Cape plc Interim Management Statement (8339Q)

TIDMCIU

RNS Number : 8339Q

Cape plc

12 November 2012

Embargoed: 0700hrs, 12 November 2012

Cape plc

("Cape" or the "Group")

Interim Management Statement

Cape plc, the international provider of essential, non-mechanical support services to the energy and mineral resources sectors, today issues the following interim management statement for the period 1 July 2012 to date.

For the three months ended 30 September 2012 Cape delivered year-on-year revenue growth of 6% driven by higher activity levels primarily in the CIS and Gulf/Middle East regions, partially offset by lower activity levels in Australia.

The trading performance of the Group's businesses in the UK, CIS/Mediterranean & North Africa and Gulf/Middle East regions and Asia was in line with expectations. However, the Group's operating margin was impacted by a substantial deterioration in the performance of the Group's onshore Australian business driven by both a further downturn in current trading and the recognition of a number of legacy issues. As part of the previously reported review of the Group's Australian operations, a detailed review of the onshore Australian business' balance sheet was initiated which has led to the identification and correction of a number of issues relating to the valuation of certain balance sheet items. This review is expected to be complete before year-end; until then there remains some uncertainty over the full year performance for this business.

In light of the legacy issues identified in the onshore Australian business, the Board has prudently extended the review to a detailed analysis of all balance sheet items Group-wide. It is expected that this review will be complete for year-end reporting.

The provision taken in H1 2012 relating to the Arzew Project remains unchanged. During Q3 Cape has demonstrated its ability to deliver in line with the required levels of productivity; however, the project is currently progressing slower than anticipated due to the inadequacy of work package releases. Achievement of acceptable levels of productivity and completion at the end of Q1 2013 are both dependent on the timely release of work packages from the client. Cape is initiating discussions with its client in order to secure compensation for any additional costs incurred due to delays caused by inadequate work package releases.

During October the Group has recognised a GBP1.5m provision in the Gulf/Middle East region relating to a potential bad debt with a customer in the Kingdom of Saudi Arabia reported to be in financial difficulty; this potential bad debt is not deemed reflective of a structural change in the region.

As a result of the above issues the Board anticipates that the Group will deliver a full year operating profit performance significantly below previous expectations. Until the detailed review of balance sheet items is complete there remains uncertainty in the eventual outcome of the full year performance.

The Group's financial position remains robust. The H2 working capital inflow in the UK arising from seasonal shutdown related activity in the region is progressing as expected. The unwinding of working capital relating to early stage projects in the Middle East, the Arzew Project and a specific large project in Asia is occurring more slowly than anticipated. It is expected that the year-end net debt position will be between GBP80m and GBP90m.

The Board announces that Richard Bingham is standing down as Group CFO by mutual consent with immediate effect.

Australia restructuring

The previously announced review of operations in Australia has identified the need to focus the business on core Cape activities of providing multi-disciplined services on-site to industrial clients both for maintenance and new capital projects. The review has identified actions to address the underperformance by investing in developing these core capabilities, strengthening the management team and reducing overheads. The Group has appointed Gary McLean as Divisional Managing Director to lead the Australian business. Gary has successfully led a significant part of the Middle East/Gulf operations of Cape for the last five years and will bring a wealth of experience and leadership capability to the Group's Australian operations.

The organisational changes will include the divestment of the following non-core operations: the two hire and sales scaffolding businesses with operations focussed on the residential and commercial construction markets in Melbourne and Perth; and the stand-alone blasting and painting workshop facility in Kwinana (Perth).

As previously announced, the carrying value of the assets acquired in Australia in 2007 is being assessed as part of this review. It is expected that a charge, recognised against the carrying value of these assets and treated as a non-cash exceptional item, will be taken in the full year 2012 results.

Cape expects to announce its preliminary results for the year ending 31 December 2012 on 6 March 2013.

Enquiries:

 
 Cape plc 
 Joe Oatley, Chief Executive                                  [phone] 
 Karen Menzel, Director of Investor Relations                 [phone] 
 
 M:Communications 
 Patrick d'Ancona                                             [phone] 
 Ben Simons                                                   [phone] 
 
 

Forward looking statements

Any forward looking statements made in this document represent the Board's best judgment as to what may occur in the future. However, the Group's actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors, some of which will be outside the control of the Group. Such factors could cause the Group's actual results for future periods to differ materially from those expressed in any forward looking statements included in this announcement.

About Cape:

Cape plc (www.capeplc.com), which is listed on the main market of the London Stock Exchange, provides a range of non-mechanical industrial services including access systems, insulation, painting, coatings, blasting, industrial cleaning, training and assessment to both industrial plant operators and major international engineering and construction companies.

As a single source provider, Cape is able to provide a range of specialist multi-disciplinary services specifically tailored to meet the needs of the client providing the most intelligent and cost efficient solutions for our customers non-mechanical in-plant maintenance and capital needs.

In the year ended 31 December 2011, Cape reported revenues of GBP722.5 million. With scale and leading market positions across its international footprint, Cape employs over 19,000 people around the world.

This information is provided by RNS

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