Interim Results
30 September 2003 - 5:01PM
UK Regulatory
RNS Number:3195Q
Cape PLC
30 September 2003
CAPE PLC
("Cape" or the "Company")
Interim Results for the half-year ended 30 June 2003
Cape, the international industrial services business, today announces further
significant progress in its restructuring, its half year results and the interim
findings of its strategic review.
FINANCIAL HIGHLIGHTS
* Industrial Services turnover up 16% to #104.2m (2002: #90.0m)
* Industrial Services operating profit up 6% to #3.6m (2002: #3.4m)
* Overall Group turnover of #107.8m (2002: #110.7m)
OPERATIONAL HIGHLIGHTS
* Settlement of South African and UK shipyards asbestos litigation
* Further significant progress in the Group's restructuring
* Long term and improved bank facilities in place
* Industrial Services performance in line with plan
* Major new LNG construction projects in Malaysia and Egypt
Commenting on the results, Martin K May, Chairman, said:
"Industrial Services is well placed to reap the benefits of the continuing
growth in investment in LNG projects worldwide. Trading for the second half and
over the year as a whole will be broadly in line with plan and at similar levels
to last year. "
30 September 2003
Enquiries:
Cape PLC Tel: 020 8236 6201
Martin K May, Chairman
College Hill
Matthew Gregorowski Tel: 020 7457 2020
Mark Garraway
CHAIRMAN'S STATEMENT
I am pleased to report that the Group made further significant progress in the
first half of 2003 recording an operating loss before exceptional items of #0.1
million (2002: #1.7m) on turnover of #107.8 million (2002: #110.7 million). This
resulted in an operating loss after taxation of #0.1 million (2002: #2.0
million), with a loss per share of 0.2 pence (2002: 3.6 pence).
Group net debt at the half year was #21.1 million (2002: #32.7 million).
Shareholders funds were #24.2 million (2002: #18.5 million).
The Directors have decided not to declare an interim dividend (2002: 0.0p per
share).
Restructuring Update
In August 2002 Cape Calsil Systems ("CCS"), a loss making manufacturing business
unit, was sold to Promat, a subsidiary of the Belgian group Etex. Cape retained
freehold properties at Uxbridge, Caerphilly and Washington, Tyne and Wear and
entered into an agreement with Promat to convert all remaining stock into
finished product. As a result of the disposal of CCS and closure of the sites in
Uxbridge and Caerphilly in December 2002 the financial position of Group has
improved significantly.
I am pleased to report further progress over the last six months during which
management has continued to take action to reduce risk, drive cost out of the
business and generate cash to pay down debt.
Prior to the half-year end
1. The claim made on behalf of 7,500 South African mine workers for asbestos
related diseases has been settled, without admission of liability, to the
satisfaction of all parties, bringing to an end a costly and time-consuming
dispute.
2. The Board reached agreement with its Banks to put in place long-term
financing facilities.
3. The sale of the remaining stock of CCS to Promat, the purchaser of the
business, as provided for in the sale agreement has been completed.
4. The Group Head Office in Uxbridge was closed and the functions downsized and
transferred to Cape Industrial Services ("CIS") in Wakefield. CIS relocated
to purpose built premises during the first half.
5. The sale of the former manufacturing site at Caerphilly, along with the sale
of redundant plant and machinery resulted in a profit of #0.5m in excess of
book value.
Post the half-year end
1. The sale of the surplus manufacturing site at Uxbridge realised a
consideration of #10.0 million, a profit of #1.7 million over book value.
2. The Company has concluded an agreement with Chester Street Insurance Holdings
(formally Iron Trades Holdings Ltd) and other Iron Trades Policy holders.
This will cap the level of Cape's contribution towards all current and
future asbestos related shipyard claims brought against Cape and its
subsidiaries. The Board believes that the terms of the settlement are
favourable as they produce certainty and reduce costs arising out of further
shipyard claims.
