape" or the "Group")
Preliminary results for the twelve months to 31 December
2015
Cape plc, the international provider of critical support
services to the energy and natural resources sectors, announces its
results for the twelve months ended 31 December 2015.
Financial summary
Audited 2015 2014
(restated)
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Financial highlights
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Continuing operations:
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Revenue GBP711.4m GBP690.5m
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Adjusted operating profit GBP52.5m GBP52.3m
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Adjusted operating profit margin 7.4% 7.6%
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Adjusted profit before tax GBP44.7m GBP45.5m
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Adjusted diluted earnings per share 29.9p 30.0p
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Dividend for the year (per share) 14.0p 14.0p
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Adjusted net debt GBP109.9m GBP101.0m
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Statutory results
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Revenue GBP711.4m GBP690.5m
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Operating profit GBP39.9m GBP39.7m
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Profit before tax GBP29.1m GBP30.0m
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Diluted earnings per share 12.7p 8.6p
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Throughout this statement, various non-statutory measures are
used and referred to as 'Adjusted', these are defined and
reconciled to their statutory equivalents in note 8, 'Adjusted
measures'. Certain amounts do not correspond to the 2014 financial
statements and reflect the adjustments detailed in note 4, 'Prior
period adjustments'.
Highlights
-- Order intake increased by 13% to GBP841m (2014: GBP744m);
order book at 31 December 2015 was 18% higher at GBP861m (2014:
GBP731m)
-- Revenue increased by 3.0% to GBP711.4m (2014: GBP690.5m)
-- Adjusted operating profit increased to GBP52.5m (2014:
GBP52.3m) demonstrating the resilience of the business in
challenging markets
-- Adjusted operating profit margin fell slightly to 7.4% (2014:
7.6%) due to increasing market pricing pressures
-- Adjusted diluted earnings per share of 29.9p (2014: 30.0p)
benefitted from a favourable mix of post-tax earnings
-- Continued progress on strategy in both operational excellence
and target areas for growth including geographic expansion and
broadening of service offering
-- Operating cash flow up 29% to GBP43.9m (GBP2014: GBP34.1m)
resulting in adjusted net debt of GBP109.9m (2014: GBP101.0m)
-- Full year dividend maintained at 14.0p (2014: 14.0p)
-- Market conditions are expected to continue to weaken through
2016 with a resultant pressure on margins
Commenting on the results, Joe Oatley, Chief Executive of Cape
said:
"Cape achieved a robust performance in 2015 despite the
substantial challenges in the oil and gas industry, demonstrating
the progress we have made in implementing our strategy. The results
are a testament both to the dedication of all of the people at Cape
and the progress we have made in making Cape into a strong and
resilient business.
We continue to develop our Operational Excellence programme and
are also making progress across a number of our targeted areas for
growth including both geographic and service line expansion. Whilst
we anticipate that our markets will become tougher in 2016 and this
is likely to put pressure on margins across our business, Cape is
well positioned to navigate safely through these stormy waters and
we remain committed to investing in our strategy which I believe
will continue to deliver long term sustainable shareholder
value".
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
Bobby Morse, Ben Romney and Helen Chan, Buchanan
benr@buchanan.uk.com
+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 (www.capeplc.com) is an international leader in the
provision of critical industrial services principally to the energy
and natural resources sectors. Cape provides a multi-disciplinary
service offering including the traditional services of access,
insulation, coatings and mechanical, and a range of specialist
services including oil and gas storage tanks, heat exchanger
replacement and refurbishment, and environmental services.
Cape employs c. 16,400 people working across 19 countries and in
2015 reported revenue of GBP711.4 million.
Chairman's statement 2015
A robust performance
2015 has been another year of good progress for Cape. Not only
has the business delivered a strong set of results in challenging
markets, but we have also moved forward on a number of our key
strategic goals.
The benefits of our Operational Excellence programme have been
seen in our performance and have also been recognised by a number
of our key clients. The implementation of our new systems and
processes has been an important element in a number of our recent
successes in securing new work.
Our ambition to grow by expanding our range of services has been
supported by the ongoing development of the Motherwell Bridge tank
business both in the UK and Middle East and the acquisition during
the year of Redhall Engineering Solutions Limited which has now
been rebranded as Cape Engineering Services Limited (CESL). The
opportunity to expand the services of these businesses further
across the Cape Group remains substantial. We have taken the first
steps towards growth through geographic expansion by opening
operations in Kuwait and Malaysia. I am confident both will deliver
positive results in the years ahead.
Safety remains our top priority and is at the top of every Board
agenda. We continue to strive for the highest level of safety
performance across every one of our operations. I was pleased that
we achieved a significant improvement in the number of Lost Time
Incidents during the year even though we saw a slight fall off in
our Total Recordable Incident Rate.
We expect that 2016 will present additional challenges as market
conditions are likely to weaken further. Nonetheless, I firmly
believe we have the right strategy and the right team to steer the
business through these challenges and to deliver long term
growth.
Financial results
In a year of particularly demanding market conditions, it is a
pleasure to report that Cape has delivered a stable and robust set
of results. Order intake was strong, demonstrating that our clients
recognise the value and quality that Cape offers, and as a result
we finished 2015 with a robust order book of GBP861 million, 18%
higher than at the end of 2014. We achieved a steady increase in
revenue of 3% to GBP711.4 million (2014: GBP690.5 million), driven
by both a solid performance in a number of our markets such as the
Kingdom of Saudi Arabia (KSA), the Wheatstone contract in Australia
and the contributions from the new businesses of Motherwell Bridge
and CESL. With a slight erosion of margin due to market pricing
pressures, we still delivered a steady result in earnings with
adjusted diluted EPS only marginally down on the prior year at
29.9p (2014: 30.0p).
Dividend
The Board is recommending a final dividend for 2015 of 9.5 pence
(H2 2014: 9.5 pence) reflecting our confidence in the delivery of
our strategy and future prospects of the Group. With the interim
dividend of 4.5 pence (H1 2014: 4.5 pence) this results in a full
year dividend of 14.0 pence (2014: 14.0 pence). This is subject to
shareholders' approval at the Annual General Meeting to be held on
11 May 2016 and the final dividend will be payable on 24 June 2016
to shareholders on the register as at 20 May 2016.
Board changes
(MORE TO FOLLOW) Dow Jones Newswires
March 16, 2016 03:01 ET (07:01 GMT)
I am delighted to welcome Samantha Tough, Steve Good and Brian
Larcombe to the Board. All three bring a wealth of senior
leadership experience across a range of industries and we are
fortunate to be able to attract such high quality individuals to
the business. Samantha has added experience of Australia's energy,
infrastructure and natural resources sectors; Steve has brought
recent executive expertise and knowledge of the chemicals and
plastics markets; while Brian brings perspectives from private
equity and other plc boards.
As previously announced, both Brendan Connolly and Leslie Van de
Walle decided to step down from the Board to reduce their travel
time and concentrate on other interests. Both Brendan and Leslie
played an important part in the transformation of Cape over the
last three years and I thank both of them for their commitment and
contribution to the Group.
Cape people
I would like to take this opportunity to congratulate all our
employees on their skill and hard work during 2015. This is
reflected in the delivery of good financial results for our
shareholders and vindicates the drive and dedication shown by all
our people.
Tim Eggar
Chairman
Chief Executive's review
Overview
I am delighted to announce a robust set of results for 2015
demonstrating the resilience of our business model in testing
market conditions. We remain committed to our strategy of investing
in both operational excellence in parallel with the pursuit of a
number of avenues for growth. Whilst the challenging market
conditions have clearly impacted our short-term growth, I am
pleased to be able to report that we achieved a strong order intake
with a closing order book of GBP861 million, up 18% on prior year
(2014: GBP731 million).
We have made good progress on a number of our target growth
areas. We entered both the Kuwaiti and Malaysian markets in the
second half of 2015 with initial activity anticipated in both
during 2016. In May 2015 we announced the acquisition of Redhall
Engineering Solutions Limited, which adds a range of mechanical and
engineering maintenance services to the Group including specialist
pipe repair, tank repair and shutdown services. We have established
a dedicated team in the MENA region to develop our specialist
services and the MENA business has secured its first tank
refurbishment maintenance contract from Gasco in the UAE, which is
expected to run for a three-year period.
Our joint venture in Azerbaijan is now operating from a firm
footing delivering both construction and maintenance work in the
country and the Group reported its first profit from this joint
venture in 2015. We strengthened our Australian business by both
streamlining operations and securing a key contract with Woodside
to provide multi-disciplinary services to the Karratha Gas Plant
Life Extension project through a newly formed joint venture with
UGL.
Although our business has proven to be resilient through 2015,
we remain subject to the effects of reduced spending by our key
clients across a number of sectors, in particular upstream oil and
gas. As oil, gas and iron ore prices continue to remain low, we
expect that 2016 will prove to be a challenging year for the
business with pressure on both volumes and prices.
Market conditions 2015
The price of crude oil ranged between $47 and $68 per barrel for
the first half of the year before falling significantly in the
final quarter of 2015 to a low of $36 per barrel in December. This
continued low price of oil drove both a reduction in volume and
significant pressure on pricing in the upstream oil and gas sector.
Demand from the downstream and industrial markets remained solid
throughout the year with the refining and petrochemical sectors
committing to investment in both maintenance and upgrading of
facilities. Overall the Group saw increasing pricing pressure
across all of its core geographies in the final quarter of the
year.
Overall demand in the UK, Europe & CIS region reduced in
2015, largely driven by the weakening upstream oil and gas sector
in the UK. The UK offshore business saw both project and
refurbishment work in the North Sea reduce significantly as our
clients sought to reduce both capital and operating expenditures.
The UK onshore business also experienced a reduction in demand from
the UK coal based power generation sector as Longannet, Ferrybridge
and Eggborough power stations announced plans for closure in 2016.
The refining and petrochemical sector was boosted by the reduced
cost of feedstock and this fed through to robust demand for the
Group's services from this sector. Demand in Azerbaijan was strong,
driven by new projects such as Shah Deniz 2 and Sangachal and
steady maintenance activity.
The overall level of demand for our services remained solid in
MENA, although there was significant variation across the region.
Construction activity remained robust in KSA and whilst we
experienced delays to a number of projects within the country, such
as the Jizan new refinery, investment remains committed and key
projects continue to move forward. Progress on the Sohar refinery
expansion and other new projects in Oman have been slower than
expected and construction activity in both UAE and Qatar remained
low. The construction market in Kuwait continued to grow with major
projects such as the KNPC Clean Fuels project moving forward.
Demand for maintenance activities remained solid for the region as
a whole, although the business experienced an increased focus from
its customers on cost and pricing across both construction and
maintenance work in the second half of 2015.
Market conditions across Asia Pacific remained mixed. Demand
from the LNG construction sector in Australia grew as activity on
the Gorgon, Wheatstone and Ichthys projects all increased during
the year, with this sector also driving construction demand in Asia
where a number of the modules for these projects are being built.
The mining sector in Australia continues to be extremely
challenging as our clients seek to reduce their operational costs
to offset the falling price of commodities, in particular iron ore.
Outside of the LNG module construction work in the Asian yards,
other construction activity in Asia remained relatively low
throughout the year.
2015 operating performance
Despite challenging market conditions, Cape performed well in
2015.
Order intake grew by 13% to GBP841 million (2014: GBP744
million) with the UK business securing the key Federal Maintenance
contract renewal with BP and a number of new contract wins across
the Group including the Karratha Life Extension Project with
Woodside in Australia and a multidisciplinary maintenance contract
with ExxonMobil at Fawley in the UK. As a result the Group
concluded 2015 with a healthy closing order book of GBP861 million,
up 18% on prior year (2014: GBP731 million) with 56% of that order
book due for delivery within 2016. The SOCAR-Cape joint venture in
Azerbaijan also secured a number of key contracts, both for
maintenance and construction work, not included in the order intake
and order book values above, in accordance with our accounting
policies.
Revenue was 3% higher than the prior year at GBP711.4 million,
(2014: GBP690.5 million), as the business benefitted from a full
year of the Motherwell Bridge business and the acquisition of
Redhall Engineering Solutions Ltd in May 2015. At constant
currency, excluding the contribution from acquisitions, underlying
revenues decreased by 2% with growth in Australia partly mitigating
reductions in demand from the UK, the UAE and Qatar. Adjusted
operating profit increased slightly to GBP52.5 million (2014:
GBP52.3 million) as the benefits of improved performances in
Azerbaijan and Australia offset the effects of increased pricing
pressures in the UK and, latterly, in the MENA region.
Adjusted net debt increased to GBP109.9 million (2014: GBP101.0
million) driven primarily by acquisition costs of GBP5.5 million
and an increase in capital expenditure.
Progress on strategy
The successful implementation of our strategy has delivered a
resilient business, well positioned to cope with the current
challenging market conditions. Although our markets have changed
considerably over the last year, we are convinced that our strategy
remains valid and will enable us to continue to deliver shareholder
value over the long term. Our ambition remains to be the market
leader for our chosen services in each of our key markets. Our
strategy to achieve this is built upon five key pillars:
Operational excellence; Customer intimacy; Balanced business;
Growth through broadening our range of services; and Growth through
geographic expansion. We have made progress in all these areas
during the last twelve months and as a result the Group is well
placed to weather the current challenging market conditions and is
also well positioned to capture opportunities as our markets
recover.
Operational excellence
The goals of our Operational Excellence programme remain
unchanged: 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. Our middle and senior management development programmes are
now well established within the business and are enabling us to
develop more of our management talent in-house. We have now
extended our investment in training and development to a Group-wide
programme for all front line supervisors to ensure that all of the
people who are responsible for putting our employees to work and
for overseeing the delivery of our services at the workface are
trained to the same high standard.
(MORE TO FOLLOW) Dow Jones Newswires
March 16, 2016 03:01 ET (07:01 GMT)
We are continuing to develop our systems to ensure that we have
the best tools available to measure and manage our work, and drive
better productivity. These systems are recognised by many of our
clients as industry-leading and they have been instrumental in
securing several of the new contracts that the Group has been
awarded in the last year. Our improved communications tools and our
more open, collaborative culture provide the basis for the sharing
of best practice around the Group.
