19th Mar 2008 07:01
Cape PLC19 March 2008 Cape PLC ("Cape" the "Group" or the "Company") Preliminary results for the year ended 31 December 2007 Cape is a leading international provider of essential support services to theenergy and natural resources sectors, providing a broad range ofmulti-disciplinary, skilled services throughout the life cycle of majorindustrial assets. Cape's services are deployed during initial project build,commissioning, routine maintenance, extension of life projects anddecommissioning. Cape works with many of the world's leading national andinternational petrochemical, LNG and mining companies. The Group's internationalcoverage now extends from the UK, through the Gulf & Middle East, Caspian & CISand into the Far East & Pacific Rim. Cape's 13,000 employees deliver safe,reliable, on time and intelligent solutions both on and offshore in over 23countries around the world. Cape is pleased to announce an outstanding set of results for the year ended 31December 2007 which reflect the very strong organic growth seen right across theGroup during the year. Financial highlights Group revenueup 56.5% to £428.8m (2006:£274.0m) Group operating profit from continuing operations before exceptional itemsup 143.9% to £36.1m (2006: £14.8m) Group profit before taxup 111.5% to £33.0m (2006: £15.6m) Net cash inflow from operating activities before industrial disease schemefunding up 22.6% to £16.8m (2006: £13.7m) Net assetsincreased by 140.3% to £180.7m (2006: £75.2m) Diluted EPS from continuing operationsup 63.8% to 26.2 pence (2006: 16.0 pence) Underlying adjusted EPS from continuing operationsup 47.5% to 23.6 pence (2006: 16.0 pence) Business highlights - High levels of organic growth in every region; order book continues to firm - Australian acquisitions; diversification into resources sector -Acquisition of additional complementary services within the UK - Group reorganised into four key geographic regions; Regional Directorsappointed - Appointment of additional Non-Executive Director and Group Human Resources &Safety Directors - Continued investment in training; CITB approved trainingcentre in the Philippines - Every region recognised by clients for safety performance - Rebranding of all Group businesses as Cape - dropping previous trading styles CIS, RB Hilton and Cape East Martin May, Chief Executive said: "I am very pleased to announce another outstanding set of results. During 2007,Cape generated substantial organic growth in all its key markets and completed aseries of strategic acquisitions which will further enhance the Group's abilityto offer its services in the Far East & Pacific Rim and in particular thebooming Australian LNG and resources sectors. The Group also acquired twobusinesses in the UK providing additional complementary services to sell toexisting customers. During 2008, we will start to market these services acrossour international footprint. Cape closed 2007 with activity levels at record highs for the second year in arow. In every business region the Company is currently trading in line withmanagement's expectations. Looking ahead, global demand for energy will continue to be the key driver forour business and, as a consequence, we expect to see strong demand from ourcustomers for the broad range of services we supply. I am confident that during2008 the Group will continue to enjoy strong organic growth. In Australia wewill complete the integration of the recent acquisitions which, in turn, willdeliver a broad range of cost and operational synergies right across the Group.2007 was an outstanding year and we now look forward to a sustained period ofstrong organic growth." Further information Cape PLCMartin May, Chief Executive +44 (0) 203 178 5380 Bell Pottinger Corporate & FinancialNick Lambert/Victoria Geoghegan +44 (0) 20 7861 3232 Hawkpoint Partners LimitedChristopher Kemball/Chris Robinson +44 (0) 20 7665 4500 There will be a presentation for analysts today commencing at 9:15am for a 9:30am start to be held at Bell Pottinger's offices: 6th Floor, Holborn Gate, 330 High Holborn, WC1V 7QD. Chairman's statement 2007 has been a transformational year for Cape and I am delighted to reportthat, during a period of significant acquisition activity, Cape has also postedrecord levels of revenue and profit. The outlook for 2008 is also looking verypromising. On 23 April 2007, Cape completed the placing of 26.9 million Ordinary Shares at£2.60 per share, raising £70 million before expenses. The placing wasoversubscribed and the net proceeds were used to part fund the Australianacquisitions. During the year Cape entered into a new £220 million committed, five year banking facility with Barclays Bank. Net debt at the year end was £190.5 million. As outlined in the 2006 Annual Report, the Group has embarked upon a programmeof strategic acquisitions. During the first half of 2007, Cape made two bolt-onacquisitions in the UK, namely the rope access company, Total Rope AccessInternational ("TRAIL"), and the specialist industrial cleaning company,Endecon. More materially, these were followed by three strategic acquisitions inAustralia in the second half to extend the Group's footprint within the Far East& Pacific Rim: TCC in August and Concept Hire and PCH in October and November,respectively. Results for 2007 Group revenue for the year was up 56.5% to £428.8 million (2006: £274.0million), an increase of £154.8 million. Of this increase, revenue attributableto organic growth was £128.1 million. Group operating profit from continuingoperations before exceptional items increased by 143.9% to £36.1 million (2006:£14.8 million). Diluted earnings per share