Over the balance of the second half of 2003 the Board will decide how best to
maximise the value of its remaining freehold property portfolio. These assets
comprise two former manufacturing sites of CCS located in Washington Tyne and
Wear and Chesham in Surrey, and a 120 acre brown field site in Uxbridge located
between the M40 and M4 adjacent to the M25. The Group is currently in discussion
with the Highways Agency regarding possible development opportunities for this
site. All proceeds arising from the sale of these assets will be used to reduce
debt and fund the further development of CIS.
Cape Industrial Services (CIS)
With the sale of the manufacturing business, CCS, last year, the sole remaining
operating division of the Group is Cape Industrial Services (CIS). CIS made an
operating profit of #3.6 million (2002: #3.4 million), up 6%, whilst turnover
improved to #104.2 million (2002: #90.0 million), up 16% in the six months ended
30th June 2003.
Despite a challenging operating environment where margins continue to be under
pressure, CIS has maintained a very strong market position with international
blue chip companies that make up a significant proportion of its client base.
All of the main business units continue to perform well and are on track to
deliver performance for the full year according to plan.
In the UK, which generates approximately two thirds of sales in CIS, we have
successfully completed a re-organisation of the North West and Midlands regions,
further reducing the cost base. The re-organisation of the North East Region is
progressing and on plan. During the period CIS was awarded a contract by Heerema
Ltd, an offshore module fabrication facility based in Hartlepool, to provide
industrial painting services to BP's Clair drilling rig on behalf on Noble
drilling.
Outside Europe, the rapid expansion of the Liquid Natural Gas ("LNG") market and
the number of major projects to construct new LNG plants is proving to be very
beneficial for the business.
I believe that we are well placed to secure further orders in this sector,
particularly in the Middle East, where we are the market leader, once the
political and economic climate stabilises. We are currently working on large
projects in Bintulu in Malaysia and Damietta in Egypt. We are currently
providing multi disciplinary services on the Karachaganak Development project
and pipeline network in Kazakhstan, at Baku, Azerbaijan and in Georgia in
support of investment initiatives supported by British Gas, Agip and BP. In
South East Asia, we will continue to look to extend our operations into
Indonesia again to capitalise upon our regional leadership and the continuing
investment in the development of facilities for LNG.
Financing
In March 2003, the Group reached agreement with its bankers to put in place long
term borrowing facilities. The terms of these facilities reflected the difficult
financial circumstances of the Group at that time, when much of the
restructuring referred to above had yet to be completed. In the light of the
progress made over the first half and given the improving outlook for the Group,
in August 2003 your Board took the opportunity to renegotiate improved
facilities with Barclays Bank plc. The Group has a long-standing relationship
with Barclays and has subsequently entered into an arrangement that will run for
three years from August 2003.
Industrial Disease Claims
The net charge to the Profit and Loss account for industrial disease claims in
the six months to 30 June 2003 was #1.8 million (2002: #1.5 million).
The Group has received, and continues to receive, claims from historical
asbestos related activities. On the basis of the information presently
available, it is not possible for the Directors to quantify, with sufficient
reliability the amount required to settle future claims, and accordingly claims
are accounted for on the basis of claims lodged or settlements reached or
outstanding. Based on the recent history of settlements, the Directors
anticipate that future settlements can be met from the future cash flows
generated by the operations of the Group.
Strategic Review
The review thus far confirms that CIS is well placed to maintain its already
strong position in the UK and where appropriate selectively consolidate its
market. Our existing operations in the Middle and Far East provide a firm base
from which to grow our spread of activities and our existing market share in
these important markets. In particular, we believe that investment in Liquid
Natural Gas (LNG) facilities will result in major opportunities for CIS over the
medium and long term.