Operational excellence is the bedrock upon which the long-term
success of the Group is founded and it continues to provide the
basis for high quality delivery to our clients and sustainable
returns to our shareholders.
Customer intimacy
We have built long-term relationships with several of our key
customers including EDF, BP and SABIC over a number of years.
Through these relationships we have developed a deep understanding
of their businesses and we use this to develop solutions, both
commercial and technical, that deliver real value to these clients.
This process of developing a close relationship with our key
clients is an important differentiator for our business and enables
us to deliver significant benefit to our clients as we develop and
extend our range of services with them.
Balanced business
Cape already has a balance of business across a range of
geographies, which gives the Group an inherent stability against
fluctuations in demand from any one particular region and this will
continue to develop as we expand into new countries and regions
around the world. In addition, we have been actively growing our
maintenance business to provide stability against the natural
variability in demand from the construction project market. I am
pleased to be able to report that the Group's revenue from
maintenance activity has remained stable in absolute terms at
GBP474m, only a slight reduction of 1% compared to GBP478m in the
prior year. The proportion of Cape's business derived from
maintenance activities in 2015 was 67% (2014: 69%).
Growth through broadening our range of services
In May we added a new service line to our UK business through
the acquisition of Redhall Engineering Solutions Limited, which has
since been renamed Cape Engineering Services Limited (CESL). CESL
is a highly regarded provider of mechanical and engineering
maintenance services in the UK including specialist welding, pipe
repairs and shutdown management. The addition of these services to
our UK business has significantly expanded our addressable market
and we have already achieved revenue synergies by taking these new
services to our existing client base.
Cape Specialist Services (CSS) is the grouping of our businesses
that have more specialist technical content and we have continued
to invest in these businesses during 2015. CSS is progressing well
with new project work including the construction of a large
liquefied ethane storage tank for a key client in the UK, a project
that is utilising the combined strength of the Motherwell Bridge
tank construction expertise and the traditional Cape services of
insulation, access and coatings. We secured our first storage tank
maintenance contract in the UAE in the second half of the year and
are now in the process of delivering this contract. We will
continue to invest in order to build our specialist services
capability across the Cape footprint around the world.
Growth through geographic expansion
We aim to have the leading market share for our services in each
of our key geographies. In practice we seek to grow market share
wherever possible and to defend our leading positions in our more
mature businesses. We have been successful in growing our share of
the market in Australia with contract wins such as the Karratha
Life Extension project in Australia and have maintained our leading
position in the UK with key wins such as the Fawley refinery
contract for ExxonMobil. Our KSA business continues to grow both in
maintenance and project activities and our SOCAR-Cape joint venture
has cemented its leading position in Azerbaijan by securing both
key project work and an extension of its core maintenance contract
with BP.
We have also established operations in Malaysia and Kuwait, two
countries we have been targeting for future growth based upon the
expected increase in construction project work in these territories
over the medium term. I expect that we will be actively delivering
our services in both these countries during the next twelve
months.
Organisation and people
As a service provider with over 16,000 employees across Cape's
global footprint, our people are central to the current and future
success of the business. We continue to invest in developing our
people and ensuring that everyone can achieve their potential at
Cape. We now have well established management and leadership
development programmes both for our current and future senior
leaders and we continued to invest in these programmes during 2015.
Our biggest new people development effort for 2015 went into a
Group-wide comprehensive training programme for all 1,600 of our
site supervisors. Every day our supervisors are the individuals who
are responsible for ensuring that our work is carried out in a
safe, high quality manner, to meet our customers' requirements. As
such they are a critical contact point for our customers, the face
of our business and at the front line in making sure that we keep
our people safe. We now have a programme that ensures all of our
supervisors are trained to the same standards wherever they are
working in the world.
Safety
The safety of our people and of those people around us is
central to everything we do at Cape. We continue to seek out new
ways to drive a better safety culture and resultant safety
performance. One such initiative during 2015 was a programme called
the 'Line of Fire' which we rolled out across every member of the
Group. The 'Line of Fire' was a video campaign using employees'
family members as a trigger to remind people to stop and assess the
safety requirements of their day to day work situations. It has
been a very powerful reminder for every one of us about the
importance of remaining focussed on safety in everything we do.
In December 2015, a severe storm hit the Caspian Sea resulting
in major structural damage to a number of offshore assets and a
fire on Shallow Water Gunashli, platform 10. Two of the personnel
from our Azerbaijan joint venture are still missing, presumed dead,
along with 20 workers employed by other contractors. Our thoughts
are with all involved in this tragic situation.
Our Lost Time Injury Frequency record (LTIF) has improved
significantly in 2015 almost halving the LTIF rate to 0.184
incidents per 1,000,000 hours worked, from 0.323 in 2014. The
business is also now focussing on forward-looking measures of
safety performance such as the number of safety orientated senior
leadership site tours carried out per month, the delivery of safety
inspection programmes and the timely close out of safety
observations and incidents. Our energy and focus on safety will be
continued in 2016 as we seek to build on the improvements made over
the last few years. Cape continues to strive to achieve a safe work
environment with zero harm to our employees, partners and third
parties.
Outlook
The robust performance in 2015 is a reflection of the resilience
of our business. Nonetheless, the Group is not immune to the
effects of deteriorating market conditions. Approximately 22% of
the Group's revenue is related to the upstream oil and gas sector
and it is anticipated that this sector will be particularly
challenging in 2016, with oil prices currently remaining near to
the lows experienced during the final quarter of 2015. The
midstream/downstream oil and gas market, which represents
approximately 33% of Group's revenue, is less directly affected by
the fall in oil price, with maintenance demand from this sector
remaining solid. Nonetheless, we are now seeing a significantly
increased focus on cost across all geographies from our customers
in the midstream/downstream oil and gas sector and therefore expect
that this will translate into downward pressure on pricing and
margins across the Group. With the announcement of forthcoming
closures of three UK coal-fired power stations, the Group expects
the demand for its services from this sector to decline in 2016,
with the demand from the nuclear power generation sector remaining
robust.
The Board currently anticipates that the 2016 result will be
similar to 2015 in terms of volume of activity, with some
contraction in margins as our continued drive for operational
performance partly mitigates the effects of increased pricing
pressure in our core markets. We remain committed to making the
investments required to deliver our strategy, both for growth and
for continuous improvement in our operational performance.
Whilst the current market conditions are clearly challenging,
our business has demonstrated its resilience to short-term
volatility and the long-term drivers of demand for our services
remain robust. Although the timing of new construction activity is
inherently uncertain, the key projects that the Group is targeting
across both MENA and Asia Pacific continue to move ahead with
committed investment from the end-user. Maintenance demand is
intrinsically more stable and the progress we have made over the
last three years in increasing our exposure to the maintenance
sector has been a key element of the Group's resilience. I remain
confident that our strategy will deliver increased shareholder
value over the medium to long term through our focus on operational
performance and growth in both our service offering and geographic
reach.
Joe Oatley
Chief Executive
Business review
(MORE TO FOLLOW) Dow Jones Newswires
March 16, 2016 03:01 ET (07:01 GMT)
UK, Europe & CIS
GBPm 2015 2014 Change
--------------------------------- ----- ----- -------
Order intake(1) 443 444 0%
Order book(1) 447 401 +11%
Revenue(1) 395.8 388.5 +1.9%
Adjusted operating profit 34.5 38.5 -10.4%
Adjusted operating profit margin 8.7% 9.9% -120bps
--------------------------------- ----- ----- -------
1 Excludes value in respect of the SOCAR-Cape joint venture
Order intake remained robust at GBP443 million, in line with
prior year (2014: GBP444 million), with a number of significant
contract awards including the two year renewal of the BP Federal
Maintenance contract in the UK and a five year contract with
ExxonMobil at the Fawley refinery to provide both access and
insulation services. Other important contract awards were the
renewal of a five year multi-disciplinary maintenance contract with
Sakhalin Energy Investment Company, the BP Clair Ridge contract to
support the hook-up and commissioning of BP's two new bridge-linked
Clair Ridge platforms, cleaning and tank maintenance at Sullom Voe,
a number of contracts with Perenco for scaffold, insulation,
painting and mechanical services, and a 60m diameter gasholder for
Tata Steel in Scunthorpe. The order intake for 2015 includes the
value of the order book from CESL, acquired in May 2015.
Adjusted revenue was 1.9% higher than prior period at GBP395.8
million (2014: GBP388.5 million) with a 9.0% benefit from the full
period impact of the Motherwell Bridge acquisition completed in
March 2014 and the acquisition of CESL in May 2015. At constant
currency, organic revenues fell by 6.2% driven by a reduction in
demand from the North Sea and UK thermal coal power station
sectors. Sakhalin performed well with revenue from maintenance
activities growing steadily however organic growth of 12.6% was
negated by unfavourable foreign exchange movement.
The business continues to be largely maintenance driven with 81%
of revenues (2014: 82%) derived from maintenance and shutdown
activities.
The UK business continued to be successful in the energy and
power sectors completing a total of 14 power station outages over a
nine month period. The work covered both coal fired and nuclear
power stations and required over 1,400 additional personnel to
complete the work within the required time frame.
CESL has performed exceptionally well and has now been
integrated into Cape's UK business. CESL contributed GBP27.6
million of revenue in the year, spread over a range of blue-chip
companies. The business provides a range of maintenance services
including specialist pipe welding and repair, tank repair, bundle
pulling and shutdown services.
Azerbaijan had a strong performance in 2015 with the award of
significant project work through the SOCAR-Cape joint venture in
the first half of the year followed by the award of a two year
extension contract by BP for the provision of fabric maintenance
services in the second half; in line with our accounting policy
these orders are excluded from the Group order intake and order
book. The SOCAR-Cape joint venture is progressing well with a
significant increase in revenue compared to the prior period driven
by both project work on Shah Deniz 2 and the Sanaghal terminal
upgrade projects, and ongoing steady demand for maintenance
work.
Operating margins in the UK were adversely impacted by higher
than expected start-up costs on the contract at Fawley and the
deterioration in market conditions in the upstream oil and gas
sector which led to both pricing pressure and a change in mix with
less higher margin specialist services work. This pressure on
margins was partly mitigated by cost reduction actions initiated
early in the year within the UK and the first profit attributable
to Cape from the SOCAR-Cape joint venture of GBP2.8 million. The
decreased operating margin of 8.7% (2014: 9.9%) led to a 10.4%
reduction in operating profit compared to the prior year, to
GBP34.5m (2014: GBP38.5 million).
The continued weakness in the oil price in early 2016 has
resulted in continued pressure on pricing and margins in the
upstream oil and gas sector in particular. The business continues
to both review its own cost base to ensure it is appropriate to
current market conditions and also to work with its customers to
find ways to reduce their overall operating costs.
Middle East & North Africa (MENA)
GBPm 2015 2014 Change
------------------------------------------------- ----- ------ -------
Order intake 212 204 +4%
Order book 180 135 +33%
Revenue 174.6 175.6 -0.6%
Adjusted operating profit 25.4 21.1 +20.4%
Adjusted operating profit margin 14.5% 12.0% +250bps
------------------------------------------------- ----- ------ -------
Order intake increased by 4% compared to the prior year at
GBP212 million (2014: GBP204 million). The largest proportion of
the order intake continues to come from the downstream oil and gas
sector across the region with the most significant awards being an
extension of the existing maintenance contract with QNFS for RasGas
in Qatar, the provision of access and refractory services for SABIC
in KSA and insulation services for Bapco in Bahrain. Order intake
in the region continues to be made up of a large number of smaller
contracts, both maintenance and construction, which provides some
stability to the overall performance of the region. In line with
the Group's geographic expansion strategy, we secured our first
contract in Kuwait to provide blasting and painting works on the
Kuwait National Petroleum Company's Clean Fuel Project. Bidding
activity remains high in the region. However, the business has
experienced some delays to work releases in both maintenance and
project work as clients seek to manage their spend.
Revenues were broadly in line with prior period at GBP174.6
million (2014: GBP175.6 million) with an 8% benefit from foreign
exchange offsetting an underlying decrease of organic revenue of
8%. The reduction in organic revenue was largely driven by a
reduction in demand for construction work in UAE and Qatar being
partially offset by continued growth in activities in KSA. The KSA
business remained strong with 2.6% organic growth on the prior year
driven by both maintenance and construction project work with
activity continuing on the Petro Rabigh II project and continuing
maintenance work with SABIC and the Saudi Arabia Refineries
Company.
The region continues to make good progress on the Group's
strategy to achieve a balanced business with the proportion of
revenue derived from maintenance activities growing to 50% (2014:
47%).
In line with the Group's strategy to drive growth through the
internationalisation of its specialist service offering, the
business has invested in building a team dedicated to growing these
services across the MENA region. The business was successful in
securing its first tank refurbishment project in UAE during the
year, expected to be delivered over a three-year period. This team
continues to build the pipeline of specialist service opportunities
across the region.
Operating margins increased to 14.5% (2014: 12.0%), driven by a
strong performance in the first half of the year as the business
achieved a favourable result from the close out of a number of
contracts across the region. Adjusted operating profit grew
strongly to GBP25.4 million, a 20.4% increase compared to the prior
year (2014: GBP21.1 million) due to an 8.7% favourable impact of
foreign exchange movement and an underlying organic increase of
10.8%. We continued to make solid progress on the onerous contract
in Qatar; as at the end of December the project was 99% complete
with only a very small number of personnel involved in its
completion of snagging during January 2016.
As a result of the continued weakness in the price of oil, the
business is seeing an increased focus from its clients on reducing
costs across the region in both construction projects and
maintenance. Although the strength of Cape's business in the region
gives some resilience to the effects of this, we are experiencing
significantly increased pressure on pricing and margins. As a
result, we anticipate that operating margins going forward are
likely to be lower than the previously targeted 12-13%.
