CIU.L Regulatory News (CIU)

Embargoed: 0700hrs, 29 August 2013

Cape plc

("Cape" or the "Group")

Interim results for the half-year ended 30 June 2013

Cape plc, an international leader in the provision of essential industrial services to the energy and natural resources sectors,announces its unaudited half-year results for the six months ended 30 June 2013.

Overall trading in line with expectations despite challenging market conditions

Financial summary

Highlights

• H1 2013 performance in line with the Board's expectations

• Robust performances from the majority of the Group offset by a continued poor performance in Asia Pacific

• Order intake subdued at £239m (H1 2012: £363m) largely due to weakness in Asia Pacific; key prospects targeted for H2 2013

• Arzew Project substantially complete

• Good progress on driving the Operational Excellence programme

• Performance improvement programme initiated in Australia; Exceptional charge of £15.6m (H1 2012: £nil)

• Interim dividend of 4.5p (H1 2012: 4.5p)

• The Board anticipates the full year performance will be broadly in line with expectations

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

"Cape has delivered a solid first half performance for the Group as a whole, with stable revenue and a recovery in margin in line with our expectations, despite some challenging end markets. As expected, 2013 has been, and will continue to be a year of consolidation. Our priorities for the remainder of 2013 have not changed. We remain focused on driving operational excellence throughout the Group to ensure that we are optimising the performance of our existing business whilst providing the platform for future growth. We remain on track to deliver continued good regional performance outwith the Asia Pacific region which is expected to remain loss making for the full year; nevertheless the overall Group performance for the full year is anticipated to be broadly in line with expectations."

Commenting on the results, Tim Eggar, Chairman of Cape said:

"These results demonstrate the first steps of delivering on our goal to ensure we have the organisational structure and operational processes in place to address near-term challenges and deliver future growth. The Cape brand continues to resonate with our clients as the leading provider of their critical support services. We anticipate continued growth in the demand for our services in the long-term. Whilst recognising that 2013 will be a year of consolidation to build the platform for sustainable growth, the Board is confident that these steps will ensure the Group is well positioned to deliver long-term value to shareholders."

1 Restated for changes to segmental reporting, the reclassification of certain items as discontinued operations, other adjustments and the implementation of IAS 19 'Employee benefits'.

Throughout this document, various non-statutory measures are used and referred to as adjusted. These are defined and reconciled to their statutory equivalents in Note 8 'Adjusted measures'.

Analyst meeting

The Group will be presenting to a meeting of analysts at 9am today at the office of Buchanan, 107 Cheapside, London, EC2V 6DN. The presentation will shortly be available on the company's website at: www.capeplc.com/investors/financial-results-and-presentations.aspx

Enquiries

About Cape

Cape plc (www.capeplc.com), which is listed on the Main Market of the London Stock Exchange, provides a range of essential industrial services including access systems, insulation, refractory linings, painting, coating, blasting, industrial cleaning, training and assessment to industrial plant operators and major international engineering and construction companies.

As a single source provider, Cape is able to provide a range of specialist multi-disciplinary services specifically tailored to meet the needs of the client providing the most intelligent and cost efficient solutions for its clients' in-plant maintenance and capital needs.

In the year ended 31 December 2012, Cape reported adjusted revenues of £745.7 million. With scale and leading market positions across its international footprint, Cape employs over 21,000 people around the world.

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.

INTERIM MANAGEMENT REVIEW

Summary

We are pleased to report that Cape has delivered an overall trading performance for the first half of 2013 in line with the Board's expectations. The focus for the remainder of the year remains driving operational excellence throughout the Group to optimise the performance of its existing business whilst providing the platform for future growth. In recognition of the Board's confidence in the Group's underlying and future prospects, the Directors have declared an interim dividend of 4.5p (2012: 4.5p) per share.

Order intake during the first half fell 34% to £239m (H1 2012: £363m), largely due to the timing of major maintenance contract renewals in the UK and lower new construction project initiation across Asia Pacific and the CIS. In April, the Group secured an important maintenance contract in Azerbaijan through its SOCAR Cape joint venture, which is therefore not included within the reported order book value.

The UK, Europe & CIS region performed in line with expectations, with slightly higher volumes offsetting a less favourable mix of work which resulted in a slightly lower margin. The MENA region performed well, driven by higher revenue as activity on a number of construction projects was accelerated by our clients. The Arzew Project in Algeria has been delivered in line with the revised plan set in early 2013 and is now substantially complete.

The good performances from our UK, Europe & CIS and MENA regions were offset by a poor performance from our Asia Pacific region with both the Asian and Australian businesses performing below expectation. The underperformance in Asia was largely driven by lower margins resulting from a change in the mix of contract volumes: the business is now focusing on driving growth in higher margin parts of the region to address this issue. Our Australian business suffered from both lower than expected volumes onshore as market conditions continued to weaken and lower margins across a number of contracts. Management is implementing a Performance Improvement Programme in Australia to reduce overhead and improve gross margin, and this initiative is now well underway.

