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Group Head Offi ceCape plc9 The SquareStockley ParkUxbridgeMiddlesex UB11 1FW

www.capeplc.com

Image: © BP plc

Annual Report 2009

Adjusted operating profi t margin(2) improved to 10.8% (2008: 10.4%)

Free cash fl ow(4) up 128.3% to £54.1m (2008: £23.7m) with 95.9% (2008: 87.7%) operating cash conversion(5) at AER(10)

Net debt(6) reduced by 31.4% to £113.6m (2008: £165.5m), 1.3 times(7) adjusted EBITDA(8) (2008: 2.1 times adjusted EBITDA)

1 Adjusted PBT comprises loss before tax of £15.6m (2008: profi t of £37.8m), adjusted for exceptional items of nil (2008: £4.1m), IDC charge of £74.2m (2008: £5.7m), IDC fi nance income of £0.8m (2008: £2.0m) and amortisation of intangible assets of £2.9m (2008: £2.7m).

2 Adjusted operating profi t margin is calculated as adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) divided by revenue of £655.1m (2008: £622.7m).

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

4 Free cash fl ow is defi ned as cash generated from operations adjusted for the impact of industrial disease costs, interest, tax, net capital expenditure, amortisation of bank fee and exceptional costs paid.

5 Operating cash conversion is defi ned as cash generated from operating activities of £84.4m (2008: £70.9m) divided by adjusted EBITDA(8).

6 Net debt is calculated by deducting current borrowings of £32.0m (2008: £38.9m) and non current borrowings of £134.9m (2008: £159.9m) from cash and cash equivalents of £53.3m (2008: £33.3m).

7 Ratio of net debt to adjusted EBITDA(8) is calculated by dividing the net debt fi gure at the period end of £113.6m (2008: £165.5m) by the adjusted EBITDA(8) of £88.0m (2008: £80.8m).

8 Adjusted EBITDA is calculated by adding back depreciation of £15.8m (2008: £15.3m) to adjusted operating profi t of £72.2m (2008: £65.5m).

9 Based on 2010 consensus revenues.10 Constant currency fi gures refl ect actual 2009 results

retranslated using the foreign currency exchange rates used for the 2008 reporting. The average exchange rates for the year ended 31 December 2009 were GBP/AUD 1.98282 and GBP/USD 1.55135 (2008: GBP/AUD 2.19628 and GBP/USD 1.85175)

11 Adjusted operating profi t (EBITA) comprises loss before interest and taxation of £4.9m (2008: profi t of £53.0m), adjusted for exceptional items of £nil (2008: £4.1m), IDC charge of £74.2m (2008: £5.7m) and amortisation of intangible assets of £2.9m (2008: £2.7m).

12 Gearing is net debt divided by total equity.13 Return on Managed Assets (ROMA) is calculated as

adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) divided by managed assets.

14 Managed assets is calculated by deducting the trade and other payables of £95.7m (2008: £133.0m) from the sum of property, plant and equipment of £142.9m (2008: £152.3m), inventories of £17.3m (2008: £17.2m) and trade and other receivables of £156.0m (2008: £184.7m).

15 Interest cover is calculated by dividing the adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) by the fi nance costs of £12.3m (2008: £18.0m).

16 Reference to people includes employees and sub-contractors.

Intelligent ntelligent solutions solutionsCape is an international leader in the provision of essential non-mechanical industrial services focused on the energy and natural resources sectors. The range of multi-disciplinary services includes access systems, insulation, painting, coatings, blasting, industrial cleaning, training and assessment, throughout the life cycle of large secure industrial assets.

Image:BP Refi nery, Kwinana, Australia

Annual Report 2009

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2009 Operations

01 Financial highlights

03 Operating regions

04 Regional business units

06 Chairman’s statement

18 Chief Executive’s review

20 Operating and fi nancial review

30 2009 Group health, safety

and the environment

33 Risks and uncertainties

Governance

36 The Board

37 Directors’ report

42 Corporate governance report

45 Independent auditors’ report

Financial statements

46 Consolidated income statement

47 Consolidated statement of

comprehensive income

48 Consolidated balance sheet

49 Consolidated statement of

changes in equity

50 Consolidated statement of cash fl ows

51 Notes to the fi nancial statements

88 Parent Company balance

sheet (UK GAAP)

89 Parent Company notes to the

fi nancial statements (UK GAAP)

94 Five-year fi nancial summary

95 Principal subsidiary undertakings

96 Directors, offi cers and advisers

Group revenue up 5.2% to £655.1m (2008: £622.7m)

Adjusted profi t before tax(1) up 25.7% to £60.7m (2008: £48.3m) at AER(10) and up 8.9% at CER(10)

Adjusted diluted earnings per share(3) up 25.0% to 37.5p (2008: 30.0p)

£622

.7m

£428

.8m

£274

.0m

£238

.9m

£655

.1m

05 06 07 08 09

£48.

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£33.

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£17.

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£13.

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£60.

7m

05 06 07 08 09

30.0

p

24.1

p

13.8

p

9.5p

37.5

p

05 06 07 08 09

+5.2% +25.7% +25.0%

Group revenue Adjusted profi t before tax Adjusted diluted earnings per share

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01 Cape plc Annual Report 2009

Trusted

BuildCape provides access, insulation, refractory services, fi reproofi ng and coatings during the initial build phase. In recent years, Cape has established an unrivalled reputation in the construction of Liquifi ed Natural Gas (LNG) facilities. This is supported by the fact that Cape has been involved in the build and maintenance of 70% of the world’s LNG exporting facilities.

MaintenanceFollowing the construction phase, Cape is often retained by plant operators to maintain the asset. Cape provides a wide range of essential non-mechanical services to support client maintenance and shutdown programmes on typically 3-7 year contracts.

Extension of lifeAs an industrial asset gets older, Cape will work closely with the client on rejuvenation projects, to devise a strategy to extend its useful life.

DecommissioningCape’s expertise and broad range of services makes Cape the contractor of choice to support decommissioning and asset abandonment activities.


Annual Report 2009

4Countries

6.2mMan hours

4,380Number of people(16)

18Principal locations

6Countries

24.4mMan hours



9Countries

4.3mMan hours



9Countries

6.3mMan hours



UKThe UK Region delivered a solid result in 2009. It is the largest employer of access and insulation labour in the UK industrial services market and supports nearly half of the UK’s total power generating capacity.

Gulf/Middle EastThe region delivered another year of strong revenue growth and margin progression in 2009. It is the largest provider of specialist industrial services in the Gulf Cooperation Council (GCC) states and has been operating in the region for over 30 years.

CIS, Mediterranean & North Africa2009 proved to be another successful year in the development of the Cape business in the region with results mostly deriving from operations in Kazakhstan, onshore and offshore.

Far East/Pacifi c RimLast year was a challenging year for Cape in the region, however, signs of confi dence are returning to our markets and our business is well positioned to benefi t from the expected increased activity levels in 2010.

2009-2010 Highlights– World class safety performance

evidenced by a 48% improvement in the Lost Time Incident (LTI) frequency rate.

– Maintenance of 70% of the UK’s coal and oil-fi red power generation capacity and 87% of the current nuclear generation capacity.

– Strategic contract wins include a seven-year fl eet-wide maintenance contract with British Energy and a fi ve-year contract with BP for offshore fabric maintenance.

2009-2010 Highlights– Excellent safety performance

recognised by a number of awards from our clients RasGas, BAPCO, ADGAS and Samsung.

– Strong results in Qatar with 69% of revenues project related refl ecting several new build Liquefi ed Natural Gas (LNG) and Gas to Liquid (GTL) facilities.

– Extensive work undertaken in Northern Gulf on the Yansab Olefi ns project and the Khurais Oilfi eld Development project.

– Record levels of activity in Abu Dhabi with major projects being the GASCO third Natural Gas Liquid (NGL 3) plant, IGD Habshan 5 and Borouge II.

2009-2010 Highlights– Excellent safety performance; 4.3 million

man hours without a LTI and an award for Best Contractor HSSE Practice on the Karachanganak site in Aksai, Kazakhstan.

– New contract awards in Kazakhstan including Kashagan onshore process facility at Karabatan and offshore Island D and the 4th Train expansion project at Karachaganak.

– Opened a facility in Arzew, Algeria as well as securing the fi rst expansion project for the Mejillones LNG receiving and re-gasifi cation terminal in Chile.

2009-2010 Highlights– Excellent safety performance in

Asia including two million man hours on Pluto LNG project in Thailand without a LTI.

– Improvement of the safety performance across the acquisitions in Australia as Cape systems were rolled out.

– Major project work undertaken on the Pluto LNG project in Australia and Thailand, the Vale Inco Goro Nickel project in New Caledonia and the Shell MEG plant in Singapore.

Operating regions

Notes 1-16 are detailed on the inside front cover.


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24a day

28Countries

Regional business units

Cape focuses on 5 key industrial sectors across the globe.

1.

4.3.

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5.

1. Oil & Gas OffshoreCape has extensive offshore experience and capability throughout its international footprint. Activities are focused on fabric maintenance of later cycle production assets (with no exposure to exploration or drilling segments) and include clients such as BP, Shell, Conoco Phillips and BG Group.

2. Oil & Gas OnshoreCape works for many leading names within the downstream oil and gas sector, including all the major IOC’s (International Oil Companies) and several NOC’s (National Oil Companies). 3. Power GenerationCape has extensive experience in the power generation sector and works with clients such as British Energy, EDF, RWE, Iberdrola and International Power.

4. ChemicalCape currently works for a wide range of chemical and petrochemical clients including ExxonMobil, Dow Corning, INEOS and SABIC.

5. Minerals and MiningCape’s clients in the minerals and mining sector include Alcoa, BHP Billiton, Vale Inco and Rio Tinto and its activities are largely performed in Australia and New Caledonia.

6. OtherCape’s clients in other sectors vary from steel plant operators, defence, local government contractors and commercial construction companies.

UK

Gulf/Middle East

CIS, Mediterranean & North Africa

Far East/Pacifi c Rim

hrs

in


Annual Report 2009

41.2m

man hours

365 days a year

To fi nd out more about our international operations: go to www.capeplc.com

Revenue by region

£304.7mUK revenue

1

£48.4mCIS, Mediterranean & North Africa revenue

3

£170.7mGulf/Middle East revenue

2

£131.3mFar East/Pacifi c Rim revenue

4

£655.1mGroup revenue

1

2

3

4

for


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Strategic updateSince 2006, Cape has pursued a strategy of value creation through growth. This strategy has focused on:

capturing increasing levels of maintenance and capital spending to maintain and extend the life of ageing energy infrastructure in the UK (eg British Energy fl eet-wide maintenance contract signed in Q1 2009);

building strong positions in high growth international markets such as Gulf/Middle East and Far East/Pacifi c Rim (eg Pluto module access and hook up in Thailand and Karratha, Western Australia in Q3 2008 and Q3 2009);

capitalising on the increasing industry trend towards sourcing cost effective bundled multi-disciplinary services from a single source provider (eg BP Federal Contract UKCS in Q1 2010);

maintaining our uncompromising safety proposition with an ambition to provide injury free project execution; and

Chairman’s statementCape’s businesses delivered a robust operating and fi nancial performance in 2009.

Sean O’Connor – Chairman

Cape’s businesses delivered a robust operating and fi nancial performance in 2009 with record revenue of £655.1 million (2008: £622.7 million) and record adjusted PBT(1) of £60.7 million (2008: £48.3 million). Adjusted diluted earnings per share(3) increased by 25% to 37.5 pence (2008: 30.0 pence). With fi ve consecutive years of growth, the Group has delivered compound annual growth in adjusted diluted earnings per share(3) of 41%.

The cash generative qualities of the business were again evident in the Group’s performance with strong operating cash fl ows of £84.4 million (2008: £70.9 million). This solid result was achieved despite some intense pricing pressures in more mature markets and refl ects the rapid and decisive actions taken by our business unit heads in response to the downturn.

Gearing(12) at 31 December 2009 reduced to 42.4% compared to 67.2% at the end of 2008, with a further 31% reduction in net debt(6) to £113.6 million (2008: £165.5 million). This reduces the Group’s ratio of net debt to adjusted EBITDA(8) to 1.3 times(7) (2008: 2.1 times) and represents signifi cant progress towards the Board’s current target range of up to one times adjusted EBITDA(8).

Market viewCape largely serves downstream energy and resources related markets whose longer-term growth prospects are robust. We won some important milestone contracts with International Oil Companies (IOCs), power generators and global mining customers last year which again showed the compelling nature of

Cape’s intelligent bundled service solution, tailored to meet the needs of our clients.

Whilst the Gulf/Middle East market remained particularly strong, the slowdown in the global economy clearly delayed the pace of new orders in certain of our markets. However, the fundamentals of Cape’s business remain strong. The defensive nature of the maintenance business, some 48% of revenues (2008: 48%), combined with the longevity of the typical large industrial projects we work on provides excellent revenue visibility.

Rapid response to downturnAlthough strong trading continued in certain markets, a range of short-term initiatives were implemented to conserve cash and ensure that all Cape’s operations remained profi table and robust, even in a prolonged downturn. The peripheral Hire and Sales operations in the UK together with certain marginal operations in Australia and Malta were closed, capital expenditure was tightly controlled and overhead cost savings initiatives were implemented across the Group.

The devolved nature of Cape’s business model emphasises accountability and responsibility at the local level and encourages an entrepreneurial approach to running operations. Nowhere is this approach more apparent than in the timely and decisive actions taken and innovative responses to conserving cash and cutting cost without impairing safety performance, operational integrity, or future growth opportunities.


Annual Report 2009


building on Cape’s world class reputation and track record for consistent project execution and delivery on time and on budget.

In 2006 and 2007, Cape’s strategy was delivered through a combination of both organic and acquisition-led growth to build a portfolio diversifi ed by geographic region and service offering and with the scale, capacity and capability to compete for large-scale, new projects. This transformational period was completed in 2007 with the three acquisitions in Australia. These acquisitions were supplemented by the targeted bolt-on acquisitions of specialist cleaning businesses DBI and Endecon and further broadened Cape’s service offering. The transformation of acquired operations and the development of an integrated, international business under the Cape brand is now well advanced across our existing footprint.

The successful delivery of this strategy to date has created an international industrial services group, focused on the energy and mining services sectors with a strong track record and reputation for successful project execution, and winning awards for innovation and safety from major international clients.

Delivering future growthThe ongoing focus on ROMA(13) enhancement and operational excellence will continue to play a signifi cant role in Cape’s strategy.

Overseas, a number of substantial announced projects are now reaching the fi nal approval and construction stage in the Far East/Pacifi c Rim, Gulf/Middle East and North Africa and should provide Cape with real organic growth opportunities over the medium term.

Whilst we see few opportunities for substantial growth in the UK in the short to medium term, we have reinforced our positions both onshore and offshore in the mature maintenance led UK market and are increasingly well placed to benefi t from the onshore new build power generation opportunities and North Sea asset abandonment programmes that are likely to come through towards the end of the decade.

With the de-gearing of the Group nearing the Board’s (1x adjusted EBITDA(8)) target, selective bolt on acquisitions in international markets will be considered.

Industrial Disease Claims (IDC) Scheme and provision for future claimsFollowing further work from independent actuaries in the fi nal quarter of last year, the Board considers that the value of the total future asbestos-related liabilities can be estimated with suffi cient reliability to enable a provision to be recorded. The Group has previously provided for the estimated costs of notifi ed claims only and disclosed by way of note details of actuarial assessments of the total discounted aggregate liability. The recent actuarial work conducted by the Scheme’s independent actuaries concluded that a reasonable estimate of the net discounted reserve would lie in the range of £60 million to £100 million with a central estimate of £79 million. Further detail is provided in note 26 to the Group fi nancial statements. With the increased confi dence this study provided, the Board has recognised an additional provision of £70.5 million and considers that in making this change to the Group’s fi nancial statements they are now more informative and meaningful. It should be noted that whilst we are making full provision, on the basis of the information currently available Scheme funds currently equate to eleven years of anticipated claims.

In addition, the Emphasis of Matter paragraph with regards to the fundamental uncertainty of IDCs is not required in respect of the 2009 fi nancial statements. The total provision

for Industrial Disease related liabilities at 31 December 2009 is £80.2 million and includes estimated costs of £9.7 million (2008: £9.7 million) in respect of notifi ed claims.

BoardWith the increasing international focus of the business, we recognise it would be benefi cial to broaden the Board. A process has therefore commenced, overseen by the Nomination Committee, to appoint two additional Non-Executive Directors to assist the Group’s objectives of growing its international business and also of returning to the Full List. Although I shall be remaining on the Board, it is my intention to step down as Chairman later this year.

PeopleCape now has over 17,000 people and again delivered in excess of 41 million man hours in 2009. I would like to thank them all for their continuing dedication and commitment and also the Executive Board and regional management teams whose leadership once again delivered a record fi nancial performance.

Outlook and prospectsThe ongoing investment in large industrial projects in the Gulf/Middle East combined with our rapid but measured response to the downturn in other regions in the early part of the year delivered a creditable result in 2009. Whilst we continue to be suitably cautious about growth in 2010, we believe the swift resumption of E&C contract awards and investment in key growth projects offers a more favourable environment to drive sustainable organic growth in 2011 and beyond.

Cape’s investments over the last three years have delivered a focused business with real scale and internationally recognised capability and the Board is confi dent the Group is ideally positioned to benefi t from the increasing capex spend of our energy and resources sector clients.

Our increased confi dence in the medium-term outlook and Cape’s encouraging prospects and fi nancial position, have enabled the Board to signal a fi rm intent to reinstate dividend payments later this year. Cape last paid a dividend to shareholders ten years ago, and it would be particularly pleasing to mark another step in Cape’s rejuvenation and recovery with a return to the dividend list.

Sean O’ConnorChairman15 April 2010

No.1

5Five consecutive years of growth

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Cape plc Annual Report 2009

AgipKCO Kashagan, Island D, Kazakhstan Since 2007 Cape has been providing scaffolding, surface protection and rigging works at AgipKCO’s Island D, Kashagan, Kazakhstan.

Sector: Oil & Gas Offshore

9+ years

We have been working with Shell in the Philippines for nearly a decade

Main image: Shell Malampaya platform, the Philippines Cape has been working for Shell on the Malampaya platform in the Philippines for nearly a decade, providing maintenance support services, planning, onshore fabrication, training, assessment and more.

Through a programme of multi-task training, Cape has enhanced the skill level of the workforce on the platform, increasing productivity and bringing tangible benefi ts to the project.

% of Grouprevenue

22%

Annual Report 2009


BP, North Sea, UKCape has been providing services to BP in the North Sea continuously for the past 28 years. Cape delivers 56 separate services under one contract including access, coatings, insulation and multi-discipline deck crews.

North Adriatic LNG Terminal, SpainDuring 2008 and 2009, Cape’s joint venture with Resa provided access and insulation works on the North Adriatic LNG Terminal.

28years

Cape has been providing services to BP in the North Sea continuously for the past 28 years

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Cape plc Annual Report 2009 09

Karachaganak, Aksai, KazakhstanIn 2009 Cape was awarded a contract to provide access services on the 4th Train expansion project with Petrofac and KPO (Karachaganak Petroleum Operating B.V.).

Main image: Qatargas LNG plant, Ras Laffan Industrial City, QatarCape has been working at Ras Laffan Industrial City for Qatargas since 1995 assisting with the construction of all 7 Trains, maintenance as well as numerous shutdowns.

During this time Cape has provided access services, insulation, surface preparation, painting, fi reproofi ng, coatings, and refractory services and our excellent performance has seen us win more than 10 safety and appreciation awards.

