TIDMCIU
RNS Number : 4509K
Cape plc
16 April 2015
Cape plc
16 April 2015
16 April 2015
Cape plc ('Cape' or the 'Company')
Mailing of Annual Report, Notice of Annual General Meeting
and Electronic Documents and Information Letter
Cape announces that its Annual Report and Accounts for the year
ended 31 December 2014 (the "Annual Report"), the Notice of Annual
General Meeting ("Notice of AGM"), Form of Proxy and a letter
requesting the sending of documents and information by electronic
means ("Electronic Documents and Information Letter") have been
mailed to Ordinary Shareholders and the Scheme Shareholder (as
defined in the Company's Articles of Association).
Pursuant to Listing Rule 9.6.1, the Annual Report, Notice of
AGM, Form of Proxy and Electronic Documents and Information Letter
have been submitted to the National Storage Mechanism and will
shortly be available for inspection at: www.Hemscott.com/nsm.do and
can also be viewed on the Company's website at www.capeplc.com.
AGM Location
The Company's AGM will be held at 11.00am (BST) on Tuesday 12
May 2015 at the offices of Cape at Drayton Hall, Church Road, West
Drayton, Middlesex UB7 7PS, United Kingdom.
Additional Information
In accordance with Disclosure and Transparency Rule 6.3.5(2)
(b), additional information is set out in the appendices to this
announcement. This information is extracted in full unedited text
from the Annual Report. References to page numbers are the
respective page numbers in the Annual Report. This information is
not a substitute for reading the full Annual Report.
Cape plc
Richard Allan
Company Secretary
Appendices:
Appendix 1: Directors' Responsibility Statement
The following directors' responsibility statement is extracted
from the 2014 Annual Report (page 80).
Directors' responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable laws and
regulations. The directors are also responsible for the preparation
of the directors' remuneration report, which they have chosen to
prepare, being under no obligation to do so under Jersey law.
The directors are also responsible for the preparation of the
directors' governance report under the Listing Rules.
Jersey company law requires the directors to prepare financial
statements for each financial period in accordance with generally
accepted accounting principles prescribed for the purposes of the
law. Pursuant to that law, the directors have prepared the
consolidated financial statements and the parent company
financial statements (together the financial statements) in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Company at the period's
end and also the profit or loss of the Company for the period then
ended. In preparing those financial statements, the directors
should:
- select suitable accounting policies and then apply them consistently
- make judgements and estimates that are reasonable
- state that the financial statements comply with IFRSs as
adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements
- prepare the financial statements on the 'going concern' basis
unless it is inappropriate to presume that the Company will
continue in business, in which case there should be supporting
assumptions or qualifications as necessary.
The directors are responsible for keeping proper accounting
records which are sufficient to show and explain the Company's
transactions and as such to disclose with reasonable accuracy at
any time the financial position of the Company and to enable them
to ensure
that the financial statements comply with the law. They are also
responsible for safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation
in other jurisdictions.
Responsibility statement under the Disclosure and Transparency
Rules
Each of the current directors, whose names and functions are
listed on page 54 confirms that, to the best of his knowledge:
- the consolidated financial statements, prepared in accordance
with IFRS as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profi of the Group and
the undertakings included in the consolidation taken
as a whole
- the directors' governance report (including the corporate
governance report and the Audit Committee report) on pages 52 to 80
and the Regional and Chief Financial Officer's reviews on pages 28
to 37 include a fair review of the development and performance of
the business and the position of the Group and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face
as set out in the risks and uncertainties review on pages 16 to
23.
Directors' statement under the corporate governance code
The strategic report and this directors' governance report
(including the remuneration report) were reviewed and approved by
the Board on 17 March 2015. The Board confirms that, taken as a
whole, these reports represent a fair, balanced and understandable
report on the Group.
By order of the Board
Michael Speakman
Chief Financial Officer
17 March 2015
Appendix 2: Principal Risks & Uncertainties
The following description of the principal risks and
uncertainties that the Company faces is extracted from the 2014
Annual Report (pages 16 to 23).
Risk factors
Cape's performance and prospects may be affected by a number of
risks and uncertainties that relate to the industries and the
environments in which it undertakes its operations around the
world. The Board is alive to the issue of risk, and has ensured
that the Group has appropriate systems and procedures in place to
identify, assess and mitigate major business risks.
Each regional operation and group function is required to
undertake a formal review of the risks that could impact its area
of business. Identified significant risks and agreed mitigation are
formally reviewed on a regular basis and are recorded in a
standardised active risks register.