The Group achieved an adjusted operating cash inflow of £8.3m (H1 2012: £5.1m outflow) and maintained a robust financial position with period-end adjusted net debt of £73.9m (30 June 2012: £89.1m).

The Group incurred an Exceptional charge of £15.6m (H1 2012: £nil) primarily driven by the programme to 'right size' the continuing business in Australia. This is largely non-cash with £7.9m relating to the impairment of assets, £2.5m to the future liability associated with onerous leases and the balance to the cash cost of restructuring.

Progress on strategy

We aim to achieve market leading positions in our chosen markets as we believe this will drive superior performance. Our strategy is designed to achieve this leadership through a deep understanding of our clients' needs and by delivering industry leading operational performance to meet those needs.

The Group strategy consists of two phases: near-term, where the focus is on ensuring the business is performing optimally whilst capturing available opportunities in our existing core markets; and longer-term where we will drive growth primarily through expansion into emerging and high growth markets around the world.

As expected our focus during 2013 has been primarily on progressing our near-term priority of driving operational excellence throughout the Group. This drive currently encompasses three main areas:

Project management

We are working to establish a consistent best practice project management process across the Group from the early bidding and estimation phase through to final project completion. The overall framework for this has been established and our plan is for the detailed process to be piloted during the second half of 2013 before subsequent roll-out. This will be crucial in establishing a consistent way of working that will ensure we deliver the best performance possible from our existing operations and also de-risk our entry into new regions.

Management capability

We have recognised the need to improve the management capabilities across the Group and have developed a tiered Cape Management Development Programme ("CMDP") for all managers across the Group including:

• A standardised Site Supervisor Training programme;

• An enhanced Future Leaders Programme, including the completion of a relevant project management qualification;

• A new Senior Management Programme, which together with a broader development package will enhance senior managers' leadership and management skills across the Group; and

• An Executive Coaching and Mentoring Programme for the Group's Senior Executives.

This significant investment will deliver broader and deeper management and leadership competencies across the Group.

Financial controls

In order to actively and continuously improve the financial controls of the Group a number of initiatives have commenced including:

• Improved reporting and communication on financial matters;

• Enhanced review process of the Group's major risks;

• Strengthened bid processes;

• Implementation of monthly operational reviews and quarterly reforecasting; and

• The launch of a project to upgrade and to standardise the Group's management information systems.

Organisational developments

As reported in March, we have implemented a new regional organisational structure. Effective from 1 January 2013, the Group is organised into three key regions, which will enable us to better meet our clients' needs as well as encourage greater collaboration and sharing of best practice across the Group.

To ensure that we achieve our goal of improved and consistent operational performance across the Group we have decided to establish a new position of Group Chief Operating Officer ("COO"). This position will be effective from 1 January 2014 and the COO will be responsible for the day-to-day operational management of the Group. Steve Connolly, currently MD of the UK, Europe & CIS region, will be appointed to this role, where he will be able to bring his considerable experience and capability to the whole of Cape.

Financial Overview

A summary income statement with explanatory discussion of each of the key items is provided below.

1 Restated for changes to segmental reporting, the reclassification of certain items as discontinued operations, other adjustments and the implementation of IAS 19 'Employee benefits'.

Revenue from continuing operations increased by 3% to £371.1m (H1 2012: £359.7m) driven by higher activity levels in the MENA and the UK, CIS and Europe regions, partially offset by lower volumes in the Asia Pacific region and Australia in particular.

Adjusted operating profit from continuing operations increased to £24.8m (H1 2012: £15.4m) reflecting:

• A good performance in the UK, Europe & CIS region;

• Increased activity in the MENA region, partially offset by the anticipated reduction in operating profit margins, as the market continues to mature;

• A weakening of operating margins in the Asia Pacific Region, reflecting challenging markets in Australia and the completion of a significant, albeit low margin project in Asia; and

• The non-recurrence of the £14.0m charge in respect of the Arzew LNG contract in Algeria, as reflected in the H1 2012 result.

The Group incurred an Exceptional charge of £15.6m (H1 2012: £nil) primarily driven by the programme to 'right size' the continuing business in Australia. This is largely non-cash with £7.9m relating to the impairment of assets, £2.5m to the future liability associated with onerous leases and the balance to the cash cost of restructuring.

Adjusted diluted earnings per share from continuing operations was 13.6 pence (H1 2012: 6.9 pence) arising from adjusted earnings attributable to equity shareholders of £16.5m (H1 2012: £8.4m).

