Preliminary results

18 March 2015

Cape plc

("Cape" or the "Group")

Preliminary results for the twelve months to 31 December 2014

Cape plc, the international provider of critical support services to the energy and mineral resources sectors, announces its results for the twelve months ended 31 December 2014.

Financial summary

Throughout this statement, various non-statutory measures are used and referred as 'Adjusted', these are defined and reconciled to their statutory equivalents in note 8, 'Adjusted measures'. Certain amounts do not correspond to the 2013 financial statements and reflect the adjustments detailed in note 4, 'Prior period adjustments'.

Highlights

· Order intake increased by 22% to £765m (2013: £625m); order book at 31 December 2014 was 15% higher at £746m (2013: £648m)

· Revenue increased by 3.5% to £698.3m (2013: £674.9m)

· Maintenance revenues increased by 16% to £486m (2013: £419m), increasing the resilience of the business

· Adjusted operating profit up 28% to £52.1m (2013: £40.6m)

· Improved adjusted operating profit margin, increasing from 6.0% to 7.5%

· Adjusted diluted earnings per share up 28% to 29.9p (2013: 23.3p)

· Operating cash conversion of 65% (2013: 151%) resulting in adjusted net debt of £101.0m (2013: £60.2m)

· Commercial and financing structure of SOCAR-Cape joint venture in Azerbaijan agreed and prospects improving with the recent contract awards on the Shah Deniz 2 development projects

· Good progress on strategy with continued operational improvement; the business is now pursuing the growth element of its strategy

· £36.6m acquisition of Motherwell Bridge in Q1 2014, now part of newly formed Cape Specialist Services offering

· Full year dividend maintained at 14.0p (2013: 14.0p) reflecting the Board's confidence in the future prospects of the Group

Commenting on the results, Joe Oatley, Chief Executive of Cape said:

"The excellent result for 2014 is a reflection of the progress we have made in strengthening the operating performance across the business, with improved margins driving robust profit growth, and we believe that our strategy of having a balanced business provides resilience against a downturn in any one sector or geography.

With continued progress on improving operational performance mitigating the volatility in some of our key markets, the Board currently anticipates that the 2015 result will be broadly in line with 2014, although we recognise there is increased uncertainty in the outcome for the second half of the year. We remain focused on the implementation of our strategy which I am confident will deliver long term growth and continue to create shareholder value."

Analyst meeting

The Group will be presenting to a meeting of analysts at 9.30 am today. The presentation will be available on the company's website later today at: www.capeplc.com/investors/financial-results-and-presentations.aspx

Enquiries:

For more information contact:

Joe Oatley, Chief Executive, Cape plc

joe.oatley@capeplc.com

+44 (0)18 9545 9979

Michael Speakman, Chief Financial Officer, Cape plc

michael.speakman@capeplc.com

+44 (0)18 9545 9979

Rachel Amey, Director of Investor Relations, Cape plc

rachel.amey@capeplc.com

+44 (0)18 9545 9965

Bobby Morse, Ben Romney & Jason Day, Buchanan

+44 (0)20 7466 5000

Forward looking statements

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

About Cape:

Cape (www.capeplc.com), which is premium listed on the main market of the London Stock Exchange, is an international leader in the provision of critical industrial services principally to the energy and natural resources sectors. Our multi-disciplinary service offering includes access systems, insulation, specialist coatings, passive fire protection, refractory linings, environmental services, oil and gas storage tanks and heat exchanger replacement and refurbishment.

Cape employs c. 17,500 people working across 21 countries and in 2014 reported revenue of £698.3 million.

Chairman's statement

A year of progress

I am delighted with the progress that the business has demonstrated over the last two years. The management team have delivered a substantial recovery and the business now has the stability and capability to pursue new avenues for growth. An important element of that strategy is to expand the range of specialist services and I was pleased that the business was able to complete the acquisition of Motherwell Bridge in March. The integration of the acquisition has gone to plan and we will be able to deliver significant growth for Motherwell Bridge by combining its technical expertise with Cape's substantial geographic footprint. We have continued to develop the strategy through the year and Cape now has a broad range of opportunities for medium and long term growth. We remain confident that we will deliver a sustained increase in shareholder value over the medium term despite the potential impact of current low oil prices.

The Group has refinanced its banking facilities during the first quarter of 2014. The new facility of £295 million was arranged with eight banks; broadening our lender base, and giving us the potential for both organic and acquisitive growth in the future.

We have strengthened the Cape Board further with the appointment ofSamantha Tough as a non-executive director. I am delighted to welcome Samantha to Cape and believe that she will bring an added dimension to the Board in terms of her extensive experience gained in the energy, infrastructure and natural resource sectors in Australia and the wider Asia Pacific region.

Particular attention has been placed this year on strengthening the breadth and depth of the senior and middle management teams and significant progress has been made in this regard. We are also constantly seeking to improve training and global career development opportunities so that we develop future management talent.

Financial results and dividend

I am pleased to report that Cape has delivered a robust performance in 2014 with revenues slightly ahead of 2013 at £698.3 million (2013: £674.9 million) and adjusted operating profit significantly higher at £52.1 million (2013: £40.6 million), a 28% increase on 2013. The business delivered an improved operating margin, increasing from 6.0% to 7.5%, predominantly driven by an improved performance in Asia Pacific and the benefit of the Motherwell Bridge acquisition.

Following these results, we are recommending a final dividend for 2014 of 9.5 pence (H2 2013: 9.5 pence) which reflects our confidence in the Group's ability to continue to deliver on our strategy and drive future growth. With the interim dividend of 4.5 pence (H1 2013: 4.5 pence) this results in a full-year dividend of 14.0 pence (2013: 14.0 pence). This is subject to shareholders' approval at the Annual General Meeting on 12 May 2015 and the final dividend will be payable on 23 June 2015 to shareholders on the register as at 22 May 2015.

People and safety

Our employees are pivotal to the success of Cape. Keeping all of our people safe, those that work for us as well as those we work with, is at the heart of everything we do. In 2014 we re-launched our Golden Rules; these are ten key safety rules which we believe can help us achieve our ultimate goal of zero accidents every day. We have refreshed our health and safety campaign to ensure our policies and procedures are available to everyone whatever their first language. Our Cape People Strategy also works to ensure that all employees are engaged effectively. We continue to focus on delivering our promises to our clients by providing them with a committed and effectively trained workforce. This was demonstrated by the launch of the Cape People Academy in our Asia Pacific region, this has enhanced the current training capability by providing a standardised curriculum which our employees can follow while also providing long term development opportunities. In addition we have refocused our efforts within the Australia business unit and have established a training facility to fulfil the competency requirements for the Wheatstone project in Western Australia. We are committed to provide our employees with opportunities to enable them to succeed throughout our global network.

Board structure and corporate governance

I am delighted to welcome Samantha Tough to the Board. Samantha was appointed as a non-executive director with effect from 1 January 2015. Brendan Connolly has decided not to stand for re-election at the AGM in order to pursue new business interests. On behalf of the Board I would like to thank Brendan for his contribution both as Chairman of the Remuneration Committee and interim Chief Executive during 2012.

The Board remains committed to maintaining our high standards of corporate governance and see this as an integral part of value creation for our stakeholders. During the year the Board and its Audit Committee has overseen the renewal of the Group's Business Integrity & Ethics Code. We recognise that the right culture and behaviours in our business are fundamental to the long term success of the Group. We have also conducted an externally-facilitated review of the Board and of its committees. This is indicative of our standards, even though external facilitation is not strictly required of the Group under the UK Corporate Governance Code.