from continuing operations increased63.8% to 26.2 pence (2006: 16.0 pence) and the adjusted fully diluted EPS for2007 (excluding the effect of a one off tax credit received in the year on theconsolidation of Concept Hire in Australia) were 23.6 pence (2006: 16.0 pence).Cape has now delivered substantial growth in revenue, underlying profitabilityand earnings per share for the last four consecutive years. The Board Since 1 April 2007, when Sean O'Connor rejoined the Board, its composition hasremained unchanged. The Board currently comprises: David McManus - Non-executive Chairman Martin May - Chief Executive Mike Reynolds - Group Finance Director David Robins - Non-executive Director Sean O'Connor - Non-executive Director Cape is undergoing dynamic change and the demands on the Board are growing. Myown work commitments elsewhere are also growing and it is with some regrettherefore that I have concluded I cannot devote sufficient time to my role asChairman. Accordingly, it is my intention to step down as Chairman at theconclusion of the 2008 Annual General Meeting. I am delighted to confirm howeverthat with the unanimous approval of the Board, Sean O'Connor has agreed tobecome non-executive Chairman in my place. Sean brings to the job not only awealth of experience in business and the City, but also an extensive knowledgeof Cape. I am also pleased to confirm that I will be remaining on the Board as anon-executive director. David Robins continues as Senior Independent Non-Executive Director. Our people As a Board, we recognise that it is the dedication, quality and enthusiasm ofCape's employees that underpins the Company's success. We are delighted,therefore, to have welcomed more than 3,000 new employees to the Group in thelast 12 months. We are committed to the success of the whole business and,through our "One Cape" philosophy, believe that by effective collaboration andthe leveraging of relationships across the organisation we can provide anoutstanding and safe service to all our clients. Nevertheless, we do not underestimate the personal and professional challengesthat people face, whether as part of a business that is joining the Group or asone of the existing team during a sustained period of rapid growth. So, onbehalf of the Board, I would like to thank the Group's management, staff andemployees at every level for the hard work and commitment throughout 2007 thathas delivered such an excellent set of results. With strong underlying demand for our services in 2008 the Board looks forwardto another year of substantial progress. David McManusChairman19 March 2008 Chief Executive's report I am delighted to report that Cape has again delivered an outstanding set of results. Cape, which specializes in the provision of access services, insulation, fireprotection, specialist cleaning and other essential support services to majorindustrial clients principally in the energy and natural resources sectors, hasgenerated substantial organic growth in all its key markets and completed aseries of earnings enhancing acquisitions which will maximize the Group'sability to offer its services throughout its footprint and in particular withinthe Far East/Pacific Rim. During the year the business was reorganised into four discrete geographic business units: the UK, Gulf/Middle East, CIS/Caspian and Far East/Pacific Rim. Regional management teams for each of the business units have been appointed and, at the beginning of 2008, the Group head office function was relocated to Stockley Park close to Heathrow in West London. Also, during 2007, the Malta office has been significantly expanded in order to develop the market for our multi-disciplinary services in the Southern Mediterranean/Northern African area which offers very exciting long term prospects. Financial summary Revenue for the year from continuing operations but excluding acquisitions was£402.1 million (2006: £270.5 million), an increase of 48.7%. Revenue from 2007acquisitions amounted to £26.7 million by the year end (2006:£3.5 million).Revenue from all Group operations, including the Group's share of joint ventureswas up 56.5% to £428.8 million (2006: £274.0 million). The net charge to the income statement for industrial disease claims was £1.6million (2006: £3.4 million). One of the benefits of the Scheme is thatasbestos-related Scheme claims are paid directly from the £40.0 million fundestablished for that purpose in 2006. During the year, the Scheme fund generatedinterest of £2.2 million whilst Scheme claims received during the year totalled£2.3 million (2006: £3.5 million). The Scheme paid out £3.0 million to settleclaims made in 2007 and prior years. There were no claims paid that were notcovered either by the Scheme in their entirety or by an agreement which caps theCompany's liability or by insurance. Whilst Cape has a continuing obligation totop up the fund to the extent that the triennial assessments show that there isa shortfall in the Scheme funding requirement the most recent independent reviewis expected to show that the Scheme is fully funded for at least the next 13years. Consequently, the Directors can confirm that there is no requirement totop up the Scheme at this time. Net debt as at 31 December 2007 stood at £190.5 million (2006: £21.4 million).The higher debt figure is a direct result of our successful acquisitions in2007, less the funds raised by our equity placing and from our organic cashgeneration. The Group has sufficient borrowing capacity to finance currentinvestment plans. The tax charge for the year on continuing operations was £5.4 million (2006:£2.0 million), an effective rate of tax for the Group