Regional Review

The Group reports its financial results from a geographic perspective under three reporting regions.

1 Restated for changes to segmental reporting, the reclassification of certain items as discontinued operations, other adjustments and the implementation of IAS 19 'Employee benefits'.

2 MENA results for the half-year ended 30 June 2012 include revenue of £2.8m and an operating loss of £14.0m in respect of the Arzew Project in Algeria.

Adjusted operating profit is shown pre-franchise fee. Definitions and reconciliation of non-statutory measures to their statutory equivalents can be found in Note 8 'Adjusted measures'.

UK, Europe & CIS

Results

Order intake was 14% lower than the prior year at £119m (H1 2012: £139m) reflecting the timing of major long-term UK maintenance contract renewals and excludes order intake associated with our joint ventures in the CIS. Nevertheless the business secured important renewals with a number of key clients, including Eggborough Power Station where the onshore business secured a three year plus options renewal to its multi-disciplinary site services contract. The UK business continued to develop its work with SABIC Petrochemicals at its Teesside sites, where the multi-disciplinary contract was extended to cover the three year fixed term period of 2013 to 2015.

The Group's joint venture with SOCAR in Azerbaijan was awarded a three-year contract with two one-year options by a major international oil company for the provision of Fabric Maintenance Services at its offshore and onshore assets in Azerbaijan. Our ability to secure this contract reflects the synergies of combining the management and expertise of the predominantly maintenance led business in the UK with the more project focused CIS business. This contract will be accounted for in the share of post-tax results of joint ventures and is therefore not reflected in the reported order book and revenue.

Revenue increased 6% to £184.8m (H1 2012: £174.3m) driven largely by an expansion of our fabric maintenance and campaign activities with the existing client base in the North Sea and a continued good performance within our UK onshore and specialist environmental services businesses. Revenues in the CIS were in line with the prior year reflecting high activity levels on the Kashagan Project in Kazakhstan, as it nears completion and lower than expected activity levels in Sakhalin, reflecting the delay of some shutdown activities into 2014.

Overall, the region continues to be largely maintenance based with 83% of reported revenues (H1 2012: 81%) in the region derived from maintenance support services both onshore and offshore. The significant maintenance contract awarded in Azerbaijan during the second quarter, which recently commenced mobilisation, will provide a solid base of maintenance activity for the CIS business.

Adjusted operating profit margin decreased to 9.8% (H1 2012: 11.0%) due to the relative mix of work across the region, in particular the increased activity arising from the lower margin UK offshore activities, resulting in an adjusted operating profit of £18.2m (H1 2012: £19.2m).

Market conditions

In the UK, we see continued steady demand for our services both onshore and offshore, driven by a focus from our clients on ensuring that they achieve the maximum output from their existing infrastructure through improved operational efficiency. We expect the North Sea to offer growth opportunities given many of the assets require upgrading and refurbishment, although competition in this market is intense resulting in lower than average margins. In the longer term the UK will need to invest in new power generation capacity which will provide additional opportunities for Cape's services.

In the CIS, activity will reduce in the second half of 2013 due to the completion of current project activity in Kazakhstan and the deferral of shutdown work in Sakhalin. Whilst the timing of new project initiation is difficult to judge, we expect activity in Sakhalin to increase in 2014 as delayed work from 2013 is started and new project work in Kazakhstan to increase in the latter part of 2014.

Middle East & North Africa (MENA)

Results

Order intake was 24% higher than the previous year at £93m (H1 2012: £75m) reflecting a solid order intake of multiple smaller construction project awards and maintenance renewals in Abu Dhabi, KSA and Qatar, with limited awards of new major construction projects.

Revenue grew strongly by 43% to £109.5m (H1 2012: £76.7m), driven by accelerated activities on several major downstream oil and gas projects, particularly in the UAE, including the Gasco NGL 3 and Borouge 3 Projects, which are expected to complete during the third quarter.

Cape continues to maintain a leading position in the provision of construction support activities in the region being active on nearly 90 major construction projects. The higher revenue was driven primarily by the accelerated level of activity across a number of construction projects, and as a result the proportion of revenue derived from construction projects increased to 68% (H1 2012: 61%) during the first half. The Group continues to focus on building on its strong position in the provision of maintenance support services, including shutdown activities on over 70 sites with existing relationships across the region, with clients including BAPCO, SABIC, SIPCHEM, Saudi Aramco, Qatargas and Rasgas. As a result revenue derived from maintenance support services increased 17% year on year to £35m (H1 2012: 30m).

