18th Sep 2007 07:02
Cape PLC18 September 2007 Cape PLC ("Cape" or the "Company") INTERIM RESULTS: 6 months to 30 June 2007 Financial highlights Group turnover - continuing operations up 46% to £187.4m (2006: £128.2m) Group operating profit up 191% to £13.1m (2006: £4.5m) Diluted Earnings per share - continuing operations up 127% to 10.0p (2006: 4.4p) These results are the first to be reported under IFRS and the comparativefigures reflect a consequent restatement of the results for the equivalent priorperiod on a similar basis. Business highlights During the period: • Continued progress in all key markets • Forward order book growing • Further significant contract wins in UK and international markets • Global business now organised into four key geographic regions • Placing in April 2007 to raise approximately £70 million (before expenses) • Acquisition of Total Rope Access International and Endecon in the UK Since 1 July 2007: • Acquisition of Total Corrosion Control Group in Australia • Announcement of recommended cash offer for Concept Hire Limited in Australia • Announcement of conditional cash offer for PCH Group Limited in Australia • Capital reduction confirmed by the High Court • New £240 million committed bank facility Martin May, Chief Executive Officer, said: "I am pleased to announce another set of excellent numbers for Cape for the lasthalf year. We have continued to deliver on our strategy of driving organicgrowth in chosen markets combined with an aggressive acquisitions strategy. Wecontinue to drive growth in mature markets like the UK whilst establishing astrong and growing presence in our chosen international markets. With astrengthened management team we are confident the Group will continue to improveupon the growth and progress seen over the past five years." Enquiries Cape PLCMartin May, Chief Executive Officer +44 (0)1924 876 276 Bell Pottinger Corporate & FinancialNick Lambert / Victoria Geoghegan +44 (0) 207 861 3232 +44 (0) 7811 358 764 Collins Stewart Europe LimitedChris Wells/ Mark Connelly +44 (0) 207 523 8350 Chairman's statement I am delighted to report that the first six months of 2007 has again seen Capeachieve record levels of trading activity. The Group is delivering excellentlevels of growth in turnover and profit in all its key markets. The outlook forthe remainder of the year is also very promising. In what has been an eventful six months, Cape has also started to deliver on itsacquisition strategy with the acquisitions in June of two UK companies, TotalRope Access International Limited and Endecon Limited. Shortly following the period end, Cape also acquired the TCC Group in Australia. On 10 September 2007, Cape announced a recommended cash offer for Concept HireLimited ("Concept Hire"), an Australian based hire and industrial servicescompany, valuing Concept Hire at approximately £52.4 million. Further, on 13 September 2007, Cape announced a cash offer for PCH Group Limited("PCH"), the Australian based hire and industrial services company. The offervalues PCH at approximately £112.2 million (including debt of £17.1 million).The offer, which has not yet been recommended by the PCH board, is subject,inter alia, to the condition that Cape is released from the standstill imposedby PCH in early discussions which currently prevents Cape acquiring PCH sharesin the market. As set out in detail in the announcement made on 13 September2007, Cape's Board believes there is a compelling case for the merger of therespective interests of Cape and PCH in order to create a substantialinternational industrial services company. Following the EGM on 31 July 2007 at which shareholders voted in favour of aplanned capital reduction, I am pleased to report that the High Court orderconfirming the capital reduction became effective on 13 September 2007. Thereduction removes one of the obstacles preventing Cape from paying dividends. Notwithstanding that the capital reduction has become effective, it may still besome time before the payment of dividends is resumed since the Board will haveto be satisfied both that profits are available for the purpose and that theCompany has complied fully with the provisions of the Scheme of Arrangement asregards the financing of Cape's Asbestos Fund. On 3 September 2007, Cape entered into a new £240 million five year bankingfacility with Barclays Bank Plc. The facility comprises term loans to fund theacquisitions of Concept Hire and PCH and revolving credit and ancillaryfacilities for working capital and other purposes. In order to ensure that the full amount of the bank facility can be drawn, itwill be necessary for Cape to obtain the approval of its shareholders to aresolution increasing the limit on the Company's borrowing powers from thecurrent limit of £200 million. Details of the resolution will be contained in acircular to be posted to shareholders very shortly. David McManusChairman 18 September 2007 Chief Executive's report I am pleased to report that Cape has again delivered results substantially aheadof the Board's expectations in the first six months of 2007. Cape, which specializes in the provision of scaffolding, insulation, fireprotection, specialist cleaning and other essential support services to majorindustrial clients principally in the energy sector, has generated significantorganic growth in all its key markets and begun a series of acquisitionsintended to maximize the Group's potential to offer its services in the Far East/ Pacific Rim and in the booming Australian resources sector. Over the last six months the business has been reorganized into four discretegeographic business units: the UK, Middle East, Far East & Pacific Rim and theFormer CIS states (including Sakhalin Island). Regional Directors for each ofthe business units have now been appointed and as a consequence the Group headoffice function will be relocated to West London during the first quarter of2008. On turnover from continuing operations of £187.4 million (2006: £128.2 million),the Group made an operating profit of £13.1 million for the six months to 30June 2007 (2006: £4.5 million). The basic earnings per share is 10.3p (2006: 4.6p) and despite a 12.0% increasein the weighted average number of ordinary shares in issue during the period,the diluted earnings per share from continuing operations of 10.0p (2006: 4.4p)reflect continued improved trading. Operating and financial review While the buoyant energy market and high levels of investment continue tounderpin Cape's operations, it is Cape's first class safety proposition andproven ability to deliver bundled industrial services "on time all of the time"that is key to the Group consolidating its market leading position. Cape's continuing operations, before the deduction of head office costs of £2.1million (2006: £1.1 million) and industrial disease costs of £1.0 million (2006:£1.4 million), made an operating profit of £16.2 million (2006: £6.2 million) onturnover of £187.4 million (2006: £128.2 million). Of particular significance has been the growth in the UK, the most mature andcompetitive market in which the Group operates, with revenue increasing by 42.8%to £126.2 million (2006: £88.4 million) and operating profit more than doublingfrom £3.2 million in 2006 to £8.3 million. Elsewhere in the world, revenue in the Middle East increased by 20.9% from £24.9million in 2006 to £30.1 million, in the Former CIS from £10.6 million to £21.8million and in the Far East & Pacific Rim from £3.9 million to £8.7 million.Operating profit in the Middle East also more than doubled, rising from £2.4million in 2006 to £6.4 million. The results announced today are the first that the Company has presented underIFRS. On 14 September 2007, the Company announced its reconciliation andrestatement of the results from prior periods in accordance with IFRS. As can beseen from the reconciliation, the change to IFRS has not had any significantimpact on Cape's main reporting metrics. Forward order book Cape has continued to win significant contracts and renewals in the UK andinternationally, with new and existing clients in each of its core markets aswell as expanding the range of services it offers. Since the publication of the Company's Annual Report and Accounts on 22 May2007, we have announced that: - in the UK, DBI Industrial Services Limited, the industrial cleaningbusiness acquired by Cape in October 2006, has been awarded a contract for theprovision of site-wide drainage cleaning and CCTV survey at BP's Sullom Voeterminal. The contract is for three years with the option to renew for a furthertwo years and is expected