of 16.4% (2006: 12.8%). Net assets increased from £75.2 million to £180.7 million. The increase was dueprimarily to the placing of £70 million before expenses, with the balancelargely attributable to retained earnings. Business review Every region within the Group performed ahead of our expectations during 2007.The reorganisation of the Group into four regions with dedicated and independentmanagement teams is starting to deliver above average results for the Group. TheUK benefited from a strategy based around selling a broader range ofmulti-disciplinary services to key clients whose maintenance needs continue togrow, driven onshore by higher demand and offshore by oil and gas prices.Elsewhere, and in particular in non-OECD countries where our market share issmall, our incumbent strategy continues to deliver exceptional results for theGroup with many completed projects now turning into long term maintenancecontracts. UK The regional HQ is based in Wakefield in West Yorkshire. The business hasextensive onshore operations throughout the UK and offshore operations on the UKcontinental shelf (UKCS). Towards the end of 2007 a new facility was establishedin Glasgow as a base for Cape DBI and all other operations within the area tobetter service the West Coast of Scotland. During 2007, the region and its newly acquired subsidiaries, Endecon and TRAIL,saw substantial growth in revenue - up by 42.2% from £189.9 million to £270.1million, whilst operating profits increased by 103.9% up from £10.3 million to£21.0 million. 2007 also saw a further improvement in our health and safetyperformance. Whilst any LTIs (lost time injuries) are unacceptable, themanagement team and workforce delivered a 40% improvement in the LTI accidentfrequency rate year on year. In recognition of its health and safety performanceCape has received the British Safety Council's 5 star award and most recentlythe Exxon Mobil Platinum Ten Year Flawless Safety Award for reaching the safetymilestone of 10 years work on tank rehabilitation works with only one first aidinjury and no LTIs. Gulf/Middle East The HQ for the region is located in Bahrain. The business has extensiveoperations throughout the region having major business units in Saudi Arabia,Qatar and Abu Dhabi, with developing businesses in Oman and Kuwait. Year on year revenue increased by 62.8%, up from £40.6 million to £66.1 million,whilst operating profits increased by 31.9% up from £9.4 million to £12.4million. Key achievements during the year included the successful re-entry tothe Kuwait market, growing our share of the maintenance market in Qatar, asignificant increase in sales of insulation products from our manufacturingfacility in Abu Dhabi and the commissioning of a purpose built metal fabricationfacility in Saudi Arabia. CIS/Caspian The HQ for the region is located in St Albans and during 2008 the office willmove to Stockley Park. The business has extensive operations in Azerbaijan,Kazakhstan and on Sakhalin Island. There is also a satellite office in Maltawhich focuses on opportunities in the Southern Mediterranean & Northern Africawith the aim of developing it into a further business region. Year on year revenue increased by 45.8%, up from £31.0 million to £45.2 million,whilst operating profits increased elevenfold from £0.4 million to £4.6 million.Key achievements during the year included completion of significant tranches ofwork on Sakhalin LNG trains 1 & 2 and the award of a long term maintenancecontract for the facility. In Kazakhstan, over and above the significantcontract awards achieved during the year, we established a training facility inAtyrau to underpin future growth of this important regional business. With anestablished base of contracts in Malta, Egypt, and Tunisia and with majorprojects targeted in Algeria, Libya, and Tunisia, the prospects for furthergrowth in this new region look very promising. Far East/Pacific Rim Following the acquisitions of TCC, Concept and PCH, the HQ for the region hasbeen relocated from Singapore to Perth in Western Australia. The office inSingapore will continue to provide financial and commercial back up for ourexisting and acquired businesses operating outside of Australia i.e. inThailand, Indonesia, Singapore the Philippines and elsewhere. Year on year revenue increased by 285.6% up from £11.8 million to £45.5 million,whilst operating profits increased significantly up from breakeven in 2006 to£2.9 million in 2007. Key achievements during the year, Australian acquisitions apart, included acomplete reorganisation of our Singapore operation which has led to a number ofcontract awards, including a significant package of work for Stone & Webster aspart of the construction of a major olefins recovery project on Jurong Island.The Thailand business was awarded Best Safety Contractor of the Year at the EssoSriracha refineries where we worked in excess of 1,000,000 man hours without anLTI. In the Philippines, we successfully completed the New Caledonia modulefabrication project at Batangas for Inco Goro Nickel, trained over 240 accesspersonnel to UK/ international standards and successfully deployed them to siteto enable ontime delivery of the modules to the site on New Caledonia. We alsocompleted a major shutdown for Clough Amec Joint Venture on the Bayu Undanfacilities in the Timor Sea, during which we deployed another 240 trainedoperatives, spanning 14 disciplines. As a result of our outstanding safetyperformance over the last eight years the Philippines business has again beennominated for the British Safety Council's 5 star award and Sword of Honour.Ahead of the acquisitions, a new facility was established