Sector: Oil & Gas Onshore

15+ years

Cape has been working at Ras Laffan with Qatargas for 15 years

% of Grouprevenue

28%

Annual Report 2009


Fawley refi nery, UKCape has worked on the Fawley refi nery on the UK south coast for over 35 years. The provision of services now extends to insulation, alternative access, painting, blasting and asbestos removal.

Das Island LNG plant, UAEAt ADGAS LNG Plant on Das Island, UAE, Cape provided access and insulation services for the ADGAS 2009 Replacement of MCHE Cryogenic Column project.

35years

Cape has worked on the Fawley Refi nery on the UK south coast for over 35 years

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Mesaieed Power Plant, Qatar Cape is currently providing access and insulations services for Iberdrola Ingenieria y Construccion on the Qatar Mesaieed A IPP project.

Main image: Eggborough, UKIn 2009 Cape was awarded a fl eet-wide contract to supply access, insulation and associated services over a period of seven years, in support of British Energy’s eight nuclear power stations. In addition, Cape supply similar services to the British Energy

coal-fi red station at Eggborough. The fl eet-wide contract extended Cape’s long standing relationship with British Energy from four nuclear power stations to the entire fl eet and Cape is now proud to support nearly half of the UK’s total power generation capacity.

Sector: PowerGeneration

46%

Cape now support nearly half of the UK’s total power generation capacity

% of Grouprevenue

17%

Annual Report 2009


Longannet power station, Scotland, UKCape has been providing services at Longannet for over 15 years. Services include access, insulation, asbestos management and removal, industrial cleaning and waste management.

15years

Cape has been providing services at Longannet power station for over 15 years

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PetroRabigh Petrochemical Complex, Saudi ArabiaBetween 2006 and 2009 Cape provided refractory and insulation works at the PetroRabigh Petrochemical Complex in Saudi Arabia.

Main image: Dow Corning site, South Wales, UKCape has been working on Dow Corning’s site in Barry, South Wales since 2001 delivering innovative industrial cleaning solutions for scheduled cleaning including planned shutdown programmes and also

emergency response regimes. Cape provides a full service of cleaning processes including chemical cleaning, semi-automated high pressure water jetting procedures and high airfl ow vacuum services for all reactors, pressure vessels, process pipe-work and heat exchangers.

Sector: Chemical

9 years

Cape has been working on the Dow Corning site since 2001

% of Grouprevenue

12%

Annual Report 2009


Jurong Island petrochemical complex, SingaporeCape provides scaffolding, insulation, painting and fi reproofi ng services to the Jurong Island petrochemical complex in Singapore.

Yansab Olefi ns Complex, Yanbu, Saudi ArabiaCape provided access, insulation and refractory services during the construction of Yansab Olefi ns Complex, Yanbu, Saudi Arabia.

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Qatalum Aluminium Plant, QatarCape is providing access and insulation works for the construction of one of the largest Aluminium Plants, Qatalum.

Main image: Alcoa, AustraliaAlcoa operates the world’s largest integrated bauxite mining, alumina refi ning, aluminium smelting and rolling system, located in Western Australia. Over the past 25 years Cape has provided access, insulation, painting, blasting and asbestos removal

services to Alcoa’s sites in Kwinana, Pinjarra and Wagerup. Cape’s close partnerships with Alcoa and understanding of their requirements has led to the implementation by both parties of a number of new initiatives improving safety, increasing productivity and reducing operating costs.

Sector: Minerals & Mining

25years

Cape has provided services to Alcoa’s sites in Western Australia for 25 years

% of Grouprevenue

7%

Annual Report 2009


BHP Billiton Olympic Dam, AustraliaCape has been working with BHP Billiton on the Olympic Dam operations in Australia since February 2008, providing access solutions. The Olympic Dam is a complex mine processing copper, uranium, silver and gold.

2years

Cape has been working with BHP Billiton for two years on the Olympic Dam mine in Australia

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Chief Executive’s review

Cape delivered on its promises in 2009 with another solid year of progress, winning high quality contracts right across its footprint and delivering real value for its customers and shareholders.

Martin K May – Chief Executive

IntroductionCape delivered on its promises in 2009 with another solid year of progress, winning high quality contracts right across our footprint and delivering real value for our customers. This focus on operational excellence has been achieved at the same time as exceeding our targets for both cost savings and debt reduction.

Adjusted profi t before tax(1) increased by 25.7% to £60.7 million (2008: £48.3 million) refl ecting a £5.7 million reduction in fi nance costs to £12.3 million (2008: £18.0 million) and £8.1 million benefi t from favourable foreign exchange movements.

Cape has again continued to deliver margin progression, demonstrating the resilience of our business model. The Group’s revenues are largely derived from maintenance works and large scale Engineering and Construction (E&C) projects in the Oil Field Services (OFS) and mining services sectors. Maintenance spending is an essential operating expense of plant operators and therefore impacted less by short-term changes in the macro environment.

Developing people and organisational capabilityStrong progress was made in 2009 in driving through initiatives to strengthen senior operational and functional management across the Group.

We have strengthened the Key Management Group with the appointment of a number of Regional Operations Directors, CFOs and HR professionals during the year. Cape’s Key Management Group now comprises 36 executives across the business. In addition, the rolling out of structured Performance Development Review processes and other HR process improvements have greatly added to the assessment and development of the Cape management pool.

During the course of 2009, we continued to review and make changes to the Group’s operating business unit structure to ensure all business units remained appropriately sized and resourced to achieve success in the current market conditions.

Also throughout 2009 steps were taken to create stronger linkage between the Group’s commercial and fi nancial processes and improve the internal control and reporting environment. Greater rigour has been introduced to fi nancial review processes across the Group under the direct control of the Group CFO. In Australia, we have carried out a major Enterprise Resource Planning (ERP) systems implementation creating a common platform across the acquired businesses.

Finally, we have made progress with building a more structured Business Development capability within the Group and I expect further developments in this area in 2010.

Top: British Energy site, Heysham, UKBottom: Insulation services, Qatar



Annual Report 2009

Strategic progress

Figure 1.For the twelve months ended 31 December:

Revenue Adjusted EBITA(11)

(£m) (£m)Region 2009 2008 2009 2008 Growth

UK 304.7 309.0 25.4 27.0 (5.9)%Gulf/Middle East 170.7 112.0 38.6 23.1 67.1%CIS, Med & North Africa 48.4 54.4 6.1 5.8 5.2%Far East/Pacifi c Rim 131.3 147.3 7.9 16.1 (50.9)%Joint Venture – – 1.6 0.5 220%Total before central costs 655.1 622.7 79.6 72.5 9.8%Central costs – – (7.4) (7.0) Total 655.1 622.7 72.2 65.5 10.2%

Overall much of the work done this year has been to create a platform for future growth.

Regional overviewThe Group continues to manage its business on a geographical basis with 12 business units reporting into four geographic regions. See fi gure 1.

As reported at the half year, the proportion of Group profi ts generated from outside the UK continued to grow and now represents 68% of adjusted EBITA(11) before central costs (2008: 63%). The Gulf/Middle East was the key growth region in the year, driven by signifi cant maintenance shutdown and project E&C activity particularly in Qatar.

Our results in the Far East/Pacifi c Rim, principally Australia, were adversely impacted by the Group’s exposure to the weak commercial and residential scaffold hire markets, the deferral of projects in the mining services sector and delays to Pluto LNG, the one large scale oil and gas project currently in progress.

The performance of each of the four regions is discussed further in the Operating Review.

Safety fi rst and lastSafety is a way of life at Cape. No matter how hazardous the environments in which we work, we believe that every accident is preventable. We have

in place a world-class sustainable safety framework which governs every managed operation and project. Total recordable lost time injury frequency rates have been reduced by 35% since 2007 or an average reduction of around 18% each year, including dramatic improvements at acquired operations. This is very pleasing and an indication of our businesses’ success in prioritising safety resources at the site level and in encouraging a strong safety culture.

Outlook and prospectsOur clients have sought to reduce costs whilst maintaining productivity and safety performance. Cape will continue to assist them to achieve these objectives by specifi cally tailoring the scope of the services provided and adopting more fl exible pricing mechanisms.

Looking ahead, we do not expect to see a signifi cant change in the Group’s overall activity levels this year. We will aim to continue to improve customer service and lay the foundations for a return to higher growth levels in 2011 and beyond.

Martin K May Chief Executive Offi cer

7years

is the typical length of a long-term Maintenance contract

Awarded BE fl eet-wide contract

Maintenance and major project wins in Gulf/Middle East and Far East/Pacifi c Rim

Awarded BP Federal Contract, UK Continental Shelf (UKCS)

19%Improving safety statistics year on year

Successful completion of several major projects across all regions, winning follow on maintenance contracts (Sakhalin, Goro Nickel)


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OPERATING REVIEW

Market environmentMore positive signs in project markets:

industry analysts expect global oil industry capex levels to increase in 2010 and 2011 driven by onshore Australia and Gulf/Middle East segments (and offshore Latin America);

increased tendering activity across our growth regions, building stronger relationships in the Gulf/Middle East and Far East/Pacifi c Rim; and

growing maintenance markets driven by ageing infrastructure (UK) and new build plant coming on stream (Gulf/Middle East).

Operating and fi nancial review

UK Region

£304.7m

2009 revenue

2009 PerformanceOnshore revenues down 12.8% at £169.3 million.

Offshore revenues increased by 26.6% to £112.2 million.

Environmental Services down 11.5% at £23.2 million. Strategic wins Onshore: Seven-year British Energy fl eet-wide maintenance contract.

Offshore: Five-year BP Federal contract for fabric maintenance at all nine North Sea assets.

Environmental: Three-year contract renewal from BP at the Sullon Voe Terminal in the Shetland Islands.

The UK Region delivered a solid result in 2009 given the impact of pricing pressures and the global fi nancial crisis on a number of the Group’s clients and markets. Revenues declined by 1.4% to £304.7 million (2008: £309.0 million) with an adjusted operating profi t of £25.4 million (2008: £27.0 million).

The region’s safety performance was again world class evidenced by a 48% improvement in the Lost Time Incident (LTI) frequency rate and an improvement of 19% in the all injury Accident Frequency Rate (AFR).

The UK business also received several prestigious safety awards including:

– SABIC Global Contractor SHE Award & SABIC European Contractor SHE Award

– Sellafi eld’s Resident Engineer Safety Award

– RoSPA Gold Award– Drax Power’s ‘Safe Contractor of

the Outage’ Award

The value of the UK Region’s order book is currently at record levels having increased by 72% since year end 2008 levels with high quality strategic long-term contract wins both onshore and offshore. Some 71% of the region’s 2010 budgeted revenues are now secured.

Onshore industrial servicesUK onshore revenues declined by 12.8% at £169.3 million (2008: £194.2 million) refl ecting:

1. the completion and demobilisation of three major projects at Marchwood Power’s natural gas combined cycle (CCGT) plant, Fiddlers Ferry power station’s Flue Gas Desulphurisation (FGD) plant and the SABIC new low density polyethylene (LDPE) chemical plant at Wilton, Teesside;

2. the substantial completion of the South Hook LNG receiving terminal with CB&I;

3. a reduction in the upgrade work undertaken at British Energy’s Heysham power station relative to that undertaken in 2008; and

Insulation services, Eggborough, UK



Annual Report 2009

4. completion of the strategic exit from the commercial Hire and Sale business with reduced revenues of £3.9 million in 2009 (2008: £8.7 million).

In the power generation sector, the cyclical nature of the outage/shutdown programmes produce annual fl uctuations as specifi c sites target expansive pieces of work to meet legislative requirements. However, increases in gas and coal prices linked with a falling megawatt price clearly resulted in the deferral of some discretionary investment last year.

Cape currently maintains 70% of the UK’s coal and oil-fi red power generation capacity and 87% of the current nuclear generation capacity. Together these provide nearly half of the country’s total generating capacity.

With the fl eet-wide British Energy contract secured early in the year, Cape consolidated its position as the largest onshore provider of specialist non-mechanical industrial services in the UK with an estimated 25% of the overall UK onshore market and 46% of the UK power generation market. In addition to the British Energy contract, our UK onshore business secured several signifi cant contract awards at UK power stations including:

– renewal of our contract with Scottish & Southern for the supply of access, insulation and painting services at the Ferrybridge coal-fi red power station in North Yorkshire;

– two-year extensions of our long-standing relationship with EDF Energy for services at Cottam and West Burton coal-fi red power stations in Nottinghamshire and Eggborough power station in North Yorkshire;

– a four-year contract at Rugeley power station with International Power; and

– the three-year contract renewal, with a further two-year option, at Fawley power station from RWE nPower.

In addition to the power generation sector, Cape also continued to win high quality long-term industrial contracts. These included the renewal of a contract with SABIC for the supply of safety critical maintenance services at the Wilton and North Tees industrial plants, a three-year term maintenance contract with Novartis at its Grimsby facility and with BAE Systems Surface Ships Ltd for the Royal Navy’s new generation aircraft carriers through Cape’s joint venture company, Ship Support Services Limited.

Maintenance revenues now account for 87% of total onshore revenues and we do not anticipate signifi cant change to the business in the medium term or until the UK government’s nuclear decommissioning and new build programmes commence later this decade. All ten of the announced new nuclear power stations are to be built at or near existing nuclear sites.

Offshore industrial servicesDespite a diffi cult and demanding trading year for service companies in the UK North Sea, Cape’s UK offshore revenues grew by 26.6% to £112.2 million (2008: £88.6 million) benefi ting from:

– signifi cant work on the BG Armada Platform on a Field Life Extension Integrity upgrade;

– increased activity at BP Schiehallion; and

– additional works on Shell’s Northern Gas plants rejuvenation project.

Rope access services, BP platform, North Sea, UK Effective training is fundamental to Cape’s excellent health and safety performance

12%increase in people(16) numbers

People(16) by region1. UK – 4,3802. Gulf/Middle East – 7,7193. CIS, Mediterranean & North Africa – 1,9104. Far East/Pacifi c Rim – 3,063

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The key contract win, announced on 20 January 2010, was the fi ve-year BP Federal Contract for the provision of fabric maintenance support and deck operations at all BP’s nine North Sea assets incorporating three additional assets for Cape: ETAP, Andrew and Clair in addition to the Dimlington gas terminal.

In common with all North Sea contractors, Cape has been subject to considerable pressure from operators to reduce costs and non-essential spends. All expenditure is focused around production and safety critical operations only and we continue to work with our clients to provide enhanced value through innovation and effi ciency improvements.

Other notable contract awards in the year included a contract for provision of multi-disciplinary services for the Aurora Project at the BP operated Sullom Voe Terminal in the Shetland Isles and Phase 1 of the decommissioning project for the Norwegian Ekofi sk 1 platforms with Heerema.

The offshore business is currently experiencing increased tendering activity with an upturn in the quantum of fabric maintenance work available from both smaller operators in the UK sector and in the wider North West European Continental Shelf (NWECS) including the Norwegian and Dutch sectors.

Environmental servicesThe environmental services business (Cape DBI) delivered a creditable result in challenging circumstances with revenues down 11.5% at £23.2 million (2008: £26.2 million).

The continued resilience of our integrated technical service offerings for the power industry pre-commissioning market and oil and gas installations (both onshore and offshore) helped mitigate the deferred or cancelled works in the steel and petrochemical sectors.

Notable contract awards and renewals during the period included:

– a three-year contract renewal from BP at the Sullom Voe Terminal in the Shetland Islands for waste management services, industrial cleaning (including crude oil storage tanks) and drain management;

– pre-commissioning hydro-testing and chemical cleaning at the Staythorpe Combined Cycle Gas Turbine (CCGT) power station in Newark with Alstom;

– a one-year extension to our existing contract with Dow Corning for specialist cleaning services at its plant in Barry, South Wales;

– a 12 month contract from Nexen for ‘On-line’ sand separator cleaning support in the North Sea; and

– the two-year renewal of our industrial cleaning contract with Huntsman Tioxide at their Seal Sands complex on Teesside.

Whilst we have seen a downturn in environmental services work on Teesside, we continue to see higher activity levels in the oil and gas and power generation sectors although a return to growth is unlikely in the short term.

Gulf/Middle East Region

£170.7m

2009 revenue

2009 PerformanceStrong revenue and EBITA growth of 52% and 67% respectively.

Qatar result particularly strong with tight labour market and clients seeking to limit project delays.

Building the maintenance base with further maintenance contract wins with Qatargas, ORYX GTL, SABIC, Saudi Aramco and BAPCO.

The region delivered another year of strong revenue growth and margin progression in 2009. Headline revenues increased by 52.4% to £170.7 million (2008: £112.0 million) with operating profi ts up 67.1% to £38.6 million (2008: £23.1 million). On a constant currency(10)

basis, revenue and profi t grew 27.9% and 40.7% respectively.

The continuation of several large scale industrial construction projects in the region has underpinned Cape’s performance with approximately 70% of revenues now generated from construction projects. With a tight labour market and clients seeking to limit project delays, margins remained robust throughout the year. Of our three business units in the region, Qatar delivered a particularly strong result.

Fawley refi nery, UK Blasting at Shell’s Pearl GTL site, Qatar

Operating and fi nancial reviewcontinued


Annual Report 2009

Some 87% (2008: 97%) of the region’s 2009 revenues were from the oil and gas and petrochemical sectors and the key drivers of our success have been our growing reputation for providing a cost effective bundled service offering combined with our excellent safety track record.

Employee numbers in the region peaked at over 7,500 and we delivered more than 24 million man hours (2008: 19 million) with an excellent safety performance. Our clients recognised this achievement with a number of awards: – RasGas in recognition of Cape’s

contribution towards 10 million man hours without a LTI across their LNG trains at Ras Laffan;

– BAPCO in Bahrain with ‘Safety Contractor of the Year – category 2’;

– Abu Dhabi Gas Liquefaction Company Ltd (ADGAS) in recognition of Cape’s contribution towards ten million man hours worked without a LTI over the last three years on the ADGAS annual turnaround; and

– in Saudi Arabia, a certifi cate of excellence was received from Samsung for Cape’s access and insulation work on the Saudi Kayan PP/PH project.

The region’s order book has remained broadly fl at since the beginning of 2009 and this refl ects the slow-down in new oil, gas and petrochem projects nonetheless about 60% of budgeted 2010 revenue is now secured.

QatarOur Qatar business has enjoyed particularly favourable trading conditions in 2009. Project revenues remained strong throughout the year with some 69% of revenues project-related as clients utilised Cape to complete major projects in Ras Laffan and Mesaaied including the Pearl Gas to Liquids (GTL) project, RasGas Train 7, Al-Khaleej Gas Phase-2, the Ras Girtas Power and Desalination plant and the Q-CHEM 2 project.

Cape also won new long-term maintenance contracts at Qatargas’ onshore and offshore facilities and at the ORYX Gas to Liquids (GTL) plant. We continue to benefi t from the growing maintenance market in Qatar with substantial shutdown contracts with Dopet, Qatar Petroleum, Dolphin LNG and RasGas.

With the completion or near completion of numerous major projects, we expect activity levels in Qatar to reduce signifi cantly in 2010.

Northern GulfIn the Northern Gulf (Kingdom of Saudi Arabia, Bahrain and Kuwait) we undertook extensive work on the Yanbu National Petrochemical Company (Yansab) Olefi ns project, the Khurais Oilfi eld Development project and the Rabigh Petrochemical Complex. Our work on the Saudi Kayan project is progressing well and we fi nished the year at peak manning levels.

A number of high profi le projects in our Northern Gulf area were delayed to benefi t from the reduction in raw material prices and this will impact on activity

levels this year. New project awards in the second half of the year included packages on the National Chevron Phillips (NCP) Olefi ns project at Al-Jubail and the Ma’aden Aluminium Refi nery at Ras Al Zawr.

In addition to project work, we have secured further maintenance contracts with both SABIC, for the provision of insulation and refractory services, and with Saudi Aramco for access services during the year.

