11 May 2016 07:00
11 May 2016
Cape plc
("Cape" or the "Group")
AGM Statement
Cape plc, the international provider of critical support services to the energy and natural resources sectors, today issues the following AGM Statement for the period 1 January 2016 to date, incorporating the first quarter's results from 1 January 2016 to 3 April 2016. Trading in the first quarter was mixed with solid order intake and revenue, but lower than expected margins; nonetheless, the Board's expectations for the full year performance remain unchanged.
Trading for the first quarter of 2016
The Group's overall trading for the first quarter was mixed. Order intake was solid and the resultant Group order book, as at the end of the first quarter 2016 was £862m (31 December 2015: £861m). Revenues developed positively as the Group benefitted from favourable foreign exchange rate movements and a faster than expected ramp up on the Wheatstone project in Australia. The Group, experienced a greater downward pressure on margins than previously anticipated and, as a result, Group operating profit was below expectations.
Each of our regions delivered margins below previous expectations. Downward pressure on margins in the UK was largely driven by costs at the Fawley site continuing to run at a level higher than expected and lower utilisation of our specialist services in the North Sea. MENA margins were adversely impacted by delays in project initiation in Oman and pricing pressures in the UAE and Qatar. The KSA business has continued to perform strongly, with both volume and margin higher than expectations. The Asia Pacific business benefitted from a significant ramp up in revenues at Wheatstone which partly offset the adverse effect of project demobilisation costs and reduced volumes across many of the Asian businesses.
There have been no material developments in respect of the ongoing industrial disease insurer product liability litigation since the publication of the Group's 2015 Annual Report and Accounts.
Outlook
The UK North Sea and coal fired power station sectors are expected to continue to be challenging, with the downstream and general industrial markets remaining robust. Despite the overall weakness in the UK market, the UK business is expected to deliver some recovery in margins in the second half of the year due to a combination of improved contract performance and the benefit of a refocussing of the organisation, currently underway.
Market conditions in the MENA region are expected to improve in the second half of the year with KSA continuing to be robust and increasing project activity in Oman and Kuwait offsetting ongoing weakness expected in Qatar and the UAE. As a result the region is expected to deliver a stronger revenue and margin performance in the second half of the year.
Activity levels remain mixed across the Asia Pacific region with weakness in much of Asia mitigated by increasing activity levels from the LNG sector in particular in Australia. The region is expected to benefit from increased volume on the Wheatstone, KLE and Prelude projects offsetting lower volumes and utilisation across its Philippines, Thailand and Indonesian businesses.
The Board's expectations of the full year performance are unchanged; with a higher than usual weighting of earnings in the second half as the weaker first quarter is offset by increasing levels of activity during the year and the continuing benefit of current favourable foreign exchange rates.
Cape expects to announce its results for the half year ending 3 July 2016 on 23 August 2016.
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
Bobby Morse, Ben Romney and Helen Chan, Buchanan
benr@buchanan.uk.com
+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) is an international leader in the provision of critical industrial services principally to the energy and natural resources sectors. Cape provides a multi-disciplinary service offering including the traditional services of access, insulation, coatings and mechanical, and a range of specialist services including oil and gas storage tanks, heat exchanger replacement and refurbishment, and environmental services.
Cape employs c. 16,400 people working across 19 countries and in 2015 reported revenue of £711.4 million.