in Darwin to underpindevelopment of our offshore business in this important region. Acquisitions During the first half of 2007, Cape made two bolt-on acquisitions in the UK.These were followed by three strategic acquisitions in Australia in the secondhalf. Total Rope Access International Limited TRAIL is the UK's market leader in the use of abseiling techniques to provide non-destructive testing, inspection, fabric maintenance, insulation, painting and window cleaning services to major industrial clients. Endecon Limited Endecon provides environmentally safe systems to decontaminate oil refinery and petrochemical systems. In addition to these services, Endecon has acquired exclusive rights in the UK to high pressure membrane press technology which is capable of separating oily waste into recoverable fuel oil and dry friable solid or cake acceptable on landfill sites under the Landfill Directive which came into force in July 2004. Both TRAIL and Endecon operate within Cape's core business sectors and their acquisition further enhances Cape's ability to provide a comprehensive package of bundled industrial services to the energy and resources sectors. Endecon sitsalongside Cape DBI, the high specification cleaning business Cape acquired in October 2006. TCC On 31 August 2007, Cape completed the acquisition of the Australian based TCCGroup. TCC, which operates mainly in Western Australia, offers a wide range ofindustrial services to blue chip clients in the mining, oil, gas andconstruction industries. TCC specializes in the provision of blasting,industrial painting, protective coatings, thermal and acoustic insulation, sheetmetal fabrication, rubber lining and access scaffolding. It is headquartered inKwinana where it operates one of the largest blasting and painting workshops inthe world. It also has regional offices at Karratha and Port Hedland. Concept Hire On 16 October 2007, Cape acquired ASX listed Concept Hire. Concept Hire is aleading supplier of scaffold equipment and associated services to theresidential and commercial construction, civil engineering, mining andpetrochemical industries. The company is headquartered in Victoria and hasoffices in Queensland and Western Australia. PCH On 26 November 2007, Cape acquired PCH. PCH is headquartered in Perth andprovides services including scaffolding and access management, formwork andshoring, temporary fencing, aluminium light access and materials hoists. Thebusiness is diversified across a range of industries with construction andmaintenance activities in Australia, the Caspian, South East Asia and the MiddleEast. Cape's acquisition of these three Australian businesses marks a major milestonein the achievement of Cape's strategic plan. Each of the Australian businessesmade a positive contribution to the 2007 year end result. A detailed integrationplan has been agreed and its implementation is well under way. Under theleadership of Peter Harley, the regional non-executive chairman, a newmanagement team has been put in place. Regional Finance and Human Resourcesdirectors have been appointed and the remainder of the key management group hasbeen drawn from Cape's existing international senior management group and theacquired companies. The Board is confident that synergies will be achieved in excess of thoseforecast at the time of the respective acquisitions. The Board believes thatonce the companies have been combined and fully integrated within Cape'sinternational business they will make a very significant contribution to thefuture of the Group. Forward order book Cape and its newly acquired subsidiaries have continued to win significant newcontract awards and renewals throughout 2007. Notable contract wins in 2007included: • a significant new maintenance contract for up to nine years with John Wood Group on the Shell St Fergus and Mossmorran terminals in Scotland; •a c. £10 million maintenance contract renewal over five years with RWE Npower at Didcot A and B power stations; •a c. £7.5 million maintenance contract renewal over three years with RWE Npower at the Aberthaw power station; •a c. £6 million contract over three years (with the option to extend for up to two more years) with Saltend Cogeneration Company, part of International Power, for the provision of access, insulation and painting services at its plant in the UK; •a c. AUD$30 million contract renewal with BHP Billiton for the provision of specialist coatings and insulation which has been extended to include scaffolding services on the Worsley Alumina site in Western Australia; •in Kazakhstan, a c. US$10 million contract with Aker Kvaerner to provide access, winterisation, rigging, painting, insulation and pipe cutting services on the hook up and commissioning of the offshore facilities on the Kashagan Field Development; •in Qatar, two three year maintenance contract renewals with Qatar Petroleum on the Dhukan oilfield with a combined value of c. US$9.5 million; and •also in Qatar, a US$8 million insulation contract for Descon Engineering. We are also pleased to announce the following significant contract awards in early 2008: •a c.