In Bahrain we have completed a major refractory and insulation project at the Gulf Industrial Investment Co (GIIC) aluminium plant for Kobe Steel and were awarded a four-year maintenance contract by BAPCO at their Bahrain refi nery.

Southern GulfOur project work in the Southern Gulf (UAE and Oman) continued to increase throughout the year with project starts in Abu Dhabi unaffected by the fi nancial crisis. We fi nished the year with record levels of employees in Abu Dhabi with major projects being the GASCO third Natural Gas Liquid (NGL 3) plant in Ruwais, IGD Habshan 5 and Borouge II.

Shutdowns accounted for 30% of the full year revenue with these being carried out at the Ruwais Fertiliser plant, Borouge, Ruwais and the Takreer refi nery.

Whilst we see activity levels in the Southern Gulf area continuing to increase, we also see an increase in competition with new contractors entering the market, particularly from Korea and China.

Safety is a way of life at CapeSheet metal fabrication using automated Mabi machine at Cape’s facility, Jubail, Saudi Arabia


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CIS, Mediterranean & North Africa Region

£48.4m

2009 revenue

2009 PerformanceCIS performance was broadly fl at with increased activity in Kazakhstan compensating for the completion of the Sakhalin 2 project last year.

Revenue reduced in the Mediterranean & North Africa as the only major contract in the region (Adriatic LNG project) was carried out by the Spanish joint venture.

A facility was established in Arzew, Algeria.

Last year proved to be another successful year in the development of the Cape business in the region with adjusted operating profi ts increasing by 22% to £7.7 million (2008: £6.3 million) including a £1.6 million (2008: £0.5 million) post tax contribution from the joint venture Cape-Resa in Southern Europe. Revenues in the region (excluding Cape’s share of JV revenue) reduced to £48.4 million (2008: £54.4 million). On a constant currency(10) basis revenue fell by 25.4% whilst operating profi ts increased by 3.2%.

The region’s order book closed slightly ahead of year end 2008 level, with 54% of the region’s budgeted 2010 revenue having been secured.

CISRevenues from Cape’s operations in the CIS countries remained broadly fl at at £46.0 million (2008: £46.3 million) with the main activities continuing in Kazakhstan and Russia. The reduction of work in Russia following completion of the Sakhalin 2 project, was largely replaced by further awards in Western Kazakhstan at:

– Kashagan – onshore processing facility at Karabatan (Bolashak);

– Kashagan – offshore, fi rst phase central processing facilities (Island D); and

– Karachaganak (Aksai) – 4th Train expansion project with Petrofac and KPO (Karachaganak Petroleum Operating B.V.).

During the year Cape successfully completed extensive works at our onshore facilities at Aktau for ERSAI Caspian Contractor LLC. Operating from our three bases in Kazakhstan and with our regional management team based locally in Atyrau, Cape’s long-term commitment to the region continues with further increases in resources and equipment made in the year.

In Russia, we continued to win work on Sakhalin Island with project works at Odoptu and the Chayvo Onshore Processing Facility, in addition to the Sakhalin 2 maintenance contract.

Cape repeated the excellent safety performance on the KPO site in Aksai and has again won the General Directors’ Annual award as ‘Best Contractor HSSE Practice’ for a million hours

achieved without a LTI. SGS ISO certifi cation is confi rmed and extended for Kazakhstan operations.

The market for Cape’s services in the CIS countries will remain stable in 2010. Current projects are coming to completion phase with major new projects planned to commence early next year. The emphasis will be on securing these works and continuing to develop our capability and resources for growth in 2011.

Mediterranean & North AfricaIn 2009 Cape’s operations in the Mediterranean and North Africa generated revenues of only £2.4 million (2008: £8.1 million). The only major contract in the year was for the construction phase of the ExxonMobil Adriatic LNG receiving terminal with Aker Solutions which was successfully carried out by our Cape-Resa joint venture. The Cape-Resa JV, together with its new Italian partner, has also successfully won a fi ve-year multi-discipline maintenance contract for Adriatic LNG.

In North Africa, our target projects in Algeria and Libya continue to be suspended or delayed and we do not expect contracts to be awarded until the fi nal quarter of this year or 2011. In any event North Africa will not have a material impact on this year’s results. As highlighted at the half year, we have opened a small facility in Arzew, Algeria adjacent to the industrial zone where the Sonatrach LNG facility is to be built.

Cape also secured the fi rst expansion project for the Mejillones LNG receiving and re-gasifi cation terminal in Chile.

Karachaganak, Kazakhstan



Annual Report 2009

Far East/Pacifi c Rim Region

£131.3m

2009 revenue

2009 PerformanceRevenue was down 11% with cancellation/deferral of industrial projects and non-essential maintenance.

Major project work included the Pluto LNG project (Australia and Thailand), the Goro Nickel project (New Caledonia) and the Shell MEG plant (Singapore).

Growing offshore revenue.

Revenue in the region reduced by £16.0 million to £131.3 million (2008: £147.3 million) with adjusted operating profi ts reducing to £7.9 million (2008: £16.1 million). As explained at the interim stage, our business in this region operates in a number of sectors which have been less resilient to the prevailing economic conditions than the energy sector. These include commercial and residential construction and mining services.

In many respects last year was a challenging year for Cape in the region and required a degree of restructuring including depot rationalisation, management de-layering and overhead reduction measures. These were undertaken at a time when key post acquisition integration projects were still ongoing. We are seeing signs of confi dence returning to our markets and believe our business is well positioned to benefi t from the expected

increase in activity levels in 2010.Safety performance also continued to improve as Cape systems were rolled out across the acquired businesses. Notable safety achievements included the milestone two million man hours worked on the Pluto LNG project in Thailand without a LTI, a signifi cant contribution to the project’s 29 million safe working hours and awards from Esso in respect of its Sriracha Refi nery in Thailand and Foster Wheeler/Shell on the Shell Monoethylene Glycol (MEG) plant in Singapore.

The region’s order book has continued to grow and has increased over year end 2008 levels. Pleasingly, secured revenues now represent some 48% of 2010 budgeted revenues. The secured revenue is lower than other regions, refl ecting the different nature of the business.

Onshore industrial servicesRevenues in our onshore industrial services business in the region fell 9.8% to £102.8 million (2008: £114.0 million) refl ecting both the cancellation or deferral of both project works and non-essential maintenance works by plant operators.

Maintenance activities represented 29.9% of onshore industrial services revenues (2008: 28.8%) with the mining services sector remaining dominant. We have continued to work with our major operator clients to signifi cantly reduce maintenance costs at their sites by adopting a more innovative approach to service delivery. Principal maintenance sites last year again included Alcoa’s three refi neries in Western Australia (WA) together with the Alcoa managed Portland Aluminium smelter in Victoria,

ExxonMobil, Adriatic LNG Terminal, Spain Blasting at Cape’s facility Kwinana, Australia

25.7%growth of Group adjusted profi t before tax in 2009

31%of revenues attributed to Cape’s top 10 customers


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BHP’s multi-mineral Olympic Dam site in South Australia and the BHP-owned Worsley Alumina refi nery in WA.

In the oil and gas sector, our principal maintenance client was again BP at its Kwinana refi nery in WA.

Signifi cant maintenance contract awards or renewals in the year included a three-year multi-disciplinary maintenance contract at the Minara Resources/Glencore owned Murrin Murrin Nickel refi nery in WA.

Onshore major project work in the region included:

– packages on the Woodside Petroleum Pluto LNG project both in Thailand and Australia;

– access services on the Vale Inco Goro Nickel project on the South Pacifi c Island of New Caledonia;

– the Shell Monoethylene Glycol (MEG) plant in Singapore; and

– protective coatings at the Boddington Gold Mine, WA.

Our major project awards in the year included access, insulation, fi re proofi ng and coatings services at the ExxonMobil Singapore Parallel Train (SPT) project at Jurong Island, Singapore with Shaw Stone & Webster and access services at Woodside’s Pluto LNG project in Karratha, Western Australia.

As we fully mobilise on existing contracts throughout the year and with the visible uptick in tendering activity now being seen across the region, we anticipate a return to growth in activity levels both in 2010 and beyond.

Offshore industrial servicesOur offshore revenues in the region increased by 26.9% to £6.6 million (2008: £5.2 million) with continuing activity on our two principal maintenance contracts with ConocoPhillips Bayu-Undan in the Timor Sea and the Shell Malampaya platform in the South China Sea.

Our regional offshore management team will relocate from the Philippines to Australia in the fi rst half of this year given the more extensive offshore opportunities in Australia.

Access solutionsOur access solutions business, which is entirely focused on commercial and residential construction markets in Australia, has been the most impacted by the adverse economic conditions with revenue reducing by 22% to £21.9 million (2008: £28.1 million).

Steps have been taken to reduce fi xed costs and rationalise yards in the face of intense competition. Our three major depots are based at Malaga, Perth WA, Springvale, Victoria and Beenleigh, Queensland and all service local markets.

We expect the commercial and residential construction markets to remain soft in Australia with no expected pick up until the fourth quarter of this year at the earliest.

Cape’s CIS regional offi ce, Atyrau, KazakhstanAccess systems, Alcoa Pinjarra refi nery, Australia


68%of Group adjusted EBITA(11) generated from outside the UK

Group adjusted EBITA(11)

1. UK – £25.4m2. Gulf/Middle East – £38.6m3. CIS, Mediterranean & North Africa – £7.7m4. Far East/Pacifi c Rim – £7.9m

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Annual Report 2009

FINANCIAL REVIEWRevenue for the year increased 5.2% to £655.1 million (2008: £622.7 million) with total adjusted operating profi t (EBITA(11)) increasing by 10.2% to £72.2 million (2008: £65.5 million).

The strong performance during the year resulted in growth of 25.0% in adjusted diluted earnings per share(3) to 37.5p (2008: 30.0p). Basic earnings per share decreased by 113.1% to a 3.5p loss (2008: earnings per share of 26.7p).

As reported at the half year, the Group’s headline results have materially benefi ted from favourable exchange movements, the Group’s results being retranslated at different average rates from year to year. In 2009, the headline results benefi ted from the weakness in GB pounds against the US dollar relative to last year particularly in the fi rst half. Figure 1 sets out the impact on 2009 revenues and adjusted EBITA had 2008 average exchange rates applied.

The overall foreign exchange impact has been to increase revenues by £49.4 million or 8.2% and adjusted operating profi ts by £8.3 million, equivalent to 5.4p per share.

Operating and free cash fl owThe Group’s strong operating cash generation continued throughout the year with a full year operating cash fl ow of £84.4 million (2008: £70.9 million) representing an operating cash conversion rate(5) of 95.9% (2008: 87.7%). After servicing of debt the Group’s free cash fl ow was £39.1 million (2008: £3.7 million).This result was driven by the increased EBITDA as well as continued tight controls on capital expenditure and working capital.

Capital structure and debt reductionThe Group’s year end net debt excluding the ring fenced Industrial Disease Claims (IDC) Scheme funds amounted to £113.6 million (2008: £165.5 million) including fi nance lease obligations of £14.6 million (2008: £20.7 million). The Group’s fi ve-year syndicated senior credit facility (with expiry on 3 September 2012) reduced by £15.0 million (2008: £20.0 million) to £185.0 million (2008: £200.0 million).

The Group’s balance sheet gearing(12) reduced to 42.4% (2008: 67.2%) and the ratio of net debt to adjusted EBITDA has fallen to 1.3 times (2008: 2.1 times) and close to the Board’s target of up to 1 times.

Return on Managed Assets (ROMA)(13) increased to 32.0% (2008: 29.4%) with the Group’s investment in receivables and work in progress reducing to 96 days (2008: 118 days).

Debt fi nancing costsThe net fi nance charge (excluding Scheme interest) amounted to £11.5 million (2008: £17.2 million) and included fi nance lease interest of £1.7 million (2008: £1.7 million) and amortisation of loan issue costs of £0.7 million (2008: £0.7 million) in respect of commitment and ancillary fees under the Group’s Senior debt facility. The Group’s effective interest rate fell to 7.3% (2008: 8.1%) with interest cover(15) increasing to 5.7 times (2008: 3.6 times).

Rope access services, Longannet power station, Scotland, UK

SABIC’s Wilton plant, UK

Figure 1.

2009-translated 2009-translated at actual at 2008 average rates average rates Revenue EBITA(11) Revenue EBITA(11)

£m £m £m £m

UK 304.7 25.4 304.7 25.4Gulf/Middle East 170.7 38.6 143.3 32.5CIS, Med & NA (incl. JV) 48.4 7.7 40.6 6.5Far East/Pacifi c Rim 131.3 7.9 117.1 6.9Central (7.4) (7.4)Total 655.1 72.2 605.7 63.9



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At the year end, the Group had an interest rate swap in place that converted the interest rate on £60.0 million (2008: £90.0 million) of its GB pound denominated debt from a fl oating LIBOR rate to a fi xed interest rate of 5.145%. In addition the Group had a swap in place converting the interest rate on $30.0 million of its US dollar denominated debt from a fl oating US LIBOR rate to a fi xed interest rate of 3.23%.

IDC and provision for estimated future asbestos related liabilitiesScheme funds reduced by £3.7 million (2008: £1.6 million) to £33.8 million (2008: £37.5 million). The reduction largely refl ects the reduced interest received of £0.5 million (2008: £2.0 million) in the year. During the year a total of £4.1 million (2008: £3.6 million) was paid to asbestos related claimants.

The net charge to the income statement for industrial disease claims lodged and outstanding reduced to £3.7 million (2008: £5.7 million).

With fi ve years having now elapsed since the fi rst independent actuarial assessment of the Group’s unpaid and uninsured UK asbestos related claims in 2004, the Directors considered it appropriate to review the accounting treatment whereby the Group provides in the income statement for the estimated liability in respect of claims lodged and outstanding but not for an estimate of the total aggregate discounted value of unpaid UK asbestos-related liabilities. To assist in this review, the independent actuaries quantifi ed a reasonable range of reserve estimates as between £60 million and £100 million with a central estimate of £79 million. Following consideration of this report, the Directors consider that

making an additional provision for the total aggregate discounted value of unpaid UK asbestos-related liabilities is both appropriate and more meaningful to the users of the Group’s fi nancial statements. Consequently an additional provision of £70.5 million has been recognised in the Group’s fi nancial statements with an additional charge to the income statement net of deferred tax of £50.8 million (2008: £nil). Further detail is provided in note 26 to the Group fi nancial statements. Following the booking of this provision, the Group’s auditors have confi rmed that the Emphasis of Matter paragraph concerning the fundamental uncertainty of future IDC liabilities is not required in respect of the 2009 fi nancial statements.

Tax charge and effective tax rateThe tax charge in the period before other items increased to £13.9 million (2008: £12.2 million) with an effective tax rate of 23.7% (2008: 25.3%). Tax paid in the period increased to £7.6 million (2008: £4.8 million) this increase predominantly relates to the Gulf/Middle East and Far East regions where there has been the introduction of payment on account systems in certain jurisdictions along with the overall increase in profi ts in the Gulf/Middle East.

The Group’s total tax credit for the year of £14.1 million (2008: £5.9 million), comprises a current tax charge of £9.9 million (2008: £7.1 million) and a deferred tax credit of £24.0 million (2008: £1.2 million).

Construction of the Mesaieed Power Plant, Qatar

£655.1m2009 Group revenue



Annual Report 2009

The deferred tax credit relates predominantly to the recognition of a deferred tax asset on the provision raised for future asbestos related liabilities and a further Australian tax benefi t from the acquisition of PCH.

Balance sheetShareholders’ equity at 31 December 2009 increased to £264.7 million (2008: £245.5 million) and refl ects both the retained profi ts for the year and the change in accounting treatment relating to the provision for future industrial (largely asbestos related) disease claims in the UK.

The Group’s intangible assets, which had a year end book value of £210.5 million (2008: £188.0 million), comprised acquired customer contracts and goodwill that arose on acquisitions predominantly in Australia and the increase in value of the assets during the year was due to changes in foreign exchange rates. The Group completed a goodwill impairment test based on value in use calculations which estimate the recoverable amounts of the Group’s Cash Generating Units. The test demonstrated that no impairment was necessary.

The Group had a year end property, plant and equipment balance of £142.9 million (2008: £152.3 million). Additions of £11.6 million (2008: £26.2 million) were made during the year and the depreciation charge for the year was £15.8 million (2008: £15.3 million). The most signifi cant proportion some £117.7 million (2008: £128.2 million) relates to access and

scaffolding equipment. The Group’s real property assets totalled £17.0 million (2008: £17.7 million) and includes £2.0 million in respect of 130 acres of land adjacent to the M25 in Uxbridge, UK.

Current trade and other receivables decreased by £28.7 million to £156.0 million (2008: £184.7 million). Trade receivables have decreased by £12.7 million to £112.6 million (2008: £125.3 million) refl ecting further improved credit control procedures across the Group. At the year end trade receivables represented 62.7 days (2008: 73.4 days) of invoicing.

Non current provisions for other liabilities and charges of £85.6 million (2008: £14.4 million) primarily relate to industrial disease liabilities comprising £9.7 million (2008: £9.7 million) in respect of the estimated costs of settling notifi ed claims and £70.5 million (2008: £nil) in respect of the additional provision recognised for the estimated future liability.

PensionsThe Group Defi ned Benefi t Pension Scheme had a net surplus of £10.5 million as at 31 December 2009 (2008: £10.1 million), this continues to be restricted to £nil in the accounts under IFRIC 14.

Alcoa Kwinana refi nery, AustraliaRefractory services at the Iron Ore Pellet Plant, Bahrain

Total assets1. UK – £87.1m2. Gulf/Middle East – £84.9m3. CIS, Mediterranean & North Africa – £24.0m4. Far East/Pacifi c Rim – £310.2m

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In 2009, Cape again demonstrated an excellent health and safety performance across the Group and in particular we are pleased to report that our health, safety and environmental performance continues to improve within our international operations across a range of key performance indicators.

The level of Lost Time Incidents (LTI) performance, the primary international benchmark to measure our safety performance, this year has signifi cantly reduced by 19% on 2008 fi gures. The Group achieved an LTI frequency rate of 0.065 per 100,000 hours worked which has exceeded our internal target and is truly world class within our industry sector. We continue to steer the business on its journey to the ultimate goal of zero injuries/accidents and no harm to the environment.

In 2009 we consolidated the initiatives introduced in 2008. We also introduced new initiatives designed to help Cape continue to improve its health, safety and environmental performance, the most notable being:

Monitoring the performance of our company wide Golden RulesOur Golden Rules are essential to ensure the health and safety of our people and members of the public who could be affected by our operations. These are now fully embedded in everything we do and we have been monitoring performance to ensure all of our operations abide by these set of expectations.

An additional health, safety and quality accreditation for our operations in KuwaitCape actively seeks external verifi cation of our health, safety, environment and technical performance by utilising external accreditors certifi ed by the UKAS accreditation authority. This year we again increased the number of international health, safety and quality accreditations. Coverage now includes our operations in Kuwait, bringing the total number of certifi cates of conformity for ISO 9001 (quality systems), 14001 (environmental) and OSHAS 18001 (health and safety) to 24.

The update of our internationally recognised OSHAS 18001 health and safety accreditation to the latest 2007 versionThis was a considerable achievement as it involved reviewing all relevant legislation impacting health and safety in the countries in which we operate and positively demonstrating that our processes and systems were fully compliant with the local laws and regulations.

CapeSafe our branded health and safety campaign vehicle was reinforced throughout 2009 with a number of initiatives such as:

– high quality poster campaign designed to make our employees think about health and safety and continue to make it their fi rst priority;

– introduction of articles and information on our intranet systems available to all employees with web access; and

– marking work wear with CapeSafe references. In countries such as Australia work wear is an important focal point. All of our equipment and clothing was therefore marked with CapeSafe references to help remind our people of the importance of health and safety to themselves, colleagues and members of the public.