to be worth c. £3 million over the full term; - in Qatar, Cape has been awarded two three year maintenance contractrenewals with Qatar Petroleum on the Dhukan oilfield with a combined value of c.US$9.5 million; - in Kazakhstan, Cape has received a letter from Aker Kvaerner confirmingtheir firm intention to award a c. US$10 million contract to provide access,winterisation, rigging, painting, insulation and pipe cutting services on thehook up and commissioning of the offshore facilities on the Kashagan FieldDevelopment; - in Singapore, Cape has been awarded a c.US$2.8 million accessscaffolding contract with Foster Wheeler on the Lucite Alpha 1 Project; and - its recently acquired Australian subsidiary Total Corrosion ControlGroup ("TCC Group"), has secured a major support services contract forscaffolding, insulation and painting services for the BP Kwinana refinery. Thecontract is estimated to have annual revenues of £2.4 million and is for aninitial period of three years with an option to extend for a further two years. We are also pleased to announce that Cape has been awarded a c. £6 millioncontract over three years (with the option to extend for up to two more years)with Saltend Cogeneration Company Limited, part of International Power, for theprovision of access, insulation and painting services at its plant in Hull, inthe UK. Health & Safety Cape continues to place a heavy emphasis on all aspects of health and safetywhich are an integral part of its business proposition. Despite working in someof the most challenging environments in the world, Cape has maintained its firstclass safety record. It is a tribute to the hard work of Cape's management teamsand the focus of its operatives that Cape has completed over three million manhours without a time lost incident on Sakhalin Island. Industrial Disease Claims The net charge to the profit and loss account for industrial disease claims inthe six months to 30 June 2007 was down from the same period last year at £1.0million (2006: £1.4 million). Given the outlook for the Group and assuming thatfuture settlements broadly follow recent history, Cape's Directors remainconfident that any required top-ups to the Scheme fund and (insofar as there areany) future claims outside the Scheme, to the extent not matched by insurancerecoveries, can be met from operating cash flows. In the six months to 30 June 2007, the Scheme Fund generated interest of £1.0million. Cape Claims Services Limited, the company established to administerclaims on behalf of the Scheme companies, paid out £1.8 million in claims. Therewere no claims paid that were not covered by the Scheme. Acquisitions As outlined in the Annual Report for the year ended 31 December 2006 and in thecircular for the placing, which was successfully completed on 24 April 2007, theGroup has embarked upon a programme of strategic acquisitions. Whilst wedescribed PCH as the principal target at the time of the Placing we alsoidentified several alternative potential acquisition opportunities. The proposedacquisition of PCH has taken longer than expected and our offer has yet toreceive a recommendation from PCH's board. We have, however, made significantprogress on the other targets as described below. Since April the Directors haverevised and increased the scope of the acquisitions programme to include threeidentified targets in Australia, including PCH, all of which have now beenannounced. Total Rope Access International ("TRAIL") On 5 June 2007, Cape completed the acquisition of TRAIL for total considerationof £0.9 million. TRAIL are market leaders in the UK in the use of abseilingtechniques to provide non-destructive testing, inspection, fabric maintenance,insulation, painting and window cleaning services to major industrial clients.TRAIL's clients include: BAE Systems, British Energy, BP, Conoco, Drax, EDF,Huntsman, PX Power, Sabic and Shell. Endecon The acquisition of TRAIL was followed by that of Endecon Limited on 21 June 2007for £2.0 million. Endecon provides environmentally safe systems to decontaminateoil refinery and petrochemical systems removing benzene, H2S (hydrogen sulphide)and pyrophorics, and minimising heavy, oily sludge and deposits in order toprovide significant safety and productivity benefits at plant shutdowns. Endeconalso applies its technology to chemically clean processing units in chemical andother heavy industries, removing scale deposits and corrosion formation, as wellas providing heat exchanger bundle pulling services to oil refineries andpetrochemical plants using robotic, hydraulic equipment. In addition to these services, Endecon has acquired exclusive rights in the UKto high pressure membrane press technology which is capable of separating oilywaste into recoverable fuel oil and dry friable solid or cake acceptable onlandfill sites under the new Landfill Directive which came into force in July2004. Under Cape's ownership it is intended to introduce market leadingsecondary processing services during 2007 to reduce waste even further. Both TRAIL and Endecon operate within Cape's core business sectors and theiracquisition further enhances Cape's ability to provide a comprehensive packageof bundled industrial services to the energy and resources sectors. TCC Group On 31 August 2007, Cape, through its wholly-owned subsidiary, Cape AustraliaInvestments Pty Limited ("Cape Australia") acquired the Australian based TCCGroup. Under the agreement between Cape Australia and the shareholders of TCC Holdings(2005) Pty Ltd ("TCC Holdings"), the ultimate holding company of the TCC Group,all of the issued share capital of TCC Holdings was acquired for a considerationthat reflects an enterprise value for the TCC Group of £34.3 million. Subject tothe TCC Group achieving its earnings target for the year ending 30 June 2008, upto a further £5.1 million will be payable. The initial consideration paid at completion comprised £26.3 million in cash and£8.0 million in Cape new ordinary shares ("Initial Consideration Shares") (at anissue price per share of £2.94) which are subject to orderly market provisionsregarding their disposal until 31 August 2009. Any additional consideration willbe payable in cash. The TCC Group, which operates mainly in Western Australia, offers a wide rangeof industrial services to blue chip clients in the mining, oil, gas andconstruction industries. The TCC Group specializes in the provision of blasting,industrial painting, protective coatings, thermal and acoustic insulation, sheetmetal fabrication, rubber lining and access scaffolding. The TCC Group isheadquartered in Kwinana where it operates one of the largest blasting andpainting workshops in the world. It also has regional offices at Karratha andPort Hedland. Its principal customers are BHP Billiton, Alcoa, Rio Tinto, BPRefineries, the Murrin Murrin Nickel Mine and Woodside. In the year to 30 June 2007, the TCC Group's turnover was £45.9 million, itsearnings before interest, depreciation, tax and amortization were £6.0 millionand it generated earnings before interest and tax of £5.6 million. Theapproximate value of the net assets acquired at completion is £7.4 million.Cape's Directors are of the opinion that the acquisition will be earningsenhancing in the first year(1). Cape's acquisition of the TCC Group is a major milestone in the achievement ofCape's international strategic plan. Cape's Directors believe that acquisitionof the TCC Group will bring immediate benefits to both businesses. The TCC Groupwill provide a stable platform from which to develop Cape's existing Far East/Pacific Rim businesses while significantly extending Cape's footprint in theregion. The TCC Group's blasting, painting, insulation and access services areall key components of Cape's core disciplines. The TCC Group's establishedpresence in Australia's booming resources sector offers Cape an opening into ahuge new market. (1) This statement should not be interpreted as a profit forecast and does notnecessarily mean that Cape's future earnings per share will match or exceed Cape's reported historical earnings. Offer for Concept Hire On 11 September 2007, Cape announced a recommended cash offer for Concept Hire,a public company listed on the Australian Stock Exchange (ASX:CSH). Concept Hireis a leading supplier of scaffold equipment and associated services to theresidential and commercial construction, civil engineering, mining andpetrochemical industries. The company is headquartered in Victoria and has stateoffices in Queensland and Western Australia. In the financial year ended 30 June 2007, Concept Hire generated EBITDA of £5.1million