The findings of the review have been considered in turn by the committees and the full Board and the areas for improvement and focus will be addressed in 2015.

Conclusion

We have made good progress on the development of the Group during 2014. We end the year a much stronger business with a solid platform and a range of opportunities for growth. This has only been possible due to the commitment and hard work of all of our employees and I would like to thank them all for their continued support and endeavours throughout the year. We expect demand for Cape's services to increase and we are well positioned to continue to grow in line with our strategy.

Tim Eggar

Chairman

Chief Executive's review

Overview

Our focus during 2014 has been to start the implementation of the growth phase of our strategy, whilst continuing our drive for operational excellence across the Group. Our strategic objective is to pursue growth across a number of different avenues to diversify our business and reduce our risk. During the year we have made good progress on developing our core business in those areas where we see market growth such as the Kingdom of Saudi Arabia (KSA), Australia and Azerbaijan, and have expanded our service offering with the establishment of Cape Specialist Services (CSS) which brings together Motherwell Bridge, Cape Environmental Services and York Linings.

Whilst we have moved into the growth phase of our strategy, we have maintained our focus on driving operational excellence throughout the Group. The objective for 2014 was to embed the new project management tools and processes into the high priority areas. We have made good progress and will continue the roll-out of these new systems during 2015.

We have again delivered an improved profit performance compared to the prior year with a continued robust performance from the UK and MENA businesses. Despite challenging market conditions through much of the year we saw the benefits of the 2013 Australian restructuring with a substantial improvement compared to the prior year in a near four-fold improvement in adjusted operating profit for the Asia Pacific region as a whole.

Market conditions 2014

Market conditions remained mixed during the year across both the Group's geographic regions and market sectors. Downstream oil and gas investment activity in particular by National Oil Companies (NOCs) in the Middle East and Asia increased during the year with major refinery and petrochemical projects moving ahead in both regions. The demand for maintenance services remained steady across the Group. The fall in oil price towards the end of 2014 resulted in uncertainty in the outlook for the oil and gas market, in particular capital expenditure associated with the development of higher cost fields in the upstream sector.

The level of demand during the year across the UK, Europe & CIS region was mixed with the UK and Sakhalin markets remaining solid, continued very low levels of activity in Kazakhstan and an increase in project activity in Azerbaijan, largely driven by the development of the Shah Deniz field and associated onshore infrastructure.

Overall demand for our services remained high in the MENA region. There continued to be high levels of activity in the construction market in the KSA with several major construction projects in progress such as the new export refinery and IGCC power plant at Jizan, the Petro Rabigh II Petrochemical development, and the Sadara Petrochemical complex. We are working on all of the above developments and continue to bid for further contracts as these projects progress.

Demand for maintenance services grew steadily within the KSA. The Qatar market continued to be maintenance focused and demand for our services from this sector remained steady through the year. It was announced that two future construction projects in Qatar, the Al Sejeel Petrochemical Complex and the Al-Karaana Petrochemical project had been cancelled during the year, reflecting continued low levels of activity in the construction sector in the country. In the United Arab Emirates (UAE) activity on major construction projects reduced significantly during 2014 with projects such as Gasco NGL 4 and Gasco IGD 5 Habshan now complete. The maintenance market in the UAE remained robust although, with reduced demand from new construction projects, it has become increasingly competitive. Awards were made during 2014 to EPC companies for the Clean Fuel refinery project in Kuwait and BP's Khazzan development and the Sohar Refinery projects in Oman. These should lead to an increase in future opportunities for the Group in both countries.

Market conditions in the Asia Pacific region remained mixed. Several of the construction yards across Asia have been active in module build in support of the major Australia LNG projects; however, new construction project activity for the Asian market itself has been low throughout 2014. Nonetheless, a number of significant Asian construction opportunities are now visible with EPC contracts having been awarded for a number of forthcoming projects in the region including a second LNG receiving terminal in Singapore, the RAPID petrochemical complex in Malaysia and a refinery project in Vietnam.

In Australia, the LNG market remains the key driver of construction activity with three major projects now underway: Wheatstone, Ichthys and Gorgon. The maintenance market continued to be subdued in both the downstream oil and gas and mining sectors.

2014 operating performance

Order intake grew strongly by 22% to £765 million (2013: £625 million) with the most significant contribution being the £150 million EDF maintenance renewal in the UK, announced in December 2014. The remainder of the order intake was driven by a large number of smaller contracts across maintenance, rescue work and smaller projects.

Revenue was £698.3 million, 3.5% ahead of the prior year's revenue of £674.9 million. The acquisition of Motherwell Bridge accounts for a 4.1% growth in revenue with foreign currency movements resulting in 3.4% decline in revenue. The business achieved underlying organic growth of 2.8%. Pleasingly the underlying growth in our core business has compensated for the completion of several large construction projects in 2013, including the Arzew GNL3-Z plant in Algeria, the SPT project in Singapore, the Kipper Tuna project in Australia and a number of construction projects in the UAE. The growth has been predominantly driven by strong growth in the KSA and the Wheatstone project in Australia.

Adjusted operating profit was 28% higher than the previous year at £52.1 million (2013: £40.6 million) with 9.9% of the growth attributable to the Motherwell Bridge acquisition and a decline of 2.9% as a result of foreign currency movements. The underlying organic growth of 21.3% was driven by a significantly improved performance in Australia, with the full year benefit of the profit performance plan that was implemented in 2013. The year on year improvement in operating profit was also partially driven by the provision taken in 2013 on the onerous contract in Qatar.

This onerous contract in Qatar continues to be challenging and as such the provision taken on the contract has been increased; however the project team continue to make good progress and we anticipate completing the project in line with the client's expectations. The commercial and financing structure of our SOCAR-Cape joint venture in Azerbaijan has now been agreed with our partner, SOCAR, and prospects are encouraging with the recent contract awards on the Shah Deniz 2 development projects and increasing work levels on the ongoing maintenance projects. Due to the continued low levels of activity and deteriorating prospects in Kazakhstan, the Board has taken the decision to exit this market and we are working with our joint venture partners to ensure this is done in a controlled manner.

Adjusted net debt increased to £101.0 million (2013: £60.2 million) driven primarily by the acquisition of Motherwell Bridge for £36.6 million in March 2014 and a working capital outflow of £18.2 million (2013: £21.2 million inflow) which is a result of the higher revenue in the second half of the year.

Progress on strategy

We laid out our strategy in 2012 to first bring stability to the Group, before embarking on the growth phase of our plan. Through the focus on operational excellence and installing disciplined controls we have been able to establish a solid platform from which we could begin to implement our growth strategy during 2014. We are targeting growth in three key areas: first, we will develop our existing core business in existing geographies where there is market growth or an opportunity to grow market share. Second, we will expand our range of services into adjacent, more specialist areas with a higher technical and engineering content; and third, we will enter a small number of selected new territories where there are new project opportunities for our services. We have made good progress in all three of these elements of our growth strategy.

In our traditional business we have achieved strong growth in the KSA, capturing a position on a number of key new projects including insulation and painting works for the Petro Rabigh Phase II Project and insulation works on the Sadara Chemical II project. We are also growing our share of the maintenance market with key clients such as SABIC for whom we now provide a complete multi-disciplinary service on 18 sites across the country. We have grown the turnover of our KSA business by over 80% in the last two years. We have also established a leadership position in Azerbaijan through our joint venture with SOCAR, the strength of which was demonstrated by the business securing significant new construction contracts relating to the Shah Deniz 2 development projects in February 2015. We also achieved growth in a number of existing territories within Asia including Thailand, Myanmar and Indonesia.