Asia Pacific
Restated
GBPm 2015 2014 Change
------------------------------------------------- ------ -------- ------
Order intake 186 96 +94%
Order book 234 196 +19%
Revenue 141.0 126.4 +11.6%
Adjusted operating profit 6.9 6.8 +1.5%
Adjusted operating profit margin 4.9% 5.4% -50bps
------------------------------------------------- ------ -------- ------
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Order intake grew very strongly to GBP186 million, up 94% on the
prior year (2014: GBP96 million) with important contract wins in
both Asia and Australia. Key new awards include a contract with
Samsung Heavy Industries in South Korea for the installation of
insulation to the cryogenic pipework on Shell's Prelude Floating
Liquefied Natural Gas (FLNG) vessel, announced in February 2016; a
multi-disciplinary services contract for Mitsui Engineering &
Shipbuilding on a large petrochemical plant in Singapore and a
contract secured by a newly formed joint venture with UGL for
multi-disciplinary services on the Woodside operated Karratha Gas
Plant Life Extension Program (KLE) in Western Australia. The
formation of a project-specific joint venture with UGL was a key
element of securing the contract from Woodside which was won
through our innovative approach and combined service offering with
our contract partner.
Revenue increased by 11.6% compared to prior year, rising to
GBP141.0 million (2014: GBP126.4 million) despite an adverse
movement of 7.6% due to foreign exchange effects, with the
resultant 20.8% organic growth primarily driven by ramp-up of
activity on the Wheatstone project. The business anticipates that
volumes will continue to increase on Wheatstone to reach peak
levels during 2016. Within Australia, activity levels remained low
outside the Wheatstone project as the mining sector in particular
remained depressed. Within Asia increased volumes on the LNG module
work in Thailand for Ichthys and on other projects in Asia
partially mitigated the effects of the reduction in volume from
completion of projects in 2014 and early 2015 in Singapore and
Papua New Guinea.
Overall, the region shifted more towards construction activity
due to a reduction in shutdown work combined with an increase in
construction work, in particular on the Wheatstone project.
Pricing pressures in the Australian market remain severe,
exacerbating the effect of low demand from the resources sector. In
order to remain competitive and to mitigate the effects of this
pressure, the Australian business carried out a restructuring
programme during the year to ensure that it was both able to
provide the correct level of support to the growing Wheatstone and
KLE contracts whilst remaining competitive for the remainder of the
market. The costs of this exercise were expensed during the year
with the benefits being delivered in the second half of 2015.
Adjusted operating profit increased slightly to GBP6.9 million
(2014: GBP6.8 million) with 6.5% being attributable to organic
growth with a 5.0% reduction as a result of unfavourable foreign
exchange movement. The business achieved a significant improvement
in operating margin in the second half of the year compared to the
first (H1 2015: 3.0%; H2 2015 6.7%) as the benefits of the
restructuring in Australia and increased volumes on Wheatstone
offset a negative effect of a shift in mix of work in Asia with
more project volume and less shutdown work.
Market conditions remain mixed across the region with weakness
in the Australian mining sector and low levels of offshore activity
in Asia mitigated by robust activity levels from the LNG sector,
particularly from the construction phase of the Wheatstone, Icythys
and Prelude projects. Increased volumes in Australia, combined with
the benefits of the restructuring already carried out there are
expected to offset any weakness in Asia and deliver a continued
steady margin performance through 2016.
Chief Financial Officer's review
A summary income statement from continuing operations with
explanatory discussion of the key items is provided below:
Restated
2015 2014
GBPm GBPm
---------------------------------------------------- ----- ----------
Revenue 711.4 690.5
Adjusted operating profit 52.5 52.3
Adjusted operating profit % 7.4% 7.6%
Other items (3.4) (11.7)
Exceptional items (9.2) (0.9)
Operating profit 39.9 39.7
---------------------------------------------------- ----- ----------
Revenue
Revenue from continuing operations increased by 3.0% to GBP711.4
million (2014: GBP690.5 million) with a 5.0% increase resulting
from the benefit of a full year of Motherwell Bridge and the
acquisition of Redhall Engineering Solutions Limited (rebranded
Cape Engineering Services Limited (CESL)) in May 2015, and an
underlying organic decrease of 2.1%. There were some strong
performances across the Group, in particular in KSA, the Wheatstone
project in Australia and on other projects in Asia, which taken
together compensated for the weaker market conditions seen in the
North Sea and Australian mining sector. There was an overall
negligible impact of foreign exchange of 0.1%.
We have maintained a good balance between maintenance and
construction revenue with GBP474 million derived from maintenance
contracts (2014: GBP478 million). Maintenance revenue increased in
the UK, Europe & CIS to GBP322 million (2014: GBP319 million),
a similar increase was seen in MENA with revenue from maintenance
contracts of GBP87 million (2014: GBP82 million). A decrease in
maintenance revenues from the mining sector was responsible for a
reduction in maintenance in Asia Pacific to GBP65 million (2014:
GBP77 million). Globally revenue from construction projects
increased to GBP237 million (2014: GBP212 million) mainly as a
result of increased activity on the Wheatstone project in
Australia.
Cape's largest client, across numerous individual contracts,
represented 12% of Group revenue (2014: 15%) and largely related to
activities in the UK, Europe & CIS, with a smaller amount in
MENA and Asia Pacific. The Group's top ten clients represented 45%
of revenue (2014: 42%).
Adjusted operating profit
Adjusted operating profit from continuing operations increased
slightly to GBP52.5 million (2014: GBP52.3 million), consisting of
a favourable foreign exchange impact of 0.7%, a 4.9% benefit of the
Motherwell Bridge and CESL acquisitions, and an organic performance
decrease of 5.4%. The Group's organic results are driven by a
number of factors including pricing pressure and reduced volume in
the North Sea and UK coal power stations, higher than expected
start-up costs on the contract at Fawley, the benefit of the
Wheatstone project partially offset by pricing pressure in the
Australian mining sector, reduced volume of activity in Asia due to
a number of project completions, and MENA continuing to record a
strong performance across the region.
Revenue split by geography
UK, Europe Asia
GBPm & CIS MENA Pacific Total
---------------------------------- ---------- ------- -------- ---------
2015
H1 194.9 95.4 69.1 359.4
H2 200.9 79.2 71.9 352.0
----------------------------------- ---------- ------- -------- -------
FY 2015 395.8 174.6 141.0 711.4
----------------------------------- ---------- ------- -------- -------
2014 (Restated)
H1 180.4 89.1 48.8 318.3
H2 208.1 86.5 77.6 372.2
----------------------------------- ---------- ------- -------- -------
FY 2014 388.5 175.6 126.4 690.5
----------------------------------- ---------- ------- -------- -------
Adjusted operating Adjusted operating
Revenue profit profit margin
GBPm GBPm %
------------------ ------------------- --------------------- ---------------------
Restated Restated Restated
Year ended 2015 2014 2015 2014 2015 2014
------------------ ------ ----------- --------- ---------- ------- ------------
Region
UK, Europe & CIS 395.8 388.5 34.5 38.5 8.7 9.9
MENA 174.6 175.6 25.4 21.1 14.5 12.0
Asia Pacific 141.0 126.4 6.9 6.8 4.9 5.4
Central - - (14.3) (14.1) n/a n/a
711.4 690.5 52.5 52.3 7.4 7.6
------------------ ------ ----------- --------- ---------- ------- ------------
Other items
Other items decreased to GBP3.4 million (2014: GBP11.7 million)
and comprise GBP3.6 million (2014: GBP3.3 million) of
post-acquisition charges, including amortisation of acquired
intangible assets relating to Motherwell Bridge and CESL and a
credit of GBP0.2 million (2014: GBP8.4 million charge) comprising
IDC expenses of GBP0.4 million offset by an actuarial adjustment to
the IDC provision of a GBP0.6 million credit.
Share of post-tax result of joint venture
In 2015 the SOCAR-Cape joint venture made a profit with the
value attributable to Cape recognised as a post-tax profit of
GBP2.8 million (2014: GBPnil).
Exceptional items
Exceptional items total GBP9.2 million (2014: GBP0.9 million)
and comprise of a non-cash GBP8.8 million goodwill impairment in
Asia which is a reflection of the level and distribution of
business activity across this geographically diverse regional
business, and GBP0.4 million transaction costs relating to the
acquisition of CESL in May 2015.
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Operating profit
Operating profit was GBP39.9 million (2014: GBP39.7 million) and
reflects an adjusted operating profit of GBP52.5 million (2014:
GBP52.3 million), other items of GBP3.4 million (2014: GBP11.7
million) and exceptional items of GBP9.2 million (2014: GBP0.9
million).
Finance costs
Net finance costs amounted to GBP10.8 million (2014: GBP9.7
million) including the annual GBP3.3 million (2014: GBP3.4 million)
non-cash charge relating to the unwinding of the discount on the
long term IDC provision and interest income in the IDC Scheme funds
in the period of GBP0.3 million (2014: GBP0.5 million).
Adjusted finance costs increased to GBP7.9 million (2014: GBP7.6
million) with interest cover (calculated by dividing adjusted
operating profit by the adjusted finance costs) decreasing to 6.6
times (2014: 6.9 times).
Taxation
The tax charge on adjusted profit before tax (which excludes
exceptional and other items), excluding share of post-tax result
from joint ventures, was GBP8.0 million (2014: GBP9.2 million)
representing an effective tax rate of 19.1% (2014: 20.2%) which is
lower than anticipated primarily as a result of a regional one-off
tax incentive being obtained. The cash tax paid during the period
was GBP9.3 million (2014: GBP8.4 million) which is in line with
expectations. The total tax charge on profit before tax was GBP8.1
million (2014: GBP7.4 million).
Discontinued operations
Due to limited opportunities of growth within Hong Kong, the
Board has taken the decision to exit this geographical market and
is pursuing an exit through the sale of its current legal entity.
As a result of this decision, the assets and liabilities within
Hong Kong have been reclassified as directly associated within a
disposal group held for sale in the 2015 results.
A GBP5.2 million loss has been recognised within loss from
discontinued operations in the income statement in 2015 (2014:
GBP12.2 million loss) with GBP5.8 million relating to Hong Kong,
including GBP3.4 million for impairment of goodwill. The majority
of the remaining balance is attributable to the exit from
Kazakhstan, which was discontinued in 2014, and was completed
within the level of costs estimated and provided for during the
prior year, resulting in a credit of GBP0.9 million to discontinued
operations in 2015. The prior year GBP12.2 million loss primarily
relates to the exit from Kazakhstan.
Earnings per share
For continuing operations the adjusted diluted earnings per
share (EPS) was 29.9 pence (2014: 30.0 pence) and adjusted basic
earnings per share was 30.0 pence (2014: 30.0 pence). EPS was
enhanced by the geographic distribution of earnings, which resulted
in low earnings attributable to non-controlling interests and a
beneficial tax rate, not expected to repeat in 2016. The diluted
weighted average number of shares increased to 121.6 million (2014:
121.1 million).
Dividend
After considering the 2015 financial results, current market
conditions and the underlying prospects of the Group, the Board is
proposing a final dividend for 2015 of 9.5 pence (2014: 9.5 pence)
per share in line with the 2014 final dividend. In addition to the
interim dividend of 4.5 pence per share (2014: 4.5 pence) paid on 9
October 2015, the total dividend for the year will be 14.0 pence
per share (2014: 14.0 pence). Subject to shareholders' approval at
the Annual General Meeting on 11 May 2016, the final dividend will
be payable on 24 June 2016 to shareholders on the register as at 20
May 2016.
Acquisitions
In line with the Group strategy to expand the range of critical
services we offer, Cape announced its acquisition of UK based
Redhall Engineering Solutions Limited in May 2015 for an enterprise
valuation of GBP6.2 million including debt of GBP5.3 million and a
working capital contribution of GBP0.7 million. The business
predominantly operates in the process and downstream oil and gas
industries and provides a range of maintenance services including
specialist pipe repair, tank repair and shutdown services. The fair
value of net liabilities acquired was GBP2.1 million and goodwill
of GBP2.3 million arising from the acquisition is attributable to
the value of the assembled workforce, expected synergies and other
benefits arising from combining the rebranded CESL operations into
the Group.
Operating and free cash flow
Restated
2015 2014
GBPm GBPm
-------------------------------------------------------- ------- --------
Adjusted operating profit 52.5 52.3
Depreciation 15.9 18.1
-------------------------------------------------------- ------- --------
Adjusted EBITDA 68.4 70.4
Non-cash items (11.5) (3.9)
Decrease/(increase) in working capital* 4.6 (18.3)
Net capital expenditure (17.6) (14.1)
-------------------------------------------------------- ------- --------
Operating cash flow 43.9 34.1
Operating cash flow to adjusted operating profit 83.6% 65.2%
Net interest (6.9) (6.4)
Tax (9.3) (8.4)
-------------------------------------------------------- ------- --------
Free cash flow 27.7 19.3
Dividends paid (17.0) (16.9)
Acquisitions (including settlement of debt and working
capital) (6.2) (36.9)
Investment in SOCAR-Cape joint venture (1.0) (3.6)
Net transfer to restricted funds (5.8) -
Discontinued operations 0.3 5.8
Other movements in adjusted net debt (6.9) (8.5)
-------------------------------------------------------- ------- --------
Movement in adjusted net debt (8.9) (40.8)
-------------------------------------------------------- ------- --------
Opening adjusted net debt (101.0) (60.2)
Closing adjusted net debt (109.9) (101.0)
-------------------------------------------------------- ------- --------
* At average rates of exchange
Working capital
Trade and other receivables and inventories decreased by GBP3.8
million to GBP211.5 million (2014: GBP215.3 million) which, along
with a decrease in trade and other payables of GBP3.5 million to
GBP120.8 million (2014: GBP124.3 million), resulted in an overall
decrease in net working capital of GBP0.3 million (at balance sheet
rates) to GBP90.7 million (2014: GBP91.0 million). Working capital,
as expected, reduced by GBP28.3 million in the second half of
2015.