Further validation occurred in 2014 through a risk assessment
carried out independently by the Board. The Group continues to
develop its risk management systems and processes to ensure that
our responses remain appropriate to the range of risks that we
face. A number of the risks that Cape faces are also faced by other
service providers, finding rigorous methods of mitigating such
risks can generate competitive advantages.
The following factors and the other information contained in
this Annual Report should be carefully considered.
The following section contains a description of the risks that
may affect some or all of our activities and which may affect the
value of an investment in our securities. If any of the events
described below occurs, the business, financial condition or
results of operations of the Group could be adversely affected in a
material way. Additional risks and uncertainties of which the Group
is unaware or that it currently deems immaterial may in the future
have a material adverse effect on the Group's business, results of
operations and financial condition.
Effective risk management
The effective identification, reporting and management of risk
is critical to the success of Cape. As a result, the following
systematic approach is applied across the Group:
Identifying key risks
To consistently apply the same methodology of identifying risk
at project, operation, business unit and Group level.
Analysing risks and controls
Risks are evaluated to ascertain financial and non-financial
impacts, the likelihood of occurrence and the root cause. This
results in a prioritised register of risks, against which we then
review the nature, adequacy and appropriateness of our current
controls to mitigate these risks.
Determining management actions
If new, different or additional risks are identified or if
additional controls are required, these are developed and
appropriate responsibilities to discharge are assigned. Acquisition
and other investment related risks are identified and assessed
before key investment decisions are made.
Reporting and monitoring
Emerging risks are identified, reported and reviewed on an
on-going basis, with particular focus on capturing emerging risk
and monitoring all changing risk during monthly business
reviews.
Management is responsible for monitoring the effectiveness of
controls and progress of actions taken to mitigate the key risks;
this is supported through the Group's internal audit programme. The
results of the risk management process are reported to the Audit
Committee at least every six months.
Further details of the Group's internal control and risk
management processes can be found in the Directors' governance
report on pages 52 to 80.
Operational excellence
There are three key operational excellence goals.
Firstly, through improved recruitment, training and management
development to provide the Group with a pool of operational
management, across all levels, with the practical and leadership
skills necessary to consistently manage Cape's operations.
Secondly, to develop the best available tools and procedures to
manage and monitor the business, initially focused on operational
activities and large projects, then extending to the whole
organisation.
Thirdly, to increase collaboration and knowledge sharing across
the Group to ensure that the benefit of the expert knowledge within
the Group is maximised and is being consistently applied to provide
best practice operating standards across all services and
geographies.
Good progress was made in 2014 which saw the implementation of
many of the systems and processes developed in 2013.
This work will continue through 2015 and beyond.
Risk Category
External Risks: Global political, security, and economic
conditions
Operating activities may be affected by factors outside the
Group's control. These include other economic events, such as
changes in oil, gas and commodity demand and prices, geopolitical
events, government actions or inactions, climatic conditions,
unusual or unexpected geological occurrences, environmental
hazards, terrorist events, disease outbreaks or epidemics,
industrial conditions, technical failures, labour disputes, delays
in construction, availability of materials or parts and shipping,
import or customs delays.
Changes in the political or security environment or sanctions
regimes in existing and new territories may result in Cape, or its
clients, losing commercial or legal protections, facing economic or
security threats or being less able to control their
operations.
A number of the Group's clients operate in the oil and gas
sector and as such may be negatively affected by recent falls in
oil prices. The effect on the demand for the Group's services is
uncertain but likely to be negative.
Incidence and severity of geopolitical and economic tension has
increased in some locations and reduced in others. The net impact
is an increase.
Regional management teams have been strengthened with managers
that are more attuned to such risks.
Market Risks: Key Market Dependency and Key Client
Dependency
Losing certain key clients could have an adverse effect on
Cape's revenues, particularly where these clients have several
contracts with Cape.
Cape's clients operate in a number of sectors including:
- downstream oil and gas
- upstream oil and gas
- power generation
- mining
- marine.
These markets have a range of differing characteristics and
dynamics.
Although the long term demand for Cape's services is driven by
the long term requirement for energy, commodity and petrochemical
products it is possible that a cyclical downturn could lead to
short term declines in demand for Cape's services.
Evolution in 2014
Client dependency has increased slightly during 2014.
All levels of management have been refocused on the importance
of client responsiveness and of developing multiple level
relationships.
As discussed above, a number of the Group's clients operate in
the oil and gas sector and as such may be negatively affected by
recent falls in oil prices.