£25 million contract over three years with Ineos at the Grangemouth refinery in Scotland; •in Saudi Arabia, letters of intent have been received from the Mohammad Al-Mojil Group (MMG) for three separate work packages on the Kayan petrochemical complex and one on the MA'Aden ammonia plant with a total value of c. US$25 million; and •in Australia, a c. AUD$12 million three year contract with BHP Billiton to provide access and maintenance services on the Olympic Dam project. Finance During 2007, Cape secured a new £220 million five year committed facility fromBarclays Bank. The facility comprises a term loan to part fund the Australianacquisitions and revolving credit and other facilities for working capital andother purposes. Health, safety and training The health, safety and welfare of our employees and others who potentially couldbe affected by our operations are crucial to the future development and successof the Company. Cape firmly believes that all unsafe acts, injuries and workrelated illness are preventable and that we should minimise, where appropriate,our impact on the environment to protect it for future generations. Behaving responsibly towards people and the environment is at the heart of theway we operate; we think that this focus is a key strength and differentiatorbetween Cape and our competitors. To this end we strive continuously to look foropportunities to improve our performance by strengthening our quality managementsystems and introducing specific initiatives, such as the corporate culture andbehavioural change programmes targeted at improving the health, safety andenvironmental ("HS&E") impact of our business on the world community. One major HS&E initiative planned over the coming year is to introduce a webbased international health, safety and environmental reporting system designedto provide an on-line reporting service of accidents and incidents of all types,with further advantages of a common underlying causal analysis and a powerfulcapability to track follow-up actions from investigations, audit and riskassessments. The Group has gone through an extensive period of transition over the last 18months to become a truly international player in our sector and, as aconsequence, the Board has strengthened the Group's health, safety, environment,quality and technical capabilities by appointing a Group Safety Director whoseprincipal focus is to aid the Chief Executive and the Board to identify bestpractice and provide expertise in health, safety, environment and technicalmatters. Our occupational health and safety performance continues to be in the upperquartile of comparable companies with an accident frequency rate per 100,000hours worked of 0.1 for the Group as a whole. This achievement met the stretchperformance level set by the Board and, when compared to available industrydata, is an exceptional achievement. In some areas of the world we deliveredsignificantly better results than the Group average and over the comingreporting period we will continue to implement best practice and transfer it around the Group to improve our overall performance. Although there can be no guarantee that accidents and incidents will neveroccur, the measures taken by the Group are intended to focus on prevention andcontinuous vigilance and improvement. Our superior performance is fundamentally underpinned by the competence of ouremployees. Cape, throughout this period, has continued to develop and improveits international training facilities to ensure that our employees have theright skills and knowledge to undertake their work safely, efficiently and withthe least impact as possible on the environment. We opened three new training facilities in 2007. Often local skilled labour istrained to a level at which they themselves can become certified trainers topass on their knowledge to the local workforce. The Group as a whole hassignificantly increased its spending on technical related training. We believethis continued investment will be rewarded in our ability to seek, capture anddeliver superior performance for our clients. Outlook With this outstanding set of results Cape has demonstrated its ability togenerate significant organic growth and grow a profitable business whilst at thesame time extending its footprint and sowing the seeds for future growth in thebuoyant energy and natural resources sectors, particularly in the Far East &Pacific Rim. The Board believes that Cape's future growth is underpinned by several factors: •global demand for energy; in 2007, the US Energy Information Administration forecast that demand for energy in non-OECD countries would increase by 95% compared with an increase of 24% in the OECD; •within the OECD, the need on the part of energy producers to extend the life of assets ahead of the next investment cycle; •an increasing appetite on the part of Cape's major customers to outsource non-core services and to look for bundled service proposals; and •a demand on the part of blue chip clients to work with safe suppliers who have access to local workforces and the ability to train them to exacting standards. Cape's management team is now firmly focussed on cash generation, integratingthe businesses acquired in 2007, delivering the associated synergies andensuring that all newly acquired services are pulled through the Group. 2007 was an outstanding year and we now look forward to a sustained period ofstrong organic growth. Martin K MayChief Executive19 March 2008 Cape PLC Unaudited consolidated income statement for the year ended 31 December 2007 2007 2006 Total Total £m £mContinuing operationsRevenue 428.8 274.0 Operating profitGroup operating profit before exceptional items 36.1 14.8Exceptional items (0.3) 1.0Group operating profit 35.8 15.8 Finance costs (6.2) (1.6)Finance income 3.4 1.3Share of post tax profits from joint ventures - 0.1 Profit before tax 33.0 15.6 Taxation (5.4) (2.0) Profit from continuing operations 27.6 13.6 Discontinued operations (Loss)/profit from discontinued operations (0.7) 1.1 Profit for the year attributable to equity 26.9 14.7shareholders Earnings per share for profit attributable to the equity holders of the company during the