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 126%
(2014: 84%), in line with expectations with scaffold asset
purchases to meet clients' demands largely across MENA and in the
UK.
Free cash flow
The Group's free cash flow of GBP27.7 million (2014: GBP19.3
million) is more than sufficient to fund, in cash terms, the full
value of the proposed dividend of GBP17.0 million (2014: GBP16.9
million).
Financing and banking facilities
The Group's adjusted net debt increased year-on-year by GBP8.9
million to GBP109.9 million (2014: GBP101.0 million) including
finance lease obligations of GBP3.0 million (2014: GBP2.2 million).
Balance sheet gearing (calculated by dividing adjusted net debt by
total equity), excluding ring-fenced IDC Scheme funds, increased to
85.0% (2014: 79.2%).
The ratio of adjusted net debt to adjusted EBITDA increased to
1.6 times (2014: 1.4 times). A reconciliation of adjusted net debt
and adjusted EBITDA can be found in note 8, 'Adjusted
measures'.
In 2014 the Group entered into an interest rate cap for a period
of three years, commencing in 2015 and terminating in February
2018. The derivative is for GBP70 million and gives protection to
the Group against its Sterling borrowings when LIBOR exceeds the
strike price of 2.5%.
Provision for pension
The defined benefit pension schemes had a net surplus of GBP11.3
million (2014: GBP11.8 million) as at 31 December 2015 which
continues to be restricted to nil in the accounts under IFRIC 14.
The agreed monthly contribution rate of GBP14,600 ceased in June
2015.
Provision for estimated future asbestos related liabilities and
IDC Scheme funds
The discounted provision decreased to GBP95.5 million (2014:
GBP98.2 million) reflecting the unwinding of the discount of GBP3.3
million in the year (2014: GBP3.4 million), credit of GBP0.6
million for actuarial adjustments (2014: GBP8.2 million charge) and
GBP5.4 million (2014: GBP7.7 million) of settlements. The actuarial
adjustment of GBP0.6 million relates to the changes in significant
external economic variables. The level of Scheme cash settlements
remains in line with actuarial assumptions. The ring-fenced IDC
Scheme funds increased to GBP32.1 million (2014: GBP29.3 million)
benefiting from a cash injection from the Group's funds of GBP6.2
million (2014: nil), interest received of GBP0.3 million (2014:
GBP1.7 million) and offset by the cash settlements on scheme claims
in the year of GBP3.7 million (2014: GBP3.7 million).
Currencies
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The vast majority of 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 favourably impacted both revenue and operating profit
in 2015 by 0.1% and 1.1% respectively. In 2015, 25% (2014: 28.5%)
of revenues were contracted in US dollars or US dollar pegged
currencies and 16% (2014: 13.8%) in Australian dollars.
The following significant exchange rates applied:
2015 2014
---------------- ----------------
Closing Average Closing Average
---- ------- ------- ------- -------
AUD 2.03 2.09 1.91 1.83
USD 1.48 1.51 1.56 1.65
---- ------- ------- ------- -------
Treasury policies
Cape has a centralised treasury function whose objectives are to
monitor and manage the treasury risks across 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 policies.
Return on invested capital
Return on invested capital is defined at Group level as adjusted
operating profit divided by the accounting value of equity plus
adjusted net debt. Return on invested capital in 2015 was 21.9%,
slightly down on the prior year (2014: 22.9%).
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
geo-political, security and economic conditions such as
geo-political events, sanctions, terrorist events, disease
outbreaks or environmental hazards; key client and market
dependency risks; operational risks including HSE, contracting,
project execution; and generic financial risks. In 2015 the price
of oil has remained low; the Group has assessed this risk and will
continue to monitor the situation closely and respond with
mitigating actions as appropriate.
There are two specific sources of risk associated with the
Group's historical IDC legacy liabilities. The first relates to the
inherent uncertainty in predicting the future level of asbestos
related industrial disease claims and of the costs arising from
such claims relating to the existing liabilities for which the
Board believes the Group to be liable. 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 second source of IDC risk relates to any change in legal
precedent or judgement that leads to a material expansion of the
scope of liability for which the Group is held to be liable in the
future. The Group has previously disclosed an increase in the
number of product liability claims received from insurance
companies (Insurer PL Claims) that have been experienced by the
Group. The Board has received legal advice from leading counsel
that these Insurer PL Claims place very substantial evidential
burdens upon the insurer claimants, are based upon novel legal
arguments and are without precedent. Accordingly, the Board
believes these claims to be without merit and the Group is
vigorously defending them. The risks relating to industrial disease
claims and the associated impact on the Group and its stakeholders
are described in note 22 'Industrial disease claim provision and
contingent liabilities'.
We operate across a number of economies and jurisdictions which
therefore exposes the Group to a range of tax laws that vary
significantly and are rapidly evolving toward global transparency
and harmonisation. Uncertainty may occur when the Group is required
to interpret laws and treaties.
The Group is alert to the challenges of managing risk and has
systems and procedures in place across the Group to identify,
assess and mitigate major business risks. As part of the long term,
strategic Operational Excellence programme the Group continues to
improve its detailed process of project risk identification and
mitigation from contract tender through to project completion.
The directors have reviewed the principal risks and
uncertainties and are satisfied that they are relevant. A full
review of the Group's principal risks and uncertainties is given in
the strategic report within the Group's Annual Report.
Michael Speakman
Chief Financial Officer
Condensed consolidated income statement
for the year ended 31 December 2015
Restated*
2015 2014
---------------- ----------- ------- -------------- -------------- -----------
Exceptional Exceptional
Business and Business and
performance other items Total performance other items Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Revenue from continuing
operations 7 711.4 - 711.4 690.5 - 690.5
Operating profit before
other items 49.7 - 49.7 52.3 - 52.3
Other items 9 - (3.4) (3.4) - (11.7) (11.7)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Operating profit before
exceptional items 49.7 (3.4) 46.3 52.3 (11.7) 40.6
Share of post-tax
result
of joint ventures 2.8 - 2.8 - - -
Exceptional items 9 - (9.2) (9.2) - (0.9) (0.9)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Operating profit 52.5 (12.6) 39.9 52.3 (12.6) 39.7
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Finance income 10 0.1 0.3 0.4 0.8 0.5 1.3
Finance costs 10 (7.9) (3.3) (11.2) (7.6) (3.4) (11.0)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Net finance costs (7.8) (3.0) (10.8) (6.8) (2.9) (9.7)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Profit before tax 44.7 (15.6) 29.1 45.5 (15.5) 30.0
Income tax
(expense)/credit 11 (8.0) (0.1) (8.1) (9.2) 1.8 (7.4)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Profit from continuing
operations 36.7 (15.7) 21.0 36.3 (13.7) 22.6
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
(Loss) from
discontinued
operations 9,12 (0.3) (4.9) (5.2) (1.3) (10.9) (12.2)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Profit for the year 36.4 (20.6) 15.8 35.0 (24.6) 10.4
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Attributable to:
Owners of Cape plc 15.5 10.4
Non-controlling
interests 0.3 -
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
15.8 10.4
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Earnings per share
attributable
to the owners of Cape
plc
Pence Pence Pence Pence
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Basic
Continuing operations 30.0 17.1 30.0 18.7
Discontinued operations (0.3) (4.3) (1.1) (10.1)
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----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Total operations 13 29.7 12.8 28.9 8.6
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Diluted
Continuing operations 29.9 17.0 30.0 18.7
Discontinued operations (0.3) (4.3) (1.1) (10.1)
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
Total operations 13 29.6 12.7 28.9 8.6
----------------------- ------ ---------------- ----------- ------- -------------- -------------- -------------
*Certain amounts shown here do not correspond to the 2014
condensed consolidated financial statements and reflect adjustments
made to reclassify the results of discontinued operations.
Condensed consolidated statement of comprehensive income for the
year ended 31 December 2015
2015 2014
GBPm GBPm
------------------------------------------------------------ ----------- ------------
Profit for the year 15.8 10.4
Other comprehensive income/(expense)
Other comprehensive income/(expense) to be reclassified
to profit or loss in subsequent periods
Currency translation differences 3.2 (0.1)
------------------------------------------------------------- ----------- ------------
Net other comprehensive income/(expense) to be reclassified
to profit or loss in subsequent periods 3.2 (0.1)
------------------------------------------------------------- ----------- ------------
Other comprehensive income/(expense) not to be reclassified
to profit or loss in subsequent periods
Re-measurement of defined benefit pension plan (0.8) (4.9)
Tax effect - -
------------------------------------------------------------ ----------- ------------
(0.8) (4.9)
Movement in restriction of retirement benefit asset
in accordance with IFRIC 14 0.9 4.0
Movement in restriction of interest income in accordance 0.4 -
with IFRIC 14
Tax effect (0.1) 1.0
------------------------------------------------------------- ----------- ------------
Net other comprehensive income not to be reclassified
to profit or loss in subsequent periods 0.4 0.1
------------------------------------------------------------- ----------- ------------
Other comprehensive income for the year 3.6 -
------------------------------------------------------------ ----------- ------------
Total comprehensive income for the year 19.4 10.4
------------------------------------------------------------- ----------- ------------
Attributable to:
Owners of Cape plc 19.0 10.2
Non-controlling interests 0.4 0.2
------------------------------------------------------------- ----------- ------------
19.4 10.4
------------------------------------------------------------ ----------- ------------
Condensed consolidated statement of financial position at 31
December 2015
2015 2014
Note GBPm GBPm
---------------------------------------------- ------ -------------- ---------------
Assets
Non-current assets
Intangible assets 15 138.6 148.1
Investment property 2.0 2.0
Property, plant and equipment 16 80.2 77.3
Investments accounted for using the equity 2.8 -
method
Derivative financial assets - 0.2
Deferred tax assets 20.7 24.3
Restricted deposits 9.0 9.0
---------------------------------------------- ------ -------------- ---------------
Total non-current assets 253.3 260.9
---------------------------------------------- ------ -------------- ---------------
Current assets
Inventories 12.7 15.0
Trade and other receivables 198.8 200.3
Cash and cash equivalents 81.4 78.0
Restricted deposits 23.3 20.9
Assets directly associated with disposal
group held for sale 12 1.0 2.6
---------------------------------------------- ------ -------------- ---------------
Total current assets 317.2 316.8
---------------------------------------------- ------ -------------- ---------------
Total assets 570.5 577.7
---------------------------------------------- ------ -------------- ---------------
Equity
Share capital 18 30.3 30.3
Share premium account 1.0 1.0
Special reserve 18 1.0 1.0
Other reserves 18 9.6 9.5
Translation reserve 18 99.4 96.3
Retained (losses) (14.9) (13.4)
---------------------------------------------- ------ -------------- ---------------
Equity attributable to equity holders of
the parent 126.4 124.7
---------------------------------------------- ------ -------------- ---------------
Non-controlling interests 2.9 2.8
---------------------------------------------- ------ -------------- ---------------
Total equity 129.3 127.5
---------------------------------------------- ------ -------------- ---------------
Liabilities
Non-current liabilities
Borrowings 190.2 177.1
Retirement benefit obligations 13.3 12.4
Deferred tax liabilities 5.4 7.5
Provision for industrial disease claims 17 90.2 93.5
Other provisions 17 2.7 2.9
---------------------------------------------- ------ -------------- ---------------
Total non-current liabilities 301.8 293.4
---------------------------------------------- ------ -------------- ---------------
Current liabilities
Borrowings 0.1 -
Derivative financial instruments - 0.2
Trade and other payables 120.8 124.3
Current income tax liabilities 6.0 7.6
Provision for industrial disease claims 17 5.3 4.7
Other provisions 17 5.5 17.7
Liabilities directly associated with disposal
group held for sale 12 1.7 2.3
---------------------------------------------- ------ -------------- ---------------
Total current liabilities 139.4 156.8
---------------------------------------------- ------ -------------- ---------------
Total liabilities 441.2 450.2
---------------------------------------------- ------ -------------- ---------------
Total equity and liabilities 570.5 577.7
---------------------------------------------- ------ -------------- ---------------
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Condensed consolidated statement of changes in equity for the
year ended 31 December 2015
Share Total Non-
Share premium Special Other Translation Retained attributable controlling Total
capital account reserve reserves reserve earnings to parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
At 1 January 2015 30.3 1.0 1.0 9.5 96.3 (13.4) 124.7 2.8 127.5
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
Profit for the
year - - - - - 15.5 15.5 0.3 15.8
Other
comprehensive
(expense)/income:
Currency
translation
differences - - - - 3.1 - 3.1 0.1 3.2
Re-measurement of
defined benefit
pension
plan - - - - - (0.8) (0.8) - (0.8)
Movement in
restriction
of retirement
benefit
asset in
accordance
with IFRIC 14 - - - - - 0.9 0.9 - 0.9
Movement in
restriction
of interest
income
in accordance
with
IFRIC 14 - - - - 0.4 0.4 0.4
Tax effect on
retirement
benefit asset - - - - - (0.1) (0.1) - .1)
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
Total
comprehensive
income for the
year - - - - 3.1 15.9 19.0 0.4 19.4
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
Transactions with
owners
Dividends - - - - - (17.0) (17.0) - (17.0)
Transfer to
disposal
group liabilities - - - - - - - (0.3) (0.3)
Share options
- value of
employee
services - - - - - (0.4) (0.4) - .4)
- deferred tax on
options - - - 0.1 - - 0.1 - 0.1
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
- - - 0.1 - (17.4) (17.3) (0.3) (17.6)
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
At 31 December
2015 30.3 1.0 1.0 9.6 99.4 (14.9) 126.4 2.9 129.3
------------------ ------- ------- ------- --------------- ----------- -------- ------------ ----------- -------------
for the year ended 31 December 2014
Share Total Non--
Share premium Special Other Translation Retained attributable controlling Total
capital account reserve reserves reserve earnings to parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
At 1 January 2014 30.3 1.0 1.0 9.3 96.6 (7.6) 130.6 2.6 133.2
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
Profit for the
year - - - - - 10.4 10.4 - 10.4
Other
comprehensive
(expense)/income:
Currency
translation
differences - - - - (0.3) - (0.3) 0.2 (0.1)
Re-measurement of
defined
benefit pension
plan - - - - - (4.9) (4.9) - (4.9)
Movement in
restriction
of retirement
benefit
asset in
accordance
with IFRIC 14 - - - - - 4.0 4.0 - 4.0
Tax effect on
retirement
benefit asset - - - - - 1.0 1.0 - 1.0
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
Total
comprehensive
income/(expense)
for
the year - - - - (0.3) 10.5 10.2 0.2 10.4
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
Transactions with
owners
Dividends - - - - - (16.9) (16.9) - (16.9)
Share options:
- value of
employee
services - - - - - 0.6 0.6 - 0.6
- deferred tax on
options - - - 0.2 - - 0.2 - 0.2
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
- - - 0.2 - (16.3) (16.1) - (16.1)
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
At 31 December
2014 30.3 1.0 1.0 9.5 96.3 (13.4) 124.7 2.8 127.5
------------------ -------- --------- -------- ----------- ------------ ---------- ------------------ --------------- --------
Condensed consolidated cash flow statement
for the year ended 31 December 2015
Restated*
2015 2014
Note GBPm GBPm
---------------------------------------------------- ------ -------------- ------------------
Operating activities
Cash generated from operating activities -
continuing operations 19a 51.6 44.7
Interest received 0.1 0.8
Interest paid (7.0) (7.2)
Tax paid (9.3) (8.4)
---------------------------------------------------- ------ -------------- ------------------
Net cash flows from operating activities -
continuing operations 35.4 29.9
---------------------------------------------------- ------ -------------- ------------------
Net cash flows from operating activities -
discontinued operations 19a 0.3 1.2
---------------------------------------------------- ------ -------------- ------------------
Net cash flows from operating activities 35.7 31.1
---------------------------------------------------- ------ -------------- ------------------
Investing activities
Continuing operations
Proceeds from sale of property, plant and equipment 2.9 1.3
Purchase of property, plant and equipment 16 (20.1) (15.3)
Purchase of intangibles 15 - (0.1)
Net transfer to restricted funds 19b (5.8) (0.6)
Acquisition of subsidiaries net of cash acquired 21 (0.2) (30.2)
Loans (to) joint ventures (1.0) (3.6)
Cash paid into escrow for deferred consideration - (2.1)
---------------------------------------------------- ------ -------------- ------------------
Net cash used in investing activities - continuing
operations (24.2) (50.6)
---------------------------------------------------- ------ -------------- ------------------
Discontinued operations
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Proceeds from sales of assets held for sale - 3.6
Net cash realised from investing activities
- discontinued operations - 3.6
---------------------------------------------------- ------ -------------- ------------------
Financing activities
Continuing operations
Repayment of facility - (130.6)
Settlement of debt arising on acquisition 21 (5.3) -
Drawing on borrowings 20 13.2 167.9
Finance lease principal payments - (0.1)
Dividends paid to shareholders (17.0) (16.9)
Net cash flows used in financing activities
- continuing operations (9.1) 20.3
Net cash flows used in financing activities - -
- discontinued operations
---------------------------------------------------- ------ -------------- ------------------
Net foreign exchange difference 1.0 -
---------------------------------------------------- ------ -------------- ------------------
Net increase in cash and cash equivalents 20 3.4 4.4
Cash and cash equivalents at 1 January 78.0 73.6
---------------------------------------------------- ------ -------------- ------------------
Cash and cash equivalents at 31 December 81.4 78.0
---------------------------------------------------- ------ -------------- ------------------
*Certain amounts shown here do not correspond to the 2014
condensed consolidated financial statements and reflect adjustments
made to reclassify the results of discontinued operations and the
presentation of cash flows relating to joint ventures as 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 ending 31 December 2015 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 purpose of
Article 105 of the Companies (Jersey) Law 1991.