Mitigation
Potential margin pressures or reduction in revenue due to cuts
in upstream investment driven by the oil and gas price falls are
mitigated by the diversity of market sector exposure set out in the
market risk section below and by steps being taken to reduce the
overhead cost base to ensure it remains correctly sized to deal
with pressures in the market.
These external factors are normally likely to affect a specific
location, client relationship or a single contract. Cape's business
is diverse by geography, number of client sites, range of services
and exposure to industries or sectors. This portfolio
diversification reduces the impact of Cape's overall exposure to
individual risks and uncertainties.
Cape's policy is to avoid a concentration of activity in
markets/regions which it assesses as high risk.
Risk is mitigated by a strong senior management presence in each
region and particularly where risks are identified, regions operate
in close communication with central management.
Local legal counsel is regularly engaged to ensure compliance
with local legislation and to advise managers on actual or
potential changes in legal or regulatory framework.
We monitor carefully any changes in sanctions and political
regimes that might impact on our business. Cape has an in-house
Head of Security, who is responsible for security coordination in
higher-risk territories and we have expanded our use of specialist
consultancies to advise us and when necessary, provide
protection.
Opportunities
Opportunities could exist if perceptions of risk differ from the
reality.
Existing and potential risks often differ between regions of a
country and the specific locations where Cape staff work are kept
under regular review.
Mitigation
Cape's top ten clients accounted for 42% of Group revenues in
2014 (2013: 40%), with the largest customer accounting for 15% of
Group revenues (2013: 11%). Cape has a broad customer base, with
circa 95 clients (2013: 105) each contributing more than
GBP1 million of annual revenue. Cape seeks to maintain a
widespread, stable and balanced customer profile.
Cape has developed long-standing relationships with clients,
based on service quality, reliability and safety. These
relationships are at multiple levels from site supervisors to
senior management. Strong 'client responsive' relationships support
revenue retention and growth through on-going contract award and
renewal. In most existing markets Cape has a relatively small
market share.
Most contracts cover a multi-year engagement and are for work of
a long term nature. Cape, therefore, has limited exposure to
fluctuations in the spot price of any one energy product, or its
short term demand.
Cape is firmly positioned in the downstream energy
infrastructure, power generation and later cycle production
markets. These markets are less sensitive to changes in oil and gas
pricing than upstream, exploration segments. The majority of the
Group's exposure to the upstream market is in the provision of
maintenance services which are typically less affected by
variations in oil price than capital expenditure projects.
In some industries, there is a counter-cyclical effect with
extra maintenance (outages) required when demand falls or spot
prices decline.
Cape's wide range of essential services ensures it can serve
clients' needs through the lifecycle of the production asset,
whether related to installation, maintenance, extension of life or
decommissioning.
Opportunities
Strong customer relationships based on consistent high service
levels produce opportunities to cross-sell additional services and
to sell into new locations.
Innovative maintenance solutions allow assets to remain live,
saving production costs for clients.
Health, Safety and Environmental (HSE) risks
Achievement of HSE excellence and inherent site dangers
Description and potential impact
Many clients have assets or sites with associated health and
safety risks (offshore platforms, refineries, and power stations).
Failure to maintain the highest Health, Safety and Environmental
(HSE) standards on-site could result in injury to our employees or
others involved in site operations. Failure to deliver HSE
excellence could result in a material loss of clients and/or damage
to Cape's reputation and the environment.
Evolution in 2014
The Group's HSEQ instructions are continually reviewed by the
global teams ensuring easy, secure access is made available at all
site operations.
Mitigation
Cape values its excellent reputation for safety and HSE related
matters around the world. Cape's investment in systems and
resources, with around 412 (2013: 455) people in full-time HSE
roles across the Group, continues to deliver a superior performance
in accident prevention, working days lost and environmental
incidents.
Occupational health and safety performance continues to be ahead
of the industry norms with a TRIR of 1.028 per 1,000,000 hours
worked (2013: 0.92) for the Group as a whole.
Through both its training centres and on-site training courses,
Cape invests a considerable amount in improving staff skills. This
helps retain key staff through regular progression, helps reduce
skills shortages and improves safety performance.
Opportunities
Demonstration of an excellent HSE performance is increasingly
becoming a pre-qualification requirement for most large oil, gas,
mineral and power generation tenders.
Skill shortages and HR risks
Recruitment, development and retention of key managers,
supervisors or skilled employees
Description and potential impact
The loss of key managers, supervisors or skilled employees, may
adversely affect Cape's business. Cape's ability to successfully
operate and grow the business is largely dependent on its ability
to attract and retain high-quality personnel. An inability to
attract and retain well-qualified and skilled personnel could
materially adversely affect Cape's business, operating results or
financial condition.