and profit before tax of £3.4 million. As at 30 June 2007, Concept Hirehad gross assets of £36.6 million. Cape views Concept Hire as an integral part of its international growth strategyand intends to use Concept Hire and its local management team to continue todevelop its existing Far East/ Pacific Rim businesses and further extend itsfootprint in the region. The offer values Concept Hire at approximately £52.4 million (including debt of£10.0 million). As at the close of business on 17 September 2007 (being the lastbusiness day prior to the announcement of these results), Cape had acquired arelevant interest in respect of 19.99% of Concept Hire's shares. Offer for PCH On 13 September 2007, Cape announced a cash offer for PCH. PCH is a publiccompany listed on the Australian Stock Exchange (ASX:PCG) and is headquarteredin Perth. PCH provides services including scaffolding and access management,formwork and shoring, temporary fencing, aluminium light access and materialshoists. The business is diversified across a range of industries with servicesprovided for construction and maintenance activities in Australia, the CaspianSea, South East Asia and the Arabian Gulf. In the financial year ended 30 June 2007, PCH generated EBITDA of £8.4 millionand profit before tax of £5.1 million. As at 30 June 2007, PCH had gross assetsof £58.3 million. Cape believes that the acquisition of the PCH Group would bring a number ofbenefits to Cape including: •the extension of Cape's footprint in the Far East/ Pacific Rim; •synergies based on Cape's expertise in supplying labour and a broader range of products and services to PCH's customer base; and •the opportunity for Cape's management to apply their expertise towards generating additional revenue and margin growth. The offer values PCH at approximately £112.2 million (including debt of £17.1million). The offer, which has not yet been recommended by the PCH board, issubject, inter alia, to the condition that Cape is released from the standstillimposed by PCH in early discussions which currently prevents Cape acquiring PCHshares in the market. Finance On 3 September 2007, the Company and its subsidiaries entered into a new £240million five year banking facility with Barclays Bank Plc. The facilitycomprises term loans of up to £146 million to fund the acquisitions of PCH andConcept Hire and revolving credit and ancillary facilities totalling £94 millionfor working capital and other purposes. Capital Reduction The capital reduction was approved at the EGM on 31 July 2007. Shareholdersvoted overwhelmingly in favour of the cancellation of the share premium accountof the Company the effect of which will be to enable the Directors to credit tothe profit and loss account the amount required to eliminate the deficit andpermit future profits to be available for distribution when appropriate andpermissible. I am pleased to report that, as required in order for the capital reduction tobecome effective, the High Court order of confirmation was registered on 13September 2007. Outlook Cape continues to maintain its leading position in the majority of the marketsin which it operates. Sales in Cape's UK business unit have grown significantlyover the last two years and once again this area of the business has performedwell ahead of expectations. In the second half, however, while underlying demandfor Cape's broad range of bundled services will continue to be strong, on a likefor like basis the UK business is anticipated to grow less rapidly. The Group's overall business will, however, continue to benefit from growth inthe other regional business units, in particular, in the Far East/ Pacific Rimand the prospects for new work driven by the buoyant energy and resourcessectors and recent acquisitions are excellent. The Board has every reason tobelieve that the Group will continue to improve upon the growth and progressseen over the past five years. Martin K MayChief Executive 18 September 2007 For the purposes of this announcement, a conversion rate of AUD$1 : £0.404 hasbeen used. CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 30 JUNE 2007 Unaudited Unaudited Unaudited Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £m £m £m Continuing operations Revenue 187.4 128.2 274.0 Operating profit Group operating profit before ---------------------------------- exceptional items 13.1 3.7 13.9 Exceptional items relating to scheme of arrangement - 0.8 1.0 ---------------------------------- Group operating profit 13.1 4.5 14.9 Finance costs (1.1) (0.3) (1.6) Finance income 1.4 0.9 2.2 Share of post tax profits from joint ventures - - 0.1 ---------------------------------- Profit before tax 13.4 5.1 15.6 Taxation (3.3) (1.2) (2.0) ---------------------------------- Profit from continuing operations 10.1 3.9 13.6 Discontinued operations Profit from discontinued operations - 0.1 1.1 ---------------------------------- Profit for the period 10.1 4.0 14.7 Profit attributable to minority interest 0.5 - - Profit attributable to equity shareholders 9.6 4.0 14.7 ---------------------------------- 10.1 4.0 14.7 ---------------------------------- Earnings per share for profit attributable to equity shareholders From continuing and discontinued operations - Basic 10.3p 4.6p 17.6p - Diluted 10.0p 4.6p 17.4p From continuing operations - Basic 10.3p 4.4p 16.2p - Diluted 10.0p 4.4p 16.0p CONSOLIDATED BALANCE SHEET AT 30 JUNE 2007 Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 Assets £m £m £m Non current assets Goodwill 15.7 0.6 14.3 Intangible assets 1.5 - 1.1 Property, plant and equipment 40.3 29.4 32.0 Investments accounted for using - 0.1 0.1 equity method Retirement benefit asset 8.0 7.6 8.1 Deferred tax asset 3.8 4.1 4.8 ------------------------------------- 69.3 41.8 60.4 ------------------------------------- Current assets Inventories 12.3 8.7 8.3 Trade and other receivables 103.2 82.7 78.2 Financial assets - derivative 0.1 - 0.3 financial instruments Cash - Scheme funds (restricted) 39.2 40.1 40.1 Cash and cash equivalents 53.7 10.5 15.3 -------------------------------------- 208.5 142.0 142.2 -------------------------------------- Liabilities Current liabilities Financial liabilities - Borrowings (8.8) (25.1) (13.3) - Derivative financial - (0.1) (0.1) instruments Trade and other payables (73.2) (59.7) (67.5) Current tax liabilities (4.0) (2.4) (3.3) -------------------------------------- (86.0) (87.3) (84.2) -------------------------------------- Net current assets 122.5 54.7 58.0 -------------------------------------- Non current liabilities Financial liabilities - Borrowings (21.1) (14.6) (23.4) Retirement benefit liabilities (2.3) (2.2) (2.2) Deferred tax liabilities (2.9) (2.3) (2.7) Provisions (12.9) (13.3) (14.9) ------------------------------------- (39.2) (32.4) (43.2) ------------------------------------- Net assets 152.6 64.1 75.2 ------------------------------------- Shareholders' equity Called up share capital 32.0 25.2 25.2 Share premium account 86.2 25.0 25.0 Other reserves (2.9) (1.0) (2.2) Retained earnings 36.8 14.9 27.2 ------------------------------------ Total shareholders' equity 152.1 64.1 75.2 Minority interest in equity 0.5 - - ------------------------------------- Total equity 152.6 64.1 75.2 ------------------------------------- STATEMENT OF RECOGNISED INCOMEAND EXPENSE FOR THE HALF-YEAR ENDED 30 JUNE 2007 Unaudited Unaudited Unaudited Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £m £m £m Profit for the period 10.1 4.0 14.7 Net exchange adjustments offset in reserves net of tax (0.6) (1.0) (2.4)Actuarial (loss)/gain recognised in the pension scheme (4.2) 5.2 7.7Movement in restriction of retirement benefit asset in accordance with IAS 19 3.7 (5.3) (7.1)Movement on deferred tax relating to pension asset 0.2 - (0.1)Cash flow hedges - fair value (losses)/ gains (0.1) 0.5 0.7Excess tax on share option scheme (0.1) - 0.6 -----------------------------------Net losses not recognised in the income statement (1.1) (0.6) (0.6) ----------------------------------- Total recognised income relating to the period 9.0 3.4 14.1 ----------------------------------- Attributable to: Equity shareholders 8.5 3.4 14.1Minority interest 0.5 - - ------------------------------------ 9.0 3.4 14.1 ------------------------------------ CONSOLIDATED CASH FLOW STATEMENTFOR THE HALF-YEAR ENDED 30 JUNE 2007 Unaudited Unaudited Unaudited Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £m £m £m Cash flows from operating activities ----------------------------------------Cash generated from operating activities (4.0) (7.7) 13.7Scheme funding - transfer to restricted cash - (40.0) (40.0) ----------------------------------------Net cash absorbed by operating activities (4.0) (47.7) (26.3) ----------------------------------------Interest received 1.0 0.3 1.3Interest received on restricted funds (1.0) - (1.0) ----------------------------------------Net interest received - 0.3 0.3Interest paid (1.2) (0.4) (1.7)Issue costs of new bank loans - - (0.5)Tax paid (1.6) (0.9) (1.4) ----------------------------------------Net cash outflow from operating activities (6.8) (48.7) (29.6) ---------------------------------------- Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (2.9) - (12.2)Deferred consideration paid (1.0) - -Disposal of business - - 5.4Proceeds from sale of property, plant and equipment 0.2 - 3.5Purchase of property, plant and equipment (11.2) (2.4) (8.9)Dividends received from joint ventures - 0.1 0.2 ---------------------------------------- Net cash used in investing activities (14.9) (2.3) (12.0) ---------------------------------------- Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 68.0 - -Net proceeds from issue of new bank loans - 15.0 26.5Finance lease principal payments (0.9) (0.5) (1.5)Increase in short term borrowings - 10.8 -Repayment of borrowing (2.8) - - ---------------------------------------- Net cash received from financing activities 64.3 25.3 25.0 ----------------------------------------Exchange losses on cash, cash (0.1) - (0.6) ----------------------------------------equivalents and bank overdraftsNet increase in cash, cash equivalents and bank overdrafts 42.5 (25.7) (17.2)Opening cash, cash equivalents and bank overdrafts 9.1 26.3 26.3 --------------------------------------- Closing cash, cash equivalents and bank overdrafts 51.6 0.6 9.1 --------------------------------------- Note to the Financial Statements 1. Preparation of interim accounts Prior to 2007, the Group prepared its audited financial statements and unauditedinterim financial statements under UK Generally Accepted Accounting Principles("UK GAAP"). From 1 January 2007, the Group is required to prepare its annualconsolidated financial statements in accordance with International FinancialReporting Standards ("IFRS") as adopted by the European Union and implemented inthe UK. The date of transition to IFRS for the Group was 1 January 2006 and theGroup has prepared its opening IFRS balance sheet as at that date. This interim financial report has been prepared in accordance with theaccounting policies set out in note 2 of this report. The IFRS and InternationalFinancial Reporting Interpretations Committee ("IFRIC") interpretations thatwill be applicable as at 31 December 2007, including those that will beapplicable on an optional basis, are not yet known with certainty at the time ofpreparing this report. The comparative figures in respect of 2006 have been restated to reflect therevised accounting policies. Reconciliations and explanations of the effect ofadopting IFRS compliant accounting policies on the Group's equity (net assets),profits and cash flows are provided in the document entitled "IFRS RestatementReport", which can be found on the company's website. The interim financial report has been prepared under the historical costconvention, as modified by the accounting for derivative financial instrumentsat fair value through profit or loss. In addition, this interim financial reportdoes not comply with IAS 34 "Interim Financial Reporting", which is notcurrently required to be applied under AIM rules. The financial information included in this interim financial report for the sixmonths ended 30 June 2007 does not constitute statutory accounts as defined insection 240 of the Companies Act 1985 and is unaudited. The restated comparativefigures for the financial year ended 31 December are also unaudited. A copy ofthe Group's annual report and accounts for the year ended 31 December 2006,which were prepared under UK GAAP in accordance with the Companies Act 1985 havebeen delivered to the Registrar of Companies and include an auditors' reportwhich was unqualified. 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. This interim financial report will be published on the Company's website, inaddition to the paper version posted to shareholders. The maintenance andintegrity of the Cape PLC website is the responsibility of the directors.Legislation in the UK governing the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions. 2. Accounting policies The Group's key accounting policies are set out below. These policies have beenprepared on the basis of the recognition and measurement requirements of IFRSstandards in effect that apply to accounting periods beginning on or after 1January 2007. Basis of consolidation (a) A business combination is recognised where separate legal entities orbusinesses have been brought together within the Group. Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies generally accompanying a shareholding of morethan 50% of the voting rights. Subsidiaries are fully consolidated from the dateon which control is transferred to the Group. They are de-consolidated from thedate that control ceases. The purchase method of accounting is used to account for business combinationsmade by the Group. The cost of a business combination is measured as the fairvalue of the assets acquired, equity instruments issued and liabilities incurredor assumed at the date of exchange, plus costs directly attributable to thebusiness combination. Contingent consideration is included in the cost of a business at theacquisition date only if the consideration is probable and can be reliablymeasured, and is discounted using an appropriate discount rate. If the futureevents upon which the contingent consideration is based do not occur or theestimate needs to be revised or if contingent consideration, which has not beeninitially included, does become probable and can be reliably measured, the costof the business combination, and any associated goodwill, is adjustedaccordingly. Identifiable assets, liabilities and contingent liabilities acquired in thebusiness combination are measured initially at their fair value at theacquisition date. The excess of the cost of acquisition over the fair value ofthe Group's share of the identifiable net assets acquired is recorded asgoodwill. If the cost of acquisition is less than the fair value of the netassets acquired, the difference is credited to the income statement in theperiod of acquisition. (b) The Group's interest in joint ventures is accounted for under the equitymethod. The consolidated financial statements include the Group's share of theprofits or losses of joint ventures and the consolidated balance sheet includesthe investments in joint ventures at cost, including attributable goodwill, plusthe Group's share of post-acquisition reserves. (c) Minority interests in subsidiaries consolidated by the Group are disclosedseparately from the Group's equity and income. Losses attributable to a minorityin excess of the minority's interest in net assets of the subsidiary areadjusted against the interest of the group unless there is a binding obligationon the part of the minority to contribute additional investment in thesubsidiary. (d) Inter-company income, expenses, balances and unrealised gains and losses ontransactions between group companies are eliminated on consolidation. Foreign currencies (a) Functional and presentational currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates ("functional currency"). The consolidated financial statementsare presented in Pounds Sterling, which is the Company's functional andpresentational currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency usingexchange rates prevailing at the date of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at period end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement, exceptwhen deferred in equity as qualifying cash flow hedges and qualifying netinvestment hedges. Translation differences on non monetary financial assets and liabilities arereported as part of the fair value gain or loss. Translation differences onnon-monetary financial assets and liabilities such as equities held at fairvalue through the profit and loss are recognised as part of the fair value gainor loss. (c) Group Companies The results and financial position of all group entities that have a functionalcurrency different from the presentation currency are translated into thepresentation currency as follows: • Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet; • Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction); and • All resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of the netinvestment in foreign operations, and of borrowings and other currencyinstruments designated as hedges of such investments, are taken to shareholders'equity. When a foreign operation is partially disposed of or sold, exchangedifferences that were recognised in equity are recognised in the incomestatement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing exchange rate. Goodwill Goodwill arising on acquisition represents the excess of the cost of a businesscombination over the fair value of the Group's share of the identifiable netassets acquired. Goodwill is tested annually for impairment and carried at costless accumulated impairment losses. Goodwill is allocated to the appropriatecash generating unit for the purpose of impairment testing. Any impairment isrecognised immediately through the income statement and is not subsequentlyreversed. Intangible assets Intangible assets are recognised if it is probable that there will be futureeconomic benefits attributable to the asset, the cost of the asset can bemeasured reliably, the asset is separately identifiable and there is controlover the use of the asset. The assets are amortised over the period over whichthe group expects to benefit from these assets. Property, Plant and Equipment Property, plant and equipment is stated at cost net of accumulated depreciationand any provision for impairment. Cost comprises purchase cost together with anyincidental costs of acquisition. Certain land and buildings are held at previousrevalued amounts less accumulated depreciation as these amounts have been takenas their deemed cost as at the date of transition to IFRS in accordance with theexemption under IFRS 1 "First-time Adoption of IFRS". Depreciation is providedto write off the cost less the estimated residual value of tangible fixed assetsby equal instalments over their estimated useful economic lives with theexception that no depreciation is provided on freehold land. The asset'sresidual values and useful economic lives are reviewed, and adjusted asappropriate, at each balance sheet date. The following rates are applied: - Freehold buildings - 2% per annum - Leasehold land and buildings - the period of the lease - Plant, machinery, fixtures and fittings - 62/3% to 331/3% per annum - Scaffolding equipment - 62/3% to 331/3% per annum The carrying value of tangible fixed assets are reviewed for impairment ifevents or change in circumstances indicate that the carrying value may not berecoverable. Any impairment in the value of fixed assets is dealt with in the incomestatement in the period in which it arises. Impairment of assets (excluding goodwill) At each balance sheet date the Group reviews the carrying amounts of itstangible and intangible fixed assets to assess whether there is an indicationthat those assets may be impaired. If any such indication exists, the Groupmakes an estimate of the assets recoverable amount. An assets recoverable amountis the higher of an assets fair value less costs to sell and its value in use.In assessing value in use, the estimated future cash flows attributable to theasset are discounted to their present value using a pre tax discount rate thatreflects current market assessments of the time value of money and the risksspecific to the asset. Where the recoverable amount is estimated to be less than its carrying amount,the carrying amount is reduced to its recoverable amount. An impairment loss isrecognised immediately in the income statement. Trade and other receivables Trade receivables are recognised and carried at original invoice amounts less anallowance for any amount estimated to be uncollectible. Leases Finance leases Where assets are financed by leasing agreements that give rights approximatingto ownership, the amount representing the outright purchase price is capitalisedand the corresponding leasing commitments are shown as obligations to thelessor. The relevant assets are depreciated in accordance with the Group'sdepreciation policy or over the lease term if shorter. Net finance charges,calculated on the reducing balance method, are included in finance costs. Operating leases Payments made under operating leases, net of any incentives received from thelessor, are charged to the income statement on a straight line basis over theperiod of the lease. Use of estimates and assumptions The preparation of these financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenue during the reporting period. Actual results could differ from theseestimates. Information about such judgements and estimation is contained inindividual accounting policies. Key sources of estimation uncertainty that could cause an adjustment to berequired to the carrying amount of asset or liabilities within the nextaccounting period are: • Review of residual lives, residual values, carrying values and impairment charges for intangible assets and property, plant and equipment; • Estimation of liabilities for pension and other post retirement costs; • Revenue recognition and assessment of construction contract performance; • Liabilities in relation to industrial disease claims; and • Recoverability of deferred tax assets. A review of the useful economic lives and residual values for scaffoldingrelated items included within property, plant and equipment has been performedin the period. As a result of this review the useful economic lives and residualvalues of certain items of scaffold equipment have been revised to reflect thecurrent residual values and useful economic lives experienced by the Group. Theeffect on the results in the six months to 30 June 2007 is a reduceddepreciation charge of £0.8million with the estimated effect on the results forthe year to 31 December 2007 being £1.6 million. Compensation for industrial disease Provision is made for compensation for industrial disease where it is possibleto estimate the liability with sufficient reliability. This is generally onlycurrently possible in respect of claims lodged and outstanding at the periodend. Where this is not possible, a contingent liability is noted. Benefit isrecognised for insurance recoveries for claims provided when they areanticipated with virtual certainty. Provisions Provisions for liabilities, except for those for industrial disease, are madewhere the timing or amount of settlement is uncertain. A provision is recognisedwhen: the Group has a present legal or constructive obligation as a result ofpast events; it is probable that an outflow of resources will be required tosettle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of the expenditures expected to berequired to settle the obligation using a pre tax rate that reflects currentmarket assessments of the time value of money and risks specific to theobligation. Inventories Inventories which include raw materials and work in progress are stated at thelower of cost and net realisable value. Raw materials are valued based on firstin first out method. Net realisable value is the estimated selling price in the ordinary course ofbusiness less selling expenses. Allowance is made for obsolete and slow movingitems based on annual usage. Revenue recognition Revenue comprises the fair value of the consideration received or receivable forthe sale of goods and services in the ordinary course of the Group's activities.Revenue is shown net of the value added tax, returns, rebates and discounts andafter eliminating sales within the Group. Revenue recognition in relation toconstruction contracts is described in the accounting policy for constructioncontracts. Construction contracts Contracts are undertaken for customers either on a short or long-term basis. Forshort-term contracts, work done is substantially billed as performed and forlong-term contracts, work is carried out on a substantially fixed orlimited-price basis. For short-term contracts, turnover and profit arerecognised according to work executed. Amounts taken to turnover in respect ofwork done not billed are included within amounts recoverable on contracts. Costsincurred, including an appropriate allocation of overheads, in respect oflong-term contracts are included in work in progress net of progress paymentsreceived and provisions for foreseeable losses. Provision is made in full forany losses as soon as they can be foreseen. Any payments on account orprovisions for foreseeable losses in excess of contract balances are included increditors. Turnover and attributable profit on long-term contracts is recognisedaccording to the percentage of estimated total contract value completed or theachievement of contractual milestones