The comparative financial information is based on the statutory
accounts to 31 December 2014 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
2015 was approved by the Board of directors on 15 March 2016.
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 condensed consolidated financial statements for the year
ending 31 December 2015 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority.
2.1 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.
2.2 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
will be available on the Group's website at www.capeplc.com.
2.3 Going concern basis
After making enquiries, the directors have reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in preparing
its condensed consolidated financial statements.
3. New and amended standards and interpretations adopted by the Group
Several new standards and amendments apply for the first time in
2015, however they do not have a significant impact on the annual
financial statements of the Group. These new standards and
amendments are listed below:
- Amendments to IAS 19: Defined Benefit Plans: Employee
Contributions (early adopted)
- Annual Improvements to IFRSs 2010-2012 Cycle (early
adopted)
- Annual Improvements to IFRSs 2011-2013 Cycle
Except as noted above, the Group has not yet early adopted any
other standard, interpretation or amendment that has been issued
but is not yet effective.
b) New standards and interpretations not yet adopted
The following standards and interpretations in issue which will
have an effect for the Group, have not yet been adopted by the
Group:
Effective dates
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 9 Financial Instruments 1 January 2018
Annual Improvements to IFRSs 2012-2104 Cycle 1 January 2016
Amendments to IAS 27: Equity Method in Separate
Financial Statements 1 January 2016
Amendments to IAS 16 and IAS 38: Clarification of
Acceptable Methods of Depreciation and Amortisation 1 January
2016
Amendments to IFRS 11: Accounting for Acquisitions
of Interests in Joint Operations 1 January 2016
The Group is currently assessing the impact of these standards
and plans to adopt the new standards on the required effective
date.
4. Prior period adjustments
As a result of the discontinuation of operations in Hong Kong
during 2015, the prior period figures in the condensed consolidated
income statement have been restated, together with any associated
notes.
The comparative amounts in the condensed cash flow statement for
the year ended 31 December 2014 have been restated to include loans
to joint ventures of GBP3.6 million within investing
activities.
5. Group specific accounting measures
To be able to provide readers with clear, meaningful and
consistent presentation of financial performance, the Group
reflects its underlying financial results in the 'business
performance' column within the condensed consolidated income
statement. Business performance excludes 'Other items' and
'Exceptional items', which are considered non-operational in their
nature and which are reported separately in a different column
within the condensed 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. Other items include
administration expenses, financial incomes and financial costs
associated with industrial disease claims and certain
post-acquisition charges, including amortisation of acquired
intangibles arising from business combinations.
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,
business acquisition costs and restructuring costs.
6. Significant judgements and estimates
Certain of the Group's accounting policies require critical
accounting estimates that involve subjective judgements and the use
of assumptions, some of which may relate to matters that are
inherently uncertain and susceptible to change.
a) Judgements
Areas of judgement that have the most significant effect on the
amounts recognised in the condensed consolidated financial
statements are:
(i) Revenue recognition and assessment of long term contract performance
The Group generally accounts for long term construction
contracts using the percentage of completion method as performance
of the contract progresses. This method requires judgement to
determine accurate estimates of the extent of progress towards
contract completion and may involve estimates of the total contract
costs, remaining costs to completion, total revenues, contract
risks and other judgements.
(ii) Carrying value of property, plant and equipment
Assessing whether property, plant and equipment may be impaired
requires a review for indicators of impairment and, where such
indicators exist, an estimate of the asset's recoverable amount by
reference to value in use. Management are required to exercise
significant judgement in reviewing for and identifying asset
indicators of impairment and subsequently calculating value in
use.
(iii) Trade and other receivables
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The Group provides for likely non-recovery of receivables to the
extent that the carrying value is more than the present value of
expected future cash flows. Assessing the value of the provision
requires significant management judgement and review of individual
receivables based upon individual customer creditworthiness,
current economic trends and analysis of historical bad debts.
(iv) Deferred tax assets
The Group recognises deferred tax assets on all applicable
temporary differences where it is probable that future taxable
profits will be available for utilisation. This requires management
to make judgements and assumptions regarding the amount of deferred
tax that can be recognised based on the magnitude and likelihood of
future taxable profits.
(v) Defined benefit pension plans
The cost and the obligation of the Group's defined benefit
pension plan is based on a number of selection assumptions. These
include the discount rate, inflation rate, salary growth, longevity
and expected return on the assets of the plan. Differences arising
from actual experience or future changes in assumptions will be
reflected in future periods.
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 GBP3.1 million is recorded at 31 December 2015 (2014: GBP9.7
million).
(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 2015 was GBP118.0
million (2014:GBP127.2 million).
(iii) Provision for industrial disease claims
To the extent that such costs can be reliably estimated as at 31
December 2015, a provision has been made for the costs which
the
6. Significant judgements and estimates (continued)
Group is expected to incur in respect of lodged and future
industrial disease claims for which the Board believes the Group to
be liable arising on alleged exposure to previously manufactured
asbestos products, notwithstanding the matters disclosed under note
22 'Industrial disease claim provision and contingent liabilities'.
The most recent full actuarial valuation was performed in 2013 and
the next full valuation is scheduled to be completed in early 2017
in respect of the period up to 31 December 2016. The amount of the
provision is based on historic patterns of claim numbers and
monetary settlements as well as published tables of projected
disease incidence. Key assumptions made in assessing the
appropriate level of provision include the period over which future
claims can be expected, the nature of claims received, the rate at
which claims will be filed, the rate of successful resolution as
well as future trends in both compensation payments and legal
costs. Management monitors claims received on an ongoing basis as
well as any other factors which would require a change to the
assumptions or trigger a full actuarial review in the current year.
When determining the appropriate level of provision, the Board has
considered various potential, threatened and actual claim types
which, relying on appropriate legal advice, it does not believe to
have legal merit and which are, accordingly, not provided for.
During 2015, changes in macroeconomic conditions necessitated a
revision to the discount rate and inflation rate assumptions,
giving rise to a decrease in the amount of the provision of GBP0.6
million (2014: increase of GBP8.2 million) with an equivalent
credit to profit or loss (2014: charge). The value of the provision
at 31 December 2015 is GBP95.5 million (2014: GBP98.2 million). See
note 17 for details of movements on the provision during the
year.
(iv) Income tax
Group entities can be subject to routine tax audits and also a
process whereby tax computations are discussed and agreed with the
appropriate authorities. Whilst the ultimate outcome of such tax
audits and discussions cannot be determined with certainty,
management estimates the level of required tax provisions on the
basis of professional advice and the nature of current discussions
with the tax authority concerned.
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 and the Group
reports three regional segments and a central support function. The
main profit measure used by the CODM in its review is adjusted
operating profit.
Each regional segment derives its revenues from the provision of
critical industrial services focussed on the energy and natural
resources sectors. No operating segments have been aggregated.
The segment information for the year ended 31 December 2015 is
as follows:
UK, Europe Asia Pacific
& CIS MENA GBPm Central Group
GBPm GBPm GBPm GBPm
2015
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Continuing operations
Revenue 395.8 174.6 141.0 - 711.4
Adjusted operating profit
/(loss) before joint ventures 31.7 22.0 2.6 (6.6) 49.7
Share of post-tax profit from
joint ventures 2.8 - - - 2.8
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Adjusted operating profit/(loss)
after franchise fees 34.5 22.0 2.6 (6.6) 52.5
Other and exceptional items (12.6)
Net finance costs (10.8)
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Profit before tax 29.1
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
UK, Europe Asia Pacific
& CIS MENA Central Group
2014 Restated GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Continuing operations
Revenue 388.5 175.6 126.4 - 690.5
Adjusted operating profit
/(loss) before joint ventures 38.5 16.6 1.6 (4.4) 52.3
Share of post-tax profit from - - - - -
joint ventures
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Adjusted operating profit/(loss)
after franchise fees 38.5 16.6 1.6 (4.4) 52.3
Other and exceptional items (12.6)
Net finance costs (9.7)
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
Profit before tax 30.0
--------------------------------- ------------ ------------ --------------------- ----------------- -------------
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 8.
There were no significant sales between segments in either
year.
7. Segment information (continued)
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Other segment items included in the condensed consolidated
income statement are as follows:
2015 GBPm UK, Europe Asia Pacific
& CIS MENA GBPm Central Group
GBPm GBPm GBPm GBPm
--------------------------------- ----------- --------- -------------------- ----------------- --------------
Depreciation (excluding
discontinued
operations) 5.2 6.5 4.2 - 15.9
Amortisation 3.4 - - - 3.4
--------------------------------- ----------- --------- -------------------- ----------------- --------------
UK, Europe Asia
& CIS MENA Pacific Central Group
2014 GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ------ --------- -------- ------
Depreciation (excluding discontinued
operations) 5.0 6.3 6.7 0.1 18.1
Amortisation 2.6 - - - 2.6
-------------------------------------- ----------- ------ --------- -------- ------
The geographical origin of revenue based on location of the entity
is analysed as follows:
Restated
2014
2015
Note GBPm GBPm
------------------------------------ --------- ------- ------- ------------- ---------------
Continuing operations
United Kingdom 385.7 378.4
Australia 113.6 96.7
Abu Dhabi 34.6 39.5
Qatar 54.6 56.6
Kingdom of Saudi Arabia 70.0 63.2
Singapore 0.8 2.9
Rest of the world 52.1 53.2
------------------------------------ --------- ------- ------- ------------- ---------------
Revenue from continuing operations 711.4 690.5
------------------------------------ --------- ------- ------- ------------- ---------------
Discontinued operations 12 5.3 10.3
------------------------------------ --------- ------- ------ ------------- -----------------
Total revenue 716.7 700.8
------------------------------------ --------- ------- ------ ------------- -----------------
The strategic report section in the Annual Report provides an
analysis of 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.
Revenue from continuing operations derived from maintenance
support services was GBP474 million (67%) (2014: GBP478 million
(69%)) and revenue derived from construction support services was
GBP237 million (33%) (2014: GBP212 million (31%)).