The Board
Since the announcement of our preliminary results in May of this year, there
have been a number of changes to the Board. On 24 June I was appointed as
Chairman and Mike Reynolds was appointed Group Finance Director. Mr Reynolds
replaces Ian Widdowson, who resigned from the Board on that day to take up an
opportunity outside the Group in New Zealand. Ian was with the Group for eleven
years and had been Group Finance Director for five years. I would like to thank
Ian on behalf of the Board for his full contribution to the Group and in
particular for his participation in the successful restructuring of the Group.
Shareholders
Subsequent to the announcement of our preliminary results in May 2003, there
have been a number of important changes to our share register principal of which
are as follows:
* Rutland Trust Plc sold its 14.7% holding
* Montpellier Group Plc sold its 29.9% holding
* M & G increased its shareholding to 14.9% from 9.9%
The Directors thank Rutland Trust and Montpellier for their valued support and
anticipate a widening of the share register following their decision to divest.
Outlook
The Board intends to continue to focus on improving the prospects of CIS from
its already strong market position by reducing risk to the business of long tail
liabilities, improving margins, driving down cost, and generating cash from
asset disposals to pay down debt.
CIS is well placed to reap the benefits of the continuing growth in investment
in LNG projects worldwide. Trading for the second half and over the year as a
whole will be broadly in line with plan and at similar levels to last year.
Martin K May, Chairman
30th September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE HALF-YEAR ENDED 30 JUNE 2003
Unaudited Unaudited Audited
Half-year Half-year Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Turnover
Continuing 105.4 90.9 191.7
operations
Discontinued 3.6 20.7 33.1
operations
Total turnover including group 109.0 111.6 224.8
share of joint ventures
Less share of turnover (1.2) (0.9) (3.2)
of joint ventures
Group turnover 107.8 110.7 221.6
Group operating (loss)
/ profit
Continuing 0.1 (0.3) 5.0
operations
Discontinued (0.2) (1.4) (0.6)
operations
Group operating (loss) / (0.1) (1.7) 4.4
profit before operating
exceptional items
Operating exceptional
items
Continuing - - 10.5
operations
Discontinued - - 2.5
operations
- - 13.0
Group operating (loss) (0.1) (1.7) 17.4
/ profit
Share of operating (loss) / - (0.3) (0.1)
profit in joint ventures
Profit on sale of 0.5 - 0.5
fixed assets
Loss on sale and subsequent - - (3.8)
closure costs of Calsil
Division
(Loss) / Profit on ordinary 0.4 (2.0) 14.0
activities before interest
Net interest payable (0.9) (0.9) (1.7)
Other finance income 0.4 1.1 2.3
(Loss) / Profit on ordinary (0.1) (1.8) 14.6
activities before taxation
Tax on loss / profit - (0.2) (0.3)
on ordinary
activities
Profit / (Loss) for (0.1) (2.0) 14.3
the period
Earnings per ordinary
share:
- basic and diluted before (0.2)p (3.6)p 8.1p
operating exceptional items
- Basic and diluted (0.2)p (3.6)p 26.2p
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2003
Unaudited Unaudited Audited
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Fixed assets
Intangible assets 0.1 - 0.1
Tangible assets 29.5 35.7 30.8
Interest in joint
ventures
Share of gross 1.0 1.3 0.8
assets
Share of gross (1.0) (1.0) (0.8)
liabilities
- 0.3 -
29.6 36.0 30.9
Current assets
Stocks 9.1 14.6 13.1
Debtors 67.3 67.3 58.7
Cash at bank and in 6.7 4.5 17.0
hand
83.1 86.4 88.8
Creditors: amounts falling
due within one year
Short term (27.6) (37.0) (36.1)
borrowings
Other creditors (51.2) (52.6) (43.3)
(78.8) (89.6) (79.4)
Net current assets 4.3 (3.2) 9.4
/ (liabilities)
Total assets less 33.9 32.8 40.3
current
liabilities
Creditors: amounts
falling due after
more than one (0.2) (0.2) (0.2)
year
Provisions for (16.7) (31.7) (23.3)
liabilities and