Training

It is vital that we learn from every opportunity to improve our health and safety performance. To aid in this process, during the next 12 months over 50 health and safety managers will be fully trained in incident investigation and root cause analysis. We have selected the internationally recognised TapRoot® system to assist us solve problems by fi nding and fi xing root causes that when corrected, stop problems from happening over and over again. It is our ultimate goal for all of our dedicated health and safety practitioners to be fully trained in the TapRoot® system.

2009 Group health, safety and the environment

CapeSafe Personal Protective Equipment (PPE)


Annual Report 2009

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Safety briefi ng at the Shell St Fergus Gas Plant, Aberdeen, UK

2009 Group health, safety and the environmentcontinued

0.065is the Lost Time Incident (LTI) frequency rate

Ensuring that our people are effectively trained to undertake their duties is fundamental to our excellent health and safety performance. To this end Cape prides itself on the investment we make in this area. Throughout 2009 we have continued to invest in the future. This included the relocation and extension of our comprehensive training facilities in Manila, the Philippines. We also increased the number of courses and competency assessment activities offered to our people and our clients there.

Asbestos management

Cape prides itself on working to the highest standards possible. This means not only meeting legislative requirements in the countries we work in, but setting aspirational goals far exceeding those simply required by law. Throughout 2009 we undertook a fundamental review of our systems and procedures and have identifi ed 14 separate standards to which we aspire. We are now ready to roll these out across all of our operations. Every manager and employee linked directly to asbestos operations, and those who will be responsible for setting the tone of how we do business, will undergo thorough training during 2010 to ensure that everyone knows the standards to which we expect the Company to operate.

Health and Safety awards

Cape’s health, safety and environmental performance is internationally recognised as being of the highest standard. This recognition has been offi cially endorsed by a number of awards, prizes and certifi cations. During 2009 all our regional businesses were recognised by our clients for their excellent health and safety performance and over 25 separate awards have been granted with examples being:

– SABIC global safety award (fi rst place);

– Award from Amec for nine years without a Lost Time Accident on its Malampaya CMB Project – the Philippines;

– QAPCO Best Contractor Safety Award – Qatar;

– RoSPA Gold Award for Occupational Health and Safety in May 2009 for the second consecutive year – Cape DBI UK; and

– Shell MEG Project – Cape’s contribution to 10 million man-hours without health and safety lost time injury.


Annual Report 2009

Risks and uncertainties

Potential impact

ExternalOperating activities may be affected by factors outside our control. These include climatic conditions, unusual or unexpected geological occurrences, environmental hazards, industrial conditions, technical failures, labour disputes, governmental actions or inactions, delays in construction, availability of materials or parts and shipping, import or customs delays.

Changes in the political environment in certain regions may result in Cape, or its clients, losing commercial or legal protections or being less able to control their operations.

Mitigation

These external factors are normally likely to affect a specifi c location, customer relationship or a single contract. Cape’s business is diverse by geography, number of clients, range of services and exposure to industries or sectors. This portfolio diversifi cation reduces the impact of Cape’s overall exposure to individual risks.

Cape’s policy is to avoid markets/regions which it assesses as high risk.

Cape maintains a broad geographic footprint and has sought to acquire businesses in safe and politically stable countries.

Risk is mitigated by a strong senior management presence in each region and particularly where risks are identifi ed, regions operate in close communication with central management.

Local legal counsel are regularly engaged to ensure compliance with local legislation and to update and advise managers on actual or potential changes in legal or regulatory framework.

Risk is an unavoidable facet of any business activity. Cape faces a number

of risks in undertaking its operations around the world. We are alive to the

issue of risk, work tirelessly to identify and evaluate risks associated with our

business and to plan measures to mitigate known risks. Identifi ed risks and

agreed mitigation are recorded in an active risks register.

No such review of risks and uncertainties can be exhaustive and risks might

exist which have not been identifi ed by the Directors. New risks might also

emerge and the likelihood of known risks occurring and the impact they

might have upon the Group may change from time to time.


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Risks and uncertaintiescontinued

Potential impact

Competition Losing certain key customers could have an adverse effect on Cape’s revenues, particularly where these customers have several contracts with Cape.

In certain markets the Group has a signifi cant market share such that applicable competition law might restrict the Group from making material acquisitions.

The majority of Cape’s customers are either in, or are dependent upon, the energy and natural resources sectors. Cape’s earnings therefore depend on long-term energy demand particularly for oil, gas and electricity.

Cyclical downturns could lead to declines in demand for Cape’s services.

Potential impact

OperationalA failure to maintain the highest Health, Safety and Environmental (HSE) standards could result in injury to our employees or others involved in our operations. Failure to deliver HSE excellence could result in a material loss of customers and/or damage to Cape’s reputation and the environment.

The loss of key senior management or employees, may adversely affect Cape’s business.

Cape’s ability to successfully operate and grow the business is largely dependent on its ability to attract and retain high-quality personnel. An inability to attract and retain well-qualifi ed personnel could materially adversely affect Cape’s business, operating results or fi nancial condition.

Mitigation

Cape’s top 10 customers accounted for 31% of Group revenues in 2009, with the largest customer accounting for 8% of Group revenues. Cape has a broad customer base and seeks to maintain a balanced customer profi le.

Cape has developed long-standing relationships with customers based on service quality, reliability, reputation and safety. These relationships are at a variety of layers from site level to senior management. Strong relationships support revenue retention and growth through ongoing contract award and renewal.

In most existing markets Cape has a very small market share.

Cape has a broad customer base and geographic footprint and has avoided marginal markets with high production costs, such as Canada.

Most contracts cover a multi-year engagement and are for work of a long-term nature. Cape therefore has limited exposure to fl uctuations in the spot price of any one energy product, or its short-term demand.

Cape is fi rmly positioned in the downstream energy infrastructure, power generation and later cycle production markets. These markets are less impacted by cyclical downturns than upstream, exploration segments.

Cape’s wide range of essential services ensures it can serve customers’ needs through the lifecycle of the asset, whether related to installation, maintenance or decommissioning.

Mitigation

Cape values its excellent reputation for safety and HSE related matters around the world. Cape’s investments in systems and resources, with around 425 people in full-time HSE roles across the Group, continues to deliver signifi cant reductions in accidents, working days lost and environmental incidents.

Occupational health and safety performance continues to be in the upper quartile of comparable companies, with a Lost Time Incident (LTI) frequency rate of 0.065 per 100,000 hours worked for the Group as a whole.

Cape’s regionalised organisational structure provides considerable management autonomy and opportunity for senior personnel to develop within the business.

Annual performance appraisals are conducted to assess executives’ performance and to discuss career goals and succession planning.

Senior executive remuneration is reviewed against market data provided by specialist remuneration consultants to ensure awards are competitive.

Long-term incentive plans are in place to encourage the retention of the key management group.


Annual Report 2009

Potential impact

FinancialFailure to achieve satisfactory returns on investments.

Inadequate fi nancial controls leading to lack of integrity or loss of fi nancial data.

Other fi nancial risks including foreign exchange and interest rate exposure are described further in note 23 to the Group fi nancial statements.

The eventual value of contracts may be lower than expected. Many of Cape’s contracts are term maintenance contracts and do not guarantee revenue levels.

Fixed price contracts expose Cape to potential cost overruns.

Potential impact

AsbestosA number of Cape’s subsidiary companies used asbestos in their manufacturing activities until the 1970’s and continue to receive claims mainly from former employees who have contracted various diseases as a result of exposure to asbestos. Future asbestos-related liabilities are estimated and provided for. However the level of claims arising in the future is inherently uncertain. Further detail is provided in note 26 to the Group fi nancial statements.

External factors (e.g. legislation changes, new types of claims) could result in a requirement for Cape to make an annual top-up payment to fund the Scheme.

Mitigation

Cape carries out detailed assessments and reviews of existing and potential investments including external legal and fi nancial diligence where appropriate.

Cape has high quality and experienced fi nance, internal audit, tax and treasury teams that operate at the head offi ce and across the regions.

Cape operates a stringent contract review process with clear authority limits governing the acceptance of contracts. Contracts values are often signifi cantly different from initial estimates or from prior year amounts. However across many contracts, increases and reductions tend to offset.

Cape seeks to avoid large fi xed price contracts, with the majority of its contracts being cost reimbursable or at scheduled rates.

Mitigation

Employee claims were mostly insured from the mid 1970’s and fully insured from 1981 onwards.

A Scheme of Arrangement was implemented in 2006 to provide both claimants and Cape and its shareholders greater certainty over the funding of future asbestos claims and related cash fl ows.

An independent actuary estimates the number and value of unpaid and future claims on a triennial basis. In addition, Cape closely monitors claims levels, which are currently in line with projections.

Any annual top up payment required is restricted to a proportion of Cape’s free cash fl ow.

The Board considers that the value of the total future asbestos liabilities can be estimated with suffi cient reliability to enable a provision to be made.


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Annual Report 2009

1. Sean O’Connor (aged 61)Non-Executive Chairman Sean O’Connor fi rst joined the Board as a Non-Executive Director in 1996 and served until 2004. He rejoined in the same capacity in April 2007 and became Chairman in June 2008. Sean O’Connor also sits on the Remuneration Committee and is Chairman of the Nomination Committee. Sean O’Connor was a marketing and advertising executive until 1989 when he founded and chaired the Stoves Group PLC and later chaired Mediakey plc, Applied Energy Holdings Limited and Babel Media Limited. He is currently Chairman of Springboard Urban Limited and a Non-Executive Director of Sportingbet plc, Graphite Enterprise Trust PLC and Crow TV Limited.

2. Martin K May (aged 56)Chief Executive Martin K May was appointed as interim Chief Executive in June 2002 and became Executive Chairman of Cape plc in June 2003, a role that he relinquished on becoming Chief Executive in 2006. Since July 2006, Martin K May has worked with the senior management team to drive forward performance in different areas within the Cape Group and ensure that each region maximises the opportunities provided and consolidates its international footprint within the market. Martin K May is a Fellow of the Institute of Chartered Management Accountants and was a founder member and Fellow of the Institute for Turnaround Practitioners.

3. Richard Bingham (aged 47)Chief Financial Offi cer Richard Bingham was appointed Chief Financial Offi cer (CFO) in June 2008. With a background in reorganisation and turnaround, he has previously held executive and non-executive roles at several public and privately owned companies as well as that of CFO of a national law fi rm. Prior to this, Richard Bingham spent several years in professional practice with PricewaterhouseCoopers.

4. David McManus (aged 56)Non-Executive Director David McManus was appointed as a Non-Executive Director in 2004 and served as Non-Executive Chairman between 2006 and 2008. He is Chairman of the Remuneration Committee and is a member of the Audit and Nomination Committees. David McManus is currently Executive Vice President of Pioneer Natural Resources, a US listed oil and gas company, with responsibility for International Operations. Prior to Pioneer he was Executive Vice President with BG Group where he was responsible for developing technical and commercial capabilities within the company and directing assets in the Eastern Hemisphere. Previously, David McManus was President of ARCO Europe until ARCO’s merger with BP in 2000.

5. David Robins (aged 57)Non-Executive DirectorDavid Robins joined the Cape Board as a Non-Executive Director in 2006. He is the Board’s Senior Independent Director and chairs the Audit Committee. He is also a member of the Nomination Committee and the Remuneration Committee. David Robins is a partner with City law fi rm, Berwin Leighton Paisner LLP, specialising in all aspects of corporate fi nance including acquisitions, mergers and funding issues. Before practising as a solicitor, David Robins was a corporate fi nance executive with a leading investment bank. He has previously held directorships at Cybit Holdings plc, a telematics services provider, and Hornby plc, the toy and hobby business.

1 2 3 4 5

The Board consists of fi ve directors in respect of whom brief biographies are set out below:

The Board


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Directors’ report

The Directors have pleasure in submitting their report and audited fi nancial statements of the Group and the Company for the year ended 31 December 2009.

Principal activitiesCape plc is a holding company. The principal activities of its subsidiary undertakings (‘subsidiaries’) during the year were the provision of multi-disciplinary non-mechanical industrial services principally to the energy and mineral resources infrastructure sectors. The range of services included access systems, insulation, refractory, painting, coatings, blasting, industrial cleaning, training and assessment. Details of the Company’s principal subsidiaries are listed on page 95. The Group also has branches located in Azerbaijan, Kazakhstan, New Caledonia, Ireland, Trinidad and Tunisia.

Business review and future developmentsThe Directors present a Business Review as required by section 417 of the Companies Act 2006. This comprises:

– the Chairman’s statement on pages 6 and 7 of the Annual Report;

– the Chief Executive’s review on pages 18 and 19 of the Annual Report;

– the Operating and fi nancial review on pages 20 to 29 of the Annual Report;

– the fi ve-year fi nancial summary and key performance indicators on page 94 of the Annual Report; and

– the discussion of the risks and uncertainties facing the Group set out on pages 33 to 35 of the Annual Report.

DividendsNo interim dividend was paid for the year ended 31 December 2009 (2008: nil pence). The Directors do not recommend the payment of a fi nal dividend for the year ended 31 December 2009 (2008: nil pence).

Property, plant and equipmentDetails of the movements in property, plant and equipment are given in note 14 to the Group fi nancial statements on page 65.

Charitable and political donationsDuring the year the Group made charitable donations of £17,906 (2008: £40,037) towards various local and national causes. There were no political donations (2008: £nil).

Share listingThe Company’s ordinary shares are admitted to and traded on AIM, a market operated by the London Stock Exchange. The Company also has in issue deferred shares, 3.5% preference shares and one plc Scheme Share. The rights and obligations attached to each share class are listed below:

Ordinary shares of 25p (‘Ordinary Shares’)The Company’s Ordinary Shares represent 86.39% of its total issued share capital. At a meeting of the Company every member present in person or by proxy shall, have one vote for every Ordinary Share of which they are the holder. Holders of Ordinary Shares are entitled to receive dividends. On a winding-up or other return of capital, holders are entitled to share in any surplus assets pro rata to the amount paid up on their Ordinary Shares. The Ordinary Shares are not redeemable at the option of either the Company or the holder. There are no restrictions on the transfer of Ordinary Shares.

Deferred shares of £1 (‘Deferred Shares’) The Company’s Deferred Shares represent 12.86% of its total issued share capital. Holders are not entitled to receive notice of, or to attend or vote at, any general meeting of the Company. Holders have no rights to receive any dividend. On a winding-up or other return of capital, holders have the right to receive out of the assets of the Company available for distribution among the members a sum not exceeding the amount paid up on the Deferred Shares as may be available after payment to the holders of the Ordinary Shares of the sum of £100 per share. The Deferred Shares are not redeemable at the option of either the Company or the holder. There are no restrictions on the transfer of shares unless the Company makes an offer to buy back the Deferred Shares, in which event a holder is not permitted to transfer any or all of their Deferred Shares.

3.5% Preference shares of £1 (‘Preference Shares’)The Company’s Preference Shares represent 0.75% of its total issued share capital. Holders are not entitled to attend or vote at any general meeting. A fi xed cumulative preferential dividend of 3.5% per annum is payable half yearly in arrears on 31 March and 30 September. On a winding-up or other return of capital, holders are entitled only to the repayment of capital together with all arrears or accruals of the fi xed preferential dividend. The Preference Shares are not redeemable at the option of either the Company or the holder. There are no restrictions on the transfer of shares.


Annual Report 2009

Directors’ reportcontinued

plc Scheme share of £1 (‘Scheme Share’)The Company has only one Scheme Share in issue. The Scheme Share carries two votes for every vote which the holders of the other classes of shares in issue are entitled to exercise on any resolution proposed during the life of the Scheme to engage in certain activities specifi ed in the Company’s Articles of Association. The Scheme Share is held on behalf of the Scheme creditors. The Company will not be permitted to engage in certain activities specifi ed in the Company’s Articles of Association without the prior consent of the holder of the Scheme Share. The rights attaching to the Scheme Share are designed to ensure that Scheme assets are only used to settle Scheme claims and ancillary costs. The Scheme Share does not confer any right to receive a distribution or any right to receive a return of surplus capital. The Scheme Share holder has the right to require the Company to redeem the Scheme Share at par value on or at any time after the termination of the Scheme.

DirectorsThe Directors of the Company during the year and at the date of this report, were as follows:

Sean O’ConnorMartin K MayRichard Bingham David RobinsDavid McManus

Their biographical details can be found on page 36.

Directors’ election and rotationThe Company’s Articles of Association provide that at each Annual General Meeting one third of the Directors shall retire from offi ce and may, if eligible and willing to act, offer themselves for reappointment.

Sean O’Connor and David Robins are the Directors retiring by rotation under Articles 100.1 and 100.2 respectively and, being eligible, offer themselves for re-election at the Annual General Meeting. David Robins and Sean O’Connor are engaged under Letters of Appointment which are terminable on 12 months’ notice.

Directors’ interestsDetails of the interests of the Directors in the shares and share option schemes of the Company are detailed below.

As disclosed in note 35 to the Group fi nancial statements, no Director had any interests in any contract with the Company or its subsidiaries at any time during the year other than their service contracts and through the share option schemes. The Company has maintained insurance to cover Directors’ and Offi cers’ liability as defi ned in section 233 of the Companies Act 2006.

Directors’ interests in sharesThe benefi cial interests of the Directors of the Company and their families in the Ordinary Shares of the Company are set out below:

Ordinary shares 15 April 31 December acquired during 31 December 2010 2009 2009 2008 Number Number Number Number

Current Directors (as at 31 December 2009) Sean O’Connor 150,700 150,700 105,000 45,700Martin K May 600,000 585,000 85,000 500,000Richard Bingham 26,500 26,500 – 26,500David Robins 36,350 36,350 13,000 23,350David McManus 35,000 35,000 – 35,000

None of the Directors had an interest in the shares of any other company in the Group. Martin K May was the only Director to purchase shares between 31 December 2009 and 15 April 2010, purchasing 15,000 shares on 9 April 2010.


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No other Directors have been granted options or awards over shares in the Company or other Group entities. None of the terms and conditions of the share options or awards were varied during the year. All options and awards were granted in respect of qualifying services.

On 17 March 2010, Martin K May and Richard Bingham were awarded 243,455 and 123,691 Performance Share Plan (‘PSP’) awards respectively, which will vest (subject to meeting certain performance conditions) on 17 March 2013.

The PSP awards are conditional awards granted at no cost to the Directors. Vesting of these shares is subject to Cape plc adjusted diluted Earnings Per Share (‘EPS’) meeting the specifi ed performance criteria over a three-year vesting period. The performance criteria is adjusted diluted EPS growth of the Retail Price Index (‘RPI’) plus 3% for the minimum of 30% of the shares awarded to vest, and EPS growth of RPI plus 10% for all of the shares awarded to vest.

The Employee Incentive Plan (‘EIP’) options were granted at the option prices detailed above and are subject to the condition that they will not be exercisable unless the performance of the Company’s adjusted EPS over a set three-year period exceeds the growth in the Consumer Price Index over the same period by 3% per annum.

Gains made by Directors on Share OptionsNone of the Directors exercised any share options during the year.

Employee Benefi t Trust (‘EBT’)The Company has established an Employee Benefi t Trust (‘EBT’) to satisfy the awards granted under the Performance Share Plan. The trustees of the EBT are Sanne Trust Company Limited which is resident in Jersey. The EBT currently holds no Ordinary Shares.

Treasury sharesThe Company currently holds no Ordinary Shares in treasury.

Directors’ indemnitiesAs permitted by the Companies Act 2006, the Company has indemnifi ed the directors and offi cers in respect of proceedings which may be brought by third parties and such indemnifi cation was in place throughout the year. Neither the Company’s indemnity nor insurance provides cover in the event that a director or offi cer, is proved to have acted fraudulently or dishonestly.