year- Basic 26.0p 17.6p- Diluted 25.5p 17.4p From continuing operations- Basic 26.7p 16.3p- Diluted 26.2p 16.0p Cape PLC Unaudited consolidated balance sheet at 31 December 2007 2007 2006 £m £mNon current assetsIntangible assets 165.6 15.4Property, plant and equipment 127.0 32.0Investments accounted for using equity method - 0.1Retirement benefit asset 0.1 8.1Deferred tax asset 6.7 4.8 299.4 60.4 Current assetsInventories 15.8 8.3Trade and other receivables 144.5 78.2Financial assets - derivative financial assets - 0.3Cash - Scheme funds (restricted) 39.1 40.1Cash and cash equivalents 20.1 15.3 219.5 142.2 LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings (108.0) (13.3)- Derivative financial instruments (0.1) (0.1)Trade and other payables (95.4) (67.5)Current tax liabilities (6.6) (3.3) (210.1) (84.2)Net current assets 9.4 58.0 Non current liabilitiesFinancial liabilities- Borrowings (102.6) (23.4)Retirement benefit liabilities (3.1) (2.2)Deferred tax liabilities (10.4) (2.7)Provisions (12.0) (14.9) (128.1) (43.2)Net assets 180.7 75.2 Shareholders' equityCalled up share capital 32.8 25.2Share premium account 7.5 25.0Special reserve 1.0 -Other reserves 5.5 (2.2)Retained earnings 132.9 27.2Total shareholders' funds 179.7 75.2 Minority interest in equity 1.0 - Total equity 180.7 75.2 Cape PLC Unaudited consolidated cash flow statement for the year ended 31 December 2007 2007 2006 £m £mCash flows from operating activitiesCash generated from operating activities 16.8 13.7Scheme funding - transfer to restricted cash - (40.0)Net cash generated from/(absorbed by) operating 16.8 (26.3)activities Interest received 3.4 1.3Interest received on restricted funds (2.2) (1.0)Net interest received 1.2 0.3Interest paid (6.2) (1.7)Issue costs of new borrowings (2.6) (0.5)Tax paid (3.3) (1.4)Net cash inflow/(outflow) from operating 5.9 (29.6)activities Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (185.2) (12.2)Deferred consideration paid (0.1) -Disposal of business - 5.4Proceeds from sale of property, plant and 1.8 3.5equipmentPurchase of property, plant and equipment (25.3) (8.9)Dividend received from joint ventures - 0.2Net cash used in investing activities (208.8) (12.0) Cash flows from financing activitiesNet proceeds from issue of ordinary shares 68.3 -Proceeds from borrowings 169.6 26.5Finance lease principal payments (2.8) (1.5)Repayment of borrowings (26.0) -Net cash received from financing activities 209.1 25.0Exchange losses on cash, cash equivalents and bank (0.1) (0.6)overdraftsNet increase in cash, cash equivalents and bank 6.1 (17.2)overdrafts Opening cash, cash equivalents and bank overdrafts 9.1 26.3 Closing cash, cash equivalents and bank overdrafts 15.2 9.1 Cape PLC Unaudited consolidated statement of recognised income and expense for the year ended 31 December 2007 2007 2006 £m £m Net exchange adjustments offset in reserves net of tax 6.1 (2.4)Actuarial (loss)/gain recognised in the pension scheme (4.3) 7.7Movement in restriction of retirement benefit asset in (5.7) (7.1)accordance with IAS 19Movement in deferred tax relating to pension asset 2.5 (0.1)Cash flow hedges - fair value gains 1.6 0.7Excess tax on share option scheme (0.2) 0.6Net income recognised directly in equity - (0.6)Profit for the year 26.9 14.7Total recognised income for the year 26.9 14.1 Attributable to:- Equity holders of the company 26.9 14.1- Minority interest - - 26.9 14.1 CAPE PLC NOTES TO THE UNAUDITED ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2007 1. Basis of preparation The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted by the EuropeanUnion, IFRIC interpretations and the Companies Act 1985 applicable to Companiesreporting under IFRS. The consolidated financial statements have been preparedunder the historical cost convention, as modified by the revaluation ofderivative instruments to fair value. The group's principal accounting policieswere disclosed in the 2007 interim report. The preliminary results for the year ended 31 December 2007 are unaudited. Thefinancial information set out in the announcement does not constitute thecompany's statutory accounts for the years ended 31 December 2007 or 31 December2006 as defined by Section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2006 is derived fromthe statutory accounts for that year (as restated upon the adoption of IFRS)which have been delivered to the Registrar of Companies. The auditors reportedon those accounts; their report whilst unqualified, contained an explanatoryparagraph making reference to the fundamental uncertainty concerning the amountrequired to settle future claims for industrial disease compensation asdescribed below. The auditors' report did not contain a statement under eitherSection 237 (2) or (3) of the Companies Act 1985. In forming their opinion, the auditors considered the adequacy of thedisclosures made in the financial statements concerning the impact of, andaccounting for, potential future claims for industrial disease compensation. Anindependent actuarial estimate of the range of certain potential liabilities hasbeen performed, however, given the wide range of estimates and significantdegree of uncertainty surrounding them, it is not possible for the Directors toquantify, with sufficient reliability, the amount required to settle futureclaims and accordingly claims are generally accounted for on the basis of claimslodged or settlements reached and outstanding at the balance sheet date. However, if it were possible to assess reliably the present value of the amountrequired to settle future claims such that this was provided in the balancesheet, there would be a materially adverse effect on the Group's financialposition. Details of the circumstances relating to this "Emphasis of matter -contingent liability for industrial disease claims" are described in thecontingent liability note in the annual report and accounts for the year ended31 December 2006. The auditors' opinion was not qualified in this respect. The statutory accounts for the year ended 31 December 2007 will be finalised onthe basis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the company's Annual General Meeting. The auditors' report on thestatutory accounts for the year ended 31 December 2007 is expected to contain anexplanatory paragraph making reference to the fundamental uncertainty concerningthe amount required to settle future claims for industrial disease compensationas described above. 