The lack of capacity, capability or competence of Cape managers
would have a significant adverse impact on the business.
Evolution in 2014
Operational excellence and other initiatives to attract, retain
and develop key staff commenced in 2013 and will continue into 2015
including:
- development of the Cape culture of 'doing things the right way'
- standardisation of corporate recruitment and other HR
processes, including mandatory business conduct
and anti-bribery training
- enhanced remuneration review processes and long term incentive plan
- improved staff performance review and management development processes
- improved business review regime
- introduction of matrix management and cross business training
- appointment of Asia based COO to supervise the more remote locations.
Mitigation
Cape's regionalised organisational structure provides
considerable management autonomy and opportunity for supervisors
and managers to develop within the business. This has both
advantages and risks, so to gain the advantages, while mitigating
the risks, the Group is taking the following steps:
Operational management is focused on working to the same high
standards across all operations by standardising procedures and
focusing on operational excellence, identifying and embedding best
practice processes across the Group and by implementing more
disciplined controls. The project delivery system (PDS) launched in
2014, for all new large projects worldwide, is a practical example
of this approach.
The Future and Senior Leaders Programmes were introduced to
provide and hone the skills managers need to effectively perform
their roles and progress to the highest level in the organisation.
The Cape Management
Training Scheme has been introduced to provide a regular
pipeline of talent for key project and management roles across the
Group. Annual performance appraisals are conducted to assess
executives' performance and to discuss career goals. All these
processes have continued to be reviewed and improved in 2014.
Formal project and operational reviews take place monthly. The
Executive Committee meets regularly to review the results and share
best practice, with the near-term focus continuing to ensure that
robust processes are in place throughout the business together with
controls to ensure those processes are being followed.
Senior Executive remuneration is reviewed against market data
provided by specialist remuneration consultants to ensure awards
are competitive. Long term incentive plans are in place to
encourage the retention of the key management group.
Opportunities
Retaining talented staff and engendering long term loyalty has
many advantages to both Cape and staff, including:
- reduced recruitment fees and basic training cost
- efficiency improvements
- retention of knowledge and skill
- growth of discipline and industry specialists
- establishment of a core of in-house trainers
- internal career development paths and opportunities
- improved operational cover, robustness and succession.
Contract acceptance risks
Contracting terms and conditions risk and contract bidding and
estimating risk
Description and potential impact
Cape could sign up to contract terms and conditions exposing the
Group to excessive financial risks and potential cost overruns. Due
to errors in the accurate determination of scope and poor estimates
or changes in on-site circumstances, Cape may not be able to
recover all costs incurred resulting in an adverse financial
performance.
Evolution in 2014
The Group General Counsel together with the Commercial Director,
appointed in 2014, are responsible for ensuring group-wide legal
risk assessment standards compliance in new contract negotiations
and subsequent contract variations.
Mitigation
Cape seeks to avoid higher risk lump sum or fixed rate
contracts, with the large majority of contracts being cost
reimbursable or at scheduled rates. To ensure contractual risk/
reward is assessed consistently, contract acceptance and
authorisation procedures and controls have been significantly
strengthened with the introduction of contract risk registers, and
the in-house Bid Approval Model (BAM) approval and tracking
software.
The Group seeks to avoid the acceptance of liabilities that are
unquantifiable or for which Cape could not reasonably be regarded
as responsible, including customer or other party delays,
liquidated damages, direct and indirect consequential losses. The
adequacy of insurance covers is reassessed annually. Senior
Executive remuneration is reviewed against market data provided by
specialist remuneration consultants to ensure awards are
competitive. Long term incentive plans are in place to encourage
the retention of the key management group.
Opportunities
Improved contract acceptance risk management will have a long
term beneficial effect on gross margin.
Operational risk
Operational and project performance risks
Description and potential impact
Actual project performance may differ materially from 'as bid'
or forecast performance.
The Group's financial performance could be significantly
affected by the performance of a relatively small number of large
contracts.
Evolution in 2014
The onerous contract identified in 2013 continues to be
challenging and as such the provision taken on the contract has
been increased, however the project team continue to make good
progress and we anticipate completing the project in line with
client expectations.
The newly appointed Commercial Director, together with the Asia
based Chief Operating Officer regularly review and supervise all
major projects.