A qualifying indemnity provision has also been made by the Company and was in force throughout the fi nancial year for the benefi t of the directors of the Company’s subsidiaries.

Supplier payment policyThe supplier payment policy for Group companies is to agree terms and conditions for business transactions with suppliers. Suppliers are made aware of the Group’s terms of payment. Payment is then made subject to these terms and conditions being met. The Company did not have any amounts owed to trade creditors at the end of the year (2008: nil). The Group had £30.0 million of trade payables at the end of the year (2008: £43.4 million) which represented 43 payable days (2008: 60).

Treasury policyThe Group’s policy on treasury and fi nancial risk (see note 23) is set by the Board and is subject to regular reporting and review. The main risks faced by the Group relate to foreign currency risk and liquidity risk.

A signifi cant proportion of the Group’s business is conducted overseas. The Group is therefore subject to exchange rate risk when translating the results and assets of its overseas subsidiaries into GB pounds. Where signifi cant transactional exchange rate risks are identifi ed, then appropriate currency contracts are used to hedge these transactions.

Directors’ share options and awardsThe following Directors held options and/or awards in the Company’s share schemes during the year:

Market At During 2009 At Price at Date from 31 December 31 December Option date of which ExpiryPlan Grant Date 2008 Granted Exercised Lapsed 2009 Price exercise exercisable Date

Martin K May EIP 7 July 2006 400,000 – – – 400,000 176p – 7 July 2009 7 July 2016 EIP 22 March 2007 200,000 – – – 200,000 269p – 22 March 2010 22 March 2017 PSP 28 April 2008 190,122 – – – 190,122 – – 28 April 2011 N/A PSP 30 April 2009 – 703,835 – – 703,835 – – 30 April 2012 N/A

Richard Bingham PSP 28 April 2008 131,119 – – – 131,119 – – 28 April 2011 N/A PSP 30 April 2009 – 357,593 – – 357,593 – – 30 April 2012 N/A


Annual Report 2009

Directors’ reportcontinued

The Group’s committed facilities all carry interest rates based on LIBOR and therefore the Group is exposed to interest rate movements. As at 31 December 2009, 56% of the Group borrowings were hedged.

Employment policiesThe companies in the Group operate within broadly prescribed personnel and employment policies. Each company develops procedures which are most appropriate to the circumstances within which it operates. The Group’s training, career development and promotion policies provide equal opportunities for all employees.

Employment of disabled personsIt is Group policy to permit, wherever practicable, the employment of disabled persons and to provide appropriate opportunities for their training, career development and promotion. Where employees have become disabled in the service of the Group, every effort is made to rehabilitate them in their former occupation or in some suitable alternative.

Employee involvementThe Group continues its practice of keeping all employees informed on matters affecting them and the Group, so that a common awareness amongst all employees is developed in relation to the fi nancial and economic factors that affect the performance of the Group. Where applicable, the Group consults employees or their representatives on a regular basis so that the views of employees can be taken into account in making decisions that are likely to affect their interests.

Senior management is kept abreast of developments in fi nancial, commercial and personnel matters and this enables them to ensure that employees at the operational level are kept informed. The Group operates pension schemes for the benefi t of eligible employees in the UK and overseas. The funds of the pension schemes are administered by Trustees and they are held separately from Group funds.

In 2006, the Group introduced a Save As You Earn scheme (the Sharesave Plan) for eligible employees. The Directors believe that share ownership among employees encourages team effort and will contribute to the ultimate success of the Group.

Health and safety policyThe Group has issued a policy statement on its commitment to a safe working environment for all employees which is detailed on pages 30 to 32. The Chief Executive is responsible for the implementation of the Group policy on health and safety within his area of responsibility. During the year, Group operations throughout the UK and the rest of the world, were subjected to internal and third party audits to monitor compliance with Company procedures and statutory requirements.

Statement of Directors’ responsibilitiesThe Directors are responsible for preparing the Annual Report and the Group and Parent Company fi nancial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare fi nancial statements for each fi nancial year. Under that law the Directors have prepared the Group fi nancial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the Parent Company fi nancial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The Group and Parent Company fi nancial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profi t or loss of the Group for that period.

In preparing those fi nancial statements, the Directors are required to:

– select suitable accounting policies and then apply them consistently;

– make judgements and estimates that are reasonable and prudent;

– state that the Group fi nancial statements comply with IFRSs as adopted by the European Union, and with regard to the Parent Company fi nancial statements that applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the fi nancial statements; and

– prepare the Group and Parent Company fi nancial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business, in which case there should be supporting assumptions or qualifi cations as necessary.

The Directors confi rm that they have complied with the above requirements in preparing the fi nancial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the fi nancial position of the Company and the Group and to enable them to ensure that the Group and Parent Company fi nancial statements comply with the Companies Act 2006 and, as regards the Group fi nancial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


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The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of fi nancial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on page 36, confi rm that, to the best of their knowledge:

– the Group fi nancial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, fi nancial position and profi t of the Group; and

– the Directors’ report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the risks and uncertainties that it faces, set out in the risks and uncertainties review on pages 33 to 35.

The Directors are responsible for the maintenance and integrity of the Group website www.capeplc.com. Legislation in the UK governing the preparation and dissemination of fi nancial statements may differ from legislation in other jurisdictions.

Statement of disclosure of information to auditorsSo far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware. Relevant information is defi ned as information needed by the Company’s auditors in connection with preparing their report. Each Director has taken all the steps (such as making enquiries of other Directors and the auditors and any other steps required by the Director’s duty to exercise due care, skill and diligence) that he ought to have taken in his duty as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Substantial holdingsThe Directors have been advised that as at 1 April 2010 the following have interests of 3% or more in the issued ordinary share capital of the Company:

Institution No. of shares % holding

M&G Investment Management 15,319,090 13.2 BlackRock 10,532,744 9.08 Deutsche Bank as principal 8,215,591 7.08 JPMorgan Asset Management 8,014,793 6.91 Slater Investments 7,174,577 6.18 Schroder Investment Management 6,796,747 5.86 Investec Asset Management 4,326,448 3.73 Acadian Asset Management 3,669,098 3.16 Four Capital Partners 3,534,172 3.05

The Company has not received notifi cation of any other interests held by persons acting together which at 1 April 2010 represented 3% or more of the issued ordinary share capital.

Purchase of own sharesAt the Annual General Meeting held on 20 May 2009, shareholders approved a resolution to authorise the Company generally and unconditionally to make one or more market purchases of the issued Ordinary Shares of the Company up to a maximum aggregate nominal value of £4,309,216 (representing 14.99% of the Company’s then issued ordinary share capital). This authority will expire at the 2010 Annual General Meeting, and a resolution will be proposed to renew this authority up to a maximum aggregate nominal value of £2,900,922 representing approximately 10% of the Company’s issued ordinary share capital. No shares were purchased under this authority during the year.

Annual General MeetingThe Company proposes to convene the Annual General Meeting for 10 am on 20 May 2010 at the offi ces of Berwin Leighton Paisner LLP at Adelaide House, London Bridge, London EC4R 9HA. The notice of Annual General Meeting is contained in a circular to be sent to Shareholders at the same time as the 2009 Annual Report and Accounts.

Independent auditorsThe auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in offi ce, and a resolution concerning their reappointment will be proposed at the Annual General Meeting.

By order of the BoardJeremy GormanCompany SecretaryCape plc9 The SquareStockley ParkUxbridgeUB11 1FW15 April 2010


Annual Report 2009

Compliance with Combined CodeCape is committed to achieving high standards of business integrity, ethics and professionalism across its worldwide operations.

As a company whose shares are traded on AIM, the Company is not required to comply with the full requirements of the Combined Code on Corporate Governance revised in June 2008. However, the Board continues to implement policies and procedures designed to comply with the Combined Code as far as reasonably practicable and appropriate for a public company of its size and complexity.

The Board is accountable to the Company’s Shareholders for good governance and the statements set out below describe how the principles identifi ed in the Combined Code are applied by the Group.

The BoardThe Board has responsibility for the overall management and performance of the Group and is responsible for formulating, reviewing and approving the Company’s long-term objectives, budgets and commercial strategy.

The Company has established properly constituted Audit, Remuneration and Nomination committees of the Board with formally delegated duties and responsibilities. Decisions concerning the direction and control of the business are made by the Board, and a formal schedule of matters specifi cally reserved for the Board is in place.

Throughout the year, the Board comprised an independent Non-Executive Chairman (Sean O’Connor), two Executive Directors (Martin K May, Chief Executive and Richard Bingham, Chief Financial Offi cer) and two other Non-Executive Directors (David Robins and David McManus).

An agreed procedure exists for Directors in the furtherance of their duties to take independent professional advice. Newly appointed Directors are made aware of their responsibilities through the Company Secretary. The Company carries out for new Directors a detailed induction process which includes discussions with senior managers and familiarisation visits to the Company’s operations.

No individual or group of Directors dominates the Board’s decision making. Each of the Non-Executive Directors is independent of management and has no cross-directorships or other signifi cant links which could materially interfere with the exercise of his independent judgement. Collectively, the Non-Executive Directors bring a valuable range of expertise in assisting the Company to achieve its strategic aims.

All Directors are subject to election by the shareholders at the fi rst opportunity after their initial appointment to the Board and to re-election thereafter at intervals of not more than three years. Biographical details of the Directors are set out on page 36.

The Company has a separate Chairman and Chief Executive each with their own responsibilities. The Chairman is responsible for the effective running of the Board and the Chief Executive is ultimately responsible for all operational matters and the fi nancial performance of the Company.

Meetings with Non-Executive DirectorsThe Chairman holds meetings as required with the Non-Executive Directors without the Executive Directors being present.

Matters reserved for the BoardThe Board has a formal schedule of matters reserved for its decision which includes:

– Group strategy and policy;

– Group corporate and capital structure;

– fi nancial reporting and controls;

– communication with shareholders;

– Board membership and other senior management appointments; and

– material transactions.

Other matters are delegated to Board Committees, individual Directors or senior management where appropriate. In addition, the Board receives reports and recommendations from time to time on any matter which it considers signifi cant to the Group.

Board meetingsThe Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. This includes detailed monthly management accounts and an analysis of the Group’s actual performance against budget and the previous year.

The Board usually meets formally not fewer than eight times a year. Informally, Board members meet more often.

Corporate governance report


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Board committeesThe Board delegates certain powers to designated committees. The terms of reference for the principal Committees can be obtained by contacting the Group Company Secretary at the Company’s registered offi ce or viewed on the Company’s website at www.capeplc.com.

Audit CommitteeThe Audit Committee has formal Terms of Reference which are approved by the Board. The Audit Committee is responsible for exercising the full powers and authority of the Board in accounting matters, fi nancial reporting and internal controls.

Its primary responsibilities are to monitor the quality of internal controls and ensure that the fi nancial performance of the Company is properly measured and reported on. It receives and reviews reports from the Company’s management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee meets at least twice a year and has unrestricted access to the Company’s auditors.

The Committee consists solely of Non-Executive Directors, each of whom has fi nancial experience in a large organisation. During the year, the Audit Committee comprised David Robins (Chairman) and David McManus. At the invitation of the Committee, the Chairman, the Chief Executive, Chief Financial Offi cer, Group Company Secretary, Group Financial Controller, Director of Internal Audit and the Company’s external auditor may attend meetings.

Remuneration CommitteeThe Remuneration Committee has formal Terms of Reference which are approved by the Board. Its principal responsibility is to determine the framework or broad policy for the remuneration of the Chairman and the Executive Directors, to consider and determine all elements of the remuneration of those Directors and to review Board performance. No Director takes part in any discussion concerning his own position. The Committee also determines and recommends the grant of share options under the Company’s Performance Share Plan.

The Committee consists solely of Non-Executive Directors and, during the year, comprised David McManus (Chairman), David Robins and Sean O’Connor.

At the invitation of the Committee, the Chief Executive, Chief Financial Offi cer, Group HR Director, Group Company Secretary and external advisers may attend meetings.

Nomination CommitteeThe Nomination Committee has formal Terms of Reference which are approved by the Board. It is responsible for monitoring and formally reviewing the performance, composition, balance and expertise of the Board as a whole and making an appraisal of the contribution of individual Directors, including a review of their time commitment and attendance records. The Committee also considers succession planning for the Board and Group senior management. When necessary, the Committee prepares a description of the role to be fi lled and engages external consultants to administer a detailed search and the generation of a shortlist of suitable candidates. Any recommendations for appointments or replacements are brought before the Board and in exercising this role, the Directors have regard to the recommendations put forward in the Combined Code.

The Committee consists solely of Non-Executive Directors and, during the year, comprised Sean O’Connor (Chairman), David McManus and David Robins. At the invitation of the Committee, the Chief Executive, Chief Financial Offi cer, Group HR Director, Group Company Secretary and external advisers may attend meetings.

Relations with shareholdersThe Company values the views of all its shareholders and recognises their interests in the Company’s strategy and performance. The Chief Executive has the responsibility for ensuring effective communication with shareholders and that the Board is fully aware of major shareholders’ views and opinions. The Chief Executive, along with the Chairman and Chief Financial Offi cer are available to meet shareholders for this purpose.

Individual attendance by Directors at full meetings of the Board and of other committees

Board Audit Remuneration Nomination

No. of meetings No. attended No. of meetings No. attended No. of meetings No. attended No. of meetings No. attended

Sean O’Connor 8 8 2* 2* 3 3 1 1Martin K May 8 8 2* 2* – – – –Richard Bingham 8 8 2* 2* – – – –David Robins 8 8 2 2 3 3 1 1David McManus 8 8 2 2 3 3 1 1

* By invitation only.


Annual Report 2009

Corporate governance reportcontinued

The Annual and Interim Reports are mailed to all shareholders. These reports, together with regular trading updates, signifi cant contract wins and health and safety achievements are published via the Regulatory Information Services and on the Company’s website at www.capeplc.com.

All shareholders are encouraged to attend the Company’s Annual General Meeting at which the Chairman and Chief Executive give an account of the progress of the business over the year and provide an opportunity for shareholders to ask any questions they may have. The Board attends this meeting and is available to answer questions from those shareholders present.

Senior Independent DirectorDavid Robins is Cape’s Senior Independent Director (‘SID’). The role of the SID is to be available to shareholders if they have concerns which contact through the normal channels of Chairman, Chief Executive or Chief Financial Offi cer has failed to resolve, or for which such contact is inappropriate, to attend suffi cient meetings with a range of major shareholders and fi nancial analysts to obtain a balanced understanding of the issues and concerns of such shareholders, to chair the Nomination Committee when it is considering succession to the role of Chairman of the Board and to meet with the Non-Executive Directors, at least annually and on such other occasions as are deemed appropriate, to appraise the Chairman’s performance, without the Chairman present. This evaluation takes into account the views of the Executive Directors.

Audit, internal control and risk managementThe respective responsibilities of the Directors in connection with the Annual Report and Accounts are explained on page 40.

Following the publication of guidance for Directors, Internal Control: Guidance for Directors on the Combined Code, the Board confi rms that there is an ongoing process for identifying, evaluating and managing any signifi cant risks faced by the Group. A formal process is now in place and is regularly reviewed by the Board in the light of the Turnbull Guidance and the subsequent Flint Report. The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. However, such a system can only provide reasonable, but not absolute, assurance against material misstatement or loss. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives.

The Directors consider proper risk management to be crucial to the Group’s ongoing success. They give a high priority to ensuring that adequate systems and structures are in place to measure, analyse and limit exposure to risk. The Directors have established key procedures to ensure that internal controls are effective and are commensurate with a group of this size. A key control procedure is the day-to-day supervision of the business by the Directors. Other internal control procedures and reviews for effectiveness by the Board continue to be developed.

The Director of Internal Audit reports directly to the Audit Committee and will meet regularly with the Audit Committee in the absence of management. In addition, a procedure has been introduced by which employees may, in confi dence, raise concerns about possible improprieties in matters of fi nancial reporting or other matters.

Audit and auditor independenceAn additional responsibility of the Audit Committee is to keep under review the scope and cost effectiveness of the external audit. This includes recommending to the Board the appointment of the external auditors and for reviewing the scope of the audit, approving the audit fee and, on an annual basis, satisfying the Committee that the auditors are independent.

PricewaterhouseCoopers LLP are retained to perform audit and audit-related work on the Group, the Company and the majority of Group companies.

Deloitte LLP are retained to provide UK and overseas tax-related advice.

The Audit Committee monitors the nature and extent of non-audit work undertaken by the auditors. It is satisfi ed that there are adequate controls in place to ensure auditor independence and objectivity. The matter is kept under review and is a standing item on the agenda for the Audit Committee reports. Periodically, the Audit Committee monitors the cost of non-audit work undertaken by the auditors. The Audit Committee considers that it is in a position to take action if at any time it believes that there is a risk of the auditors’ independence being undermined through the award of this work.

The split between audit and non-audit fees for the year under review appears in note 9 on page 62.


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Independent auditors’ report to the members of Cape plc

We have audited the Group and Parent Company fi nancial statements (the ‘fi nancial statements’) of Cape plc for the year ended 31 December 2009 which comprise the Consolidated balance sheet, the Parent Company balance sheet, the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of cash fl ows, the Consolidated statement of changes in equity, and the related notes. The fi nancial reporting framework that has been applied in the preparation of the Group fi nancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The fi nancial reporting framework that has been applied in the preparation of the Parent Company fi nancial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of directors and auditorsAs explained more fully in the Statement of Directors’ responsibilities set out on page 40, the directors are responsible for the preparation of the fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit the fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Sections 495 and 496 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the fi nancial statementsAn audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Group’s and Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the directors; and the overall presentation of the fi nancial statements.

OpinionIn our opinion:

– the Group fi nancial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2009 and of its loss and cash fl ows for the year then ended;

– the Parent Company fi nancial statements give a true and fair view of the state of the Parent Company’s affairs as at 31 December 2009;

– the Group fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

– the Parent Company fi nancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

– the fi nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the fi nancial year for which the fi nancial statements are prepared is consistent with the fi nancial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

– the Parent Company fi nancial statements are not in agreement with the accounting records and returns; or

– certain disclosures of directors’ remuneration specifi ed by law are not made; or

– we have not received all the information and explanations we require for our audit.

Ian Morrison (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLeeds15 April 2010


Annual Report 2009

2009 2008

Before Before other items Other items Total other items Other items Total Notes £m £m £m £m £m £m

Continuing operationsRevenue 3 655.1 – 655.1 622.7 – 622.7

Operating profi t before other items 3 70.6 – 70.6 65.0 – 65.0Amortisation of intangible assets 13 – (2.9) (2.9) – (2.7) (2.7)Industrial disease costs 26 – (74.2) (74.2) – (5.7) (5.7)Exceptional items 4 – – – – (4.1) (4.1)Operating profi t/(loss) 5 70.6 (77.1) (6.5) 65.0 (12.5) 52.5 Share of post tax profi ts from joint ventures 1.6 – 1.6 0.5 – 0.5Total operating profi t/(loss) 72.2 (77.1) (4.9) 65.5 (12.5) 53.0

Finance income 10 0.8 0.8 1.6 0.8 2.0 2.8Finance costs 10 (12.3) – (12.3) (18.0) – (18.0)Profi t/(loss) before tax 60.7 (76.3) (15.6) 48.3 (10.5) 37.8 Taxation 11 (13.9) 28.0 14.1 (12.2) 6.3 (5.9)Profi t/(loss) from continuing operations 46.8 (48.3) (1.5) 36.1 (4.2) 31.9 Discontinued operations Loss attributable to discontinued operations – – – (0.2) – (0.2) Profi t/(loss) for the year 46.8 (48.3) (1.5) 35.9 (4.2) 31.7 Attributable to: Equity shareholders (4.1) 30.6Minority interest 2.6 1.1 (1.5) 31.7

(Loss)/earnings per share for profi t attributable to equity shareholders From continuing and discontinued operations– Basic 12 (3.5)p 26.7p– Diluted 12 (3.4)p 26.3p

From continuing operations – Basic 12 (3.5)p 26.9p– Diluted 12 (3.4)p 26.4p

The notes and information on pages 51 to 87 form part of these accounts.