Revenue from the largest client represented 12% of total revenue
(2014: 15%) relating to activity across all geographic segments and
the top ten clients represented 45% of revenue (2014: 42%).
The segment assets and liabilities at 31 December 2015 and
capital expenditure for the year are as follows:
UK, Europe
& CIS MENA Central Unallocated Group
GBPm GBPm Asia Pacific GBPm GBPm GBPm
2015 GBPm
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Assets - continuing 174.5 162.6 74.4 23.6 134.4 569.5
Assets directly associated
with disposal group
held for sale (note 12) 0.2 - 0.8 - - 1.0
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Total assets 174.7 162.6 75.2 23.6 134.4 570.5
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Non-current assets included
in total assets
Goodwill and intangibles
- continuing 61.6 48.3 28.6 0.1 - 138.6
Other - continuing 35.5 30.9 18.4 0.2 29.7 114.7
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Total - continuing 97.1 79.2 47.0 0.3 29.7 253.3
Non-current assets - discontinued - - - - - -
operations
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Total non-current assets 97.1 79.2 47.0 0.3 29.7 253.3
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Liabilities - continuing 59.2 55.6 23.5 102.4 198.7 439.4
Liabilities - discontinued
operations - 0.1 - - - 0.1
Liabilities directly associated
with disposal group
held for sale (note 12) 0.5 - 1.2 - - 1.7
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Total liabilities 59.7 55.7 24.7 102.4 198.7 441.2
---------------------------------- ---------- ------ ------------- --------- ------------- -------
Capital expenditure - property,
plant and
equipment (note 16) 8.5 9.1 2.5 - - 20.1
---------------------------------- ---------- ------ ------------- --------- ------------- -------
7. Segment information (continued)
Included within Asia Pacific's total non-current assets of
GBP47.0 million (2014: GBP65.8 million) is GBP2.1 million (2014:
GBP2.1 million) that is located in Singapore. The geographical
origin of non-current assets held by the Group has not been
disclosed as the necessary information is not available and the
cost to develop it would be excessive.
Liabilities of discontinued operations of GBP0.1 million (2014:
GBP0.3 million) relate to liabilities held in India. Assets and
liabilities held for sale in both 2015 and 2014 relate to the
discontinuation of operations in Hong Kong and Kazakhstan
respectively.
The segment assets and liabilities at 31 December 2014 and
capital expenditure for the year are as follows:
UK,
Europe MENA Asia Central Unallocated Group
& CIS GBPm Pacific GBPm GBPm GBPm
2014 GBPm GBPm
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Assets -
continuing 120.8 115.6 82.3 124.0 132.4 575.1
Assets
directly
associated
with disposal
group held
for sale
(note 12) 2.6 - - - - 2.6
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Total assets 123.4 115.6 82.3 124.0 132.4 577.7
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Non-current
assets
included
in total
assets
Goodwill and
intangibles
- continuing 59.5 47.1 41.4 0.1 - 148.1
Other -
continuing 29.8 25.3 24.4 - 33.3 112.8
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Total -
continuing 89.3 72.4 65.8 0.1 33.3 260.9
Non-current - - - - - -
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March 16, 2016 03:01 ET (07:01 GMT)
assets -
discontinued
operations
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Total
non-current
assets 89.3 72.4 65.8 0.1 33.3 260.9
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Liabilities -
continuing 59.2 55.1 27.4 115.7 190.2 447.6
Liabilities -
discontinued
operations - 0.3 - - - 0.3
Liabilities
directly
associated
with disposal
group held
for sale
(note 12) 2.3 - - - - 2.3
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Total
liabilities 61.5 55.4 27.4 115.7 190.2 450.2
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Capital
expenditure -
property,
plant and
equipment
(note 16) 8.3 2.9 3.9 0.2 - 15.3
-------------- -------------- ----------- -------------- ---------------- ----------------------- --------------
Segment assets consist primarily of property, plant and
equipment, investments, intangible assets, inventories and trade
and other receivables. Segment liabilities consist of operating
liabilities.
Unallocated assets and liabilities
comprise: 2015 2014
------------------- -------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
----------------------------------- ------ ----------- ------ -----------
Deferred tax 20.7 5.4 24.3 7.5
Current tax - 6.0 - 7.6
Cash 81.4 - 78.0 -
Restricted funds: current 23.3 - 20.9 -
Restricted funds: non-current 9.0 - 9.0 -
Current borrowings - - - -
Non-current borrowings - 187.3 - 174.9
Derivatives - - 0.2 0.2
------------------------------------ ------ ----------- ------ -----------
Total unallocated 134.4 198.7 132.4 190.2
------------------------------------ ------ ----------- ------ -----------
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:
Restated
2015 2014
Note GBPm GBPm
-------------------------------------- -------------- -------------- ------------
Profit before tax 29.1 30.0
Other items 9a 3.4 11.7
Exceptional items 9b 9.2 0.9
Interest income on restricted funds 10 (0.3) (0.5)
Unwind of discount on provision for
industrial disease claims 10 3.3 3.4
-------------------------------------- -------------- -------------- ------------
Adjusted profit before tax 44.7 45.5
-------------------------------------- -------------- -------------- ------------
Operating profit 39.9 39.7
Other items 9a 3.4 11.7
Exceptional items 9b 9.2 0.9
-------------------------------------- -------------- -------------- ------------
Adjusted operating profit 52.5 52.3
-------------------------------------- -------------- -------------- ------------
Adjusted operating profit margin 7.4% 7.6%
------------------------------------- -------------- -------------- --------------
Adjusted operating profit 52.5 52.3
Depreciation - continuing operations 16 15.9 18.1
-------------------------------------- -------------- -------------- ------------
Adjusted EBITDA 68.4 70.4
-------------------------------------- -------------- -------------- ------------
Net debt 76.6 69.2
Unamortised borrowing arrangement
costs 2.0 2.9
Restricted funds 32.3 29.9
Less: cash transferred to assets of
disposal group held for sale 12 (1.0) (1.0)
-------------------------------------- -------------- -------------- ------------
Adjusted net debt 109.9 101.0
-------------------------------------- -------------- -------------- ------------
Finance costs (11.2) (11.0)
Unwind of discount on provision for
industrial disease claims 3.3 3.4
-------------------------------------- -------------- -------------- ------------
Adjusted finance costs (7.9) (7.6)
-------------------------------------- -------------- -------------- ------------
Certain central operations and management are based in the
Group's International Headquarters (IHQ) in Singapore with
responsibility for management and development of non-UK
intellectual property. Franchise agreements facilitate the charging
of franchise fees from IHQ to the Group's non-UK trading businesses
with such costs being reported through segment operating
profit.
The segmental adjusted operating profit before franchise fee
charges is as follows:
UK, Europe Asia Pacific
& CIS MENA GBPm Central Group
GBPm GBPm GBPm GBPm
2015
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Revenue 395.8 174.6 141.0 - 711.4
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Adjusted operating
profit
/(loss) before joint
ventures 31.7 25.4 6.9 (14.3) 49.7
Share of post-tax
result
of joint ventures 2.8 - - - 2.8
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Adjusted operating
profit
/(loss) 34.5 25.4 6.9 (14.3) 52.5
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
UK, Europe Asia Pacific
& CIS MENA Central Group
2014 Restated GBPm GBPm GBPm GBPm GBPm
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Revenue 388.5 175.6 126.4 - 690.5
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Adjusted operating
profit
/(loss) before joint
ventures 38.5 21.1 6.8 (14.1) 52.3
Share of post-tax - - - - -
result
of joint ventures
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
Adjusted operating
profit
/(loss) 38.5 21.1 6.8 (14.1) 52.3
--------------------- ------------------------ ------------ --------------------- ----------------- -------------
9. Other items and exceptional items
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March 16, 2016 03:01 ET (07:01 GMT)
a) Other items
2015 2014
GBPm GBPm
------------------------------------------------- --- ------- ------
Continuing operations
In operating profit:
Amortisation of intangibles arising on 3.4 2.6
business acquisitions
Post-acquisition management compensation 0.2 0.7
Actuarial (credit)/charge to provision
for industrial disease claims (0.6) 8.2
Other industrial disease claims expenses 0.4 0.2
------------------------------------------------------ ------- ------
Other items from continuing operations included
within operating profit 3.4 11.7
------------------------------------------------------ ------- ------
b) Exceptional items
2015 2014
Note GBPm GBPm
---------------------------------------------- ------- ------ ------
(i) Continuing operations
Acquisition related costs 21 0.4 0.9
Impairment of goodwill 8.8 -
Exceptional items from continuing operations
included within operating profit 9.2 0.9
---------------------------------------------- ------- ------ ------
2015 2014
GBPm GBPm
----------------------------------------------- ---- -------- ------
(ii) Discontinued operations
In loss from discontinued operations
Impairment of goodwill 3.4 6.1
Impairment of investment in joint venture - 0.8
Impairment of assets held for sale 1.8 2.8
Other 0.4 -
(Release)/charge of provision for exit costs (0.7) 1.2
Exceptional items included within loss from
discontinued operations 4.9 10.9
----------------------------------------------------- -------- ------
10. Finance income and costs
2015 2014
GBPm GBPm
--------------------------------- ------- -------
Interest income
Short-term bank deposits 0.1 0.1
Interest on pension assets - 0.7
Interest on restricted funds
(included in other items) 0.3 0.5
Finance income 0.4 1.3
---------------------------------- ------- -------
Interest expense
Bank borrowings (7.7) (7.4)
Finance leases (0.2) (0.2)
Unwind of discount on provision
for industrial disease claims
(included in other items) (3.3) (3.4)
Finance costs (11.2) (11.0)
---------------------------------- ------- -------
Net finance costs (10.8) (9.7)
---------------------------------- ------- -------
11. Income tax
Restated
2015 2014
GBPm GBPm
--------------------------------------- ------- ---------
Current tax
UK 2.1 1.5
Overseas 6.8 6.2
Adjustments in respect of prior years (1.1) (0.4)
Deferred tax
UK 1.0 0.5
Overseas (0.2) (0.7)
Adjustments in respect of prior years (0.5) 0.3
--------------------------------------- ------- ---------
Income tax expense 8.1 7.4
--------------------------------------- ------- ---------
The difference between the actual tax charge and the charge that
would have arisen using Jersey's standard corporate income tax rate
of 0% (2014: 0%) is explained in the table below:
Restated
2015 2014
GBPm GBPm
-------------------------------------------------- ------- ---------
Profit before tax 29.1 30.0
Tax calculated at the standard rate of corporate - -
income tax in Jersey of 0% (2014: 0%)
Adjustments in respect of prior year (1.6) (0.1)
Share option charge - 0.1
Effect of different overseas tax rates 6.1 5.5
Goodwill write-off 1.8 -
Unrelieved overseas tax 2.2 0.2
Deferred tax asset not recognised in respect of (0.3) 0.3
losses
Tax in respect of joint ventures (0.6) 0.1
Expenses non-deductible 1.1 2.2
Income not taxable (0.8) (0.8)
Change in tax rates 0.2 (0.1)
-------------------------------------------------- ------- ---------
Tax charge 8.1 7.4
-------------------------------------------------- ------- ---------
Included within the tax charge of GBP8.1 million (2014: GBP7.4
million) is a tax charge of GBP0.1 million (2014: credit of GBP1.8
million) relating to exceptional and other items. The local tax
rate is applied to the underlying costs or income however certain
exceptional costs due to their very nature will not have an
associated tax charge or credit. The overall effective rate applied
to these costs will vary year upon year depending on the location
and the nature of the cost.
Factors affecting current and future tax charges
As a Group involved in worldwide operations, Cape is subject to
several factors that may affect future tax charges, principally the
levels and mix of profitability in different jurisdictions, tax
rates imposed and tax regime reforms. Legislation has been enacted
in the UK to reduce the standard rate of corporation tax to 19%
from 1 April 2017 and 18% from 1 April 2020. Any UK deferred tax
balances have therefore been measured at an appropriate rate
depending on when the deferred tax balance is expected to
unwind.
12. Discontinued operations and assets held for sale
Analysis of the result of discontinued operations and the result
recognised on the re-measurement of assets and liabilities of the
disposal group is as follows:
Restated
2015 2014
GBPm GBPm
---------------------------------------------- ------- ---------
Revenue 5.3 10.3
Expenses (5.6) (11.9)
---------------------------------------------- ------- ---------
(Loss) before tax of discontinued operations (0.3) (1.6)
Deferred income tax (charge)/credit (0.2) 0.3
Exclude: share of loss attributable 0.2 -
to non-controlling interest
---------------------------------------------- ------- ---------
(Loss) after tax of discontinued operations
before exceptional items (0.3) (1.3)
Exceptional items:
Impairment of goodwill (3.4) (6.1)
Impairment of investment in joint venture - (0.8)
Impairment of assets held for sale (1.8) (2.8)
Other (0.4) -
Release/(charge) of provision for exit
costs 0.7 (1.2)
--------------------------------------------- ---------------- ------------
(Loss) after tax of discontinued operations
after exceptional items (5.2) (12.2)
--------------------------------------------- ---------------- ------------
Discontinued operations in 2015 and 2014 primarily relate to the
planned termination of operations in Hong Kong and Kazakhstan
respectively.