charges
Net assets 17.0 0.9 16.8
excluding pension
asset
Pension asset 7.2 17.6 7.3
Net assets 24.2 18.5 24.1
including pension asset
Capital and
reserves
Called up share 18.2 18.2 18.2
capital
Reserves 6.0 0.3 5.9
Shareholders' 24.2 18.5 24.1
funds
CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2003
Unaudited Unaudited Audited
Half-year Half-year Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Net cash (outflow) / inflow from (0.3) (2.7) 7.6
operating activities
Returns on investments and servicing of (0.9) (1.0) (1.8)
finance
Tax paid - (0.4) (0.3)
Capital expenditure and financial (0.7) (2.3) (4.1)
investment
Acquisitions and disposals - - 5.7
Net cash (outflow) / inflow before (1.9) (6.4) 7.1
financing
Financing
Capital element of finance lease rental (0.1) (0.2) (0.4)
payments
Short-term borrowings (8.5) 5.7 5.4
Net (decrease) / increase in cash (10.5) (0.9) 12.1
Reconciliation of net cash flow to
movement in net debt:
Decrease in cash in the period (10.5) (0.9) 12.1
Inflow / (outflow) from the increase in 8.6 (5.5) (5.0)
debt and leasing financing
Change in debt resulting from cash (1.9) (6.4) 7.1
flows
New finance leases (0.1) - (0.2)
Exchange movement in period 0.2 (0.2) (0.1)
Movement in net debt in the period (1.8) (6.6) 6.8
Net debt at 1st January (19.3) (26.1) (26.1)
Net debt at end of period (21.1) (32.7) (19.3)
Notes :
1. Business Analysis
Unaudited
6 Months ended
30 June 2003
Profit / (Loss)
before tax
Non-
Operating operating
Pre- exceptional exceptional
Turnover exceptional items items Total
#m #m #m #m #m
Business analysis
2003
Continuing operations
- Cape Industrial 104.2 3.6 - - 3.6
Services
- Head - (1.7) - - (1.7)
Office
- Compensation for - (1.8) - - (1.8)
industrial disease
Total 104.2 0.1 - - 0.1
continuing
Discontinued operations
- Cape 3.6 (0.2) - 0.5 0.3
Calsil
Group 107.8 (0.1) - 0.5 0.4
Joint ventures
- Continuing 1.2 - - - -
operations
- Discontinued - - - - -
operations
109.0 (0.1) - 0.5 0.4
Net interest (0.9)
Other finance income 0.4
(Loss) before (0.1)
tax
There are no significant inter-segment sales between business units
Unaudited
6 Months ended
30 June 2002
Profit / (Loss)
before tax
Non-
Operating operating
Pre- exceptional exceptional
Turnover exceptional items items Total
#m #m #m #m #m
Business analysis
2002
Continuing operations
- Cape Industrial 90.0 3.4 - - 3.4
Services
- Head Office - (2.2) - - (2.2)
- Compensation for industrial - (1.5) - - (1.5)
disease
Total continuing 90.0 (0.3) - - (0.3)
Discontinued operations
- Cape Calsil 20.7 (1.4) - - (1.4)
Group 110.7 (1.7) - - (1.7)
Joint ventures
- Continuing 0.9 (0.3) - - (0.3)
operations
- Discontinued - - - - -
operations
111.6 (2.0) - - (2.0)
Net interest/net borrowings (0.9)
Other finance income 1.1
(Loss) before tax (1.8)
There are no significant inter-segment sales between business units
Audited
Year ended 31
December 2002
Profit / (Loss)
before tax-
Non-
Operating operating
Pre- exceptional exceptional
Turnover exceptional items items Total
#m #m #m #m #m
Business analysis
2002
Continuing operations
- Cape Industrial 189.3 9.1 - - 9.1
Services
- Head Office - (1.7) (2.0) - (3.7)
- Compensation for industrial - (2.4) 12.5 - 10.1
disease
Total continuing 189.3 5.0 10.5 - 15.5
Discontined operations
- Cape Calsil 32.3 (0.6) 2.5 (3.8) (1.9)
Group 221.6 4.4 13.0 (3.8) 13.6
Joint ventures
- Continuing 2.4 0.1 - - 0.1
operations
- Discontinued 0.8 (0.2) - 0.5 0.3
operations
224.8 4.3 13.0 (3.3) 14.0
Profit on sale of fixed -
assets
Net interest (1.7)
Other finance income 2.3
14.6
There are no significant inter-segment sales between business units
2. Reconciliation of operating (loss) / profit to cash (outflow) / inflow
from operating activities
Unaudited Unaudited Audited
Half-year Half-year Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Operating (loss) / profit (0.1) (2.0) 17.4
Joint ventures (net) - 0.3 -
Depreciation charge 2.6 3.8 7.5