Consolidated income statementfor the year ended 31 December 2009


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Consolidated statement of comprehensive incomefor the year ended 31 December 2009

2009 2008 Notes £m £m

(Loss)/profi t for the year (1.5) 31.7Other comprehensive income Currency translation differences 17.9 42.6Actuarial gain/(loss) recognised in the pension scheme 16 0.2 (3.3)Movement in restriction of retirement benefi t asset in accordance with IAS 19 16 (0.7) 2.6Cash fl ow hedges – fair value gains/(losses) 2.1 (6.5)Net investment hedges – fair value gains/(losses) 2.3 (5.5)Deferred tax on hedges 17 (1.2) 3.3Other comprehensive income for the year, net of tax 20.6 33.2Total comprehensive income 19.1 64.9 Attributable to: Equity shareholders 16.6 63.8Minority interest 2.5 1.1 19.1 64.9


Annual Report 2009

2009 2008 Notes £m £m

Non current assets Intangible assets 13 210.5 188.0Property, plant and equipment 14 142.9 152.3Investments accounted for using equity method 15 0.1 0.6Retirement benefi t asset 16 0.1 0.1Deferred tax asset 17 35.7 11.9 389.3 352.9 Current assets Inventories 18 17.3 17.2Trade and other receivables 19 156.0 184.7Cash – IDC* Scheme funds (restricted) 20 33.8 37.5Cash and cash equivalents 21 53.3 33.3 260.4 272.7 Liabilities Current liabilities Financial liabilities – Borrowings 22 (32.0) (38.9)– Derivative fi nancial instruments 23 (4.4) (6.9)Trade and other payables 24 (95.7) (133.0)Current tax liabilities 25 (11.3) (9.4) (143.4) (188.2)Net current assets 117.0 84.5 Non current liabilities Financial liabilities – Borrowings 22 (134.9) (159.9)Retirement benefi t liabilities 16 (5.6) (5.2)Deferred tax liabilities 17 (12.5) (11.7)IDC* provision 26 (80.2) (9.7)Other provisions 27 (5.4) (4.7) (238.6) (191.2)Net assets 267.7 246.2 Shareholders’ equity Called up share capital 29 33.3 33.1Share premium account 9.2 8.4Special reserve 1.0 1.0Other reserves 60.6 39.4Retained earnings 160.6 163.6Total shareholders’ equity 264.7 245.5Minority interests in equity 3.0 0.7Total equity 267.7 246.2

* IDC refers to the Industrial Disease Claims which are funded using the Scheme cash

Approved by the Board of Directors on 15 April 2010.

Sean O’Connor ChairmanRichard Bingham Chief Financial Offi cer


Consolidated balance sheet at 31 December 2009


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Consolidated statement of changes in equity at 31 December 2009

Share Share Special Retained Other Minority Capital Premium Reserve* Earnings reserves Total interest Total £m £m £m £m £m £m £m £m

At 1 January 2008 32.8 7.5 1.0 132.9 5.5 179.7 1.0 180.7Profi t for the year – – – 30.6 – 30.6 1.1 31.7Other comprehensive income: Currency translation differences – – – – 42.6 42.6 – 42.6Cash fl ow hedges – fair value losses in year – – – – (6.5) (6.5) – (6.5)Net investment hedges – fair value losses in year – – – – (5.5) (5.5) – (5.5)Deferred tax on hedges – – – – 3.3 3.3 – 3.3Actuarial loss recognised in the pension scheme – – – (3.3) – (3.3) – (3.3)Movement in restriction of retirement benefi t asset in accordance with IAS 19 – – – 2.6 – 2.6 – 2.6Total comprehensive income for the year ended 31 December 2008 – – – 29.9 33.9 63.8 1.1 64.9Transactions with owners: Acquisition of minority interest – – – – – – (1.0) (1.0)Reduction in minority interest – – – – – – (0.4) (0.4)Share options – proceeds from shares issued 0.3 0.9 – – – 1.2 – 1.2– value of employee services – – – 1.2 – 1.2 – 1.2– deferred tax on share options – – – (0.4) – (0.4) – (0.4) 0.3 0.9 – 0.8 – 2.0 (1.4) 0.6At 31 December 2008 33.1 8.4 1.0 163.6 39.4 245.5 0.7 246.2

At 1 January 2009 33.1 8.4 1.0 163.6 39.4 245.5 0.7 246.2(Loss)/profi t for the year – – – (4.1) – (4.1) 2.6 (1.5)Other comprehensive income: Currency translation differences – – – – 18.0 18.0 (0.1) 17.9Cash fl ow hedges – fair value gains in year – – – – 2.1 2.1 – 2.1Net investment hedges – fair value gains in year – – – – 2.3 2.3 – 2.3Deferred tax on hedges – – – – (1.2) (1.2) – (1.2)Actuarial gain recognised in the pension scheme – – – 0.2 – 0.2 – 0.2Movement in restriction of retirement benefi t asset in accordance with IAS 19 – – – (0.7) – (0.7) – (0.7)Total comprehensive income for the year ended 31 December 2009 – – – (4.6) 21.2 16.6 2.5 19.1Transactions with owners: Reduction in minority interest – – – – – – (0.2) (0.2)Share options – proceeds from shares issued 0.2 0.8 – – – 1.0 – 1.0– value of employee services – – – 1.6 – 1.6 – 1.6 0.2 0.8 – 1.6 – 2.6 (0.2) 2.4At 31 December 2009 33.3 9.2 1.0 160.6 60.6 264.7 3.0 267.7

* The Special Reserve was created in 2007 by court order upon cancellation of the share premium and retained defi cit. The Special Reserve is undistributable and restrictions exist over its use.


Annual Report 2009

Consolidated statement of cash fl owsfor the year ended 31 December 2009

2009 2008 Notes £m £m

Cash fl ows from operating activities Cash generated from operating activities 30 84.4 70.9Interest received 1.2 2.6Interest received on restricted funds (0.5) (2.0)Net interest received 0.7 0.6Interest paid (11.4) (17.0)Issue costs of new bank loans – (1.5)Tax paid (7.6) (4.8)Net cash infl ow from operating activities 66.1 48.2 Cash fl ows from investing activities Purchase of businesses net of cash acquired – (3.6)Purchase of businesses deferred consideration paid – (0.9)Proceeds from sale of property, plant and equipment 1.1 2.7Purchase of property, plant and equipment (10.0) (19.9)Purchase of intangible assets (0.3) –Dividend paid to minority interest (0.2) (0.4)Net cash used in investing activities (9.4) (22.1) Cash fl ows from fi nancing activities Net proceeds from issue of ordinary shares 1.0 1.2Proceeds from borrowings – 8.6Finance lease principal payments (9.0) (6.1)Repayment of borrowings 31 (20.4) (20.0)Settlement of loan notes 32 (3.7) –Net cash used in fi nancing activities (32.1) (16.3) Exchange (losses)/gains on cash, cash equivalents and bank overdrafts (2.2) 5.5 Net increase in cash, cash equivalents and bank overdrafts 22.4 15.3Cash, cash equivalents and bank overdrafts at beginning of year 30.5 15.2Cash, cash equivalents and bank overdrafts at end of year 21 52.9 30.5

Reconciliation of net cash fl ow to movement in net debt (excluding IDC Scheme funds)*Net increase in cash and cash equivalents 22.4 15.3Repayment of borrowings 31 20.4 20.0Settlement of loan notes 32 3.7 –Movement in obligations under fi nance leases 7.4 (0.2)Proceeds from borrowings – (8.6)Other movements in net debt during the year (2.0) (2.8)Movements in net debt during the year 51.9 23.7Net debt (excluding IDC Scheme funds)* – opening (165.5) (189.2)Net debt (excluding IDC Scheme funds)* – closing (113.6) (165.5)

* Net debt (excluding IDC Scheme funds) is calculated by deducting current and non current borrowings from cash and cash equivalents.



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1. Basis of preparationThe consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) Interpretations as adopted by the European Union and in accordance with the provisions of the Companies Act 2006. The consolidated fi nancial statements have been prepared under the historic cost convention and on a going concern basis.

The accounts for the Parent Company, Cape plc, have been prepared in accordance with UK GAAP. The Company accounts are presented in separate fi nancial statements on pages 88 to 93.

Changes in accounting policies and disclosures(a) New and amended standards adopted by the Group

The Group has adopted the following new and amended IFRSs as of 1 January 2009:

– IAS 1 (Revised), Presentation of fi nancial statements – effective 1 January 2009. The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share;

– IFRS 8, Operating segments – effective 1 January 2009. IFRS 8 replaces IAS 14, Segment reporting. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes; and

– IFRS 7, Financial instruments – Disclosures (Amendment) – effective 1 January 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy.

The following amendments to existing standards and interpretations were also effective for the current period, but the adoption of these amendments to existing standards and interpretations did not have a material impact on the Financial Statements of the Group:

– IAS 32 (Amendment), Financial Instruments: Presentation, and IAS 1 (Amendment), Presentation of Financial Statements – Puttable fi nancial instruments and obligations arising on liquidation;

– IAS 27, Consolidated and separate fi nancial statements – Amendment relating to cost of investment on fi rst time adoption;

– IAS 39 (Amendment), Reclassifi cation of Financial Assets: Effective Date and Transition;

– IFRS 2 (Amendment), Share-based Payment (effective 1 January 2009) deals with vesting conditions and cancellations;

– IFRIC 16, Hedges of a Net Investment in a Foreign Operation; and

– IFRIC 9 (Amendment), Re-assessment of Embedded Derivatives, and IAS 39 (Amendment), Financial Instruments: Recognition and Measurement.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group.

The following standards and amendments to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010 or later periods, but the Group has not early adopted them: – IFRS 3 (Revised), Business combinations (effective from

1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some signifi cant changes. The Group will apply IFRS 3 (Revised) prospectively to all business combinations from 1 January 2010;

– IAS 38 (Amendment), Intangible Assets. The Group will apply IAS 38 (Amendment) from the date IFRS 3 (Revised) is adopted. The amendment will not result in a material impact on the Group’s fi nancial statements;

– IAS 1 (Amendment), Presentation of fi nancial statements. The amendment provides clarifi cation that the potential settlement of a liability by the issue of equity is not relevant to its classifi cation as current or non current. The Group will apply IAS 1 (Amendment) from 1 January 2010. It is not expected to have a material impact on the Group’s fi nancial statements;

Notes to the fi nancial statements


Annual Report 2009

Notes to the fi nancial statementscontinued

– IFRS 2 (Amendments), Group cash-settled share-based payment transaction (effective from 1 January 2010). The new guidance is not expected to have a material impact on the Group’s fi nancial statements; and

– IAS 27 (Revised), Consolidated and separate fi nancial statements, (effective from 1 July 2009). The Group will apply IAS 27 (Revised) prospectively to transactions with non-controlling interests from 1 January 2010.

(c) Accounting standards, interpretations and amendments that are not yet effective and not relevant to the Group.

The following interpretations and amendments to existing standards have been published by the IASB will become effective for future fi nancial reporting periods but are not relevant for the Group’s operations:

– IAS 28 – Investments in associates – consequential amendments arising from amendments to IFRS 3 (effective from: 1 July 2009);

– IAS 31 – Investments in joint ventures – consequential amendments arising from amendments to IFRS 3 (effective from: 1 July 2009);

– IAS 32 – Financial instruments: presentation – amendments relating to classifi cation of rights issues (effective from: 1 February 2010);

– IAS 39 – Financial instruments: recognition and measurement – amendments relating to eligible hedged items (effective from: 1 July 2009);

– IAS 32 (Amendment), Classifi cation of Rights Issues, effective for annual periods commencing on or after 1 February 2010;

– IFRS 1 (Revised), First-time Adoption of IFRS, effective for annual periods beginning on or after 1 July 2009;

– IFRS 1 (Amendment), Additional Exemptions for First-time Adopters, effective for annual periods commencing on or after 1 January 2010, subject to EU endorsement;

– IFRS 1 (Amendment), Limited Exemption from Comparative IFRS 7 disclosures for First-time Adopters, effective for annual periods beginning on or after 1 July 2010, subject to EU endorsement;

– IFRS 5 (Amendment), Non-current assets held for sale and discontinued operations;

– IFRIC 17, Distribution of non-cash assets to owners (effective on or after 1 July 2009);

– IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments, effective for annual periods beginning on or after 1 July 2010, subject to EU endorsement.

2. Accounting policiesThe Group’s key accounting policies are set out below. These policies have been prepared on a historic cost basis and under recognition and measurement requirements of IFRS standards in effect that apply to accounting periods beginning on or after 1 January 2009.

Basis of consolidation(a) A business combination is recognised where separate legal entities or businesses have been brought together within the Group. Subsidiaries are all entities over which the Group has the power to govern the fi nancial and operating policies. This is generally accompanying a shareholding of more than 50% of the voting rights, except in certain countries where legal restrictions over ownership of shares by non-domicile entities exist. In such situations management consolidate entities as subsidiaries where the Group has effective control over the fi nancial and operating policies. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for business combinations made by the Group. The cost of a business combination is measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the business combination.

Contingent consideration is included in the cost of a business at the acquisition date only if the consideration is probable and can be reliably measured, and is discounted using an appropriate discount rate. If the future events upon which the contingent consideration is based do not occur or the estimate needs to be revised or if contingent consideration, which has not been initially included, does become probable and can be reliably measured, the cost of the business combination, and any associated goodwill, is adjusted accordingly. Identifi able assets, liabilities and contingent liabilities acquired in the business combination are measured initially at their fair value at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is credited to the income statement in the period of acquisition.

(b) The Group’s interest in joint ventures is accounted for under the equity method. The consolidated fi nancial statements include the Group’s share of the profi ts or losses of joint ventures and the consolidated balance sheet includes the investments in joint ventures at cost, including attributable goodwill, plus the Group’s share of post-acquisition reserves and after dividends received.


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(c) Minority interests in subsidiaries consolidated by the Group are disclosed separately from the Group’s equity and income. Losses attributable to a minority in excess of the minority’s interest in net assets of the subsidiary are adjusted against the interest of the Group unless there is a binding obligation on the part of the minority to contribute additional investment in the subsidiary.

(d) Inter-company income, expenses, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation.

(e) All subsidiary undertakings have year end dates of 31 December except Cape Industrial Services Group Limited which prepares accounts to 31 March and last prepared annual accounts to 31 March 2009.

Foreign currencies(a) Functional and presentational currencyItems included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘functional currency’). The consolidated fi nancial statements are presented in GB pounds, which is the Company’s functional and presentational currency.

(b) Transactions and balancesForeign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges.

(c) Group companiesThe results and fi nancial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

– assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;

– income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction); and

– all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recognised in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifi able net assets acquired. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to the appropriate cash generating unit for the purpose of impairment testing. Any impairment is recognised immediately through the income statement and is not subsequently reversed.

Intangible assetsIntangible assets are recognised if it is probable that there will be future economic benefi ts attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifi able and there is control over the use of the asset. The assets are amortised on a straight line basis over the period over which the Group expects to benefi t from these assets, ranging from three to fi ve years.

Property, plant and equipmentProperty, plant and equipment is stated at cost net of accumulated depreciation and any provision for impairment. Cost comprises purchase cost together with any incidental costs of acquisition. Certain land and buildings are held at previous revalued amounts less accumulated depreciation as these amounts have been taken as their deemed cost at the date of transition to IFRS in accordance with the exemption under IFRS 1 ‘First-time Adoption of IFRS’.

Depreciation is provided to write off the cost less the estimated residual value of tangible fi xed assets by equal instalments over their estimated useful economic lives with the exception that no depreciation is provided on freehold land. The asset’s residual values and useful economic lives are reviewed, and adjusted as appropriate, at each balance sheet date. The following rates are applied:

– freehold buildings – 2% per annum;– leasehold land and buildings – the period of the lease; and – plant, machinery and fi xtures and fi ttings – 1% to 33%

per annum.

Investment properties are stated at cost less any provision for impairment.


Annual Report 2009


Impairment of assets (excluding goodwill)The entity assesses at each reporting date whether an asset may be impaired. If any such indication exists, the Group makes an estimate of the assets recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash fl ows attributable to the asset are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

Where the recoverable amount is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement.

Trade and other receivablesTrade receivables are recognised and carried at original invoice amounts less an allowance for any amount estimated to be uncollectable.

Leases(a) Finance leasesWhere assets are fi nanced by leasing agreements that give rights approximating to ownership, the amount representing the outright purchase price is capitalised and the corresponding leasing commitments are shown as obligations to the lessor. The relevant assets are depreciated in accordance with the Group’s depreciation policy or over the lease term if shorter. Net fi nance charges, calculated on the reducing balance method, are included in fi nance costs.

(b) Operating leasesPayments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on a straight line basis over the period of the lease.

Critical accounting estimates and judgementsThe preparation of these fi nancial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the fi nancial statements and the reported amounts of revenue during the reporting period. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies.

Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are outlined below:

(a) Carrying amount of certain assets and goodwillIn reviewing the carrying value of certain assets and goodwill, estimates of future fi nancial performance of the assets and businesses concerned are taken into account. The estimates inherently include assumptions about internal and external factors that, whilst considered reasonable at the date of these accounts, may change in the future from those levels currently expected. The carrying value of goodwill has been considered fully in note 13.

(b) Pensions and other post retirement costsThe liability in respect of the Group’s retirement benefi t obligations is dependent on a number of estimates including those relating to mortality, infl ation, salary increases and the rate at which liabilities are discounted. Any change in these assumptions would impact the retirement benefi t obligation recognised. Further information on the assumptions used is disclosed in note 16.

(c) Revenue recognition and assessment of construction contract performanceRevenue and profi t on long-term construction contracts are usually recognised according to the stage of completion of the contract, which is calculated by reference to the estimated contract revenues and expected costs including provisions. The judgements made in this process are considered to be appropriate; however, a change in these estimates would have an impact on the amount of revenue, costs and profi ts recognised.

(d) Industrial disease claimsProvision is made for compensation for industrial disease claims where it is possible to estimate the liability with suffi cient reliability. The key critical accounting estimates and assumptions in respect of the provisions for industrial disease are detailed in note 26.

(e) Deferred tax assetsDeferred tax has only been recognised where it is assumed that the deferred tax asset is recoverable. The accumulated losses reported by the Group for tax purposes in various tax jurisdictions have not been recognised as deferred tax assets where the Directors hold the view that it is unlikely that the Group will be able to utilise them in the future. Further information on the assumptions used is disclosed in note 17.

Compensation for industrial diseaseProvision is made for compensation for industrial disease where it is possible to estimate the liability with suffi cient reliability. This is in respect of both claims lodged and outstanding at the period end and future potential claims. Where this is not possible, a contingent liability is noted. Benefi t is recognised for insurance recoveries for claims provided when they are anticipated with virtual certainty.

ProvisionsProvisions for liabilities are made where the timing or amount of settlement is uncertain. A provision is recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outfl ow of resources will be required to settle the obligation and the amount has been reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that refl ects current market assessments of the time value of money and risks specifi c to the obligation.


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InventoriesInventories which include raw materials and work in progress are stated at the lower of cost and net realisable value. Raw materials are valued based on fi rst in fi rst out method.

Net realisable value is the estimated selling price in the ordinary course of business less selling expenses. Allowance is made for obsolete and slow moving items based on annual usage.

Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group. Revenue recognition in relation to construction contracts is described in the accounting policy for construction contracts.