We completed the acquisition of Motherwell Bridge, a leading provider of storage tanks, gasholders and heat exchangers to the energy and steel markets, in March 2014. This represents an important step in the expansion of our service offering into adjacent, more technically differentiated services. In July we brought together Motherwell Bridge with Cape's existing Environmental Services and York Linings businesses to form Cape Specialist Services. CSS will utilise the Group's extensive existing international footprint to reach a much more substantial market than these businesses have been able to target on a stand-alone basis.

We have now identified a number of new countries within our existing regions where Cape is not yet present, but a future increase in demand for our core services is visible. We are targeting entry into a select number of such countries and are currently actively bidding work in Malaysia and Kuwait.

One of the key pillars of our strategy is to achieve a balanced business across both a range of geographies and the maintenance and construction sectors. Recognising the intrinsic volatility in the construction sector we seek to grow our maintenance activities year-on-year. I am pleased to report that we achieved a 16% growth in maintenance revenue in 2014 compared to the prior year, with all three regions achieving year-on-year growth in maintenance revenues. Maintenance revenues represented 70% of total Group revenue in 2014 (2013: 62%)

Whilst we have now entered the growth phase of our strategy, operational excellence remains the bedrock upon which the success of the Group is built and we continue to focus on developing and enhancing the operational performance of the business.

The goals of our Operational Excellence programme remain unchanged: to attract, retain and develop the best people; to simplify and standardise our business systems and processes; and to ensure that knowledge and best practice are shared around the Group. We continue to invest in the development of all levels of management across the Group and currently have almost half of the members of the key management group on structured development programmes. We have started the process of embedding our new management processes across the wider Group with an initial focus on key projects; this roll-out will continue throughout 2015.

In addition to the process improvements that we have made we have successfully embedded a new culture across the Group. This cultural change is crucial to ensure we achieve our goal of long-term, sustained performance for the business. Our new culture is reflected in our core values which describe the behaviours that we expect throughout the business both in our internal and our external dealings with other stakeholders.

Organisation and people

Being able to attract, retain and develop the best people is key to our success as a business. We continue to focus on all three of these areas and were pleased to be able to welcome eight new graduates to Cape in 2014. This is the fourth year we have been running this programme and have now successfully placed candidates across all of our key geographies. We continue to develop all levels of management through our Cape Management Development Programme and 2014 saw the first full year of delivery of our comprehensive suite of standardised leadership development programmes across all levels within the business.

Safety

Safety is at the heart of everything we do at Cape. It is disappointing to report that we recorded a slight deterioration in safety performance in 2014 compared to the record performance that we achieved in 2013. Whilst our 2014 outcome is still considerably better than industry norms, we have redoubled our efforts to ensure we are continuing to drive towards our goal of zero injuries and accidents. It was with great sadness that, in September 2014, we reported that an incident occurred on-board the Unity platform in the UK North Sea that resulted in the tragic death of an employee. The incident has been subject to a major investigation both by the enforcing authorities and joint Cape/client investigation teams and, whilst this investigation remains on-going, at this time the root cause of the accident has been identified as a one-off, momentary lapse by an individual resulting in his tragic loss of life. Regardless of the outcome of the investigation, this remains a tragic loss of a colleague and our thoughts remain with his family and friends.

The basic requirements which all our employees must follow are described in our Golden Rules that were first launched in 2008; these have been refreshed in 2014 to ensure their importance continues to be understood throughout the business. We have reviewed and updated all of our safety processes and procedures and are implementing a new comprehensive training programme for all of our front-line supervisors.

Outlook

The excellent result for 2014 is a reflection of the progress we have made in strengthening the operating performance across the business, with improved margins driving robust profit growth, and we believe that our strategy of having a balanced business provides resilience against a downturn in any one sector or geography. Approximately 20% of Group revenue is related to oil and gas construction activity, comprising both major upgrade and greenfield projects, with the majority of the Group's activity in the midstream/downstream sector, predominantly in the Middle East. The decline in the price of oil has resulted in a significant reduction in demand from the upstream construction sector, in particular in the UK North Sea and we have taken swift action to reduce our cost base in the UK to mitigate the effect of this reduction in demand. At present the impact on the midstream/downstream construction sector has been limited with overall construction activity in the Middle East remaining robust. Demand for maintenance activities, which represent approximately 70% of Group revenue, is anticipated to continue broadly in line with that seen in 2014 across the Group's key market sectors of oil and gas, power, chemical and steel, and mining. With continued progress on improving operational performance mitigating the volatility in some of our key markets, the Board currently anticipates that the 2015 result will be broadly in line with 2014, although we recognise there is increased uncertainty in the outcome for the second half of the year. We remain focused on the implementation of our strategy which I am confident will deliver long term growth and continue to create shareholder value.

Despite the current high level of uncertainty in the oil and gas market beyond 2015, we continue to see an increase in demand over the medium term in construction projects from the downstream oil and gas sector in both the Middle East and Asia, with EPC contracts having been awarded for projects such as RAPID in Malaysia, the Clean Fuel refinery project in Kuwait and BP's Khazzan gas development and the Sohar Refinery Expansion project in Oman. The emergence of the nuclear new build programme in the UK represents a significant medium term opportunity for Cape and we are well positioned to secure work on the project through the recently announced joint venture with Prezioso.

Although the short term prospects across our markets are mixed, the long term demand for the Group's services is expected to continue to grow. We remain focused on our strategy and with a steadily growing maintenance base and improved operational processes the business is now more resilient to short term changes in demand from the construction market. The Board is confident that the Group will be able to deliver long term growth and continue to create shareholder value.

Joe Oatley

Chief Executive

Business review

UK, Europe & CIS

1 Excludes value in respect of joint ventures

Order intake was 95% higher than prior period end at £444 million (2013: £228 million) with the most significant contributor being the £150 million five year maintenance contract extension with EDF. Other important contract awards were the Magnus Life Extension project for BP and a number of smaller renewals across both the onshore and offshore elements of the UK business. The business was also successful in securing the first significant revenue synergy from the Motherwell Bridge acquisition with the award of a contract to supply both tank construction and associated access, painting and insulation services for a key client.

The region also had a strong start to 2015 with the award of significant project work in Azerbaijan through the SOCAR-Cape joint venture. Orders relating to this joint venture are excluded from the regional figures.

Revenue was 14.6% higher than prior period at £388.5 million (2013: £338.9 million). The majority of this increase was driven by the acquisition of Motherwell Bridge: at constant currency, organic growth was 6.7% driven by growth in Sakhalin and in the other CSS businesses.

The business continues to be largely maintenance driven with 82% of revenues (2013: 82%) derived from maintenance and shutdown activities. Maintenance revenue increased compared to the prior period driven by the additional maintenance business within Motherwell Bridge.

The UK continued to be successful in the energy and power sectors completing a total of twelve power station outages over a seven month period. The work covered both coal fired and nuclear power stations and required over 1,000 additional personnel to complete the work within the required time frame. Pleasingly, all outages were completed on time and with no lost time incidents.