provided that the outcome of the contractcan be assessed with reasonable certainty. Deferred income taxation Deferred income tax is recognised, using the full liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amount in the consolidated financial statements. Deferred income tax isdetermined using tax rates (and laws) that have been enacted, or substantiallyenacted, by the balance sheet date and are expected to apply when the relateddeferred tax asset is realised or deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable thatfuture taxable profits will be available against which the temporary differencescan be utilised. Deferred income tax is provided on temporary differences arising on investmentsin subsidiaries and associates, except where the timing of the reversal of thetemporary difference is controlled by the Group and it is probable that thetemporary difference will not be reverse in the foreseeable future. Exceptional items Exceptional items represent income and expenses relating to non-recurringtransactions that are significant, by virtue of their size or nature, andtherefore relevant to understanding the Group's financial performance and areshown separately to provide a better indication of the underlying results of thebusiness. Employee benefits The Group operates both defined benefit and defined contribution schemes. A defined contribution scheme is a pension scheme under which the Group paysfixed contributions into a separate entity. The Group has no legal orconstructive obligation to pay further contributions if the fund does not holdsufficient assets to pay all employees the benefits relating to employment inthe current or prior periods. The pension expense for defined contributionschemes represents contributions payable in the year. A defined benefit scheme is a pension scheme that is not a defined contributionscheme. The asset recognised in the balance sheet in respect of the definedbenefit scheme is the present value of the defined benefit obligation at thebalance sheet date less the fair value of the plan assets. The defined benefitobligation is calculated tri-annually by independent actuaries using theprojected unit method and this valuation is updated at each balance sheet date.The present value of the defined benefit obligation is determined by discountingthe estimated future cash outflows using interest rates of high qualitycorporate bonds that are denominated in the currency in which the benefits willbe paid and that have terms to maturity approximating to the terms of therelated pension liability. Current and past service costs are charged to operating profit and finance costsand expected returns on assets to financing costs or income. Actuarial gains andlosses arising from new valuations and from updating the latest actuarialvaluation to reflect conditions at the balance sheet date are recognised in fullin the statement of recognised income and expense. The pension schemes' deficits or surpluses, (to the extent that any surplusesare considered recoverable), are recognised in full and presented on the face ofthe balance sheet. The Group operates gratuity schemes in certain overseas countries. These areaccounted for in accordance with IAS 19 and accounting follows the sameprinciples as for a defined benefit scheme. Accounting for derivatives financial instruments and hedging activities The Group uses derivative financial instruments such as forward currencycontracts and interest rate caps to hedge its risks associated with foreigncurrency and interest rate fluctuations. Derivatives are initially recognised atfair value on the date the contract is entered into and are subsequentlyre-measured at their fair value. The fair value of forward currency contracts is calculated by reference tocurrent forward exchange rates for contracts with similar maturity profiles. Thefair value of interest rate caps is determined by reference to market values ofsimilar instruments. For the purpose of hedge accounting, hedges are classified as: • Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; and • Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction. The Group formally designates and documents the relationship between the hedginginstrument and the hedged item at the inception of the transaction, as well asits risk management objectives and strategy for undertaking various hedgetransactions. The documentation also includes identification of the hedginginstrument, the hedged item or transaction, the nature of the risk being hedgedand how the Group will assess the effectiveness of the hedging instruments inoffsetting the exposure to changes in the fair value of the hedge or the cashflows attributable to the hedged risk. The Group also documents its assessment,both at inception and on an ongoing basis, of whether the derivatives that areused in the hedging transactions are highly effective in offsetting changes infair values or cash flows of the hedged items. Any gains or losses arising from changes in the fair value of derivatives thatdo not qualify for hedge accounting are taken to the income statement. Thetreatment of gains and losses arising from revaluing derivatives designated ashedging instruments depends on the nature of the hedging relationship, asfollows: Fair value hedges For fair value hedges, the carrying amount of the hedged item is adjusted forgains and losses attributable to the risk being hedged: the derivative isre-measured at fair value and gains and losses from both are taken to the incomestatement. For hedged items carried at amortised cost, the adjustment isamortised through the income statement such that it is fully amortised atmaturity. The Group discontinues fair value hedge accounting if the hedginginstrument expires or is sold, terminated or exercised, or the hedge no longermeets the criteria for hedge accounting. Cash flow hedges For cash flow hedges, the effective portion of the gain or loss on the hedginginstrument is recognised directly in equity, while the ineffective portion isrecognised in the income statement. Amounts taken to equity are transferred tothe income statement when the hedged transaction affects the income statement. If the hedging instrument expires or is sold, terminated or exercised withoutreplacement or rollover, or if its designation as a hedge is revoked, anycumulative gain or loss existing in equity at that time remains in equity and isrecognised when the forecast transaction is ultimately recognised in the incomestatement. When a forecast transaction is no longer expected to occur, thecumulative gain or loss that was reported in equity is immediately transferredto the income statement. Borrowings Borrowings are recognized initially at the amount of the consideration receivedafter deduction of issue costs. Issue costs together with finance costs arecharged to the profit and loss account over the term of the borrowings andrepresent a constant proportion of the balance of capital repaymentsoutstanding. Cumulative preference shares are classified as liabilities. The dividends onthese preference shares are recognized in the income statement as interestexpense. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held on call withbanks, other short term highly liquid investments with original maturities ofthree months or less, and bank overdrafts. Bank overdrafts are shown withinborrowings in current liabilities on the balance sheet. Restricted cash relating to the Scheme of Arrangement is excluded from cash andcash equivalents for the purpose of the Group cash flow statement. Share capital Ordinary shares and deferred shares are classified as equity. Cumulativepreference shares are classified as liabilities. Incremental costs directly attributable to the issue of new shares or optionsare shown in equity as a deduction, net of tax, from the proceeds. Share based payments The group issues equity settled share based payments to certain employees whichmust be measured at fair value and recognised as an expense in the incomestatement with a corresponding increase in equity. The fair values of thesepayments are measured at the dates of grant using option pricing models, takinginto account the terms and conditions upon which the awards are granted. Thefair value is recognised over the period during which employees becomeunconditionally entitled to the awards subject to the Group's estimate of thenumber of awards which will lapse, either due to employees leaving the Groupprior to vesting or due to non-market based performance conditions not beingmet. Proceeds received on the exercise of share options are credited to share