Construction contractsContracts are undertaken for customers either on a short or long-term basis. For short-term contracts, work done is substantially billed as performed and for long-term contracts, work is carried out on a substantially fi xed or limited-price basis. For short-term contracts, revenue and profi t are recognised according to work executed. Amounts taken to revenue in respect of work done but not billed are included within amounts recoverable on contracts. Costs incurred, including an appropriate allocation of overheads and attributable profi ts, in respect of long-term contracts are included in work in progress net of progress payments received and provisions for foreseeable losses. Provision is made in full for any losses as soon as they can be foreseen. Any payments on account or provisions for foreseeable losses in excess of contract balances are included in trade and other payables. Revenue and attributable profi t on long-term contracts is recognised according to the percentage of estimated total contract value completed or the achievement of contractual milestones provided that the outcome of the contract can be assessed with reasonable certainty.

TaxationCurrent tax, including UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the consolidated fi nancial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the balance sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profi ts will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not be reversed in the foreseeable future.

Exceptional itemsExceptional items represent income and expenses relating to non-recurring transactions that are signifi cant, by virtue of their size or nature, and therefore relevant to understanding the Group’s fi nancial performance and are shown separately to provide a better indication of the underlying results of the business.

Employee benefi tsThe Group operates both defi ned benefi t and defi ned contribution schemes.

A defi ned contribution scheme is a pension scheme under which the Group pays fi xed contributions into a separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold suffi cient assets to pay all employees the benefi ts relating to employment in the current or prior periods. The pension expense for defi ned contribution schemes represents contributions payable in the year.

A defi ned benefi t scheme is a pension scheme that is not a defi ned contribution scheme. The asset recognised in the balance sheet in respect of the defi ned benefi t scheme is the present value of the defi ned benefi t obligation at the balance sheet date less the fair value of the plan assets. The defi ned benefi t obligation is calculated tri-annually by independent actuaries using the projected unit method and this valuation is updated at each balance sheet date. The present value of the defi ned benefi t obligation is determined by discounting the estimated future cash outfl ows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefi ts will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Current and past service costs, fi nance costs and expected returns on assets are charged to operating profi t. Actuarial gains and losses arising from new valuations and from updating the latest actuarial valuation to refl ect conditions at the balance sheet date are recognised in full in the statement of recognised income and expense.

The pension schemes’ defi cits or surpluses, (to the extent that any surpluses are considered recoverable), are recognised in full and presented on the face of the balance sheet.

Under IFRIC 14 the recoverability of a surplus must be assessed against the minimum funding requirements of the pension scheme.

The Group operates gratuity schemes in certain overseas countries. These are accounted for in accordance with IAS 19 and accounting follows the same principles as for a defi ned benefi t scheme.


Annual Report 2009


Accounting for derivative fi nancial instruments and hedging activitiesThe Group uses derivative fi nancial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fl uctuations. Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profi les. The fair value of interest rate swaps is determined by reference to market values of similar instruments.

For the purpose of hedge accounting, hedges are classifi ed as:

– fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability;

– net investment hedges when hedging the exposure to changes in the value of the Group’s interests in the net assets of foreign operations; and

– cash fl ow hedges when hedging exposure to variability in cash fl ows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.

The Group formally designates and documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objectives and strategy for undertaking various hedge transactions. The documentation also includes identifi cation of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the effectiveness of the hedging instruments in offsetting the exposure to changes in the fair value of the hedge or the cash fl ows attributable to the hedged risk. The Group also documents its assessment, both at inception and on an ongoing basis, of whether the derivatives that are used in the hedging transactions are highly effective in offsetting changes in fair values or cash fl ows of the hedged items.

Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the income statement. The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments depends on the nature of the hedging relationship, as follows:

(a) Fair value hedgesFor fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged; the derivative is remeasured at fair value and gains and losses from both are taken to the income statement. For hedged items carried at amortised cost, the adjustment is amortised through the income statement such that it is fully amortised at maturity. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting.

(b) Net investment hedgesFor net investment hedges, the gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Gains and losses accumulated in equity are included in the income statement when the foreign operation is partially disposed of or sold.

(c) Cash fl ow hedgesFor cash fl ow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects the income statement.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

BorrowingsBorrowings are recognised initially at the amount of the consideration received after deduction of issue costs. Issue costs together with fi nance costs are charged to the income statement over the term of the borrowings and represent a constant proportion of the balance of capital repayments outstanding.

Cumulative preference shares are classifi ed as liabilities. The dividends on these preference shares are recognised in the income statement as interest expense.

Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

Restricted cash relating to the Scheme of Arrangement (see note 34) is excluded from cash and cash equivalents for the purpose of the Group statement of cash fl ows.

Share capitalOrdinary shares and deferred shares are classifi ed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.


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Share based paymentsThe Group issues equity settled share based payments to certain employees which must be measured at fair value and recognised as an expense in the income statement with a corresponding increase in equity. The fair values of these payments are measured at the dates of grant using option pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value is recognised over the period during which employees become unconditionally entitled to the awards subject to the Group’s estimate of the number of awards which will lapse, either due to employees leaving the Group prior to vesting or due to non-market based performance conditions not being met.

Proceeds received on the exercise of share options are credited to share capital and share premium.

Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identifi ed as the Group Board.

Financial risk factorsThe Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, cash fl ow interest rate risk and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the Group’s fi nancial performance. The Group uses derivative fi nancial instruments to hedge certain risk exposures.

Risk management is carried out by the Group treasury department under policies approved by the Board of Directors. Group treasury identifi es, evaluates and hedges fi nancial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specifi c areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative fi nancial instruments and non-derivative fi nancial instruments, and investment of excess liquidity.

(a) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Australian dollar and the GB pound.

The primary exposure to the Group in terms of foreign currency risk is translation of the subsidiary results. This risk is managed primarily through borrowings denominated in the relevant foreign currencies. Foreign currency transaction exposure arising on normal trade fl ows is not hedged. The exposure of overseas operating subsidiaries to transaction risk is minimised by matching functional currency income with functional currency costs.

(b) Cash fl ow and fair value interest rate riskThe Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk. Borrowings issued at fi xed rates expose the Group to fair value interest rate risk.

Group treasury reviews its interest rate exposure, taking into consideration refi nancing, renewal of existing positions and alternative fi nancing and hedging.

Based on various scenarios, the Group manages its cash fl ow interest rate risk by using fl oating to fi xed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from fl oating to fi xed rates. Generally, the Group raises long-term borrowings at fl oating rates and swaps them into fi xed rates that are lower than those available if the Group borrowed at fi xed rates directly. Under interest rate swaps, the Group has entered into transactions to exchange, at specifi ed intervals (primarily quarterly), the difference between fi xed contract rates and fl oating rate interest amounts calculated by reference to the agreed notional amounts.

(c) Credit riskCredit risk is the risk of fi nancial loss to the Group if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations. Credit risk arises principally from the Group’s receivables from customers and deposits with fi nancial institutions.

The Group’s exposure to credit risk is infl uenced mainly by the individual characteristics of each customer. The Group has an established credit policy under which each new customer is analysed for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, and in some cases bank references.

(d) Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will always have suffi cient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or damage to the Group’s reputation.

(e) Capital riskThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.


Annual Report 2009

3. Segment informationManagement has determined the operating segments based on the reports reviewed by the Group Board (Chief Operating Decision Maker) that are used to make strategic decisions. The Board considers the business from a geographic perspective.

The segment information for the year ended 31 December 2009 is as follows:

United Gulf/Middle CIS, Med Far East/ Central Kingdom East & NA Pacifi c Rim Costs Group2009 £m £m £m £m £m £m

Continuing operations Revenue 304.7 170.7 48.4 131.3 – 655.1Operating profi t/(loss) before other items 25.4 38.6 6.1 7.9 (7.4) 70.6Amortisation of intangible assets (0.5) – – (2.4) – (2.9)IDC costs – – – – (74.2) (74.2)Operating profi t/(loss) 24.9 38.6 6.1 5.5 (81.6) (6.5)Share of post tax profi ts of joint ventures – – 1.6 – – 1.6Total operating profi t/(loss) 24.9 38.6 7.7 5.5 (81.6) (4.9)Finance income 1.6Finance costs (12.3)Loss before tax (15.6)Taxation 14.1Loss from continuing operations (1.5)

Discontinued operations Loss attributable to discontinued operations – Attributable to: Equity shareholders (4.1)Minority interests 2.6 (1.5)

There are no signifi cant inter-segment sales. United Gulf/Middle CIS, Med Far East/ Central Kingdom East & NA Pacifi c Rim Costs Group2008 £m £m £m £m £m £m

Continuing operations Revenue 309.0 112.0 54.4 147.3 – 622.7Operating profi t/(loss) before other items 27.0 23.1 5.8 16.1 (7.0) 65.0Amortisation of intangible assets (0.5) – – (2.2) – (2.7)IDC costs – – – – (5.7) (5.7)Exceptional items – – – (2.7) (1.4) (4.1)Operating profi t/(loss) 26.5 23.1 5.8 11.2 (14.1) 52.5Share of post tax profi ts of joint ventures – – 0.5 – – 0.5Total operating profi t/(loss) 26.5 23.1 6.3 11.2 (14.1) 53.0Finance income 2.8Finance costs (18.0)Profi t before tax 37.8Taxation (5.9)Profi t from continuing operations 31.9

Discontinued operations Loss attributable to discontinued operations (0.2)

Attributable to: Equity shareholders 30.6Minority interests 1.1 31.7

There are no signifi cant inter-segment sales.



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3. Segment information (continued)Other segment items included in the income statement are as follows:

2009 2008

United Gulf/Middle CIS, Med Far East/ Central United Gulf/Middle CIS, Med Far East/ Central Kingdom East & NA Pacifi c Rim Costs Group Kingdom East & NA Pacifi c Rim Costs Group £m £m £m £m £m £m £m £m £m £m £m £m

Depreciation 4.1 4.8 1.4 5.5 – 15.8 4.4 3.6 1.7 5.6 – 15.3Amortisation 0.5 – – 2.4 – 2.9 0.5 – – 2.2 – 2.7Exceptional items (note 4) – – – – – – – – – 2.7 1.4 4.1

Segment assets consist primarily of property, plant and equipment, investments, intangible assets, inventories and trade and other receivables. Unallocated assets comprise deferred taxation and cash.

Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as taxation and borrowings including related hedging transactions.

The segment assets and liabilities at 31 December 2009 and capital expenditure for the year then ended are as follows:

Gulf/ United Middle CIS, Med Far East/ Central Kingdom East & NA Pacifi c Rim Costs Unallocated Group £m £m £m £m £m £m £m

Assets – continuing 85.0 84.9 24.0 310.2 54.5 89.0 647.6Assets – discontinued 2.1 – – – – – 2.1Total assets 87.1 84.9 24.0 310.2 54.5 89.0 649.7Non current assets included within total assets are as follows: Continuing 28.5 23.7 9.4 276.0 13.8 35.9 387.3Discontinued 2.0 – – – – – 2.0Total non current assets 30.5 23.7 9.4 276.0 13.8 35.9 389.3 Liabilities – continuing 34.6 37.1 4.0 21.3 88.6 195.1 380.7Liabilities – discontinued 1.3 – – – – – 1.3Total liabilities 35.9 37.1 4.0 21.3 88.6 195.1 382.0Capital expenditure – property, plant & equipment 2.7 3.0 1.4 4.5 – – 11.6Capital expenditure – intangible assets 0.3 – – – – – 0.3

Segment assets and liabilities are reconciled to the Group assets and liabilities as follows:

Assets Liabilities £m £m

Segment assets/liabilities 560.7 186.9Unallocated: – Deferred tax 35.7 12.5– Current tax – 11.3– Cash 53.3 –– Current borrowings – 32.0– Non current borrowings – 134.9– Derivatives – 4.4Total assets/liabilities 649.7 382.0


Annual Report 2009

3. Segment information (continued)The segment assets and liabilities at 31 December 2008 and capital expenditure for the year then ended are as follows:

Gulf/ United Middle CIS, Med Far East/ Central Kingdom East & NA Pacifi c Rim Costs Unallocated Group £m £m £m £m £m £m £m

Assets – continuing 104.4 96.1 26.3 293.8 57.7 45.2 623.5Assets – discontinued 2.1 – – – – – 2.1Total assets 106.5 96.1 26.3 293.8 57.7 45.2 625.6Non current assets included within total assets are as follows: Continuing 33.3 30.6 8.1 253.3 13.0 12.6 350.9Discontinued 2.0 – – – – – 2.0Total non current assets 35.3 30.6 8.1 253.3 13.0 12.6 352.9

Liabilities – continuing 54.2 42.7 7.5 29.7 17.2 226.8 378.1Liabilities – discontinued 1.3 – – – – – 1.3Total liabilities 55.5 42.7 7.5 29.7 17.2 226.8 379.4

Capital expenditure – property, plant & equipment 7.7 10.2 2.2 6.1 – – 26.2Capital expenditure – intangible assets – – – – – – –

Segment assets and liabilities are reconciled to the Group assets and liabilities as follows:

Assets Liabilities £m £m

Segment assets/liabilities 580.4 152.6Unallocated: – Deferred tax 11.9 11.7– Current tax – 9.4– Cash 33.3 –– Current borrowings – 38.9– Non current borrowings – 159.9– Derivatives – 6.9Total assets/liabilities 625.6 379.4

4. Exceptional items

2009 2008The exceptional items comprise: £m £m

Continuing:Reorganisation costs in relation to Australian acquisitions – (2.9)Relocation of Head Offi ce – (1.2)Total continuing – (4.1)

The cash effect of the above exceptional items was an outfl ow of £nil (2008: £4.1 million).

The tax effect of the exceptional item in continuing operations is £nil (2008: credit of £1.2 million).

In addition to those items referred to above, exceptional items include a charge of £70.5 million in respect of the recognition of the provision for future IDC liabilities as described in note 26.



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5. Operating profi t/(loss)

2009 2008

Before Before other items* Other items* Total other items* Other items* Total £m £m £m £m £m £m

Analysis of operating profi t/(loss) Continuing operations Revenue 655.1 – 655.1 622.7 – 622.7Cost of sales (552.0) – (552.0) (533.2) – (533.2)Gross profi t 103.1 – 103.1 89.5 – 89.5Net operating expenses (32.5) – (32.5) (24.5) – (24.5)Operating profi t before other items 70.6 – 70.6 65.0 – 65.0Other items – (77.1) (77.1) – (12.5) (12.5)Operating profi t/(loss) 70.6 (77.1) (6.5) 65.0 (12.5) 52.5

* Other items include: amortisation of intangible assets, industrial disease related income and expenses and exceptional items

Net operating expenses comprise wholly of administrative costs.

6. Net foreign exchange (losses)/gainsExchange adjustments taken through the income statement amount to:

2009 2008 £m £m

Cost of sales (2.3) 2.5

7. Other gains/(losses) – net

2009 2008 £m £m

Financial assets and liabilities at fair value through profi t or loss 0.3 (0.2)

8. Employee benefi t expense

2009 2008 Notes £m £m

Wages and salaries 303.7 293.5Social security costs 22.4 22.5Share options granted to directors and employees 29 1.6 1.2Pension costs – defi ned contribution plans 16 3.7 2.7Pension costs – defi ned benefi t plans 16 0.6 0.7Other employee benefi t costs 16 1.6 1.2 333.6 321.8 Average number of employees including Executive Directors 15,661 13,565


Annual Report 2009

9. Auditor remunerationServices provided by the Company’s auditor and its associates.During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and its associates:

2009 2008 £m £m

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 0.2 0.2 Fees payable to the Company’s auditor and its associates for other services: – The audit of the Company’s subsidiaries pursuant to legislation 0.5 0.5– All other services – 0.1 0.7 0.8

10. Finance income and costs

2009 2008 £m £m

Interest income: – Short-term bank deposits 1.6 2.8Finance income 1.6 2.8Interest expense: – Bank borrowings (10.5) (16.1)– Finance leases (1.7) (1.7)– Other (0.1) (0.2)Finance costs (12.3) (18.0)Net fi nance costs (10.7) (15.2)

11. Income tax

2009 2008 Note £m £m

Current tax 9.9 7.1Deferred tax 17 (24.0) (1.2) (14.1) 5.9

The tax (credit)/charge on the Group’s (loss)/profi t before tax differs from the theoretical amount that would arise using the UK standard corporation tax rate applicable to profi ts of the consolidated entities as follows:

2009 2008 £m £m

(Loss)/profi t before tax (15.6) 37.8Tax calculated at the standard rate of corporation tax in the UK of 28% (2008: 28.5%) (4.4) 10.8Adjustments to tax in respect of prior periods (4.0) (1.4)Adjustments in respect of overseas tax rates (4.4) (2.7)Tax losses not recognised – 2.5Expenses non-deductible 0.4 0.1Unrelieved overseas tax – (0.1)Income not taxable (2.2) –Double tax relief 1.0 –Reduction in deferred tax liabilities arising from the rebasing of assets following the acquisition of Australian subsidiaries – (3.3) Adjustments in respect of overseas joint ventures (0.5) –Tax (credit)/charge (14.1) 5.9

The underlying tax rate applicable to the profi ts from continuing operations was 23.7% (2008: 25.3%).



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12. (Loss)/earnings per ordinary shareThe basic loss per share calculation for the year ended 31 December 2009 (2008: earnings per share) is based on the loss after tax attributable to ordinary shareholders of £4.1 million (2008: earnings of £30.6 million) divided by the weighted average number of ordinary 25p shares of 115,427,015 (2008: 114,537,257).

The diluted loss per share calculation for the year ended 31 December 2009 (2008: diluted earnings per share) is based on the loss after tax of £4.1 million (2008: earnings of £30.6 million) divided by the diluted weighted average number of ordinary 25p shares of 118,038,129 (2008: 116,381,373).

Share options are considered potentially dilutive as the average share price during the year was above the average exercise prices.

2009 2008 Shares Shares

Basic weighted average number of shares 115,427,015 114,537,257Adjustments: Weighted average number of outstanding share options 2,611,114 1,844,116Diluted weighted average number of shares 118,038,129 116,381,373

2009 2008

(Loss)/ earnings EPS Earnings EPS £m pence £m pence

Basic (loss)/earnings per share Continuing operations (4.1) (3.5) 30.8 26.9Discontinued operations – – (0.2) (0.2)Basic (loss)/earnings per share (4.1) (3.5) 30.6 26.7 Diluted (loss)/earnings per share Continuing operations (4.1) (3.4) 30.8 26.4Discontinued operations – – (0.2) (0.1)Diluted (loss)/earnings per share (4.1) (3.4) 30.6 26.3 Adjusted basic earnings per share (Loss)/earnings from continuing operations (4.1) (3.5) 30.8 26.9Amortisation 2.9 2.5 2.7 2.3Exceptional items – – 4.1 3.6IDC related costs and interest income 73.4 63.6 3.7 3.2Tax effect of adjusting items (21.4) (18.5) (3.0) (2.6)Exceptional Australian tax credit (6.6) (5.7) (3.3) (2.9)Adjusted basic earnings per share 44.2 38.4 35.0 30.5 Adjusted diluted earnings per share (Loss)/earnings from continuing operations (4.1) (3.4) 30.8 26.4Amortisation 2.9 2.4 2.7 2.3Exceptional items – – 4.1 3.5IDC related costs and interest income 73.4 62.2 3.7 3.2Tax effect of adjusting items (21.4) (18.1) (3.0) (2.6)Exceptional Australian tax credit (6.6) (5.6) (3.3) (2.8)Adjusted diluted earnings per share 44.2 37.5 35.0 30.0

The adjusted earnings per share calculations have been calculated after excluding the impact of amortisation, exceptional items, IDC related costs and interest income, the tax impact of these items and an exceptional tax credit received in Australia predominantly arising on the consolidation of PCH assets in Australia which was acquired during 2007.