Adjusted operating profit increased significantly to £14.6m (H1 2012: operating loss of £1.6m) largely due to the £14.0m loss provision taken on the Arzew Project in H1 2012 with adjusted operating profit margin improving to 13.3% (H1 2012: operating loss margin of 2.1%). Excluding the Arzew Project, the benefit of the increased volume across the region was partly offset by the expected reduction in operating margin reflecting increasing market maturity and intensifying competition. Excluding the Arzew Project, the region's adjusted operating profit margin was 14.8% (H1 2012: 16.8%).

Cape's scope of activity on the Arzew Project in Algeria (now reported in the MENA region) was substantially complete at the end of July, in line with the revised plan agreed with the client in February 2013. Cape has agreed with its client to retain a small presence on site through the remainder of 2013 to support them with the provision of fabrications needed to complete the final stages of the project. It is expected that the total loss provision for this project of £19.8m recognised in 2012 remains sufficient. We expect that the majority of the remaining working capital in the project will unwind during the second half of 2013.

Market conditions

The maintenance market continues to show steady growth across the region with the ongoing expansion of oil and gas infrastructure. Investment in the construction of new downstream infrastructure in the Middle East, in particular in Saudi Arabia, continues to increase and as a result bidding activity is high. We have seen competitive pressures intensifying throughout the first half of 2013, in particular from local competitors and it is expected that this will exert downward pressure on margins going forward.

Asia Pacific

Results

Order intake was very low at £27m (H1 2012: £149m), reflecting continued delays in the award of major LNG projects in Australia, the low level of new major project initiations in Asia and a reversal of some of the order book relating to the major project in Singapore as the final volumes were slightly lower than expected at the year end.

Revenue from continuing operations decreased by 29% to £76.8m (H1 2012: £108.7m) driven by significantly lower volumes in the Onshore Australian business, reflecting weakening market conditions and the completion of the Pluto LNG Project in H1 2012. Revenues in the Offshore Australian and Asian businesses were in-line with expectations with significant contribution from the Kippa Tuna Turram Project in Australia and the large construction project in Singapore, both of which completed during the period.

The lower volume in Onshore Australia reflects the slowdown for both new construction and maintenance work as the start-up of major LNG projects continues to be delayed and major mining clients cut back on both capital and operational expenditure. The business continues to provide maintenance services across the Asia Pacific region for a range of blue chip clients including Alcoa, BHP, BP, Clough Amec and CLP.

Reflecting these delays in new project initiation volumes derived from new construction projects fell by 38% to £49m (H1 2012: £79m) resulting in the proportion of reported revenue derived from construction projects declining to 64% (H1 2012: 72%). Revenue derived from maintenance support services declined by 10% to £28m (H1 2012: £31m) reflecting the challenging market conditions in the mining sector with clients seeking to reduce discretionary operating expenditure.

As reported in May, in light of the market conditions in Australia and resultant deterioration in business performance, management instigated further action to reduce costs in order to deliver a strong, cost effective platform for future growth in the country. Organisational changes including the consolidation of certain branches, the closure of some smaller branches, as well as the upgrade of certain key facilities are well underway. In addition, the business has reviewed all of its support functions and is in the process of transferring a number of these to the Group's service centre in the Philippines. The result will enable the business to maintain its focus on winning and executing major capital work packages whilst building a sustainable maintenance business in the long-term.

Operating profit margins for the region were significantly depressed. An adjusted operating loss of £2.9m (H1 2012: adjusted operating profit £4.2m) was driven by both lower volume and lower than expected margins in our Onshore Australian business, and lower margins in our Asian business due to the mix of work with relatively high activity levels on the low margin construction project in Singapore. This project was completed as expected during the period.

In 2012, certain non-core operations classified as discontinued operations were reclassified as assets held for sale. The sale of the stand-alone blasting and painting facility in Kwinana, Perth completed in June. The offers received for the residential and commercial hire and sales businesses in Perth and Melbourne were below expectations and as a result the decision was taken to divest of these businesses by way of separate asset sales. This is substantially complete for the Perth business and in progress for the Melbourne business.

Market conditions

In Asia, market activity levels have been subdued throughout the first half of 2013 due to the timing of new project developments and this is expected to continue throughout the remainder of the year. We expect to see a number of significant construction projects, both onshore and offshore driving new project activity in the medium and longer term to meet the growing demand for energy and the ongoing expansion of industry in the region.

Australian market conditions have been weak through the first half of 2013 with the LNG trains delayed and mining expenditure restricted. These low levels of activity are expected to continue for the second half. Bidding activity relating to the forthcoming LNG projects is high and we expect that significant work packages will be awarded to the industry over the coming six months.

Financial Review

Revenue

Revenue from continuing operations increased by 3% to £371.1m (H1 2012: £359.7m) and was driven by higher activity levels in the MENA region and the UK, Europe & CIS region, partially offset by lower volumes in the Asia Pacific region, and in particular substantially lower activity levels in the Onshore Australia business.

