Shares in FTSE-listed industrial services provider Cape rose sharply on Wednesday after the group unveiled preliminary results for the year ended December 31st, including a plan to improve operational performance.
Adjusted revenue rose 7.0% to £749.4m, with growth recorded in all regions for continuing business.
Adjusted operating profit fell 60% to £31.5m and adjusted profit before tax fell to £23.8m from £69.4m.
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Robust performances from the majority of the group were offset by poor performances on the Arzew Project and in the Onshore Australian business, the group reported.
Joe Oatley, the Chief Executive of Cape said: "2012 has been a challenging year for Cape and one of significant change, including the recruitment of a new senior management team.
"I have also identified some areas of significant underperformance and it is clear that we need to implement a new management model for Cape to succeed in the future. Many of our businesses have performed well, but the overall result for 2012 has been disappointing, largely driven by poor performances from our onshore business in Australia and the Arzew Project in Algeria.
"These poor performances have highlighted operational and control weaknesses and we have conducted a root and branch review of our balance sheets across the group to ensure any issues are identified and that all of our assets are appropriately and more prudently valued. This exercise is now complete and I am pleased to be able to move into 2013 on a firm footing," he said.
New plan for completion of Arzew Project agreedOatley said that a review of the Arzew Project revealed significant cost overruns and a loss provision of £14m was taken to reflect the best estimate at that time of future losses on the contract.
"We changed both the leadership and delivery resource of the project and with closer management, productivity improved significantly in the second half of 2012," he said.
"Despite this, recent progress on the project has been disappointing. In conjunction with our customer, we have now agreed a new plan for completion of the project and we remain committed to delivering this to meet the overall project key milestones. In light of this new plan we have reviewed the cost to complete for the project and have increased the loss provision by £5.8m to £19.8m."
Australia restructure: Several operations divestedOakley said that a comprehensive review of the Onshore Australian business was instigated in order to determine how best to improve operating performance there and ensure that the business was properly positioned to secure forthcoming work.
He said: "The key conclusions and actions resulting from this review are as follows: The business will focus on the core Cape activities of providing multi-disciplined services to industrial clients both for maintenance and new capital projects."
"The following separate operations will be divested: the hire and sales scaffolding businesses with operations focused on the residential and commercial construction markets in Melbourne and Perth; and the stand-alone blasting and painting facility in Kwinana (Perth). The process of divesting these businesses, now treated as discontinued operations, is well underway and is expected to be completed in the first half of 2013."
He added that the Australian management team had been strengthened with leadership transferred from the Middle East.
In addition, Oakley said that the onshore and offshore operations were merged to form a single Australian business to reduce overhead and maximise organisational efficiency.
A full year dividend 14p was recorded, the same as the full year dividend in 2011.
Cape's share price was up 12.88% to 263p at 12:23 on Wednesday.
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