capitaland share premium. Segmental reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that aresubject to risks and returns that are different from those of segments operatingin other economic environments. The Group's primary reporting segment is by business segment. This is splitbetween the provision of industrial services, industrial disease costs andcentral costs. The Group's secondary segment is geographical by country of destination. Notes to the interim accounts 3. Segmental reporting Business segments Six months ended 30 June 2007 (unaudited) Industrial Industrial Head Group Services disease office costs costs Continuing operations £m £m £m £mRevenue 187.4 - - 187.4 Operating profit before exceptional items 16.2 (1.0) (2.1) 13.1Exceptional items - Share of post tax profits of joint ventures -Net finance income 0.3 -------------------------------------Profit before tax 13.4Taxation (3.3) -------------------------------------Profit from continuing operations 10.1 Attributableto:Minority interests 0.5Equity shareholders 9.6 ------------------------------------- 10.1 ------------------------------------- There are no significant inter-segment sales between business units Six months ended 30 June 2006 (unaudited) Industrial Industrial Head Group Services disease office costs costs Continuing operations £m £m £m £mRevenue 128.2 - - 128.2 Operating profit before exceptional items 6.2 (1.4) (1.1) 3.7Exceptional items - - 0.8 0.8 Share of post tax profits of joint ventures -Net finance income 0.6 -----------------------------------Profit before tax 5.1Taxation (1.2) -----------------------------------Profit from continuing operations 3.9 -----------------------------------Discontinued operationsRevenue 16.9 - - 16.9 Operating profit 0.1 - - 0.1 ---------------------------------- Profit from discontinued operations 0.1 - - 0.1 ---------------------------------- Net profit attributable to equity shareholders 4.0 ---------------------------------- There are no significant inter-segment sales between business units Business segmentYear ended 31 December 2006 (unaudited) Industrial Industrial Head Group Services disease office costs costs Continuing operations £m £m £m £mRevenue 274.0 - - 274.0 Operating profit before exceptional items 20.0 (3.4) (2.7) 13.9Exceptional items - - 1.0 1.0 Share of post tax profits of joint ventures 0.1 - - 0.1Net finance income 0.6 ------------------------------------Profit before tax 15.6Taxation (2.0) ------------------------------------Profit from continuing operations 13.6 ------------------------------------DiscontinuedoperationsRevenue 16.9 - - 16.9 Operating profit 0.3 - - 0.3Profit on sale of business 0.3 - - 0.3Profit on disposal of fixed assets 1.9 - - 1.9Losses relating to sale of Cape Calsil (0.9) - - (0.9) ------------------------------------Profit before tax 1.6 - - 1.6Taxation (0.5) ------------------------------------Profit attributable to discontinued operations 1.1 ------------------------------------ Net profit attributable to equity shareholders 14.7 ------------------------------------ There are no significant inter-segment sales between business units Geographical by destination Unaudited Unaudited Unaudited Half-year ended 30 Half-year ended 30 Year ended 31 June 2007 June 2006 December 2006 Revenue Operating Revenue Operating Revenue Operating profit profit profitContinuing operations £m £m £m £m £m £m United Kingdom 126.2 8.3 88.4 3.2 189.9 10.3Middle East 30.1 6.4 24.9 2.4 40.6 9.4Former 21.8 0.8 10.6 0.8 31.0 0.4CISFar East & Pacific Rim 8.7 0.7 3.9 - 11.8 -Other 0.6 - 0.4 (0.2) 0.7 (0.1) Central costsHead - (2.1) - (1.1) - (2.7)officeIndustrial disease costs - (1.0) - (1.4) - (3.4)Exceptional items - - - 0.8 - 1.0 ---------------------------------------------------------- Group operating profit 187.4 13.1 128.2 4.5 274.0 14.9 ---------------------------------------------------------- 4. Earnings per ordinary share The basic earnings per share calculation for the 6 month period ended 30 June2007 is based on the profit attributable to equity shareholders of £9.6 million(2006: £4.0 million) divided by the weighted average number of 25p ordinaryshares of 93,585,033 (2006: 83,523,010). The diluted earnings per share calculation for the 6 month period ended 30 June2007 is based on the profit after tax of £9.6 million (2006: £4.0 million)divided by the weighted average number of 25p ordinary shares of 95,961,277(2006: 84,420,326). An adjusted basic earnings per share has been disclosed which excludes theeffects of exceptional items. It is calculated by dividing the adjusted earningsafter tax of £9.6 million (2006: £3.4 million) by the weighted average number of25p ordinary shares of 93,585,033 (2006: 83,523,010). The adjusted numbers havebeen provided in order that the effects of exceptional items on reportedearnings can be fully appreciated and has been calculated as follows: Unaudited Unaudited Unaudited Half-year ended Half-year ended Year ended 30 June 2007 30 June 2006 31 December 2006 Earnings EPS Earnings EPS Earnings EPS £m pence £m pence £m pence Adjusted basic earningsper shareContinuing operations 9.6 10.3 3.9 4.4 13.6 16.2Discontinued operations - - 0.1 0.2 1.1 1.4 ------------------------------------------------Adjusted basic earnings per share 9.6 10.3 4.0 4.6 14.7 17.6Exceptional items - - (0.8) (1.0) (1.0) (1.2)Exceptional itemsincluded in discontinuedactivities - - - - (1.3) (1.5)Tax effect of exceptional items - - 0.2 0.3 0.8 1.0 ------------------------------------------------Adjusted basic earnings per share 9.6 10.3 3.4 3.9 13.2 15.9 ------------------------------------------------ Adjusted diluted earningsper shareContinuing operations 9.6 10.0 3.9 4.4 13.6 16.0Discontinued operations - - 0.1 0.2 1.1 1.4 -------------------------------------------------Adjusted diluted earnings per share 9.6 10.0 4.0 4.6 14.7 17.4Exceptional items - - (0.8) (1.0) (1.0) (1.2)Exceptional itemsincluded in discontinuedactivities - - - - (1.3) (1.5)Tax effect of exceptional items - - 0.2 0.3 0.8 1.0 -------------------------------------------------Adjusted diluted earnings per share 9.6 10.0 3.4 3.9 13.2 15.7 ------------------------------------------------- 5. Cash flow from operating activities Unaudited Unaudited Unaudited Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £m £m £m Cash flows from operating activitiesContinuing operationsProfit for the period 13.1 4.5 14.9Depreciation 4.1 3.2 6.8Amortisation 0.2 - 0.1Share option charge 0.4 - 0.4Difference between pension charge and cash contributions - 0.1 -Payment of scheme creditors 1.8 - 0.9 Changes in working capital (excludingthe effects of acquisitions anddisposals)(Increase)/decrease in inventories (4.0) 1.5 (2.3)Increase in receivables (23.6) (12.9) (10.9)Increase in payables 7.0 4.2 7.5Decrease in provisions (2.0) (4.4) (3.1) ------------------------------------Cash (absorbed by)/generated from continuing operations (3.0) (3.8) 14.3 ------------------------------------ Discontinued operationsNet profit - 0.1 1.1Taxation - - 0.5Depreciation - 0.1 0.1Profit on sale of property - - (1.8)Loss on disposal of business - - (0.3)Difference between pension charge and cash contributions - - 0.6Increase in inventories - (0.4) (0.9)Increase in receivable - 0.9 6.1Decrease in payables (1.0) (3.1) (4.8)Decrease in provisions - (1.5) (1.2) -----------------------------------Cash outflow from discontinued (1.0) (3.9) (0.6) ----------------------------------- Cash (absorbed by)/generated from operating activities (4.0) (7.7) 13.7Scheme funding - transfer to restricted cash - (40.0) (40.0) -----------------------------------Net cash absorbed by operating activities (4.0) (47.7) (26.3) ------------------------------------ 6. STATEMENT OF CHANGES IN EQUITY Share Share Retained Other Total Minority Total Capital Premium Earnings reserves interest £m £m £m £m £m £m £m At 1 January 2006 25.2 25.0 11.0 (0.5) 60.7 - 60.7 Exchange adjustments net of tax - - - (1.0) (1.0) - (1.0)Cash flow hedges - fair value gains in period - - - 0.5 0.5 - 0.5 Net profit - - 4.0 - 4.0 - 4.0Actuarial gain recognised in thepension scheme - - 5.2 - 5.2 - 5.2Movement in restriction of retirement benefitasset in accordancewith IAS 19 - - (5.3) - (5.3) (5.3) --------------------------------------------------------- At 30 June 2006 25.2 25.0 14.9 (1.0) 64.1 - 64.1 --------------------------------------------------------- At 1 January 2006 25.2 25.0 11.0 (0.5) 60.7 - 60.7 Exchange adjustments net of tax - - - (2.4) (2.4) - (2.4)Cash flow hedges - fair value gains in period - - - 0.7 0.7 - 0.7Net profit - - 14.7 - 14.7 - 