Revenue from continuing operations derived from maintenance contracts was £216m or 58% of the total (H1 2012: £202m or 56% of the total) and revenue derived from construction support projects was £155m or 42% of the total (H1 2012: £158m or 44% of the total). Revenue invoiced to the largest client represented 11% of total revenue (H1 2012: 10%) relating to activities in all regions and the top 10 clients represented 40% of revenue (H1 2012: 36%).

Adjusted operating profit

Adjusted operating profit from continuing operations increased by 61% to £24.8m (H1 2012: £15.4m) reflecting the continued good performance from the UK, Europe & CIS region, increased volumes in the MENA region, partially offset by the anticipated margin compression as the market matures, an improved performance on the Arzew Project and depressed margins in the Asia Pacific region. As previously indicated, the Onshore Australian business continued to perform weakly; management has responded by implementing a restructuring and margin improvement programme, resulting in the recognition of an Exceptional charge described below.

Other items

Other items decreased to £0.3m (H1 2012: £0.6m) comprising IDC costs of £0.3m. In H1 2012, Other items also included the amortisation of intangible assets of £0.3m.

Share of post-tax profit from joint ventures

Included in the adjusted operating profit is the Group's share of post-tax profits from joint ventures of £0.1m (H1 2012: loss of £0.2m) primarily reflecting the early mobilisation of maintenance activity relating to the SOCAR Cape LLC joint venture in Azerbaijan and the Civmec joint venture between Cape and CCIG established in support of certain insulation activities on construction projects in Australia.

Exceptional items

A charge for Exceptional items of £15.6m (H1 2012: £nil) was made in the first half, primarily relating to actions taken to 'right size' the continuing Australian business including the rationalisation of the branch structure and the transfer of a number of support functions to the Group's service centre in the Philippines. These charges are largely non-cash with £7.9m relating to the impairment of assets, £2.5m to the future liability associated with onerous leases and £5.2m in respect of the cash cost of restructuring.

Operating profit

Operating profit for continuing operations was £8.9m (H1 2012: £14.8m) reflecting an adjusted operating profit of £24.8m (H1 2012: £15.4m) less Other items of £0.3m (H1 2012: £0.6m) and Exceptional items of £15.6m (H1 2012: £nil).

Finance costs

Net finance costs reduced to £4.7m (H1 2012: £5.1m) reflecting a £2.0m (H1 2012: £2.0m) non-cash charge relating to the unwinding of the discount on the long-term IDC liability following the booking of the provision in 2009, interest income on the IDC scheme funds in the period of £0.4m (H1 2012: £0.5m) and interest income on the defined benefit pension of £0.4m (H1 2012: £0.3m).

Adjusted finance costs reduced to £3.5m (H1 2012: £3.9m) with interest cover (calculated by dividing adjusted operating profit by the adjusted finance costs) increasing to 7.1 times (H1 2012: 3.9 times).

Profit before tax

Profit before tax for continuing operations was £4.2m (H1 2012: £9.7m) reflecting an operating profit of £8.9m (H1 2012: £14.8m) less net finance costs of £4.7m (H1 2012: £5.1m).

Taxation

The tax charge on profit before tax excluding Exceptional and Other items and discontinued operations was £4.6m (H1 2012: £2.5m) representing an annual effective tax rate of 21% (H1 2012: 21%).

Discontinued operations

Losses from discontinued operations were £2.5m (H1 2012: £1.1m) after a taxation credit of £0.9m (H1 2012: £nil) primarily relating to Onshore Australia.

The sale of the stand-alone blasting and painting facility in Kwinana, Perth completed in June. The offers received for the residential and commercial hire and sales businesses in Perth and Melbourne were below expectations and as a result the decision was taken to divest of these businesses by way of separate asset sales. This is substantially complete for the Perth business and in progress for the Melbourne business.

Earnings per share

For continuing operations adjusted diluted earnings per share were 13.6p (H1 2012: 6.9p) and adjusted basic earnings per share were 13.7p (H1 2012: 7.1p). For total operations the basic earnings per share were 1.2p (H1 2012: 4.8p). The diluted weighted number of shares decreased to 121.7 million (H1 2012: 122.5 million).

Dividend

Taking account of these financial results, current market conditions and the underlying prospects of the Group, an interim dividend of 4.5p (H1 2012: 4.5p) per share, in line with the 2012 interim dividend, was approved by the Board on 28 August 2013. The dividend will be payable on 11 October 2013 to shareholders on the register as at 13 September 2013.

Adjusted operating and free cash flow

* At average rates

The increase in profitability and net inflow from disposals were partially offset by increases in working capital and capital expenditure, and a cash outflow in respect of the Exceptional items relating to the restructuring programme in Australia. These factors resulted in an adjusted operating cash inflow for the period of £8.3m (H1 2012: £5.1m outflow).

