11th Jun 2008 07:00
11 June 2008
Cape PLC
("Cape" / the "Company" / the "Group")
AGM and Trading Update
Cape (AIM: CIU), the international provider of essential support services to the energy and natural resources sectors, announces a trading update to accompany today's Annual General Meeting, taking place at noon (BST) at the offices of Berwin Leighton Paisner LLP at Adelaide House, London, EC4R 9HA.
Highlights
Current trading in line with management expectations, strong organic growth in all international markets with activity levels at record highs across the Group.
Growth continues to be underpinned by global demand for energy; extension of our footprint into non-OECD countries has created the opportunity to cross sell bundled services into economies that have higher demand for our services.
Exceptional safety performance and year on year improvements recognised by clients in all regions.
Increasing exposure to oil services and petrochemical markets. These markets now represent in excess of 50% of Cape's turnover.
Excellent progress on the integration of Australian acquisitions into the Group. Cost and operational synergies on target.
All regions generating cash through higher levels of activity, working capital initiatives, lower levels of capital expenditure through better utilisation of PCH assets, and disposal of non core assets. On track to reduce debt levels during the year by not less than £30 million.
UK
New business wins over the first half of £33 million
Demand for Cape's bundled service offering in the UK remains strong and the medium term outlook is extremely encouraging. Good progress has been made over the first half with revenues increasing year on year, together with a targeted programme to reduce working capital levels both on and offshore. Total Rope Access International Limited (TRAIL) and Endecon Limited, Cape's two UK acquisitions in 2007, are now fully integrated into the Group. These businesses continue to create opportunities and higher levels of demand from both existing and new clients. New contracts wins include a c.£6 million contract with Ineos at the Grangemouth refinery in Scotland and a £7 million maintenance contract renewal with SABIC at the Wilton International complex in Teesside. Our safety proposition has been further enhanced by a 20% improvement in lost time incidents ("LTIs") over the year to date.
Gulf / Middle East
New business wins over the first half of £54 million
Cape's business within the Middle East and Gulf continues to grow at a strong and sustainable rate, and is performing ahead of expectations. Cape's status as the contractor of choice in the region and its ability to offer a greater range and bundling of services, especially to blue chip clients, has established a competitive advantage over the new entrants into this burgeoning market. In 2008 Cape secured its first contracts in the region offering Diving and Inspection services to the offshore market.
The market within the Gulf region for Cape's services is still expanding in all countries and no slowdown in growth is foreseen over the medium term due to the worldwide demand for energy resources and downstream petrochemical products. In addition, due to low regional energy costs, high energy users such as aluminium and steel mills have announced major capital projects throughout the Gulf region creating a further demand for Cape's range of services. New contract awards over the first half are worth £22 million in Saudi Arabia, £11 million in Qatar and £8 million in Abu Dhabi. The region's safety record is second to none with no recordable LTI's for the period along with the numerous safety awards: an outstanding achievement given a significant increase in headcount over the first half year.
CIS / Caspian / Northern Africa
Positive performance over first half, underpinned by major contract awards
The region's strong performance is underpinned by the CIS (Sakhalin) and Caspian. There have also been increased levels of tendering and activity in Northern Africa in particular in Algeria, Tunisia and Malta.
At the beginning of May, Sakhalin LNG Train 1 was handed over to its owner and due to the introduction of gas, the term maintenance contract won last year is set to grow significantly. This secures Cape's involvement with the project through to the end of 2010. Developments in Kazakhstan and Russia continue to provide growth potential with significant awards taking the Kazakhstan business back to the Karachaganak field. The reputation that the local teams have for achieving on time, safe delivery continues to ensure that Cape will continue to dominate these markets over the medium term.
Cape has just completed a major shut down for British Gas in Tunisia on the Hannibal Project, safely and on time. Growth prospects for the second half of the year are excellent with a significant opportunity for LNG work within the region.
Far East / Pacific Rim
Excellent progress on integration of the three Australian acquisitions.
The Far East/Pacific Rim region continues to be a key area of expansion for the Group. The integration of Cape's recent acquisitions in Australia is continuing successfully and is on schedule. These acquisitions along with our existing businesses in Thailand, Singapore and the Philippines have created a business of real scale in a rapidly developing market. The acquisitions are delivering cost and operational synergies in line with our expectations. The Group's increased footprint in the region, particularly on the North West Shelf, has demonstrated our commitment to the region and our client base. This will contribute greatly to Cape's competitiveness in high-profile contract bidding processes, and will underpin the Group's success in the award of future LNG projects.
Recent contract awards include a contract with STP & I Co Ltd for the erection and provision of access services for the Pluto LNG Project and a three year contract with BHP Billiton to provide access and maintenance services on the Olympic Dam project in Australia. It also includes a major decommissioning project on the Caltex Refinery in Batangas and a new build project (Jet Merox) with CB & I for Star Petroleum. Cape has already worked alongside Star Petroleum for over nine years providing maintenance services. The Purac Quinten project has also been completed with over 3.5 million man hours worked without an LTI. In Australia, in common with other contractors, we are seeing a general pushback of contract start dates. However, we expect this to result in higher revenues for Cape in the second half.
Board Changes
The Group has seen significant growth and we continue to develop our Board to reflect this. As previously announced, with effect from 1 June 2008, Richard Bingham has taken over as Chief Financial Officer. Richard originally joined Cape in October 2007 and has supported executive management in recent months in the integration of Cape's three acquisitions in Australia. At the conclusion of today's Annual General Meeting, David McManus will step down as Chairman to be replaced by Sean O'Connor. Mr McManus will remain on the Board as a non-Executive Director.
Outlook
Underlying organic growth, across all regions, illustrates and underpins Cape's increasing involvement in, and exposure to, the oil and gas services, petrochemicals and resources markets. Clients in the oil, gas and petrochemical industries now represent in excess of 50% of Cape's turnover. Global demand for energy continues to underpin Cape's business and the Group welcomes its increasing exposure to this sector. These market drivers create a highly cash generative environment for Cape enabling a repayment of existing debt over the full year in line with market expectations.
The integration of Australian acquisitions is also continuing successfully, creating a variety of cost and operational synergies. Given these market drivers and the successful integration of acquisitions, the Board looks forward with confidence to sustained organic growth.
Martin May, Chief Executive Officer of Cape, commented:
"We are experiencing robust organic growth across our international business units and the integration of our Australian acquisitions is on schedule creating cost and operational synergies across the footprint. Growth and strong cash generation within the Group is enabling us to pay down our debt in line with expectations and fills the Board with increased confidence about the future prospects for growth."
For further information, please contact:
Cape PLC
Martin K May, Chief Executive Officer +44 20 3178 5380
Bell Pottinger Corporate & Financial
Nick Lambert / Victoria Geoghegan +44 20 7861 3232 / +44 7811 358 764
Hawkpoint Partners Limited
Christopher Kemball, Vice Chairman / +44 20 7665 4551 / +44 20 7665 4598
Chris Robinson, Managing Director
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