Mitigation
The Group has a strong track record of successful project
execution which reflects a practical and client-focused approach to
both construction and maintenance project management. In response
to certain
construction project performance issues during 2012 and 2013 the
'Operational Excellence' initiative commenced. Some operational
excellence benefits were evident in 2013 and 2014, but they will
largely impact 2015 and future years, and include:
- a professional approach to contract bidding and contract
management, including
in-house training of project managers to gain APM professional
qualifications
- recognition of project management as a key competence within
Cape, and management of this resource Capewide
- development of a project management toolkit for new projects,
including standardised project planning and delivery system
framework (PDS) and a standardised site IT system with KPIs
- initiating regular, standardised, detailed reviews of projects
and cost to complete calculations in all businesses with risk based
escalation and overriding regional and central reviews.
Opportunities
Improved project management will improve the consistency of
project execution, which will improve customer perception and so
have a long term beneficial effect on gross margin.
Investment and asset integrity risks
Unacceptable return on assets or investments; inadequate control
over assets or investments; and inadequate visibility or reporting
over operations or assets
Description and potential impact
Failure to achieve satisfactory returns on assets, acquisitions,
joint ventures, partnership arrangements and other investments.
Inadequate management and financial controls leading to loss of
operational control, loss of assets, loss of financial data or loss
of the integrity of data.
Disparate and old IT systems across much of Cape are a risk to
management and financial control and prevent management at all
levels from optimising business performance.
Evolution in 2014
The Group General Counsel has improved the in-house legal advice
available for strategic investment structuring, during investment
negotiations. He is also focusing on improving Governance over
existing joint ventures and investments.
Detailed mobile asset control processes and asset counts have
been tightened, with further tightening planned for 2015.
An experienced asset manager was appointed in 2014 to
co-ordinate asset demand and supply worldwide as well as setting
enhanced standards for asset procurement and condition.
An Infrastructure Manager was appointed in 2014 and the
communications backbone has been improved, allowing MS Office 365
and Lync communication software to be deployed to managers
worldwide to improve visibility and communication
Mitigation
Cape carries out detailed assessments and reviews of existing
and potential acquisition, joint venture, partnership arrangements
and other investments including external legal and financial
diligence, where appropriate.
To assess and to help mitigate these risks Cape has a high
quality and experienced commercial, operations, finance,
acquisitions, internal audit, tax and treasury team that operate at
Group level and across the regions.
UK and ME IT servers are located at professionally hosted data
centres that operate to robust internationally recognised service
and security standards.
Work has commenced on the scoping out of a uniform ERP system
that will link with existing site systems for eventual worldwide
implementation.
Opportunities
An increasingly professional approach to investment
decision-making, management and control adds value by improving the
return on capital employed.
Better forecasting and co-ordination of assets will improve
asset utilisation and gross margin, as well as cash flow through
reduced capex.
A uniform ERP system will significantly improve management's
visibility of operations and financial results.
Compliance and business conduct risks
Breach of applicable laws and regulations; business integrity
and ethical conduct risk; failure to obtain/renew key licences and
permits; and failure to manage key relationships
Description and potential impact
Breach of applicable laws and regulations including tax,
anti-bribery and anti-corruption, competition and business conduct
laws and failure to file necessary statutory and regulatory
returns. Failure to renew key operating licences and permits,
including asbestos removal and waste transfer licences. Failure to
manage key corporate relationships including those with key
customers, joint venture partners, investors, the Scheme
shareholder and Scheme trustee directors, banking syndicate and
pensions trustees.
Evolution in 2014
The Group General Counsel continues to focus on compliance,
legal risk management and business integrity and ethics. The
executive management team is increasingly focused on building
strong relationships with all key stakeholders.
Mitigation
To assess and manage these corporate risks Cape has high-quality
and experienced finance, investor relations, corporate, internal
audit, tax, treasury, legal and compliance teams that operate at
Group level and across the regions. Strengthening of key customer
account management along with customer needs and satisfaction
reviews continues.
Opportunities
Good legal compliance and improved corporate relationships will
increase certainty and stability allowing management focus to shift
towards strategic business development and growth.
General financial risks
IDC and financial risks
Description and potential impact
To assess and manage these corporate risks Cape has high-quality
and experienced finance, investor relations, corporate, internal
audit, tax, treasury, legal and compliance teams that operate at
Group level and across the regions. Strengthening of key customer
account management along with customer needs and satisfaction
reviews continues.
Mitigation
To assess and to help mitigate these risks Cape has a
high-quality and experienced finance, acquisitions, internal audit,
tax and treasury team that operate at Group level and across the
regions.
Appendix 3: Related party transactions
Details of directors' emoluments are shown in note 37 'Related
party transactions' to the consolidated financial statements and in
the Directors' Remuneration Report on pages 64 to 76.
There have been no material transactions with the Company and
other related parties during the year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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