2. Segmental analysis (a) Primary reporting format - business segment The Group's primary reporting segments are the provision of industrial services,industrial disease related costs and balances and head office. Industrial Industrial Head Group services disease office related2007 £m £m £m £m Continuing operationsRevenue 428.8 - - 428.8 Operating profit before exceptional items 41.1 (1.6) (3.4) 36.1Reorganisation costs (0.3) - - (0.3 ) 40.8 (1.6) (3.4) 35.8 Finance income 3.4Finance costs (6.2)Profit before tax 33.0Taxation (5.4)Profit from continuing operations 27.6 Discontinued operations Operating loss before exceptional items (0.1) - - (0.1)Exceptional items (0.6) - - (0.6)Loss before tax (0.7) - - (0.7)Taxation - - - -Loss from discontinued operations (0.7) - - (0.7) There are no significant inter-segment sales between business segments. 2. Segmental analysis (continued) (a) Primary reporting format - business segment (continued) Industrial Industrial Head Group services disease office related2006 £m £m £m £mContinuing operationsRevenue 274.0 - - 274.0 Operating profit before exceptional items 20.0 (3.4) (1.8) 14.8Exceptional items - - 1.0 1.0 20.0 (3.4) (0.8) 15.8 Share of post tax profits of joint 0.1 - - 0.1venturesFinance income 1.3Finance costs (1.6)Profit before tax 15.6Taxation (2.0)Profit from continuing operations 13.6 Discontinued operationsRevenue 16.9 - - 16.9 Operating profit before exceptional items 0.3 - - 0.3Exceptional items 1.3 - - 1.3Profit before tax 1.6 - - 1.6Taxation (0.5)Profit from discontinued operations 1.1 Net profit attributable to equity 14.7shareholders Other segment items included in the income statement are as follows: 2007 2006 Industrial Industrial Head Group Industrial Industrial Head Group services disease office services disease office related related £'m £'m £'m £'m £'m £'m £'m £'mDepreciation 8.7 - - 8.7 6.9 - - 6.9Amortisation 1.0 - - 1.0 0.1 - - 0.1Restructuring 0.3 - - 0.3 - - - -costs Segment assets consist primarily of property, plant and equipment, intangibleassets, inventories and trade and other receivables. Unallocated assets comprisedeferred taxation and financial assets. Segment liabilities comprise operating liabilities. Unallocated liabilitiescomprise items such as taxation and borrowings including related hedgingtransactions. The segment assets and liabilities at 31 December 2007 and capital expenditurefor the year then ended are as follows: Business segment Industrial Industrial Head office Unallocated Group Services disease related £'m £'m £'m £'m £'mAssets - continuing 447.0 1.1 2.7 65.9 516.7Assets - discontinued 2.2 - - - 2.2Total assets 449.2 1.1 2.7 65.9 518.9 Liabilities - continuing 91.5 10.0 7.0 227.7 336.2Liabilities - discontinued 2.0 - - - 2.0Total liabilities 93.5 10.0 7.0 227.7 338.2 Capital expenditure 31.7 - - - 31.7 2. Segmental analysis (continued) (a) Primary reporting format - business segment (continued) Segment assets and liabilities are reconciled to the group assets andliabilities as follows: Assets Liabilities £'m £'mSegment assets/ 453.0 110.5liabilitiesUnallocated:Deferred tax 6.7 10.4Current tax - 6.6Cash 59.2 -Current borrowings - 108.0Non current borrowings - 102.6Derivatives - 0.1 Total 518.9 338.2 The segment assets and liabilities at 31 December 2006 and capital expenditurefor the year then ended are as follows:Business segment Industrial Industrial Head office Unallocated Group Services disease related £'m £'m £'m £'m £'mAssets - continuing 127.8 2.4 9.6 60.5 200.3Joint ventures 0.1 - - - 0.1Assets - discontinued 2.2 - - - 2.2Total assets 130.1 2.4 9.6 60.5 202.6 Liabilities - continuing 62.6 14.9 3.9 42.8 124.2Liabilities - discontinued 3.2 - - - 3.2Total liabilities 65.8 14.9 3.9 42.8 127.4 Capital expenditure 12.0 - - - 12.0 Segment assets and liabilities are reconciled to the group assets andliabilities as follows: Assets Liabilities £'m £'mSegment assets/ 142.1 84.6liabilitiesUnallocated:Deferred tax 4.8 2.7Current tax - 3.3Cash 55.4 -Current borrowings - 13.3Non current borrowings - 23.4Derivatives 0.3 0.1 Total 202.6 127.4 2. Segmental analysis (continued) (b) Secondary reporting format - geographical segment The group operates in four main geographical areas being the UK, Gulf/MiddleEast, CIS/Caspian and Far East/Pacific Rim. The home country of the operation isthe UK. Revenue Operating Revenue Operating Profit Profit 2007 2007 2006 2006Continuing operations £m £m £m £mUK 270.1 21.0 189.9 10.3Gulf/Middle East 66.1 12.4 40.6 9.4CIS/Caspian 45.2 4.6 31.0 0.4Far East/Pacific Rim 45.5 2.9 11.8 -Other 1.9 0.2 0.7 (0.1)Central costs Head office - (3.4) - (1.8)Industrial disease costs - (1.6) - (3.4) Exceptional items - (0.3) - 1.0 428.8 35.8 274.0 15.8 Revenue is allocated based on the country in which the customer is located andis all from the provision of industrial services. Operating profit is allocated based on the country in which the operation wasperformed. 