Motherwell Bridge has performed well and has now been integrated into the newly formed Cape Specialist Services. The first steps have been taken to form a team in the Middle East to ensure we are well positioned to take advantage of opportunities for growth in that region. The Motherwell Bridge business contributed £27.8 million of revenue in the year, spread over a wide range of blue chip companies. The business continues to provide services in three key markets - tank storage, which accounts for over 70% of the business, gasholders, and heat exchanger repair and refurbishment.

Commercial and financial arrangements have now been agreed with our joint venture partner in Azerbaijan and the business has now been stabilised, delivering a small profit during the year. Maintenance volumes continue to be strong and the joint venture has also now been successful in securing significant project work on the Shah Deniz 2 project and associated onshore infrastructure.

Demand has continued to be low in Kazakhstan and with poor visibility of the timing of new projects, the Board has decided to withdraw from this market. The management team are working with the business' joint venture partner to ensure a controlled exit from the country. Sakhalin continues to be a predominantly maintenance based business and has successfully grown both revenue and operating profit in the year.

The adjusted operating profit margin increased to 9.9% (2013: 9.3%) driven by an increase in volume in higher margin business in Sakhalin and the contribution of the higher margin Motherwell Bridge business.

As a result of the increased margins, adjusted operating profit increased by 22% to £38.5 million (2013: £31.5 million). The acquisition of Motherwell Bridge represents 12.8% of this increase: at constant currency the organic growth in adjusted operating profit was 9.8%.

The fall in global oil prices has put significant pressure on capital investment projects across the region leading to some uncertainty regarding the budgets of a number of our clients. The business continues to closely monitor the impact of the fall in oil price and has taken steps to reduce overhead in the UK business to ensure it remains streamlined and correctly sized to deal with the continuing pressures in the market. As such, the business implemented a plan in January 2015 to reduce the head count in the UK by 45 which will lead to overhead savings of around 10% in that business. Although the business has taken the appropriate steps to mitigate the potential impact of the current low oil price on the UK operations, the business remains robust and the need for essential maintenance services on ageing assets continues to drive the requirement for the services that Cape provides.

Middle East & North Africa (MENA)

Order intake grew by 27% compared to prior year to £204 million (2013: £161 million), despite the adverse effect of foreign exchange movement: at constant currency order intake rose by 33% compared to prior period. The largest proportion of the order intake came from the downstream oil and gas sector in KSA and Qatar, with significant wins on the Petro Rabigh II and Sadara projects in KSA as well as the Qatar Gas and Shell GTL 5 maintenance contracts in Qatar. We have been successful in broadening our maintenance base in KSA with a number of significant awards including framework agreements with SABIC to supply painting, refractory, insulation and access services across 18 sites across the Kingdom. Construction activity in the UAE was lower during 2014 and this is reflected in the order intake with most projects now complete or approaching completion.

As anticipated, revenues reduced by 13.4% compared to prior period to £175.6 million (2013: £202.8 million), partly driven by adverse exchange rate movement: at constant currency revenue decreased by 9.3% compared to prior year, driven by a significant decrease in volume in the UAE with the completion of a number of significant construction contracts in 2013, partly offset by growth in KSA and Qatar. Following the strong growth in 2013, the KSA business continued to expand in both maintenance and construction project work with key projects in the year including insulation services for the construction of the Sadara propylene oxide unit in Jubail, painting and insulation for the Hyundai Ma'aden Alumina project, and providing access and refractory services on the onshore process plant for the Wasit Gas project. This growth is set to continue into 2015 as more projects come online. 

The region has remained focused on the overall Group strategy to achieve a balanced business across the maintenance and construction sectors. This has resulted in a significant increase in maintenance volumes, driven by a steady performance in Qatar and a substantial expansion of our maintenance activities in KSA where maintenance revenues have more than doubled in the last twelve months. Construction activities have reduced in the region with project completions in the UAE and as such the proportion of revenue derived from maintenance activities grew to 47% (2013: 33%).

Adjusted operating profit grew by 6.6% to £21.1 million compared to prior year (2013: £19.8 million) despite the effect of foreign exchange movement; at constant currency adjusted operating profit grew by 13.9%. The business delivered a strong increase in operating margin, rising to 12.0%, an increase of 220bps compared to the prior year (2013: 9.8%), with the increase largely driven by the onerous contract provision taken in 2013 and a strong margin performance across a number of shutdown and rescue projects completed during 2014. Although the project team continue to make solid operational progress on the onerous contract in Qatar, the provision has been increased during the year to reflect client releases and current and expected levels of productivity. The region continues to target an underlying operating margin of 12 to 13%.

Asia Pacific

As anticipated, order intake reduced by 50% to £117 million (2013: £236 million) reflecting the £190 million award of the Wheatstone project in Australia in 2013. Bidding activity across the region has been relatively subdued throughout the year. In Asia the most significant order secured is the previously announced maintenance contract in Hong Kong and in Australia the order intake primarily comprises a number of smaller maintenance contracts as well as additional work awarded on the APLNG construction project for Laing O'Rourke in Queensland where the business is supplying painting and acoustic insulation.

Revenue increased slightly compared to prior year to £134.2 million (2013: £133.2 million) despite significant adverse foreign exchange movement; at constant currency revenue increased by 11.7%. The increase was largely driven by the start-up of the Wheatstone LNG project in Australia which more than offset the reduction in volume resulting from the completion in 2013 of SPT project in Singapore and the Kipper Tuna project in Australia. Progress on the Wheatstone project has been good, with a steady ramp up of labour on site during the second half of the year and the business continues to meet all of the client's delivery, quality and safety requirements. It is anticipated that resourcing on the project will continue to increase through the first half of 2015. Activity levels also increased on the contract to provide access services to one of the yards in Thailand building modules for the Ichthys LNG project and in Myanmar where the business is providing a range of multi-disciplined services working both onshore and offshore with Daewoo Engineering on the Daewoo Shwe Natural Gas project.

The business has continued to grow its maintenance business, with maintenance comprising 63% of revenue in the period (2013: 54%).

We have strengthened the management team across the region with new leadership for both the Australian and Asian operations and the new team has made significant improvements in both operating and safety performance across the region. The Australian business achieved a full year with zero lost time injuries. 

Adjusted operating profit grew by 340% to £6.6 million (2013: £1.5 million) as the business benefitted from the implementation of the Performance Improvement Plan in the Australian business in 2013, and a good performance from the Thailand and the Philippines businesses as they delivered strong operational performance on a number of key contracts. Adjusted operating margin increased significantly to 4.9% (2013: 1.1%).

Although market conditions remain mixed across the region, the business is confident that we will be able to expand in 2015 through growth on the Wheatstone LNG project and targeted business development effort across the region. With these increased volumes and continued focus on operational excellence, margins are anticipated to continue to improve through 2015.

Chief Financial Officer's review

A summary income statement from continuing operations with explanatory discussion of the key items provided below:

Revenue

Revenue from continuing operations increased by 3.5% to £698.3 million (2013: £674.9 million) with a 3.4% adverse movement resulting from foreign exchange movements, a favourable 4.1% resulting from the benefit of the acquisition of Motherwell Bridge in the first quarter of 2014 and an underlying organic increase of 2.8%. Strong performances from across the Group, in particular in the Kingdom of Saudi Arabia (KSA) and in West Australia on the Wheatstone project largely compensated for the revenue decrease arising from the completion of several large construction projects in 2013 which had contributed almost £50 million of revenue. The key projects completed in 2013 included the Arzew GNL3-Z plant in Algeria, the SPT project in Singapore, the Kipper Tuna project in Australia and a number of significant construction projects in the United Arab Emirates (UAE). The newly formed Cape Specialist Services business has performed in line with expectations with the Motherwell Bridge acquisition contributing revenues of £27.8 million (2013: nil) in the year.