Profit / (Loss) on sale of - - (0.1)
fixed assets
Release of Impairment of - - (0.8)
fixed assets
Changes in working (3.3) (5.7) (18.1)
capital
Difference between pension charge and 0.9 1.7
cash contributions
Net cash (outflow) / inflow (0.3) (2.7) 7.6
from operating activities
3. Financial Information
The financial information for the half years ended 30 June 2003 and 30 June 2002
is unaudited.
The financial information for the year ended 31 December 2002 does not
constitute full accounts, but is an extract from the Company's accounts for the
year, which have been delivered to the Registrar of Companies and on which the
auditors gave an unqualified report.
However, the auditor's report referred to the adequacy of the disclosures made
in the financial statements concerning the impact of, and accounting for,
potential future claims for industrial disease compensation. On the basis of
information presently available, it is not possible for the Directors to
quantify, with sufficient reliability the amount required to settle future
claims and accordingly claims are generally accounted for on the basis of claims
lodged or settlements reached and outstanding at the Balance Sheet date.
However, if it were possible to assess reliably the present value of the amount
required to settle future claims such that this was provided in the Balance
Sheet, there would be a materially adverse effect on the Group's financial
position. Details of the circumstances relating to this fundamental uncertainty
are described in the contingent liability note below. The auditor's opinion was
not qualified in this respect.
The results for the half-year ended 30 June 2003 were approved by the Board on
17 September 2003.
4. Accounting Policies
There have been no changes to the accounting policies as set out in the 2002
Report and Accounts.
5. (Loss) / Earnings per ordinary share
Loss per ordinary share for the 6 month period ended June 2003 is calculated by
dividing the retained loss for the period of #0.1m (2002: #2.0m) by 54,326,021
(2002: 54,326,021) ordinary shares of 25p each being the weighted average number
of such shares in issue during the period.
Unaudited Unaudited Audited
Half-year Half-year Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
pence pence pence
Basic and diluted(loss) / earnings (0.6) (3.6) 26.2
per share (total operations)
Adjustments: Operating exceptional - - (24.1)
items
Non-operating - - 6.0
exceptional items
Adjusted earnings per share (0.6) (3.6) 8.1
The share options in issue are not considered potentially dilutive, as the
average share price for both 2003 and 2002 has been below any of the exercise
prices.
Supplementary basic and diluted earnings/(losses) per share have been calculated
to exclude the effect of operating and non-operating exceptional items. The
adjusted numbers have been provided in order that the effects of exceptional
items on reported earnings can be fully appreciated. The adjustments for the
year-ended 31 December 2002 have been derived by dividing all exceptional items
by the ordinary shares used in the basic calculations.
6. Contingent Liabilities
(i) There is a history of industrial disease claims being
lodged for a number of years. Where the Group has determined that it is
appropriate to do so, settlement has been made. Based on this experience, it is
likely that similar claims will continue to be received for the foreseeable
future. However, there is significant uncertainty over the number, nature,
timing and validity of such future claims. This is as a result of, inter alia,
uncertainties concerning the population that may have been exposed to asbestos
and that may develop asbestos related diseases, the nature and timing of the
diseases that may develop, the impact of other factors which might have
contributed to the claimant's condition, changes in the legal environment and to
the typical cost of settlement.
