TIDMCIU
RNS Number : 2138Z
Cape plc
13 March 2017
13 March 2017
Cape plc
("Cape" or the "Company", and together with its subsidiaries,
the "Group")
Product liability ("PL") litigation settlement and industrial
disease claim ("IDC") update
Cape plc (CIU.LN), an international leader in the provision of
critical industrial services to the energy and natural resources
sectors, today issues the following industrial disease claim
update.
Background
In 2006 a Court Approved Scheme of Arrangement ("Scheme") was
established to administer the settlement of valid claims against
Cape relating to its historical asbestos activities, whilst at the
same time protecting the Company from the potential threat of
insolvency. The Scheme has operated very effectively; Cape has met
its obligations to fund the Scheme and valid claims have been paid
out without reduction. To date, over GBP30m has been paid to those
who have become ill or to their dependents.
Settlement of insurer product liability claims
As first disclosed in the Group's 2015 Preliminary Results and
as most recently updated in the November 2016 trading update, the
Group is engaged in litigation in relation to a number of product
liability claims ("Insurer PL Claims"). This litigation ("Insurer
PL Litigation") was funded by Aviva plc, RSA Group and Zurich
Insurance Group ("Insurer Litigants") and relates to historic
employer liabilities of the Insurer Litigants.
As also previously disclosed, the Board has been evaluating
options to minimise the potential impact of the Insurer PL
Litigation on the Group and its stakeholders. Following engagement
with the Insurer Litigants, the Group reached agreement on 12 March
2017 to settle the Insurer PL Litigation ("Settlement Agreement")
that enables this litigation to be resolved outside of the court
process.
The settlement of the Insurer PL Litigation does not imply any
acceptance of liability on Cape's behalf. Following the end of the
trial on 23 February 2017, the Board received an updated opinion
from Leading Counsel which reinforced the Board's view that the
merits of the Group's defence are persuasive and that there are
substantial evidential burdens upon the Insurer Litigants.
Nonetheless, and as previously disclosed, the Board is mindful that
there remains a risk that the Insurer PL Litigation could have a
material adverse impact on the Scheme, and in turn upon the Group
and its stakeholders. The Board has therefore concluded that it is
in the best interests of Cape and its shareholders to settle at the
agreed level outlined below, thus removing a significant risk to
the business, removing the distraction of a likely protracted
appeals process and enabling management to focus on the development
of the core business.
The Settlement Agreement provides that an upfront payment of
GBP18m, inclusive of substantial legal costs, will be paid to the
Insurer Litigants immediately, with a deferred payment of up to
GBP34.5m payable to the Insurer Litigants over the period from 2018
to 2023. The maximum amount payable under the Settlement Agreement
has been included in the overall IDC provision at 31 December 2016
and will be paid out of the Group's existing cash resources.
Insurer employer liability claims
The Settlement Agreement is separate from the litigation
relating to the employer liability claims ("Insurer EL Claims")
brought by Aviva plc. The Company has previously disclosed that,
following a determinant judgment on 19 July 2016, Cape Intermediate
Holdings Limited ("CIH") was seeking leave to appeal a number of
aspects of such judgment and that the Company had increased the
provision held against industrial disease claims by GBP9.7 million.
CIH has now been granted leave to appeal on the majority of
potential appeal issues it had raised. At the same time, Aviva plc
was granted leave to cross-appeal. The appeal hearing will be held
on 25/26 July 2017.
Triennial valuation and provision
Under the rules of the Scheme, the Group is required to carry
out an actuarial revaluation of its existing IDC liability every
three years. The latest valuation was completed on 31 January 2017
in respect of the liability as at 31 December 2016 and includes the
latest claims experience and actuarial assumptions.
The total IDC provision as at 31 December 2016 increased to
GBP172.5m as a result of a number of factors including the
reduction in the discount rate used in the actuarial valuation, the
provision recognised in the 2016 interim results for the Insurer EL
Claims, an additional provision relating to the Insurer PL Claims
and a consideration of potential further claims of a similar
nature.
Scheme health
As at 31 December 2016, the Scheme had assets of approximately
GBP42m. The Cape directors anticipate that, assuming no material
deterioration in trading performance and no material change in
legal precedent or judgment, the Group will be able to sufficiently
fund its subsidiary Cape Claims Services Limited to enable it to
satisfy all claims that fall to be settled under the Scheme, with
valid claimants being compensated without deduction.
Details of the Scheme have been filed with the Registrar of
Companies and can also be found on the Cape plc website
(/corporate-responsibility/asbestos-scheme-of-arrangement.aspx).
Cape will announce its results for the full year ending 31
December 2016 on 15 March 2017.
The Settlement Agreement constitutes a Class 2 transaction for
the purposes of the UK Financial Authority's Listing Rules and, as
such, does not require Cape shareholders' approval.
This announcement contains inside information
Enquiries
Cape plc +44 (0) 1895 459 979
Joe Oatley, Chief Executive
Michael Speakman, Chief Financial Officer
Ian Wood, Head of Investor Relations
Buchanan
Bobby Morse, Ben Romney, Chris Judd +44 (0) 207 466 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. For details of the Group's principal risks, please
see pages 18 to 25 of the Group's 2015 Annual Report and
Accounts.
About Cape:
Cape (www.capeplc.com), which is premium listed on the main
market of the London Stock Exchange, is an international leader in
the provision of critical industrial services principally to the
energy and natural resources sectors. Our multi-disciplinary
service offering includes access systems, insulation, specialist
coatings, passive fire protection, refractory linings,
environmental services, oil and gas storage tanks and heat
exchanger replacement and refurbishment. Cape employs over 16,000
people working across 19 countries and in 2015 reported adjusted
revenue of GBP711.4 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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