As anticipated, revenue in the second half of the year grew significantly and is 17% higher than the first half of 2014. The Group has benefited from a full six month contribution from the Motherwell Bridge acquisition in the second half as well as an increase in activity levels in Asia Pacific, due in part to volumes increasing on the Wheatstone project with approximately 250 employees now mobilised to site.

In line with our strategy to increase maintenance revenue in absolute terms, revenue from maintenance contracts has increased 16% to £486 million (2013: £419 million) and represents 70% of total revenue. The MENA region in particular have focussed on achieving a more balanced business and have successfully increased their maintenance revenues to £83.2 million (47% of total revenues), compared to £66.6 million (33% of total revenues) in 2013. As a consequence of the previously highlighted contract completions, revenue from construction projects has declined to £212 million (2013: £256 million) or 30% of total revenues.  

Cape's largest client, across numerous individual contracts, in total represented 15% of Group revenue (2013: 11%) and related to activities in both the UK, Europe & CIS region and the Asia Pacific region. The Group's top ten clients represented 42% of revenue (2013: 40%).

Adjusted operating profit

Adjusted operating profit from continuing operations has increased by 28.3% to £52.1 million (2013: £40.6 million), consisting of an adverse foreign exchange impact of 2.9%, a 9.9% benefit of the Motherwell Bridge acquisition and an organic performance improvement of 21.3 %. The Group's organic results are driven by a number of factors including the improvement in performance from Australia (combination of the 2013 Performance Improvement Plan and the contribution of the Wheatstone contract), the non-recurrence of onerous contracts in the Group and the flow through of margin resulting from the revenue growth in areas such as the KSA.

Revenue split by half and full year and geography

Other items

Other items decreased to £11.7 million (2013: £15.3 million) and comprise of £8.4 million of IDC costs (2013: £15.3 million) and £3.3 million (2013: nil) of post-acquisition charges relating to Motherwell Bridge and including amortisation of intangible assets.

Share of post-tax result of joint venture

In 2014 the SOCAR-Cape joint venture made a small profit, however under the equity method of accounting these profits need to be derecognised and used to amortise previously recorded accumulated losses. As a result there was no profit recorded for joint ventures in 2014 (2013: £0.3 million).

Exceptional items

Exceptional items total £0.9 million (2013: £14.9 million) and comprise of transaction costs relating to the acquisition of Motherwell Bridge. Exceptional items in 2013 consisted of costs relating to the Performance Improvement Plan initiated in Australia in 2013.

Operating profit

Operating profit for continuing operations was £39.5 million (2013: £10.4 million) and reflects an adjusted operating profit of £52.1 million (2013: £40.6 million), other items of £11.7 million (2013: £15.3 million) and exceptional items of £0.9 million (2013: £14.9 million).

Finance costs

Net finance costs amounted to £9.7 million (2013: £10.0 million) including the annual £3.4 million (2013: £4.0 million) non-cash charge relating to the unwinding of the discount on the long term IDC liability and interest income in the IDC Scheme funds in the period of £0.5 million (2013: £0.7 million). In 2013 there was also a £1.2 million cost from the write off of unamortised borrowing arrangement costs.

Adjusted finance costs increased to £7.6 million (2013: £6.3 million) with interest cover (calculated by dividing adjusted operating profit by the adjusted finance costs) increasing to 6.9 times (2013: 6.4 times).

Taxation

The tax charge on adjusted profit before tax excluding exceptional and other items was £9.1 million (2013: £7.2 million) representing an average tax rate of 20.1% (2013: 20.5%). The cash tax paid during the period was £8.4 million (2013: £7.7 million) which is in line with expectations. The tax charge on profit before tax was £7.3 million (2013: £2.7 million).

Discontinued operations

Due to the continued low levels of activity and deteriorating prospects in Kazakhstan, the Board has taken the decision to exit this geographical market and we are working with our joint venture partner to ensure this is done in a controlled manner. As a result of this decision Kazakhstan has been classified as discontinued in the 2014 results. 

A £12.1 million loss has been recognised within loss from discontinued operations in the income statement in 2014 (2013: £5.0 million loss) which primarily relates to Kazakhstan in 2014 and to India and Australia in 2013.

In relation to Kazakhstan a non-cash impairment charge of £9.7 million has been recognised in the income statement with £6.1 million relating to goodwill and £3.6 million relating to investments and assets held for sale; a cash provision charge of £1.2 million has also been recognised. Net assets of the disposal group held for sale in the statement of financial position total £0.3 million (2013: £3.7 million).

Earnings per share

For continuing operations the adjusted diluted earnings per share (EPS) was 29.9 pence (2013: 23.3 pence) and adjusted basic earnings per share was also 29.9 pence (2013: 23.5 pence). The diluted weighted average number of shares decreased to 121.1 million (2013: 121.9 million).

Dividend

After considering the 2014 financial results, current market conditions and the underlying prospects of the Group, the Board is proposing a final dividend for 2014 of 9.5 pence (2013: 9.5 pence) per share in line with the 2013 final dividend. In addition to the interim dividend of 4.5 pence per share (2013: 4.5 pence) paid on 10 October 2014, the total dividend for the year will be 14.0 pence per share (2013: 14.0 pence) subject to shareholders' approval at the Annual General Meeting on 12 May 2015, the final dividend will be payable on 23 June 2015 to shareholders on the register as at 22 May 2015.

Acquisitions

In line with the Group strategy to increase the range of critical services we offer, Cape announced its acquisition of UK based Motherwell Bridge, a leading provider of storage tanks, gasholders and heat exchangers to the energy and steel markets, on 10 March 2014. The purchase consideration of £36.6 million consisted of cash of £33.1 million and debt of £3.5 million. In the final quarter of 2014 £1.0 million of escrow funds were released back to Cape reducing the cash outflow to £33.1 million from the previously reported £34.1 million. The provisional fair value of net assets acquired was £12.7 million and goodwill of £20.1 million has been recognised on acquisition, as detailed in note 21. The goodwill of £20.1 million arising from the acquisition is attributable to the acquired business model and the expected synergies arising from combining the operations into the Group.

Operating and free cash flow

* At average rates of exchange

Working capital

Trade and other receivables and inventories increased by £32.5 million to £215.3 million (2013: £182.8 million) which along with an increase in trade and other payables of £15.2 million to £124.3 million (2013: £109.1 million) resulted in an overall increase in net working capital of £17.3 million (at balance sheet rates) to £91.0 million (2013: £73.7 million). The increase since 2013 is volume related with working capital increases in areas such as Australia and the KSA where we have had significant increases in revenues. Working capital, as expected, reduced by £18.3 million in the second half of 2014.

Capital expenditure

The Group continues to manage its capital expenditure carefully whilst investing in upgrading and replacing equipment where appropriate. The Asset Replacement Ratio (calculated by dividing gross capex spend by the depreciation charge) decreased to 84% (2013: 100%). Capital expenditure is slightly lower than anticipated due to the expected purchase of system scaffold being realigned with client needs.

Free cash flow

The Group's free cash flow of £19.2 million (2013: £47.4 million) is more than sufficient to fund, in cash terms, the full value of the proposed dividend of £16.9 million (2013: £16.9 million).