Working capital

Investment in trade and other receivables and inventories increased by £6.7m to £246.3m (31 December 2012: £239.6m) which along with a decrease in trade and other payables of £15.6m to £130.2m (31 December 2012: £145.8m) resulted in an overall increase in net working capital of £22.3m (at balance sheet rates) to £116.1m, the difference primarily relates to movements in foreign exchange. Working capital has, as expected, increased in the Middle East reflecting increased activity, and in the UK reflecting the usual seasonality of the UK power industry. These increases were partly offset by a reduction in working capital investment in the significant project in Singapore, as it reaches its conclusion.

Capital expenditure

Net capital expenditure increased to £9.3m (H1 2012: £4.5m) reflecting the initiation of the UK system scaffold investment programme. The Asset Replacement Ratio (calculated by dividing capital expenditure spend by the depreciation charge) increased to 105% (H1 2012: 58%).

Forward order book

The Group's order book for continuing operations was £593m at 30 June 2013 in comparison to £725m at 31 December 2012 and £856m at 30 June 2012. This reduction reflects the lower level of order intake of £239m (H1 2012: £363m) largely due to the timing of major maintenance contract renewals in the UK and lower new construction project initiation across Asia Pacific and the CIS. The Group's reported order book excludes order book value associated with joint ventures.

The Group's order book comprises:

· Maintenance Support Services: The estimated value of our future services to support contractually committed base maintenance programmes for the contractual term period only. Typical contracts are three to five year agreements with extension options. It does not assume any value for optional extension periods not yet confirmed including future options but does include a value for planned shutdowns/outages where a contractual commitment has been received; and

· Construction Support Services: The value of services to be provided on current contracts based on client work schedules together with confirmed new orders received. Contracts are typically unit rate or defined scope packages reflecting client's needs to retain flexibility on large and complex projects.

Financing and bank facilities

The Group's adjusted net debt decreased by £15.2m to £73.9m compared to the same period in the prior year (30 June 2012: £89.1m) including finance lease obligations of £0.4m (30 June 2012: £3.9m). Balance sheet gearing, excluding ring-fenced IDC Scheme funds, increased to 43% (31 December 2012: 37%; 30 June 2012: 22%).

Provision for pensions

The Defined Benefit Pension Scheme had a net surplus of £15.7m as at 30 June 2013 (H1 2012: £14.4m) and continues to be restricted to nil in the accounts under IFRIC 14. The scheme is due for its triennial actuarial valuation during 2013.

Provision for estimated future asbestos related liabilities and IDC Scheme funds

The discounted provision decreased to £82.5m (31 December 2012: £82.8m) reflecting the unwinding of the discount of £2.0m in the half year (H1 2012: £2.0m) and the £2.3m (H1 2012: £2.0m) of settlements made in the period.

The ring-fenced IDC Scheme funds reduced by £0.9m (H1 2012: £1.5m reduction) comprising cash settlements and costs paid to claimants of £1.6m (H1 2012: £2.0m) with cash interest received of £0.7m (H1 2012: £0.5m) of which £0.4m (H1 2012: £0.5m) relates to income interest in the period, shown as finance income other items in the Condensed Consolidated Income Statement.

On 25 April 2012, the Court of Appeal held that Cape had a duty of care to a former employee of a former subsidiary company. Since this date, a small number of similar and related claims have been made against Cape which could give rise to potential additional liabilities for industrial disease claims that may or may not fall to be dealt with in accordance with the Scheme of Arrangement, as set out in Note 36 'The Scheme of Arrangement' of the Annual Report for the year ended 31 December 2012. At the date of the approval of this Report, any additional liability resulting from this decision cannot be reliably measured owing to the limited data available. In addition, discussions are on-going between Cape and its legal advisors on the validity of these claims and as such no additional provision has been recognised in the financial statements at this stage; however it is anticipated that this will be fully addressed as part of the scheduled triennial actuarial review during 2013.

The scheduled triennial actuarial review has commenced. It is expected that the outcome of this review will be incorporated into the 2013 full year audited results.

Currencies

Nearly all operating costs are matched with corresponding revenues of the same currency and as such there is little transactional currency risk in the Group. Currency translation had a 1% beneficial impact on revenue for the half year, principally due to strengthening of the US dollar which was partly offset by the weakening of the Australian dollar.

In H1 2013, 36% (H1 2012: 31%) of revenues were contracted in US dollars or US dollar pegged currencies and 13% (H1 2012: 22%) in Australian dollars.

The following significant exchange rates applied during the half-year:

Principal risks

Cape operates globally in the energy and natural resources sectors and in varied geographic markets serving a broad range of clients. As such, the Group is subject to certain general and industry-specific risks. Where practicable, the Group seeks to mitigate exposure to all forms of risk through effective risk management.

