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Cape plc (LSE:CIU) issued an interim management statement this morning for the quarter ending 30 September. At 8:05 am the share price was 196.60. Forty-nine minutes later at 8:54 am, the share price had dropped to 169.50. By 10:18, the stock had recovered to 186.00, down 76.00 pence and 30% from Friday’s close of 262.00. the 8:54 am price was the lowest the share has been since 08 June 2009.
A Bad Year
On 16 March 2012 CIU was trading at 472.00 The share price dropped 36% from 320.00 to 205.00 on 25 May 2012 immediately following an announcement that the company’s year-end projections would be adversely impacted by a one-off charge of £14 million in order to correct problems at its Arzew Project in Algeria.
The Cape share price had managed to recuperate to 296.50 by 30 July, only to be slammed again by another trading update on 01 August which cited both real and expected poor trading performance in Australia and the Pacific Rim, lower margins, pricing pressure and project delays. Once again the company said, “The Group is therefore unlikely to meet previous expectations for the year to 31 December 2012.” By 02 August the share price had fallen to 230.00, a drop of 22.5%.
Bottom line: CIU is now trading 60% lower than it was one year ago on 08 November 2011. That is a bad year.
What Now?
The interim management statement issued this morning said that the group’s overall performance had met expectations is most geographic locations. However the adverse impact of operations in Australia held the company to a year-on-year growth of 6% for the quarter. Additionally, Cape shared that it’s investigation into the problems in its Australian operations has revealed that it has identified and corrected “a number of issues relating to the valuation of certain balance sheet items,” the full impact of which on year-end results is as yet unknown, but not expected to be positive. The balance sheet irregularities under review are significant enough that the Board has chosen to broaden their review to include the entire company.
The Board has reported that, as a result of the ongoing investigations, it expects year end projections to be “significantly below previous expectations.” Almost as an afterthought, today’s announcement revealed that Group CFO Richard Bingham has resigned effective immediately by mutual consent. Try as one might to “slip that announcement in,” it puts a BIG, BOLD EXCLAMATION POINT on the severity of the company’s problems at hand.
Cape also announce the appointment of Gary McLean as its Australian Divisional Managing Director with a mandate to focus the division on its core businesses.
The View from 30,000 Feet
No matter how you look at it close up, 2012 will be a year that will live in infamy for Cape plc, whether the company survives it or not. However, if we fly up to about 30,000 feet, the picture changes a bit.
From November 2007 to October 2008 the Cape share price was rather stable, remaining, on average, between 210.00 and 250.00. Then the financial crisis hit. By March 2009 the share price had dropped to 18.25 pence. The company experienced a strong recovery all the way to 574.50 by 07 July 2011. So, despite a difficult 2012 as described in the opening paragraphs, the current price is not far off of the 2008 numbers, and whilst it is down significantly from earlier this year and the lofty height of July 2011, it is, nonetheless, only 125.oo below last 21 November 2011 and needs only a modest recovery from today’s losses to return to its 90 day moving average of about 247.00 and to within the parameters of its 2007-2008 performance.
The demise of CFO McLean many signify that real change is about to happen.