Financing and banking facilities

The Group's adjusted net debt increased year on year by £40.8 million to £101.0 million (2012: £60.2 million) including finance lease obligations of £2.2 million (2013: £0.2 million). Balance sheet gearing, excluding ring-fenced IDC Scheme funds, increased to 79.2% (2013: 45.2%).

The ratio of adjusted net debt to adjusted EBITDA increased to 1.4 times (2013: 1.0 times). A reconciliation of adjusted net debt and adjusted EBITDA can be found in note 8, 'Adjusted measures'.

During the year the Group entered into an interest rate cap for a period of three years terminating in February 2018. The derivative is for £70 million and gives protection to the Group against its GBP borrowings when LIBOR exceeds the strike price of 2.5%.

Provision for pension

The defined benefit pension schemes had a net surplus of £11.8 million (2013: £15.8 million) as at 31 December 2014 which continues to be restricted to nil in the accounts under IFRIC 14. The triennial valuation is now complete with the agreed monthly contribution rate maintained at £14,600.

Provision for estimated future asbestos related liabilities and IDC Scheme funds

The discounted provision increased to £98.2 million (2013: £94.3 million) reflecting an increase to the provision of £8.2 million (2013: £14.3 million), an unwinding of the discount of £3.4 million in the year (2013: £4.0 million) and £7.7million (2013: £3.8 million) of settlements, including a number of material one off, non-Scheme, legacy claims which accounted for £3.7 million. The increase in provision is entirely a consequence of changes in economic assumptions in 2014, primarily the decrease in the discount rate from 3.75% to 2.5%. This is further detailed in note 17. The level of Scheme cash settlements remains in line with actuarial assumptions. The ring-fenced IDC Scheme funds decreased to £29.3 million (2013: £31.3 million) benefitting from interest received of £1.7 million (2013: £1.0 million) and offset by the cash settlements on scheme claims in the year of £3.7 million (2013: £3.1 million).

Currencies

The vast majority of operating costs are matched with corresponding revenues of the same currency and as such there is very little transactional currency risk in the Group. Currency translation adversely impacted both revenue and operating profit in 2014 by 3.4% and 2.9% respectively.

In 2014, 28.5% (2013: 35.1%) of revenues were contracted in US Dollars or US pegged currencies and 13.8% (2013: 11.6%) in Australian Dollars.

The following significant exchange rates applied during this year:

Treasury policies

Cape has a centralised Treasury function whose objectives are to monitor and manage the financial risks of the Group and to ensure that sufficient liquidity is available to meet the requirements of the business. Group Treasury is not a profit centre and operates within a framework of policies and procedures. All hedging is carried out centrally and speculative trading is specifically prohibited by Group Treasury policy.

Return on invested capital 

Return on invested capital is defined at Group level as adjusted operating profit divided by the accounted value of equity plus adjusted net debt. Return on invested capital in 2014 was 22.8%, slightly ahead of the prior year (2013: 21.2%).

Principal risks

Cape operates globally in the energy and natural resources sectors and in varied geographic markets. Cape's performance and prospects may be affected by risks and uncertainties in relation to the industry and the environments in which it undertakes its operations around the world. Those risks range from external geopolitical, economic and market risks to operational risks including HSE, contracting, project execution and generic financial risks. In 2014 the price of oil dropped significantly, the Group has assessed this risk and will continue to monitor the situation closely and respond with mitigating actions as appropriate.

The Group is alert to the challenges of managing risk and has systems and procedures in place across the Group to identify, assess and mitigate major business risks. The directors have reviewed the principal risks and uncertainties and are satisfied that they are relevant. The Group continues to improve its process of project risk identification and mitigation from tender through to project completion. A full review of the Group's principal risks and uncertainties will be available in the 2014 Annual Report.

Michael Speakman

Chief Financial Officer

Condensed consolidated income statement

for the year ended 31 December 2014

*Certain amounts shown here do not correspond to the 2013 consolidated financial statements and reflect the adjustments made to reclassify the results of discontinued operations

Condensed consolidated statement of comprehensive income

for the year ended 31 December 2014

Condensed consolidated statement of financial position

at 31 December 2014

*Certain amounts shown here do not correspond to the 2013 consolidated financial statements and reflect the adjustments detailed in note 4.

Condensed consolidated statement of changes in equity

for the year ended 31 December 2014

for the year ended 31 December 2013

Condensed consolidated cash flow statement

for the year ended 31 December 2014

*Certain amounts shown here do not correspond to the 2013 consolidated financial statements and reflect adjustments made to reclassify the results of discontinued operations.

Notes to the condensed consolidated financial statements

1. General information

The Group has prepared its condensed consolidated financial statements for the year to 31 December 2014 in accordance with the Companies (Jersey) Law 1991 and International Financial Reporting Standards ('IFRS') as adopted by the European Union. These statements do not constitute accounts prepared for the purposes of Article 105 of the Companies (Jersey) Law 1991.The comparative financial information is based on the statutory accounts to 31 December 2013 which have been delivered to the Jersey Financial Services Commission. The report of the auditors on those accounts was unqualified.The preliminary announcement for the year ending 31 December 2014 was approved by the Board of directors on 17 March 2015.

Copies of this preliminary report will be available from the offices of Cape plc, 47 Esplanade, St Helier, Jersey, JE1 0BD and on the Group's website at www.capeplc.com. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

2. Basis of preparation

The condensed consolidated financial statements for the twelve months ended 31 December 2014 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority.

2.1 Discontinued operations

The Group classifies an asset or disposal group as a discontinued operation when it has been either disposed of or classified as held for sale; or it represents a single major line of business or geographical area of operation or is part of a coordinated plan for disposal.

In the period an asset or disposal group has been disposed of, or is classified as held for sale, the results of the operation are reported as discontinued operations in the current and prior periods.

2.2 Accounting policies

The accounting policies and methods of computation adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual audited Consolidated Financial Statements, which will be available on the Group's website at www.capeplc.com.

2.3 Going concern basis

After making enquiries, the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated financial statements.

3. New and amended standards and interpretations adopted by the Group

Several new standards and amendments apply for the first time in 2014, however they do not have a significant impact on the annual financial statements of the Group. These new standards and amendments are listed below:

- Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

- Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

- Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39

- Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36

- IFRIC 21 'Levies'

The Group has not yet early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

b) New standards and interpretations not yet adopted

The following standards and interpretations in issue are not yet effective for the Group and have not been adopted by the Group:

 Effective dates

IFRS 15 Revenue from Contracts with Customers 1 January 2017

IFRS 9 Financial Instruments (2014) 1 January 2018

Annual Improvements to IFRSs 2012-2014 Cycle 1 July 2016

Amendments to IAS 27: Equity Method in Separate Financial Statements 1 January 2016

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods 1 January 2016

of Depreciation and Amortisation

Amendments to IFRS 11: Accounting for Acquisitions of Interests in 1 January 2016

Joint Operations

Amendments to IAS 19: Defined Benefit Plans: Employee Contributions 1 July 2014

Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014

Annual Improvements to IFRSs 2011-2013 Cycle 1 July 2014

The Group is currently assessing the impact of these standards and plans to adopt the new standards on the required effective date.

4. Prior period adjustments

Cash and cash equivalents within the consolidated statement of financial position reported in the Group financial statements at 31 December 2013 and 1 January 2013 have been restated to reflect the correct classification of current asset restricted funds of £22.3m (2012: £10.9m) and deposits held for more than twelve months of £9.0m (2012: £16.5m) as restricted fund non-current deposits.