The following principal risks may affect some or all of the Group's activities: External (global and economic conditions), Competition (key client and, or market dependency), Operational (the achievement of HSE excellence, the recruitment, development and retention of key managers, supervisors or skilled employees, contracting risk, and project performance) and Financial (inadequate return on investments and foreign exchange or interest risk exposure).

In addition to the above risks identified in the 2012 Annual Report, as a result of a review of the Group's principal risks carried out during the period, it has been recognised that 'financing' should be considered a potential risk to the Group's financial performance. Cape enjoys good ongoing relationships with its lenders, is currently able to service its level of debt, and has no immediate need to extend its debt capacity. Nonetheless, given the continued uncertain global economic conditions and fragility of debt markets, it is possible that the cost of replacing maturing debt becomes relatively high and access is either restricted or not possible at all. This risk was identified as part of an enhanced review of the Group's risk registers and associated processes including the identification, evaluation and management of risk.

Other than the specific risk detailed above, the Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Group's performance in the second half of the year is unchanged from those identified on pages 18 to 21 of the 2012 Annual Report.

Going concern

After making the appropriate 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.

Outlook

Reported revenue for the UK, Europe & CIS region is expected to decline in the second half following the completion of significant project activity in Kazakhstan and the delay of certain shutdown activities in Sakhalin, which are now expected to be carried out in 2014. Activity on maintenance work in Azerbaijan through the SOCAR joint venture is expected to increase substantially toward the end of the year as the project is fully mobilised. The UK business is expected to be stable for the remainder of the year and into 2014.

Activity in MENA is expected to reduce in the second half as several projects come to completion; nevertheless the full year performance is anticipated to be ahead of both expectation and prior year. Margins are expected to come under pressure over the medium term due to intensifying competition, which will be partly offset by efficiency gains as the region starts to benefit from the Group's operational excellence programme.

The Asia Pacific region is expected to continue to be challenging through the remainder of the year with activity levels expected to decline further in the second half following the completion of two significant projects in the first half. The restructuring and gross margin improvement programme in Australia should begin to deliver improved results in the second half; nevertheless the region as a whole is expected to be loss making for the full year.

Despite the challenging market conditions across some of our regions, we remain on track to deliver continued good performance outwith the Asia Pacific region; nevertheless, the overall Group performance for the full year is anticipated to be broadly in line with expectations

Joe Oatley Michael Speakman

Chief Executive Chief Financial Officer

29 August 2013 29 August 2013

Statement of Directors' responsibilities

The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority ("FCA"). The DTR require that the accounting policies and presentation applied to the half-yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the Interim report, unless the United Kingdom's FCA agrees otherwise.

The Directors confirm that to the best of their knowledge the condensed set of financial statements, which have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, as required by DTR 4.2.2 and in particular include a fair review of:

• the important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated set of financial statements as required by DTR 4.2.7R;

• the principal risks and uncertainties for the remaining six months of the year as required by DTR 4.2.7R; and

• related party transactions that have taken place in the first six months of the current financial year and changes in the related party transactions described in the previous annual report that have materially affected the financial position or performance of the group during the first six months of the current financial year as required by DTR 4.2.8R.

The Directors of Cape plc are as listed in the Cape plc Annual Report for 31 December 2012.

For and on behalf of the Board of Directors.

Joe Oatley Michael Speakman

Chief Executive Chief Financial Officer

29 August 2013 29 August 2013

Independent review report to Cape plc

Introduction

We have been engaged by the Company to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed Consolidated Income Statement, Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Cash Flow Statement and related notes 1 to 21. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in Note 2, the Annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

29 August 2013

Reading

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE HALF-YEAR ENDED 30 JUNE 2013

1 Restated for changes to the reclassification of certain items as discontinued operations, other adjustments and the implementation of IAS 19 'Employee benefits'.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 30 JUNE 2013

1 Restated for the implementation of IAS 19 'Employee benefits'.

CONDENSED CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2013

1 Restated for changes of certain items as other adjustments.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 30 JUNE 2013

1 Restated for changes to the reclassification of certain items as discontinued operations, other adjustments and the implementation of IAS 19 'Employee benefits'.

.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 30 JUNE 2013 (Continued)

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE HALF-YEAR ENDED 30 JUNE 2013

1 Restated for the implementation of IAS 19 'Employee benefits'.

Notes to the Financial Statements

1. General information

The unaudited interim Condensed Consolidated Financial Statements included in this report for the half-year ended 30 June 2013 does not constitute accounts prepared for the purposes of Article 105 of the Companies (Jersey) Law 1991. A copy of the Group's Annual Report and Accounts for the year ended 31 December 2012, which were prepared under IFRS as adopted by the EU and expanded to make reference to IFRIC interpretations, have been delivered to the Jersey Financial Services Commission and include an unqualified auditors' report.