The major classes of assets and liabilities directly associated
with the disposal group classified as held for sale are split as
follows:
Restated
2015 2014
Assets directly associated with disposal Note GBPm GBPm
group held for sale
------------------------------------------------- ------- ------- ---------
Property, plant and equipment 16 - 1.8
Investment held in joint venture - 0.8
Trade and other receivables 1.8 2.6
Cash 1.0 1.0
Goodwill 15 3.4 6.1
------------------------------------------------- ------- ------- ---------
Assets directly associated with disposal
group held for sale before impairment 6.2 12.3
Impairment of assets associated with disposal
group held for sale (5.2) (9.7)
------------------------------------------------- ------- ------- ---------
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Assets directly associated with disposal
group held for sale after impairment 1.0 2.6
2015 2014
Liabilities directly associated with disposal GBPm GBPm
group held for sale
------------------------------------------------- ------- ------- ---------
Trade and other payables (1.2) (1.1)
------------------------------------------------- ------- ------- ---------
Liabilities directly associated with disposal
group held for sale before impairment (1.2) (1.1)
Provision for exit costs (0.5) (1.2)
------------------------------------------------- ------- ------- ---------
Liabilities directly associated with disposal
group held for sale after impairment (1.7) (2.3)
------------------------------------------------- ------- ------- ---------
Net (liabilities)/ assets of disposal group
held for sale (0.7) 0.3
------------------------------------------------- ------- ------- ---------
The net liabilities (2014: net assets) of the disposal group
classified as held for sale of GBP0.7 million (2014: GBP0.3 million
asset) at 31 December 2015 is stated after the Group recognised an
impairment charge of GBP5.1 million (2014: GBP9.7 million) on those
assets and the recognition of a provision for exit costs of GBP0.5
million (2014: GBP1.2 million).
13. Earnings per ordinary share
Basic earnings per share (EPS) for the year equals the profit
after tax attributable to the Company's ordinary shareholders of
GBP15.5 million (2014: profit of GBP10.4 million) divided by the
weighted average number of issued ordinary shares of 121,072,777
(2014: 121,040,516).
When the Group makes a profit from continuing operations,
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 from
continuing operations, 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 and attainment of attaching
performance criteria can be determined with appropriate certainty.
Out of the 1,237,636 options granted in the current period,
1,040,113 options are not considered dilutive.
2015 2014
Shares Shares
--------------------------------------- ----------- -----------
Basic weighted average number
of shares 121,072,777 121,040,516
Adjustments:
Weighted average number of outstanding
share options 563,679 61,245
--------------------------------------- ----------- -----------
Diluted weighted average number
of shares 121,636,456 121,101,761
--------------------------------------- -----------
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
31,160 (2014: 63,421).
2015 Restated 2014
Earnings EPS Earnings EPS
GBPm pence GBPm pence
Basic earnings/(loss) per share
Continuing operations 20.7 17.1 22.6 18.7
(10.1)
Discontinued operations (5.2) (4.3) (12.2) (10.1)
Basic earnings per share 15.5 12.8 10.4 8.6
Diluted earnings/(loss) per share
Continuing operations 20.7 17.0 22.6 18.7
(10.1)
Discontinued operations (5.2) (4.3) (12.2) (10.1)
Diluted earnings per share 15.5 12.7 10.4 8.6
Adjusted basic earnings per share
- continuing operations
Earnings from continuing operations 20.7 17.1 22.6 18.7
Amortisation of intangibles 3.4 2.8 2.6 2.1
Post-acquisition management compensation 0.2 0.2 0.7 0.6
Exceptional items 9.2 7.5 0.9 0.8
Industrial disease related costs and
interest income 2.8 2.3 11.3 9.3
Tax effect of adjusting items 0.1 0.1 (1.8) (1.5)
Adjusted basic earnings per share 36.4 30.0 36.3 30.0
Adjusted diluted earnings per share
- continuing operations
Earnings from continuing operations 20.7 17.0 22.6 18.7
Amortisation of intangibles 3.4 2.8 2.6 2.1
Post-acquisition management compensation 0.2 0.2 0.7 0.6
Exceptional items 9.2 7.5 0.9 0.8
Industrial disease related costs and
interest income 2.8 2.3 11.3 9.3
Tax effect of adjusting items 0.1 0.1 (1.8) (1.5)
Adjusted diluted earnings per share 36.4 29.9 36.3 30.0
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 and interest income and the tax impact
of these items.
14. Dividends per share
An interim dividend was paid on 9 October 2015 amounting to 4.5
pence per share (2014: 4.5 pence per share). Interim dividends are
recognised when paid. A final dividend in respect of the year ended
31 December 2015 of 9.5 pence per share (2014: 9.5 pence per
share), amounting to GBP11.5 million, is to be proposed at the
Annual General Meeting convened for 11 May 2016, making a total
dividend of 14.0 pence per share for the year (2014: 14.0 pence per
share).
These condensed consolidated financial statements do not reflect
this final dividend payable.
15. Intangible assets
Other customer
Supply related
Goodwill Trademarks agreements intangibles Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2014 243.5 - - - 5.7 249.2
Acquired through business
combination 20.1 6.8 2.6 13.8 - 43.3
Additions - - - - 0.1 0.1
Exchange adjustments (0.5) - - - - (0.5)
Transfer to assets held
for sale (note 12) (6.1) - - - - (6.1)
At 31 December 2014 257.0 6.8 2.6 13.8 5.8 286.0
Acquired through business
combination (note 21) 2.3 - - 3.1 - 5.4
Disposals - - - - (0.1) (0.1)
Exchange adjustments (7.1) - - - - (7.1)
Transfer to assets held
for sale (note 12) (3.4) - - - - (3.4)
At 31 December 2015 248.8 6.8 2.6 16.9 5.7 280.8
Amortisation and impairment
At 1 January 2014 129.8 - - - 5.5 135.3
Amortisation charge - 0.3 0.7 1.5 0.1 2.6
At 31 December 2014 129.8 0.3 0.7 1.5 5.6 137.9
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Amortisation charge - 0.3 0.9 2.1 0.1 3.4
Impairment 8.8 - - - - 8.8
Disposals - - - - (0.1) (0.1)
Exchange adjustments (7.8) - - - - (7.8)
At 31 December 2015 130.8 0.6 1.6 3.6 5.6 142.2
Net book amount:
At 1 January 2014 113.7 - - - 0.2 113.9
At 31 December 2014 127.2 6.5 1.9 12.3 0.2 148.1
At 31 December 2015 118.0 6.2 1.0 13.3 0.1 138.6
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 cash-generating unit (CGU) is based on a value in use
calculation.
GBP8.8m of goodwill was impaired in the year in relation to the
Asia CGU, reflecting a downward revision in the shorter-term cash
flow projections in light of current market conditions.
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 CGUs' 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 CGUs were
then removed from the discounted cash flows. Cash flow projections
were calculated in real rather than nominal terms.
15. Intangibles (continued)
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 CGUs (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.
Given the current uncertainty surrounding market conditions,
management have taken a prudent view on the real long-term
growth rates applied to the cash flow projections for the
purpose of impairment testing, as indicated below. Management
are of the opinion that over the short to medium term, actual
growth rates will be in excess of those used in the
projections.
The assumptions used in the value-in-use
calculations were as follows:
Goodwill Discount Long term Headroom
GBPm rate growth GBPm
rate
UK 18.9 10.2% - 101.4
MENA 48.2 11.1% - 173.6
Australia 19.2 11.4% - 9.5
Asia 9.3 13.0% - -
Motherwell Bridge 20.1 9.7% - 77.1
Cape Engineering Services 2.3 10.0% - 13.0
118.0 374.6
Sensitivities
The table below discloses what changes in the key assumptions
would cause the carrying value of the CGUs to exceed their
recoverable amounts:
Discount Long term
rate to growth rate
reach impairment to reach
impairment
UK 35.1% Note*
MENA 36.2% Note*
Australia 14.9% (6.3%)
Asia - -
Motherwell Bridge 25.9% (45.4%)
Cape Engineering Services 38.4% Note*
* Note: while the level of headroom is significant, it is not
practicable to calculate.
Sensitivities were also applied to the five year EBITDA compound
annual growth rates, again there was sufficient headroom in each of
the CGUs with flat or negative growth rates still providing
headroom.
16. Property, plant and equipment
During the year ended 31 December 2015, the Group acquired
assets with a cost of GBP20.1 million (2014: GBP15.3 million) and
received proceeds from asset sales of GBP2.9 million (2014: GBP1.3
million) as shown in the condensed consolidated cash flow statement
representing the actual cash outflow.
Assets
Land and buildings Fixtures Plant under course
GBPm and and machinery of construction
fittings GBPm GBPm Total
GBPm GBPm
Cost
At 1 January 2014 19.8 9.4 167.4 - 196.6
Exchange adjustments 0.2 - 3.0 - 3.2
Additions - 0.9 14.1 0.3 15.3
Acquired through business
combination 1.7 - 0.6 - 2.3
Disposals (0.8) (0.2) (18.4) - (19.4)
Transfer to assets held
for sale (note 12) - - (5.9) - (5.9)
At 31 December 2014 20.9 10.1 160.8 0.3 192.1
Exchange adjustments - - 2.8 - 2.8
Additions 0.6 0.6 18.1 0.8 20.1
Reclassification (0.2) - - 0.2 -
Acquired through business
combination (note 21) 0.5 - 0.1 - 0.6
Disposals (0.7) (1.4) (9.7) - (11.8)
At 31 December 2015 21.1 9.3 172.1 1.3 203.8
Accumulated depreciation
and impairment
At 1 January 2014 4.4 8.1 102.8 - 115.3
Exchange adjustments 0.1 (0.1) 2.4 - 2.4
Charge for the year 0.9 0.8 16.6 - 18.3
Impairment loss - - 0.1 - 0.1
Disposals (0.2) (0.1) (16.9) - (17.2)
Transfer to assets held
for sale (note 12) - - (4.1) - (4.1)
At 31 December 2014 5.2 8.7 100.9 - 114.8
Exchange adjustments 0.1 0.2 2.0 - 2.3
Charge for the year 1.1 0.8 14.0 - 15.9
Disposals (0.3) (1.3) (7.8) - (9.4)
At 31 December 2015 6.1 8.4 109.1 - 123.6
Net book amount
At 1 January 2014 15.4 1.3 64.6 - 81.3
At 31 December 2014 15.7 1.4 59.9 0.3 77.3
At 31 December 2015 15.0 0.9 63.0 1.3 80.2
Included within the depreciation charge for the year of GBP15.9
million (2014: GBP18.3 million) is an amount of GBPnil (2014:
GBP0.2 million) relating to discontinued operations. The remaining
GBP15.9 million (2014: GBP18.1 million) relating to continuing
operations has been charged to cost of sales in the condensed
consolidated income statement.
Exchange adjustments relate to the translation of assets held by
foreign operations into the presentation currency.
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The Group leases property, plant and equipment under finance
lease agreements. At 31 December 2015, the net carrying amount of
property, plant and equipment includes the following amounts held
under finance lease: plant and machinery GBP0.6 million (2014:
GBP0.7 million) and land and buildings GBP1.8 million (2014: GBP1.5
million). Additions during the year include GBPnil of plant and
machinery under finance leases.
17. Provisions
Industrial
Onerous disease Total
contracts Legal Other Total claims Group
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2015 9.7 6.6 4.3 20.6 98.2 118.8
Acquired through
business
combinations (note 21) - - 0.6 0.6 - 0.6
Utilised (5.9) (2.9) (1.5) (10.3) (5.4) (15.7)
Charged to the income
statement 1.4 - 0.7 2.1 - 2.1
Released to the income
statement (2.3) (2.3) (0.3) (4.9) (0.6) (5.5)
Discount unwind - - - - 3.3 3.3
Foreign exchange 0.2 - (0.1) 0.1 - 0.1
At 31 December 2015 3.1 1.4 3.7 8.2 95.5 103.7
2015
Current provisions 2.3 1.4 1.8 5.5 5.3 10.8
Non-current provisions 0.8 - 1.9 2.7 90.2 92.9
3.1 1.4 3.7 8.2 95.5 103.7
2014
Current provisions 8.8 6.6 2.3 17.7 4.7 22.4
Non-current provisions 0.9 - 2.0 2.9 93.5 96.4
9.7 6.6 4.3 20.6 98.2 118.8
Onerous contracts
A provision is made for onerous contracts where it is considered
that the contract costs are likely to exceed revenues in future
years. Inherent uncertainties in measuring the provision relate to
estimates of the future costs expected to be incurred and of
revenues expected to be received. The majority of this is expected
to be settled in 2016, with the remaining balance expected to be
settled in 2017.
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 settlements. Uncertainties relate to
whether the Group is successful in defending any action. These are
expected to be settled in 2016.
Other
Other provisions comprise of various provisions including
disposal costs on businesses being divested, restructuring
provisions, property related provisions and contingent
consideration on acquisitions. Inherent uncertainties in measuring
the provision relate to estimates of disposal costs associated with
any businesses being divested, estimates of expected restructuring
costs and expected property costs and estimates of contingent
consideration on acquisitions. The costs are expected to be settled
in 2016 and 2017.
Industrial disease claims
To the extent that such costs can be reliably estimated as at 31
December 2015, a provision has been made for the costs, which the
Group is expected to incur in respect of lodged and future
industrial disease claims for which the Board believes the Group to
be liable, arising on alleged exposure to previously manufactured
asbestos products, notwithstanding the matters disclosed under note
22 'Industrial disease claim provision and contingent liabilities'.
The most recent full actuarial valuation was performed in 2013 and
the next full valuation is scheduled to be completed in early 2017
in respect of the period up to 31 December 2016. The amount of the
provision is based on historic patterns of claim numbers and
monetary settlements as well as published tables of projected
disease incidence. Key assumptions made in assessing the
appropriate level of provision include the period over which future
claims can be expected, the nature of claims received, the rate at
which claims will be filed, the rate of successful resolution as
well as future trends in both compensation payments and legal
costs. Management monitors claims received on an ongoing basis as
well as any other factors which would require a change to the
assumptions or trigger a full actuarial review in the current year.
When determining the appropriate level of provision, the Board has
considered various potential, threatened and actual claim types
which, relying on appropriate legal advice, it does not believe to
have legal merit and which are, accordingly, not provided for.
The provision for industrial disease claims is discounted at
2.67% (2014: 2.5%) being the appropriate risk free rate as at the
balance sheet date, over the term of the liabilities, being
approximately 40 years.
The directors anticipate that, assuming no material
deterioration in trading performance, the Group will 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 will be sufficiently funded to satisfy all other UK
claims settled outside of the Scheme of Arrangement.