As a result of the discontinuation of operations in Kazakhstan during 2014, the prior period figures in the consolidated income statement have been restated, together with any associated notes.

5. Group specific accounting measures

To be able to provide readers with clear, meaningful and consistent presentation of financial performance, the Group reflects its underlying financial results in the 'business performance' column within the consolidated income statement. Business performance excludes 'Other Items' and 'Exceptional Items', which are considered non-operational in their nature and which are reported separately in a different column within the consolidated income statement.

a) Other items

Other items are those items which the directors believe are relevant to the understanding of the results for the year and which are excluded from the adjusted measures. Other items include administration expenses, financial incomes and financial costs associated with industrial disease claims and certain post-acquisition charges, including amortisation of acquired intangibles arising from business combinations.

b) Exceptional items

Exceptional items are those items which are of a non-recurring nature and, in the judgement of the directors, need to be disclosed separately by virtue of their nature, size or incidence. Items which may be considered exceptional in nature include significant write-downs of goodwill and other assets, significant changes in asset values as a result of changes in accounting estimates, business acquisition costs and restructuring costs.

6. Significant judgements and estimates

Certain of the Group's accounting policies require critical accounting estimates that involve subjective judgements and the use of assumptions, some of which may relate to matters that are inherently uncertain and susceptible to change. 

a) Judgements

Areas of judgement that have the most significant effect on the amounts recognised in the consolidated financial statements are:

(i) Revenue recognition and assessment of long term contract performance

The Group generally accounts for long term construction contracts using the percentage of completion method as performance of the contract progresses. This method requires judgement to determine accurate estimates of the extent of progress towards contract completion and may involve estimates of the total contract costs, remaining costs to completion, total revenues, contract risks and other judgements.

(ii) Carrying value of property, plant and equipment

Assessing whether property, plant and equipment may be impaired requires a review for indicators of impairment and, where such indicators exist, an estimate of the asset's recoverable amount by reference to value in use. Management are required to exercise significant judgement in reviewing for and identifying asset indicators of impairment and subsequently calculating value in use.

(iii) Trade and other receivables

The Group provides for likely non-recovery of receivables to the extent that the carrying value is less than the present value of expected future cash flows. Assessing the value of the provision requires significant management judgement and review of individual receivables based upon individual customer creditworthiness, current economic trends and analysis of historical bad debts.

(iv) Deferred tax assets

The Group recognises deferred tax assets on all applicable temporary differences where it is probable that future taxable profits will be available for utilisation. This requires management to make judgements and assumptions regarding the amount of deferred tax that can be recognised based on the magnitude and likelihood of future taxable profits.

(v) Defined benefit pension plans

The cost and the obligation of the Group's defined benefit pension plan is based on a number of selection assumptions. These include the discount rate, inflation rate, salary growth, longevity and expected return on the assets of the plan. Differences arising from actual experience or future changes in assumptions will be reflected in future periods.

b) Estimates

The key assumptions affected by future uncertainty that have a significant risk of causing material adjustment to the carrying value of assets and liabilities within the next financial year are:

(i) Onerous contracts

Provision is made for future losses on long-term contracts where it is considered that the contract costs are likely to exceed revenues in future years. Estimating future losses involves assumptions of contract performance targets and likely levels of future cost escalation over time. A provision for onerous contracts of £9.7m is recorded at 31 December 2014 (2013: £8.9m).

(ii) Impairment of goodwill

Goodwill is tested at least annually for impairment. This requires estimation of the value in use of the cash-generating units to which the goodwill is allocated. Calculation of value in use requires estimation of expected future cash flows from each of the cash generating units and also to determine a suitable discount rate to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2014 was £127.2m (2013: £113.7m). There has been a goodwill impairment charge of £6.1m during 2014 relating to discontinued operations (note 12).

(iii) Provision for industrial disease claims

To the extent that such costs can be reliably estimated, a provision has been made for the costs which the Group is expected to incur in respect of lodged and future industrial disease claims arising on alleged exposure to previously manufactured asbestos products. The most recent full actuarial valuation was performed in 2013 and the next full valuation is scheduled to be completed to 31 December 2016. The amount of the provision is based on historic patterns of claim numbers and monetary settlements as well as published tables of projected disease incidence. Key assumptions made in assessing the appropriate level of provision include the period over which future claims can be expected, the rate at which claims will be filed, the rate of successful resolution as well as future trends in both compensation payments and legal costs. Management monitors claims received on an ongoing basis and any other factors which would require a change to the assumptions or trigger a full actuarial review in the current year. At 31 December 2013, the range of reasonable estimate was determined as being between £89m and £123m.

During 2014, changes in macroeconomic conditions necessitated a revision to the discount rate and inflation rate assumptions, giving rise to an increase in the amount of the provision by £8.2m with an equivalent charge to profit or loss. The value of the provision at 31 December 2014 is £98.2m (2013: £94.3m). See note 17 for other movements during the year.

(iv) Income tax

Group entities can be subject to routine tax audits and also a process whereby tax computations are discussed and agreed with the appropriate authorities. Whilst the ultimate outcome of such tax audits and discussions cannot be determined with certainty, management estimates the level of required tax provisions on the basis of professional advice and the nature of current discussions with the tax authority concerned.

7. Segment information

Management has determined the operating segments based on the reports reviewed by the Board (Chief Operating Decision Maker 'CODM') that are used to make strategic decisions. The CODM considers the business from a geographic perspective and the Group reports three regional segments and a central support function. The main profit measure used by the CODM in its review is adjusted operating profit.

Each regional segment derives its revenues from the provision of critical industrial services focused on the energy and natural resource sectors.

The segment information for the year ended 31 December 2014 is as follows:

Segmental adjusted operating profit/(loss) in the table above is shown after charging franchise fees. Adjusted operating profit before franchise fees is set out in note 8. 

There were no significant sales between segments in either year.

Other segment items included in the consolidated income statement are as follows:

The geographical origin of revenue based on location of the entity is analysed as follows:

The strategic report section in the Annual Report provides an analysis of revenues between maintenance support services (being services to plant operators to assist with their maintenance and production support activities) and construction support services (being services to engineering and contracting companies to support major construction projects). This split in customer base and revenue does not represent an operating segment as multi-discipline services are provided to all customers and as such the segmental analysis is only presented by geographic segments.

Revenue from continuing operations derived from maintenance support services was £486m (70%) (2013: £419m (62%)) and revenue derived from construction support services was £212m (30%) (2013: £256m (38%)).

Revenue from the largest client represented 15% of total revenue (2013: 11%) relating to activity across all geographic segments and the top ten clients represented 42% of revenue (2013: 40%).

The segment assets and liabilities at 31 December 2014 and capital expenditure for the year are as follows:

Included within Asia Pacific's total non-current assets of £65.8m (2013: £71.9m) is £2.1m (2013: £3.0m) that is located in Singapore.

The geographical origin of non-current assets held by the Group has not been disclosed as the necessary information is not available and the cost to develop it would be excessive.

Liabilities of discontinued operations of £0.3m relate to liabilities held in India. In 2013, this was previously included against assets for sale. Assets and liabilities held for sale in 2014 relate to the discontinuation of operations during the year.

The segment assets and liabilities at 31 December 2013 and capital expenditure for the year are as follows:

\* The unallocated column has been restated to reflect the correct classification of current asset restricted funds of £22.3m and non-current asset restricted funds of £9.0 million.

Segment assets consist primarily of property, plant and equipment, investments, intangible assets, inventories and trade and other receivables. Segment liabilities consist of operating liabilities.