These factors affect considerations of liability and the quantum of settlement.
Experience to date is that some of these claims will be at least partially
covered by insurance policies, but the amount of the cover will not be known
until the details of the claims are available. As a result of these
uncertainties, the amount of the Group's obligation cannot generally be measured
with sufficient reliability. Accordingly, the Group generally provides in the
Profit and Loss Account each year for the estimated liability in respect of
industrial disease claims lodged and outstanding at the year-end.
If it were possible to assess reliably the present value of other amounts that
might be paid in future settlements such that this was provided in the Balance
Sheet, there would be a materially adverse effect on the Group's financial
position. There is great uncertainty over the net present value of the other
future claim settlements: these could occur in excess of twenty years, but they
are likely to exceed the amount of the net assets included in the current Group
Balance Sheet.
Based on the recent history of settlements, the Directors anticipate that future
settlements can be made from the future cash flows generated by the trading
operations of the Group. Should the future pattern as regards timing and quantum
prove inaccurate, there could be a material adverse effect on the Group's
financial position.
(ii) The South African settlement makes no provision for any future claimants
who may subsequently claim that they have an asbestos related disease as the
result of exposure at or near a mine operated by former subsidiaries of Cape
PLC. In view of the wide publicity given to the proposed settlement during 2002,
the Directors do not believe any significant numbers of possible claimants
currently suffering from asbestos related diseases exist.
It is possible that claims could arise in the future from claimants who claim
they have developed an asbestos related disease since the date of the
settlement, and that this disease was the result of the Group's former mining
activities in South Africa. There is a significant uncertainty on whether such
future claims will be made and over the number, nature, timing and validity of
such claims.
(iii) Certain companies in the group continue to be named, along with several
asbestos fibre and asbestos product suppliers, as defendants in a significant
number of legal actions in North America. The plaintiffs in such actions are
claiming substantial damages as a result of the use of these products. The
Company has received legal advice in the UK that provided no defence is mounted
or response made abroad, and so long as the normal rules governing corporate
individuality apply, a default judgement obtained in North America against
Companies within the Group which are not present in North America, would not be
enforceable in the UK. Accordingly, Companies within the Group and who are not
present in North America do not defend these actions. If any of these plaintiffs
in North America, who obtain default judgement against a Group Company, sought
to enforce it in the UK courts, such attempt would be likely to fail. The
Directors believe, in the light of legal advice they have received, that the
above-mentioned matters are unlikely to have a material effect on the Group's
financial position.
7. Pensions
The Company fully adopted the requirements of FRS17 in the year ended 31
December 2001. The surplus on the pension scheme shown in the Balance Sheet at
30 June 2003 is the amount calculated as at 31 December 2002 adjusted for
contributions, charges and finance income in the period. No interim revaluation
of the asset and liabilities of the scheme have been carried out and
accordingly, there is no actuarial gain or loss shown in the STRGL in respect of
the half year. The figures for the gains and losses for the whole year and
surplus or deficit at the end of the year will be presented in the annual report
to 31 December 2003.
8. Subsequent Events
a) The Company has concluded an agreement with Chester Street Insurance
Holdings (formally Iron Trades Holdings Ltd) (Iron Trades) and other Iron Trades
Policy holders. This will cap the level of the proportion of Cape's contribution
towards all current and future asbestos related shipyard claims brought against
Cape and its subsidiaries.
b) On 04 July 2003 the Company sold its freehold site at Iver Lane, Uxbridge
for #10.0 million. This represented an increase over book value of #1.7 million.
In addition, should the property be sold on within 10 years from the original
date of sale Cape will receive 15% of the proceeds.
c) On 27 August 2003 Cape Industrial Services Group Limited and certain other
members of the Group entered into new banking arrangements with Barclays Bank
Plc. These replaced the existing arrangements the existing borrowings now
repaid.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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