18. Share capital and reserves
2015 2014
Number 2015 Number of 2014
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 121,103,937 30.3 121,103,937 30.3
Issue of shares - - - -
Exercise of share options - - - -
------
At 31 December 121,103,937 30.3 121,103,937 30.3
------
plc Scheme share
Authorised, issued and fully
paid at 1 January and 31 December 1 - 1 -
------
As at 31 December 2015, 31,160 (2014: 31,160) 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
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.
Share based payments
The Performance Share Plan (PSP) is the conditional award of
ordinary shares granted at no cost to the participant employees or
executive directors of the Group. Awards are made upon the terms
set out in the plan and such other additional terms as the Board
shall determine. Depending on the scheme, vesting of these awards
is subject to Cape plc's Adjusted Diluted Earnings Per Share (DEPS)
meeting the specified performance criteria over a three year
vesting period.
The final year performance criteria for the 2012 awards were:
adjusted diluted EPS growth of RPI plus 3% for employees and RPI
plus 5% for executive directors for the minimum of 30% of the
shares awarded to vest, and EPS growth of RPI plus 10% for
employees and RPI plus 12% for executive directors for all of the
shares awarded to vest, calculated on an annually compounded basis.
The contractual life of the award is three years and is subject to
continued employment.
For the 2013 award specific EPS targets for the final year of
the vesting period were set to 29 pence for the minimum of 30% of
the shares awarded to vest and 36 pence for all of the shares
awarded to vest. The contractual life of the award is three years
and is subject to continued employment.
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The final year performance criteria for the 2014 awards are
based on the 2013 adjusted diluted EPS growth of the Retail Price
Index (RPI) plus 3% for the minimum of 30% of the shares awarded to
vest, and EPS growth of RPI plus 10% for all the shares awarded to
vest, calculated on an annual compounded basis. The contractual
life of the award is three years and is subject to continued
employment.
The final year performance criteria for the 2015 awards are
based on the 2014 adjusted diluted EPS growth of the Retail Price
Index (RPI) plus 3% for the minimum of 30% of the shares awarded to
vest, and EPS growth of RPI plus 10% for all the shares awarded to
vest, calculated on an annual compounded basis. The contractual
life of the award is three years and is subject to continued
employment.
The shares issued under the PSP have an exercise price of GBPnil
and under the fair value model used by the Company are deemed to
have a fair value equivalent to the share price on the day of grant
less the fair value of the dividends forgone during the vesting
period. Therefore, the shares granted at 19 March 2015 have a fair
value of 201.5 pence (2014 restated: 273.2 pence).
The Employee Incentive Plan (EIP) allows the Group to grant
options to directors and senior employees. The last tranche of this
scheme was awarded in 2008. The EIP carries a non-market based
performance criteria. The contractual life of the options is ten
years. The options become exercisable on the third anniversary of
the date of grant, subject to a growth in earnings per share over
that period
18. Share capital and reserves (continued)
exceeding an average 3% compounded annually above the growth in
the consumer price index over the same period. Exercise of an
option is subject to continued employment.
Options are valued using the Black-Scholes option pricing model.
The fair value per option granted and the assumptions used in the
calculation for the current year are as follows:
Employee
Incentive
Plan
Weighted average fair value at measurement
date 80.9p
Share price at grant date 269.0p
Exercise price 269.0p
Vesting period 3 years
Expected option life 3.95 years
Risk free interest rate 2.18%
Expected share price volatility 28%
The expected share price volatility is based on historic
volatility. The expected option life is the average expected period
to exercise. The risk free rate of return is the yield on a
five-year zero coupon UK Government bond. The assumed dividend
yield is zero.
The number and weighted average exercise price of the share
options under the PSP and the share awards under the EIP are as
follows:
Number of Number
share options of
Performance Share 2015 share options
Plan 2014
Outstanding at 1 January 2,352,771 1,823,127
Exercised - (194,470)
Granted 1,237,636 1,091,088
Forfeited (246,279) (117,735)
Lapsed (286,498) (249,239)
Outstanding at 31
December 3,057,630 2,352,771
Out of the 3,057,630 outstanding PSP awards (2014: 2,352,771),
nil shares were exercisable (2014: nil). Nil awards vested in 2015
(2014: nil). All PSP share options are at no cost to the
participant.
Weighted Weighted
average Number average Number
exercise price of share exercise of share
price
2015 options 2014 options
Employee Incentive Plan pence 2015 pence 2014
Outstanding at 1 January 269.0 10,000 269.0 85,000
Exercised - - - -
Forfeited - - 269.0 (75,000)
Outstanding at 31 December 269.0 10,000 269.0 10,000
All of the options outstanding at 31 December 2015 were
exercisable (2014: all were exercisable). No options were exercised
in the year (2014: none).
Share options and awards outstanding at the end of the year have
the following expiry date and exercise prices:
Performance Share Plan expiry date 2015 2014
20 April 2017 - 192,016
29 June 2017 - 96,522
31 March 2018 913,798 985,874
31 March 2019 943,980 1,078,359
19 March 2020 1,199,852 -
3,057,630 2,352,771
On 19 March 2015, 1,237,636 share options were awarded to
executive directors and employees under the Performance Share Plan
which vest after three years subject to performance criteria being
met (2014: 1,091,088). If the criteria are met, the awards vest at
no cost to the employees and executive directors.
Exercise
price per
Employee Incentive Plan share pence 2015 2014
expiry dates
-----------
22 March 2017 269.0 10,000 10,000
-----------
10,000 10,000
-------------
18. Share capital and reserves (continued)
The total credit for the year relating to employee share based
payment plans was GBP0.4 million (2014: charge of GBP0.6 million),
all of which related to equity settled share based payment
transactions.
At 31 December 2015, there is an amount of GBP0.3 million (2014:
GBP0.4 million) included within 'other' provisions of GBP3.7
million (2014: GBP4.3 million) as per note 17, which relates to
national insurance payable on share based payment charges.
19. Cash generated from operations
a) Reconciliation of Group profit before tax to cash generated
from continuing and discontinued operations
Restated
2015 2014
GBPm GBPm
Cash flows from operating activities
Continuing operations
Profit before tax 29.1 30.0
Finance costs - net 10.8 9.7
Share of post-tax result of joint ventures (2.8) -
Other items (2.1) (0.2)
Payments made on behalf of IDC Scheme (2.2) (3.4)
Exceptional items - impairment of goodwill 8.8 -
Share option (credit)/charge (0.4) 0.6
Depreciation and amortisation 19.3 20.7
Difference between pension charge and cash
contributions 0.8 1.3
(Gain)/loss on sale of property, plant and
equipment (0.4) 0.1
Decrease/(increase) in inventories 2.7 (2.0)
(Increase) in trade and other receivables (7.9) (18.9)
Increase in trade and other payables 9.0 2.6
(Decrease)/Increase in provisions (13.1) 4.2
Cash generated from continuing operations 51.6 44.7
Discontinued operations
Loss before tax (0.3) (1.6)
Other items (4.9) (10.6)
Impairment of goodwill and assets held for 5.2 9.7
sale
Depreciation - 0.2
Loss on sale of property, plant and equipment - 0.8
Decrease in inventories - 1.1
Decrease in trade and other receivables 1.1 2.9
(Decrease)/increase in trade and other payables (0.8) 0.6
Cash reclassified to disposal group held for (0.1) (1.0)
sale
Tax paid - (0.3)
Increase/(decrease) in provisions 0.1 (0.6)
Cash used in discontinued operations 0.3 1.2
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In the condensed consolidated cash flow statement, proceeds from
sale of property, plant and equipment comprise:
2015 2014
GBPm GBPm
Net book amount 2.5 2.2
Gain/(loss) on disposal of property, plant
and equipment - continuing operations 0.4 (0.1)
(Loss) on disposal of property, plant and equipment
- discontinued operations - (0.8)
Proceeds from disposal of property, plant and
equipment - continuing operations 2.9 1.3
b) Analysis of cash flows relating to restricted deposits
2015 2014
GBPm GBPm
At 1 January 29.9 31.3
Payment of Scheme creditors (3.7) (3.7)
Interest received 0.3 1.7
Receipt of funds 6.2 0.6
Transfer of funds (0.4) -
At 31 December 32.3 29.9
Restricted deposits include funds held to settle a tax liability
and scheme cash which is used to fund industrial disease
claims.
20. Reconciliation of net cash flow to movement in net debt
(excluding restricted deposits)
2015 2014
GBPm GBPm
Net increase in cash and cash equivalents 3.4 4.4
Movement in obligations under finance leases - -
Repayment on revolving facility - 130.6
Drawing on borrowings (13.2) (167.9)
Finance leases and borrowings on acquisition (0.8) (5.6)
Foreign exchange movements 1.8 (0.4)
Net movement in unamortised borrowing arrangement - (2.9)
costs
Cash transferred to disposal group held for sale (0.1) 1.0
Movements in adjusted net debt during the year (8.9) (40.8)
Adjusted net debt excluding restricted deposits
- opening (101.0) (60.2)
Adjusted net debt excluding restricted deposits
- closing (109.9) (101.0)
Adjusted net debt excluding restricted deposits is calculated by
deducting current and non-current borrowings from cash and cash
equivalents.
21. Business acquisitions
On 13 May 2015, the Group acquired 100% of the voting shares of
Redhall Engineering Solutions Limited, a UK incorporated entity
that provides a range of maintenance services including specialist
pipe repair, tank repair and shutdown services to the process and
downstream oil and gas industries. On 8 July 2015, the entity's
name was changed to Cape Engineering Services Limited (CESL).
The Group acquired the business to supplement both its product
portfolio and customer base. The acquisition has been accounted for
using the acquisition method.
The fair value of the identifiable assets and liabilities of the
acquired entity as at the date of acquisition were:
Fair value
recognised
on acquisition
GBPm
Assets
Property, plant and equipment 0.6
Trade and other receivables 6.9
Deferred tax asset 0.4
Intangible assets 3.1
11.0
Liabilities
Trade and other payables (5.8)
Provision (0.6)
Borrowings (6.1)
Deferred tax liabilities (0.6)
(13.1)
Total identifiable net liabilities at
fair value (2.1)
Goodwill arising on acquisition 2.3
Purchase consideration transferred 0.2
Analysis of cash flows on acquisition:
Purchase consideration 0.2
Settlement of debt 5.3
Working capital contribution 0.7
Total cash outflows 6.2
The acquired intangible assets comprise customer-related
intangibles of GBP3.1 million. At the date of acquisition, both the
gross contractual value and the fair value of receivables was
GBP6.9 million.
21. Business acquisitions (continued)
The condensed consolidated financial statements include the
results of CESL from the date of acquisition, contributing GBP27.6
million of revenue and GBP1.8 million to profit before tax from
continuing operations of the Group. Had the acquisition taken place
on 1 January 2015, it would have contributed revenue of GBP37.6
million and profit before tax for the Group from continuing
operations of GBP2.1 million.
The goodwill recognised on the acquisition is attributable to
the value of the assembled workforce, expected synergies and other
benefits arising from combining the CESL operations into the Group.
The goodwill is not deductible for income tax purposes.
Acquisition-related costs of GBP0.4 million have been charged to
exceptional items through continuing operations. Amortisation of
intangible assets acquired as part of the transaction of GBP0.4
million has been charged to other items through continuing
operations.
22. Industrial disease claim provision and contingent
liabilities
The Board considers that the provision of GBP95.5 million for
industrial disease claims as at 31 December 2015 captures all
expected material industrial disease scheme liabilities for which
the Board believes the Group to be liable at the balance sheet
date.
The Group continues to receive claims, from both individuals and
insurance companies, in connection with historical alleged exposure
to asbestos. Where claims are determined to have merit, the costs
are provided for and claims are settled in the ordinary course,
otherwise, claims are defended. As legal precedent in the area of
industrial disease claims continues to evolve, new developments and
new types of claims give rise to inherent uncertainty in both the
future level of asbestos-related disease claims and of the legal
and other costs arising from such claims. If any such claim were to
be successful, it might lead to future claims against the Group
which may result in significant additional liability over and above
that recognised under the current provision.
The Group has previously disclosed an increase in the number of
product liability claims experienced by the Group. In particular,
Cape Intermediate Holdings Limited (CIH) has received claims from
both Aviva plc and RSA Group in respect of historic and current
payments made by them in their capacity as providers of employer
liability insurance in relation to claims by employees and former
employees of third-party companies arising from asbestos-related
diseases (Insurer PL Claims). All the Insurer PL Claims relate to
damages and costs paid by the relevant insurer in respect of claims
arising in respect of mesothelioma disease.
A six-week trial in respect of the Insurer PL Claims has been
listed to commence on 16 January 2017. The Board has received legal
advice from leading counsel that the Insurer PL Claims place very
substantial evidential burdens upon the claimants, are based upon
novel legal arguments and are without precedent. As a result of the
legal advice received, the Board continues to believe that these
Insurer PL claims are without merit and they are therefore being
vigorously defended; accordingly no provision has been made. The
Board has also received legal advice from leading counsel that
these Insurer PL Claims would constitute scheme claims as defined
in the Cape Scheme, a copy of which has been filed with the
Registrar of Companies, which is also on the Cape plc website
www.capeplc.com/investors/shareholder-information/shareholder-documents.
Cape's potential liability in respect of the Insurer PL Claims
outlined above and from any potential further claims and associated
costs cannot be accurately estimated at this time. Notwithstanding
that the Board believes that the Insurer PL claims do not have a
realistic chance of succeeding, an adverse decision of the court
could have material and continuing impacts on the Group and its
stakeholders, including but not limited to the implementation of
the Group's strategic plans, potentially including the Company's
capacity to pay a dividend, and a reduction in the percentage of
each claim paid out to individual claimants under the Scheme.
During 2014, a fatality of a Cape employee was suffered at a
client's offshore installation. The investigation by the enforcing
authorities is ongoing. At the date of the statement of financial
position no amounts have been provided in respect of this matter.
It is not practicable to provide an estimate of the financial
effect and there is uncertainty relating to the amount or timing of
any outflow.
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