2007 2006Total assets £'m £'mUK 135.6 101.6Gulf/Middle East 40.4 24.5CIS/Caspian 2.8 1.2Far East/Pacific Rim 265.3 6.6Other 8.9 8.2Unallocated assets 65.9 60.5 518.9 202.6 Total assets are allocated based on where the assets are located 2007 2006Capital expenditure £'m £'mUK 15.2 5.9Gulf/Middle East 9.8 2.8CIS/Caspian 2.8 2.1Far East/Pacific Rim 3.8 1.2Other 0.1 - 31.7 12.0 Capital expenditure is allocated based on where the assets are located 3. Exceptional items 2007 2006The exceptional items comprise: £m £mContinuing:Restructuring costs (0.3) - Credit relating to Scheme of arrangement - 1.0 2007 2006 £m £mDiscontinued:Cape Calsil - additional costs relating to the disposal of the (1.0) (0.9)Calsil businessAdditional profit on sale of Calsil property 0.4 -Profit on disposal of Continental European operating business - 0.3Profit on sale of Dutch properties - 1.9 Total discontinued (0.6) 1.3 On 20 July 2006 the group disposed of the trade and certain business assets ofCleton, its operating business based in the Netherlands, Belgium and Germany.This resulted in a withdrawal from the Continental European market and as suchthe disposal was treated as a discontinued operation in the income statement. During the year, additional provisions have been made in regard to propertieswhich were used in the Calsil business. The cash movement relating to the above exceptional items was an inflow of £0.4million (2006: outflow of £4.5 million) The tax effect of the exceptional item in continuing operations is a credit of£0.1 million (2006: charge of £0.3 million) The tax effect of the discontinued exceptional items is a tax charge of £nil(2006: charge of £0.5 million) 4. Earnings per ordinary share The basic earnings per share calculation for the year ended 31 December 2007 isbased on the earnings after tax of £26.9 million (2006: £14.7 million) dividedby the weighted average number of ordinary 25p shares of 103,351,141 (2006:83,523,010). The diluted earnings per share calculation for the year ended 31 December 2007is based on the earnings after tax of £26.9 million (2006: £14.7 million)divided by the diluted weighted average number of ordinary 25p shares of105,449,927 (2006: 84,808,505). Share options are considered potentially dilutive as the average share priceduring the year was above the average exercise prices. 2007 2006 shares SharesBasic weighted average number of shares 103,351,141 83,523,010Adjustments:Weighted average number of outstanding share options 2,098,786 1,285,495Diluted weighted average number of shares 105,449,927 84,808,505 Basic earnings per share 2007 2006 Earnings EPS Earnings EPS £m pence £m penceContinuing operations 27.6 26.7 13.6 16.3Discontinued operations (0.7) (0.7) 1.1 1.3Basic earnings per share 26.9 26.0 14.7 17.6 Diluted earnings per share 2007 2006 Earnings EPS Earnings EPS £m pence £m penceContinuing operations 27.6 26.2 13.6 16.0Discontinued operations (0.7) (0.7) 1.1 1.4Diluted earnings per share 26.9 25.5 14.7 17.4 An underlying adjusted diluted earnings per share has been calculated whichexcludes the effects of a one off tax credit received in the year on theconsolidation of Concept Hire in Australia. It is calculated by dividing theadjusted earnings after tax from continuing operations of £24.8 million (2006:£13.6 million) by the diluted weighted average number of ordinary 25p shares of105,449,927 (2006: 84,808,505). The adjusted numbers have been provided in orderthat the effects of this one off item on reported earnings can be fullyappreciated, and has been calculated as follows: Underlying adjusted diluted earnings per share -continuing operationsAs stated above 27.6 26.2 13.6 16.0Exceptional Australian tax credit (2.8) (2.6) - -Underlying adjusted diluted earnings per share - continuing operations 24.8 23.6 13.6 16.0 5. Capital and reserves Share Share Retained Other Special Minority Capital Premium Earnings Reserves Reserve Total interest Total £m £m £m £m £m £m £m £m At 1 January 2007 25.2 25.0 27.2 (2.2) - 75.2 - 75.2Exchange adjustments net of tax - - - 6.1 - 6.1 - 6.1Issue of share capital 7.4 70.7 - - 78.1 - 78.1Issue expenses - (2.1) - - (2.1) - (2.1)Capital reduction - (86.3) 85.3 - 1.0 - - -Cash flow hedges - fair value gains in period - - - 1.6 - 1.6 - 1.6Net profit - - 26.9 - - 26.9 - 26.9Actuarial loss recognised in the pension scheme - - (4.3) - - (4.3) - (4.3)Minority interest arising on business combinations - - - - - - 1.0 1.0Movement in restriction of retirement benefit asset in accordance with IAS 19 - - (5.7) - (5.7) (5.7) - -Deferred tax on actuarial loss - - 2.5 - - 2.5 - 2.5Share options- proceeds from shares issued 0.2 0.2 - - - 0.4 - 0.4- value of employee services - - 1.0 - - 1.0 1.0At 31 December 2007 32.8 7.5 132.9 5.5 1.0 179.7 1.0 180.7 5. Contingencies In its annual report and accounts, the Group discloses contingent liabilities inrelation to industrial disease claims, leasehold properties, an employmenttribunal and guarantees and bonds. As regards industrial disease claims, giventhe wide range of estimates and the significant degree of uncertaintysurrounding them, the Group provides in the income statement each period for theestimated liability in respect of industrial disease claims lodged andoutstanding at the period end. The impact on the audit opinion has beenexplained in the basis of preparation above. Details of the contingent liabilities can be found in the annual report andaccounts for the year ended 31 December 2006 in note 26. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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