14.7Actuarial gain recognised in thepension scheme - - 7.7 - 7.7 - 7.7Movement in restriction of retirement benefitasset in accordancewith IAS 19 - - (7.1) - (7.1) - (7.1)Deferred tax on actuarial gain - - (0.1) - (0.1) - (0.1)Share options - value of employee services - - 1.0 - 1.0 - 1.0 ---------------------------------------------------------- At 31 December 2006 25.2 25.0 27.2 (2.2) 75.2 - 75.2 ---------------------------------------------------------- At 1 January 2007 25.2 25.0 27.2 (2.2) 75.2 - 75.2 Exchange adjustments net of tax - - - (0.6) (0.6) - (0.6)Issue of share capital 6.8 63.2 - - 70.0 - 70.0Issue expenses - (2.1) - - (2.1) - (2.1)Cash flow hedges - fair value gains in period - - - (0.1) (0.1) - (0.1)Net profit - - 9.6 - 9.6 0.5 10.1Actuarial loss recognised in thepension scheme - - (4.2) - (4.2) - (4.2)Movement in restriction of retirement benefitasset in accordancewith IAS 19 3.7 3.7 3.7Deferred tax on actuarial lossShare options - - 0.2 - 0.2 - 0.2 - proceeds from shares issued - 0.1 - - 0.1 - 0.1 - value of employee services - - 0.3 - 0.3 - 0.3 ----------------------------------------------------------- At 30 June 2007 32.0 86.2 36.8 (2.9) 152.1 0.5 152.6 ----------------------------------------------------------- On 23 April 2007 the Company issued 26,923,077 Ordinary Shares of 25p eachthrough a placing at a price of £2.60 per share. 7. CONTINGENT LIABILITIES The Group discloses contingent liabilities in relation to industrial diseaseclaims, leasehold properties, an employment tribunal and guarantees and bonds inthe annual report and accounts. Details of these contingent liabilities, whichare unchanged since 31 December 2006, can be found in the annual report andaccounts for the year ended 31 December 2006 in note 26. As referred to in note1, the auditors report for the year ended 31 December 2006 included an emphasisof matter in respect of the contingent liability for industrial disease claims. 8. RETIREMENT BENEFIT ASSETS The last triennial actuarial valuation was performed in April 2004. Inaccordance with IAS19 the valuation as at 31 December 2006 was updated toreflect the latest actuarial assumptions and asset values to June 2007. The surplus on the Scheme as calculated under IAS 19 is £11.8 million. Therecognition of this surplus has been restricted to the present value of theeconomic benefits available in the form of reduced future contributions to thescheme plus unrecognised gains and losses. This resulted in a net loss of £0.3million (2006: loss of £0.1 million) shown in the Statement of Recognised Incomeand Expenses in respect of the half year. The restricted pension surplus at 30June 2006 was £8.0m (31 December 2006: £8.1m). 9. POST BALANCE SHEET EVENTS Bank facilities On 3 September 2007, the Company and its subsidiaries entered into a new £240million five year committed banking facility with Barclays Bank Plc. Thefacility comprises term loans of up to £146 million to fund the acquisitions ofPCH Group Limited and Concept Hire Limited and revolving credit and otherfacilities totalling £94 million for working capital and other purposes. The newfacility replaces the previous Barclays/ Bank of Scotland facility. The £15million term loan used to part fund the Scheme has been repaid in full. Acquisition - TCC On 31 August 2007, Cape, through its wholly-owned subsidiary, Cape AustraliaInvestments Pty Limited ("Cape Australia") acquired the Australian based TotalCorrosion Control group of companies ("TCC Group"). Under the agreement between Cape Australia and the shareholders of TCC Holdings(2005) Pty Ltd ("TCC Holdings"), the ultimate holding company of the TCC Group,all of the issued share capital of TCC Holdings was acquired for a considerationthat reflects an enterprise value for the TCC Group of £34.3 million. Subject tothe TCC Group achieving its earnings target for the year ending 30 June 2008, upto a further £5.1 million will be payable. The initial consideration paid at completion comprised £26.3 million in cash and£8.1 million in Cape new ordinary shares ("Initial Consideration Shares") (at anissue price per share of £2.94) which are subject to orderly market provisionsregarding their disposal until 31 August 2009. Any additional consideration willbe payable in cash. The TCC Group, which operates mainly in Western Australia, offers a wide rangeof industrial services to blue chip clients in the mining, oil, gas andconstruction industries. The TCC Group specializes in the provision of blasting,industrial painting, protective coatings, thermal and acoustic insulation, sheetmetal fabrication, rubber lining and access scaffolding. The TCC Group isheadquartered in Kwinana where it operates one of the largest blasting andpainting workshops in the world. It also has regional offices at Karratha andPort Hedland. Its principal customers are BHP Billiton, Alcoa, Rio Tinto, BPRefineries, the Murrin Murrin Nickel Mine and Woodside. In the year to 30 June 2007, the TCC Group's turnover was £45.9 million, itsearnings before interest, depreciation, tax and amortization were £6.0 millionand it generated earnings before interest and tax of £5.6 million. Theapproximate value of the net assets acquired at completion is £7.4 million.Cape's Directors are of the opinion that the acquisition will be earningsenhancing in the first year. Cape's acquisition of the TCC Group is a major milestone in the achievement ofCape's international strategic plan. Cape's Directors believe that acquisitionof the TCC Group will bring immediate benefits to both businesses. The TCC Groupwill provide a stable platform from which to develop Cape's existing Far East/Pacific Rim businesses while significantly extending Cape's footprint in theregion. The TCC Group's blasting, painting, insulation and access services areall key components of Cape's core disciplines. The TCC Group's establishedpresence in Australia's booming resources sector offers Cape an opening into ahuge new market. Offer for Concept Hire On 10 September 2007, Cape announced a recommended cash offer for Concept Hire,a public company listed on the Australian Stock Exchange (ASX:CSH).Concept Hireis a leading supplier of scaffold equipment and associated services to theresidential and commercial construction, civil engineering, mining andpetrochemical industries. The company is headquartered in Victoria and has stateoffices in Queensland and Western Australia. In the financial year ended 30 June 2007, Concept Hire generated EBITDA of £5.1million and profit before tax of £3.4 million. As at 30 June 2007, Concept Hirehad gross assets of £36.5 million. Cape views Concept Hire as an integral part of its international growth strategyand intends to use Concept Hire and its local management team to continue todevelop its existing Far East/ Pacific Rim businesses and further extend itsfootprint in the region. The offer values Concept Hire at approximately £52.4 million (including debt of£10.0 million). As at the close of business on 17 September 2007 (being the lastbusiness day prior to the announcement of these results), Cape had acquired orreceived valid acceptances in respect of 19.99% of Concept Hire's shares. Offer for PCH On 13 September 2007, Cape announced a cash offer for PCH. PCH is a publiccompany listed on the Australian Stock Exchange (ASX:PCG) and is headquarteredin Perth. PCH provides services including scaffolding and access management,formwork and shoring, temporary fencing, aluminium light access and materialshoists. The business is diversified across a range of industries with servicesprovided for construction and maintenance activities in Australia, the CaspianSea, South East Asia and the Arabian Gulf. In the financial year ended 30 June 2007, PCH generated EBITDA of £8.4 millionand profit before tax of £5.1 million. As at 30 June 2007, PCH had gross assetsof £58.3 million. The offer values PCH at approximately £112.2 million (including debt of £17.1million). The offer, which has not yet been recommended by the PCH board, issubject, inter alia, to the condition that Cape is released from the standstillimposed by PCH in early discussions which currently prevents Cape acquiring PCHshares in the market. Capital Reduction On 13 September 2007, the High Court order confirming a proposed capitalreduction was registered at Companies House. The Directors intend to cancel theshare premium account and credit to the profit and loss account the amountrequired to eliminate the deficit and permit future profits to be available fordistribution when appropriate and permissible. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CIU.L