Copies of this interim 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.

The unaudited interim Condensed Consolidated Financial Statements of Cape plc and its subsidiaries (collectively the 'Group') for the six months ended 30 June 2013 were approved for issue, in accordance with a resolution of the Directors, on 29 August 2013.

2. Basis of preparation

The unaudited interim Condensed Consolidated Financial Statements for the six months ended 30 June 2013 have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the Financial Conduct Authority. The interim Condensed Consolidated Financial Statements do not include all the information and disclosures required in the Annual Financial Statements, and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2012.

2.1 Changes to segmental reporting in 2013

For management and reporting purposes, the Group is organised into regions, which are representative of its principal activities. In order to reflect recent organisational and management changes, with effect from 1 January 2013, the Group will report the following three regional segments in a manner consistent with the revised internal reporting provided to the Chief Operating Decision Maker ('CODM').

· UK, Europe & CIS region which encompasses the existing 'UK' business, and 'Europe and the CIS' where Europe (formerly called Mediterranean) and CIS were formerly part of the 'CIS, Mediterranean & North Africa' region.

· Middle East and North Africa (MENA) region which encompasses the former 'Gulf/Middle East' region and 'North Africa', which was formerly part of the 'CIS, Mediterranean & North Africa' region.

· Far East/Pacific Rim region remains unchanged. This encompasses the onshore and offshore businesses in Asia and Australia.

2.2 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.

2.3 Other adjustments

As part of the balance sheet review conducted by Management for the year ended 31 December 2012, certain adjustments were identified and reflected in the 2012 full year Financial Statements. In this report, where necessary these items have been restated in the appropriate period within the 2012 financial year, together with certain other similar prior year items. Principally, these items relate to the reassessment of certain asset values and more prudence in accounting estimates, as disclosed in the 2012 Annual Report, none of which were individually material.

2.4 Accounting policies

The accounting policies and methods of computation adopted in the preparation of the interim Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Group's annual audited Consolidated Financial Statements, which are available on the Group's website at www.capeplc.com, except for the adoption of new standards and interpretations effective as of 1 January 2013.

2.5 Estimates

The preparation of the interim Condensed Consolidated Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these interim Condensed Consolidated Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were in line with those that applied to the Group's annual audited Consolidated Financial Statements for the year ended 31 December 2012.

2.6 Foreign exchange

The Group is exposed to foreign currency risk in two key currencies. The movements in exchange rates for these two currencies are detailed below:

3. New and amended standards adopted by the Group

Adoption of new and current standards

During the period the Group adopted a number of interpretations and amendments to Accounting Standards, none of which had a material impact on the Condensed Consolidated Financial Statements of the Group other than in relation to the implementation of IAS 19 "Employee Benefits". The Group has not yet early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 13 Fair Value Measurement

The Group is aware of the requirements under IFRS 13 'Fair Value Measurement' which aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. There is no material difference between the fair value and carrying amounts of the Group's financial assets and liabilities because the amount of financial assets and liabilities carried at fair value is immaterial and as such not deemed it necessary to disclose this separately. The Group's position with regard to fair value is visible on the face of the Condensed Consolidated Statement of Comprehensive Income.

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in Other Comprehensive Income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) now have to be presented separately from items that will never be reclassified (e.g., actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affected presentation only and had no impact on the Group's financial position or performance.

IAS 19 Employee Benefits (Revised 2011) (IAS 19R)

With effect from 1 January 2013 the Group has implemented the amendments to the accounting standard IAS 19 "Employee Benefits" in relation to its UK defined benefit pension plans. The impact on the Group has been to calculate the expected return on plan assets using the same interest rate that is used to discount the plan liabilities.

The Group's reported results and financial position have been restated as a result of the adoption of the revised standard IAS 19 (2011). Previously the Group reported net interest from its pension plans in operating profit. Following the implementation of the revised standard, net interest from pension plans is reported in finance income. Prior periods have been restated accordingly.

The impact on the Condensed Consolidated Income Statement was as follows. There was no overall impact on the results for the period ended 30 June 2012, albeit operating profit decreased by £0.2m with a corresponding increase of £0.2m in finance income. For the financial year ended 31 December 2012, the impact of the revised standard was to increase finance income by £0.1m. In addition, operating profit decreased by £0.4m with a corresponding increase of £0.5m in finance income. In the Condensed Consolidated Statement of Changes in Equity the actuarial loss recognised on the pension plans increased by £0.1 million. The implementation of IAS 19 has had no effect on the prior year Condensed Consolidated Balance Sheets or Condensed Consolidated Cash Flow Statements.

4. Summary of the impact of presentational changes on 2012