Financial Performance

2 March 2011

Cape plc, the international provider of essential non-mechanical support services to the energy and resources sectors, announces its results for the twelve months ended 31 December 2010.

Financial summary

 

AER – Actual exchange rates; CER – Constant 2009 exchange rates⁽¹⁰⁾

Highlights

• Adjusted profit before tax⁽¹⁾ up 13.8% to £69.1m (2009: £60.7m) at AER (increase of 10.2% at CER)
• Adjusted operating profit margin⁽²⁾ improved to 12% (2009: 10.8%)
• Adjusted diluted earnings per share⁽³⁾ up 13.6% to 42.6p (2009: 37.5p)
• Basic earnings per share increased to 42.6p (2009: (3.5)p)
• Free cash flow⁽⁴⁾ up 17.4% to £68.0m (2009: £57.9m) with operating cash conversion⁽⁵⁾ of 103.1% (2009: 95.9%)
• Balance sheet continues to strengthen, with net debt⁽⁶⁾ halved to £52.9m (2009: £113.6m) and ratio of net debt to adjusted EBITDA⁽⁸⁾ reducing to just 0.6 times (2009: 1.3 times)
• Proposed final dividend of 8.0p per share (2009: nil) making a full year dividend of 12.0p (2009: nil)
• On track for return to London Stock Exchange Main Market in Q2 2011
• Forthcoming appointment of Tim Eggar as Cape’s new non-executive Chairman⁽¹⁸⁾
• 6% growth in order book with over 63% of consensus 2011 revenues⁽⁹⁾ now secured

Commenting on the results, Martin May, Chief Executive of Cape, said:

"Cape delivered a robust operating and financial performance in 2010 with a 13.8% increase in adjusted PBT⁽¹⁾ and a 13.6% increase in adjusted diluted EPS⁽³⁾. These results highlight the strength of our international footprint across strategically important growth markets within the energy sector. Strong growth in the Far East/Pacific Rim region, where revenues grew by 26.0% at CER⁽¹⁰⁾, largely offset the expected lower revenues in the Gulf/Middle East and UK regions.

Looking ahead, as the pause in global Exploration and Production (E&P) capex we saw in 2009/10 gives way to a return to growth, we expect demand for our construction support services to initiate a period of growth from the second half of 2011. Whilst the maintenance (Production Support) services market is not expected to grow as strongly as the capital funded Engineering and Construction (E&C) projects market, we anticipate growth will be driven by the commissioning of new plants in emerging markets, the maintenance of ageing infrastructure in mature markets and the increasing focus of plant operators on safety.

These factors contribute to a very encouraging outlook for Cape as we look forward to a sustained period of high earnings growth from mid 2011 through to 2015.”

Analyst meeting

The company will be presenting to a meeting of analysts at 9.30am today. The presentation will be available on the company's website later today at /cape/pages/investors

Footnotes

1. Adjusted PBT comprises profit/(loss) before tax of £63.1m (2009: loss of £15.6m), adjusted for the IDC charge of £0.4m (2009: £74.2m), IDC finance income of £1.0m (2009: £0.8m), unwind of discount in respect of IDC provision £4.0m (2009: nil) and amortisation of intangible assets of £2.6m (2009: £2.9m).

2. Adjusted operating profit margin is calculated as operating profit before other items of £78.2m (2009: £70.6m) divided by revenue of £650.1m (2009: £655.1m).

3. Adjusted diluted earnings per share is calculated by dividing EBITA, net of tax, by the weighted average number of ordinary shares in issue during the year adjusted to assume conversion of all potentially dilutive ordinary shares.

4. Free cash flow is defined as cash generated from operations of £98.5m (2009: £84.4m) adjusted for the impact of net interest paid of £8.2m (2009: £10.7m), tax paid of £11.5m (2009: £7.6m), net capital expenditure of £11.6m (2009: £8.9m) and the amortisation of the bank fee of £0.8m (2009: £0.7m).

5. Operating cash conversion is defined as cash generated from operations of £98.5m (2009: £84.4m) divided by adjusted EBITDA(8).

6. Net debt is calculated by deducting borrowings of £148.7m (2009: £180.3m) from cash and cash equivalents of £95.8m (2009: £66.7m).

7. Ratio of net debt to adjusted EBITDA(8) is calculated by dividing the net debt(6) figure at the year end of £52.9m (2009: £113.6m) by the adjusted EBITDA(8) of £95.5m (2009: £88.0m).

8. Adjusted EBITDA is calculated by adding back depreciation of £17.4m (2009: £15.8m) to EBITA(11) of £78.1m (2009: £72.2m).

9. Based on 2011 consensus revenues of £705.0m.

10. Constant currency figures reflect actual 2010 results retranslated using the foreign currency exchange rates used for the 2009 reporting. The average exchange rates for the year ended 31 December 2010 were GBP/AUD 1.6901 and GBP/USD 1.5526 (2009: GBP/AUD 1.9828 and GBP/USD 1.5513).

11. EBITA comprises profit/(loss) before interest and taxation of £75.1m (2009: £(4.9)m), adjusted for IDC charge of £0.4m (2009: £74.2m) and amortisation of intangible assets of £2.6m (2009: £2.9m).

12. Gearing is net debt(6) divided by total equity.

13. Return on Managed Assets (ROMA) is calculated as operating profit before other items of £78.2m (2009: £70.6m) divided by managed assets⁽¹⁴⁾.

14. Managed assets is calculated by deducting the trade and other payables of £100.3m (2009: £95.7m) from the sum of property, plant and equipment of £154.3m (2009: £142.9m), inventories of £8.8m (2009: £17.3m) and trade and other receivables of £170.1m (2009: £156.0m).

15. Interest cover is calculated by dividing the operating profit before other items of £78.2m (2009: £70.6m) by the finance costs (excluding unwind of discount in respect of IDC provision of £4.0m (2009: nil)) of £9.1m (2009: £12.3m).

16. Asset replacement ratio is calculated by dividing the capex spend for the year £12.4m (2009: £11.6m) by depreciation charge £17.4m (2009: £15.8m)

17. Effective tax rate is tax on ongoing operations of £14.6m (2009: £13.9m) divided by adjusted PBT(1)

18. The appointment of Tim Eggar is expected to take effect on 1 May 2011 and an announcement on such date will include appropriate disclosures under AIM Rule 17.