Cape plummets on margin warning

Industrial services provider Cape saw its share price dive 28% after reporting that it will incur a charge of £1.4m to cover the costs of closing its depot facilities near Brisbane.

The closure comes as a result of continued low returns in the Queensland commercial and residential access business.

The firm said: "The decision was made to exit commercial construction scaffold hire and sales activities in Queensland and focus entirely on our growing industrial services operations.

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"The board expects outturn for the year as a whole to reflect this."

However the company was keen to emphasise that its overall revenue growth has been over 15% year-on-year driven, although it admitted that the overall operating margin has been impacted by slow release of work on secured contracts and changing work mix outside the UK.

Meanwhile, the firm saw weaker operating margins in its UK offshore division, mainly as a result of the recognition of a £2.2m charge relating to a one-off specific fixed price turnkey contract, which offset increased activity levels during the period.

The company added: "Whilst we continue to see a strong pipeline of opportunities with projects being sanctioned in our key growth regions, we would expect to see ongoing margin pressures in the Middle East and the risk of project scheduling delays during 2012. However, the board remains confident of the medium-term prospects in the markets we are targeting."

The share price fell 27.72% to 336.1p by 14:08.

NR