Unallocated assets and liabilities comprise:

8. Adjusted measures

The Group seeks to present a measure of underlying performance which is not impacted by exceptional or other items, both considered non-operational in nature. These measures are described as 'adjusted' and are used by management to measure and monitor performance. Other items and exceptional items have been excluded from the adjusted measures:

Certain central operations and management are based in the Group's International Headquarters (IHQ) in Singapore with responsibility for management and development of non-UK intellectual property. Franchise agreements facilitate the charging of franchise fees from IHQ to the Group's non-UK trading businesses with such costs being reported through segment operating profit.

The segmental adjusted operating profit before franchise fee charges is as follows:

9. Other items and exceptional items

a) Other items

b) Exceptional items

The impairment of property, plant and equipment in 2013 was in respect of assets held in Australia. The charge arising on the assessment of other non-current assets in 2013 related to provisions made against the carrying value of certain other assets held outside of the Australian business. In 2013 'Other' primarily comprises of restructuring costs including onerous leases and the write off of irrecoverable current assets.

10. Finance income and costs

11. Income tax

The difference between the actual tax charge and the charge that would have arisen using Jersey's standard corporate income tax rate of 0% (2013: 0%) is explained in the table below:

Included within the tax charge of £7.3m is a tax credit of £1.8m (2013: credit of £4.5m) relating to exceptional and other items. The local tax rate is applied to the underlying costs or income however certain exceptional costs due to their very nature will not have an associated tax charge or credit. The overall effective rate applied to these costs will vary year upon year depending on the location and the nature of the cost.

Factors affecting current and future tax charges

The Group has worldwide operations and is subject to several factors that may affect future tax charges, principally the levels and mix of profitability in different jurisdictions, tax rates imposed and tax regime reforms.

12. Discontinued operations and assets held for sale

Analysis of the result of discontinued operations and the result recognised on the re-measurement of assets of the disposal group is as follows:

Discontinued operations in 2014 primarily relate to the planned termination of operations in Kazakhstan. Discontinued operations in 2013 relate to the termination of operations in India and Japan and the disposal of certain businesses following the restructuring of the Australian operations.

The major classes of assets and liabilities directly associated with the disposal group classified as held for sale are split as follows:

The net assets of the disposal group classified as held for sale of £0.3m at 31 December 2014 is stated after the Group recognised an impairment charge of £9.7m on those assets and the recognition of a provision for exit costs of £1.2m.

13. Earnings per ordinary share

Basic earnings per share ('EPS') for the year equals the profit after tax attributable to the Company's ordinary shareholders of £10.4m (2013: loss of £6.8m) divided by the weighted average number of issued ordinary shares of 121,040,516 (2013: 120,825,623).

When the Group makes a profit, diluted EPS equals the profit attributable to the Company's ordinary shareholders divided by the diluted weighted average number of issued ordinary shares. When the Group makes a loss, diluted EPS equals the loss attributable to the Company's ordinary shareholders divided by the basic (undiluted) weighted average number of issued ordinary shares. This ensures that EPS on losses is shown in full and not diluted by unexercised share options or awards.

Share options and awards are considered dilutive when the average share price during the year is higher than the average exercise price of the option or award.

The basic weighted average number of shares excludes shares that the Company holds in an employee benefit trust. The weighted average number of shares held in the trust during the year was 63,421 (2013: 266,653).

The adjusted earnings per share calculations have been calculated after excluding the impact of amortisation of intangibles, non-recurring costs, exceptional items, industrial disease claims related costs and interest income and the tax impact of these items. Options are dilutive at the level of adjusted profit from continuing operations and so, in accordance with IAS 33 'Earnings per Share', have been treated as dilutive for the purpose of adjusted diluted earnings per share.

14. Dividends per share

An interim dividend was paid on 10 October 2014 amounting to 4.5 pence per share (2013: 4.5 pence per share). Interim dividends are recognised when paid. A final dividend in respect of the year ended 31 December 2014 of 9.5 pence per share, amounting to £11.5m, is to be proposed at the Annual General Meeting convened for 12 May 2015, making a total dividend of 14.0 pence per share for the year (2013: 14.0 pence per share).

These consolidated financial statements do not reflect this final dividend payable.

15. Intangible assets

Goodwill cost and amortisation previously reported at 1 January and 31 December 2013 showed cumulative goodwill impairments of £129.8m as a reduction against cost. The information above has been restated to reflect the correct presentation within amortisation and impairment.

Impairment tests for goodwill

As required by IAS 36 'Impairment of assets', the Group tests goodwill for impairment on an annual basis. The recoverable amounts of each cash-generating unit ('CGU') is based on a value in use calculation.

Each CGUs value in use was calculated by taking the Group's five year cash flow forecasts and then applying a long-term growth rate to the periods beyond the fifth year, discounted back using a pre-tax discount rate. These present values were then compared to the combined carrying value of the CGUs assets (goodwill, intangible assets and property, plant and equipment). The key assumptions used in preparing the discounted cash flows were as follows:

EBITDA and cash flow projections

EBITDA and capital expenditure in the five year forecast commenced with the most recently approved annual budget, years two to five were prepared on a country by country basis by considering past performance, long term market share and estimates of market growth by sector. All cash flows associated with future capital expenditure that would enhance the performance of the CGUs were then removed from the discounted cash flows.

Discount rate

The discount rate reflects the estimated post-tax rate of return that would be expected from a rational investor over the period of the forecast, which is then adjusted to a pre-tax discount rate by reference to the Group's five year cash tax forecast. The post-tax discount rate was calculated using the Capital Asset Pricing Model approach, with the risk free rate based on UK Government gilts, the beta derived via weekly observations over a five year period and the risk premium based on a consistent long-term average return on shares. Adjustments were then made to the discount rate of each CGU to reflect different risks associated with those CGUs (both specific risk premiums and in respect of local risk free rates). The pre-tax discount rates applied are set out in the table below.

Long term growth rates

Long term growth rates were also applied to each CGU separately. Considerations to derive the growth rates included long term GDP growth and projected growth rates in the supply and demand for energy. The long term growth rates applied are also set out below.

The assumptions used in the value in use calculations were as follows:

Sensitivities

The table below discloses what changes in the key assumptions would cause the carrying value of the CGUs to exceed their recoverable amounts:

Sensitivities were also applied to the five year EBITDA compound annual growth rates, again there was sufficient headroom in each of the CGUs with flat or negative growth rates still providing headroom.

*Note: while the level of headroom is significant, it is not practicable to calculate.

16. Property, plant and equipment

During the year ended 31 December 2014, the Group acquired assets with a cost of £15.3m (2013: 17.7m) and received proceeds from asset sales of £1.3m (2013: £2.2m) as shown in the consolidated cash flow statement representing the actual cash outflow.

Included within the depreciation charge for the year of £18.3m (2013: £17.7m) is an amount of £0.2m (2013: £0.5 million) relating to discontinued operations. The remaining £18.1m (2013: £17.2m) relating to continuing operations has been charged to cost of sales in the consolidated income statement.

Exchange adjustments relate to the translation of assets held by foreign operations into the presentation currency.

The Group leases property, plant and equipment under finance lease agreements. At 31 December 2014, the net carrying amount of property, plant and equipment includes the following amounts held under finance lease: plant and machinery £0.7m (2013: £1.4m) and land and buildings £1.5m (2013: £nil). Additions during the year include £nil of plant and machinery under finance leases.

17. Provisions