Options are dilutive at the profi t from continuing operations level and so, in accordance with IAS 33, have been treated as dilutive for the purpose of diluted earnings per share. Diluted loss per share in 2008 is lower than basic loss per share in respect of discontinued operations because of the effect of losses on discontinued operations.


Annual Report 2009

13. Intangible assets

Total Goodwill Other £m £m £m

Cost: At 1 January 2008 166.7 157.6 9.1Adjustments to fair values 7.0 7.5 (0.5)Adjustment relating to deferred consideration of previous acquisition (0.6) (0.6) –Acquisition of remaining shares of PCH and additional direct costs relating to the acquisitions of PCH and Concept Hire 3.8 3.8 –Exchange adjustments 14.9 14.2 0.7At 31 December 2008 191.8 182.5 9.3Additions 0.3 – 0.3Exchange adjustments 25.1 24.5 0.6At 31 December 2009 217.2 207.0 10.2 Amortisation At 1 January 2008 1.1 – 1.1Amortisation charge 2.7 – 2.7At 31 December 2008 3.8 – 3.8Amortisation charge 2.9 – 2.9At 31 December 2009 6.7 – 6.7 Net book value: At 31 December 2009 210.5 207.0 3.5At 31 December 2008 188.0 182.5 5.5At 1 January 2008 165.6 157.6 8.0

Other intangibles include customer relationships and contracts, technological assets and amounts relating to favourable contracts. The useful economic lives of the intangible assets range from three to fi ve years.

Amortisation charges of £2.9 million (2008: £2.7 million) have been charged to cost of sales in the income statement.

There are three individually signifi cant intangible assets. There are two customer relationships and contracts which have carrying values of £0.6 million and £0.8 million and will be fully amortised to £nil over the next year, and a favourable lease contract which has a carrying value of £1.1 million and will be amortised to £nil over the next three years.

Impairment tests for goodwillGoodwill is allocated to the Group’s Cash-Generating Units (CGU). All goodwill relates to Industrial Services.

The aggregate carrying amounts of goodwill allocated by geographical area is as follows:

2009 2008 £m £m

UK 16.2 16.2Gulf/Middle East 0.7 0.7Australia 190.1 165.6 207.0 182.5

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash fl ow projections based on fi nancial budgets approved by management covering a fi ve-year period. Cash fl ows beyond the fi ve-year period are extrapolated using the estimated growth rates stated below.

The key assumptions used for value-in-use calculations are:

2009 2008

United Gulf/Middle United Gulf/Middle Kingdom East Australia Kingdom East Australia

Terminal growth rate 3.0% 3.0% 3.3% 3.0% 3.0% 3.3%Average fi ve-year growth rate 3.2% 1.8% 17.6% 4.0% 5.0% 6.0%Discount rate 11.0% 10.2% 11.4% 7.9% 7.4% 10.5%



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13. Intangible assets (continued)Terminal growth rates are based on the long-term growth rates for the countries in which the CGU operates. Management determined growth rates over the next fi ve years based on internal forecasts that were derived from detailed analysis on future prospects combined with the secured order book for the relevant CGU. The discount rates used are pre-tax and refl ect specifi c risks relating to the relevant CGU.

Sensitivity analysisA sensitivity analysis has been performed on the base case assumptions used for assessing the goodwill. The directors have concluded that in the case of both the UK and Middle East goodwill there are no reasonably possible changes in key assumptions which would cause the carrying value of goodwill to exceed its value in use. In the case of Cape Australia, it is reasonably possible that a change in key assumptions could occur which would lead the carrying value to exceed the value in use. The recoverable amount exceeds carrying value by £24.0 million. If the terminal growth rate, average fi ve-year growth rate or discount rate assumptions used in the model were changed to 2.7%, 15.7% or 12.0% respectively then carrying amount and value in use would be equal.

14. Property, plant and equipmentDuring the year ended 31 December 2009, the Group acquired assets with a cost of £11.6 million (2008: £26.2 million) and received proceeds from asset sales of £1.1 million (2008: £2.7 million) giving net capital expenditure of £10.5 million (2008: £23.5 million). The capital expenditure of £10.0 million (2008: £19.9 million) shown in the cash fl ow statement represents the actual cash outfl ow and therefore excludes purchases funded through fi nance leases of £1.6 million (2008: £6.3 million).

Plant, machinery, Land and fi xtures and Total buildings fi ttings £m £m £m

Cost: At 1 January 2008 168.9 16.5 152.4Exchange adjustments 29.9 1.5 28.4Additions 26.2 2.6 23.6Disposals (10.5) (0.3) (10.2)At 31 December 2008 214.5 20.3 194.2Exchange adjustments 13.8 1.1 12.7Additions 11.6 0.2 11.4Disposals (17.2) (0.9) (16.3)At 31 December 2009 222.7 20.7 202.0 Depreciation: At 1 January 2008 41.9 1.5 40.4Exchange adjustments 11.3 0.3 11.0Charge for the year 15.3 0.8 14.5Disposals (6.3) – (6.3)At 31 December 2008 62.2 2.6 59.6Exchange adjustments 10.6 0.6 10.0Charge for the year 15.8 0.9 14.9Disposals (8.8) (0.4) (8.4)At 31 December 2009 79.8 3.7 76.1 Net book amount: At 31 December 2009 142.9 17.0 125.9At 31 December 2008 152.3 17.7 134.6At 1 January 2008 127.0 15.0 112.0


Annual Report 2009

14. Property, plant and equipment (continued)Depreciation expense of £15.8 million (2008: £15.3 million) has been charged to cost of sales in the income statement.

Exchange adjustments relate to the translation of assets held by foreign operations into the presentation currency.

Included within Land and buildings is an investment property with a value of £2.0 million (2008: £2.0 million). No rent is received from the investment property. The fair value of the investment property has not been estimated as the property is the residual land left over from the sale of the Calsil businesses.

The Group leases plant and machinery under fi nance lease agreements. The leased equipment secures lease obligations (see note 22). At 31 December 2009 the net carrying amount of leased plant and machinery was £21.0 million (2008: £26.3 million).

15. Investments accounted for using the equity method

2009 2008 £m £m

At 1 January 0.6 0.1Share of post tax profi ts 1.6 0.5Dividends (2.1) –At 31 December 0.1 0.6

The Group’s share of operating profi t of joint ventures is £1.6 million (2008: £0.5 million) and dividends received from joint ventures are £2.1 million (2008: £nil).

The Group has a 51% interest in the Cape Perlite Systems joint venture incorporated in the United Kingdom for the manufacture of Perlite insulation products.

The Group has a 51% interest in Cape C.I.S.L. joint venture incorporated in Trinidad for the provision of insulation services.

The Group has a 50% interest in Orascom Cape joint venture incorporated in Egypt for the provision of insulation and scaffolding services.

The Group has a 50% interest in Orascom Cape WLL, a joint venture incorporated in Bahrain for the provision of insulation services.

The Group has a 50% interest in Cape Resa, a joint venture incorporated in Spain for the provision of scaffolding, rope access and insulation services.

The Group has a 50% interest in Ship Support Services Limited, a joint venture incorporated in the United Kingdom for the provision of scaffolding and painting services.

The Group accounts for the investments in Cape Perlite Systems and Cape C.I.S.L. as joint ventures due to the Group not having control over the fi nancial and operating policies of these entities.



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16. Retirement benefi t obligationsThe Group operates a defi ned benefi t scheme and a defi ned contribution scheme for employees within the UK and provides pensions for employees of overseas companies in accordance with local requirements and practices. The assets of both the defi ned benefi t and defi ned contribution schemes are held in trustee administered funds. The latest full valuation of the defi ned benefi t scheme was assessed by independent qualifi ed actuaries as at 6 April 2007 using the projected unit method. The valuation showed that the assets of the defi ned benefi t scheme had a market value of £132.4 million and was 100% funded. Included within the assets balance is an amount of £65.6 million in respect of insurance policies covering pensioner liabilities. The next full valuation will take place as at 6 April 2010.

Some of the Group’s overseas subsidiary undertakings operate leaving indemnity schemes as required by local laws and regulations. These schemes are unfunded. The provision for leaving indemnities is based on the number of years service and the current salary of the employee.

The pension expense in the period for the defi ned contribution pension scheme of £3.7 million (2008: £2.7 million) equalled the Group contributions to the scheme.

The defi ned benefi t scheme disclosures of the Group in this note also include fi gures relating to a small scheme held by a subsidiary undertaking.

2009 2008 £m £m

Balance sheet assets/(obligations) for: Pension benefi t assets 0.1 0.1Pension benefi t liabilities (0.4) (0.4) (0.3) (0.3)Leaving indemnities (5.2) (4.8) (5.5) (5.1)Income statement charge for: Leaving indemnities charged through cost of sales 1.6 1.2 1.6 1.2

2009 2008 £m £m

Actuarial gain/(loss) recognised in the statement of other comprehensive income in the year (before tax) 0.2 (3.3)Cumulative actuarial losses recognised in the statement of other comprehensive income (before tax) (52.0) (52.2)

Pension benefi tsThe amounts recognised in the balance sheet are determined as follows:

2009 2008 £m £m

Present value of funded obligations (113.6) (104.8)Fair value of plan assets 124.3 114.8 10.7 10.0Restriction of surplus (11.0) (10.3)Net liability in the balance sheet (0.3) (0.3)

In accordance with IFRIC 14, the Group must consider the minimum funding requirements of the pension scheme. This has resulted in the recognised surplus on the main scheme being reduced to £nil at 31 December 2009 (2008: £nil).

The amounts recognised in the income statement are as follows:

2009 2008 £m £m

Current service cost 0.5 0.7Interest cost 6.3 6.2Expected return on plan assets (6.7) (6.6)Settlements and curtailments (0.1) (0.3)Total – –

The actual return on plan assets was £14.0 million (2008: £3.3 million).


Annual Report 2009

16. Retirement benefi t obligations (continued)The movement in the fair value of plan assets over the year is as follows:

2009 2008 £m £m

Beginning of year 114.8 122.1Expected return on plan assets 6.7 6.6Actuarial gains/(losses) 7.2 (9.8)Employer contributions 0.6 0.7Employee contributions 0.2 0.2Benefi ts paid (5.2) (5.0)End of year 124.3 114.8

The movement in the defi ned benefi t obligation over the year is as follows:

2009 2008 £m £m

Beginning of year 104.8 109.5Current service cost 0.5 0.7Interest cost 6.3 6.2Contributions by plan participants 0.2 0.2Actuarial losses/(gains) 7.1 (6.5)Benefi ts paid (5.2) (5.0)Settlements and curtailments (0.1) (0.3)End of year 113.6 104.8

The principal actuarial assumptions used were as follows:

2009 2008

Discount rate 5.75% 6.25%Expected return on plan assets 5.63% 5.99%Future salary increases 4.70% 4.10%Future pension increases 3.40% 3.00%Infl ation rate 3.70% 3.10%

Mortality rateAssumptions regarding future mortality experience are set based on advice in accordance with published statistics and scheme experience.

The average remaining life expectancy in years of a pensioner retiring at age 65 on the balance sheet date is as follows:

2009 2008

Male 22.0 23.4Female 24.5 26.0

The average remaining life expectancy in years of a pensioner retiring at age 65, 20 years after the balance sheet date is as follows:

2009 2008

Male 24.0 25.6Female 26.5 28.0



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16. Retirement benefi t obligations (continued)Pension benefi tsPlan assets are comprised as follows:

2009 Expected 2008 Expected £m return £m return

Insurance annuities 83.6 5.75% 81.0 6.25%Index-linked Gilts 14.3 4.10% 13.8 3.75%Bonds 11.8 5.25% 10.9 6.25%Equities 7.9 7.50% 5.4 7.25%Property 2.8 8.25% 3.2 7.25%Cash 0.7 0.50% 0.5 2.00%Other 3.2 5.25% – –Total/weighted average return 124.3 5.63% 114.8 6.00%

The expected return on plan assets is determined by considering the expected returns on the assets underlying the current investment policy. Expected yields on fi xed interest investments are based on gross redemption yields at the balance sheet date. Expected returns on equity and property investments refl ect long-term real rates of return experienced in the respective markets.

Expected contributions to defi ned benefi t schemes for the year ended 31 December 2010 are £0.6 million.

2009 2008 2007 2006 2005 £m £m £m £m £m

Fair value of plan assets 124.3 114.8 122.1 117.9 115.7Fair value of plan liabilities 113.6 104.8 109.5 102.7 108.2Surplus 10.7 10.0 12.6 15.2 7.5Experience adjustments on plan assets 7.3 (9.7) 1.9 2.2 8.9Experience adjustments on plan liabilities 1.7 (3.4) (4.8) 0.3 (0.1)

17. Deferred income taxDeferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fi scal authority. The amounts are as follows:

2009 2008 £m £m

Deferred tax assets: – Deferred tax asset to be recovered within 12 months 9.9 8.2– Deferred tax asset to be recovered after more than 12 months 25.8 3.7 35.7 11.9Deferred tax liabilities: – Deferred tax liability to be recovered within 12 months (0.9) (9.0)– Deferred tax liability to be recovered after more than 12 months (11.6) (2.7) (12.5) (11.7)Net deferred tax assets 23.2 0.2

The gross movement on the deferred income tax account is as follows:

2009 2008 Note £m £m

Beginning of the year 0.2 (3.7)Exchange adjustments 0.1 (0.2)Income statement credit 11 24.0 1.2Tax (debited)/credited directly to equity (1.1) 2.9End of year 23.2 0.2


Annual Report 2009

17. Deferred income tax (continued)Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m

Property, plant and equipment 0.6 0.2 (11.4) (9.9) (10.8) (9.7)Intangible assets – – (0.9) (1.8) (0.9) (1.8)Retirement benefi ts – – (0.2) – (0.2) –Derivative fi nancial instruments 2.1 3.3 – – 2.1 3.3Provisions 22.2 4.7 – – 22.2 4.7Employee share options 0.6 – – – 0.6 –Tax losses carried forward 10.2 3.7 – – 10.2 3.7 35.7 11.9 (12.5) (11.7) 23.2 0.2

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Accelerated capital Tax Share allowances Provisions losses Pension Hedging options Intangibles TotalDeferred tax assets/(liabilities) £m £m £m £m £m £m £m £m

At 1 January 2008 (6.6) 4.6 – – – 0.4 (2.1) (3.7)(Charged)/credited to the income statement (2.2) (0.4) 3.5 – – – 0.3 1.2(Charged)/credited directly to equity – – – – 3.3 (0.4) – 2.9Exchange differences (0.9) 0.5 0.2 – – – – (0.2)At 31 December 2008 (9.7) 4.7 3.7 – 3.3 – (1.8) 0.2Deferred tax asset 0.2 4.7 3.7 – 3.3 – – 11.9Deferred tax liability (9.9) – – – – – (1.8) (11.7)At 31 December 2008 (9.7) 4.7 3.7 – 3.3 – (1.8) 0.2

Accelerated capital Tax Share allowances Provisions losses Pension Hedging options Intangibles TotalDeferred tax assets/(liabilities) £m £m £m £m £m £m £m £m

At 1 January 2009 (9.7) 4.7 3.7 – 3.3 – (1.8) 0.2(Charged)/credited to the income statement 0.2 17.3 5.4 (0.1) – 0.4 0.8 24.0(Charged)/credited directly to equity – – – (0.1) (1.2) 0.2 – (1.1)Exchange differences (1.3) 0.2 1.1 – – – 0.1 0.1At 31 December 2009 (10.8) 22.2 10.2 (0.2) 2.1 0.6 (0.9) 23.2Deferred tax asset 0.6 22.2 10.2 – 2.1 0.6 – 35.7Deferred tax liability (11.4) – – (0.2) – – (0.9) (12.5)At 31 December 2009 (10.8) 22.2 10.2 (0.2) 2.1 0.6 (0.9) 23.2

The deferred income tax (charged)/credited to equity during the year is as follows:

2009 2008 £m £m

Share based payments 0.1 (0.4)Hedging (1.2) 3.3 (1.1) 2.9

Deferred taxation has not been provided in the event of the distribution of the unappropriated profi ts or reserves of certain overseas subsidiary undertakings as the Group does not currently intend to make such distributions.



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17. Deferred income tax (continued)At the balance sheet date, the Group has unused tax losses of £8.6 million (2008: £15.9 million) available for offset against future profi ts, subject to agreement with the tax authorities. The losses carried forward are in certain entities and can only be utilised against future profi ts of those entities. No deferred tax asset has been recognised in respect of these losses as there is uncertainty in respect of its future recoverability. In particular, £3.3 million (2008: £10.4 million) of the balance relates to losses arising in the Australian consolidated group which are subject to strict recognition rules. The Group is still determining whether the losses can be recognised and if so, the extent to which they can be recognised.

Advance corporation tax written off to date amounts to £1.8 million (2008: £1.7 million) and is available for offset against future United Kingdom corporation tax liabilities subject to certain conditions being met. The future benefi t of advance corporation tax has not been accounted for in the provision of deferred taxation as its recoverability is uncertain.

18. Inventories

2009 2008 £m £m

Materials 5.0 8.2Contract work in progress 8.7 5.3Finished goods 3.6 3.7 17.3 17.2

The cost of inventories recognised as an expense and has been charged to cost of sales in the income statement amounted to £43.0 million (2008: £49.8 million).

Payments received on account in excess of the value of the work performed on the related contract are included within trade and other payables (see note 24).

19. Trade and other receivables

2009 2008 Note £m £m

Trade receivables 115.8 128.8Less: provision for impairment of trade receivables (3.2) (3.5)Trade receivables – net 112.6 125.3Amounts recoverable on contracts 26.1 32.7Receivables from related parties 35 0.4 0.2Other receivables 10.7 18.4Prepayments and accrued income 6.2 8.1 156.0 184.7

Trade receivables include retentions of £10.1 million (2008: £10.5 million). The fair values of trade and other receivables equals their carrying amount, as the impact of discounting is not material.

As of 31 December 2009, trade receivables of £8.7 million (2008: £6.0 million) were partially impaired. The amount of the provision was £3.2 million (2008: £3.5 million). The individually impaired receivables mainly relate to contracts within the UK and Gulf/Middle East. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

2009 2008 £m £m

Less than 3 months 2.4 2.53 to 6 months 2.8 1.37 to 12 months 2.1 1.2Over 12 months 1.4 1.0 8.7 6.0


Annual Report 2009


19. Trade and other receivables (continued)

As of 31 December 2009, trade receivables of £62.3 million (2008: £59.6 million) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

2009 2008 £m £m

Less than 3 months 57.4 54.73 to 6 months 4.6 3.17 to 12 months 0.1 0.6Over 12 months 0.2 1.2 62.3 59.6

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

2009 2008 £m £m

Australian dollar 20.0 23.7Bahraini dinar 0.7 4.0Euro 0.7 1.4GB pound 60.1 77.7Indian rupee – 0.1Kuwaiti dinar 0.5 1.7Omani rial 0.9 2.0Philippine peso 2.8 0.8Qatar riyal 10.2 6.8Saudi Arabian riyal 18.2 25.5Singapore dollar 3.3 6.2Thai baht 1.8 1.7UAE dirham 9.3 8.2US dollar 27.5 24.8Other currencies – 0.1 156.0 184.7

Provision for impairment of trade receivables:

2009 2008 £m £m

At 1 January 3.5 4.1Provision for receivables impairment 2.8 2.5Receivables written off during the year as uncollectable (1.2) (0.3)Write back of receivables previously written off – 0.9Unused amounts reversed (1.9) (3.7)At 31 December 3.2 3.5

The creation and release of provision for impaired receivables have been included in cost of sales in the income statement. Amounts charged to the bad debt provision account are generally written off when there is no expectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above.

The Group does not hold any collateral as security.


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20. Cash – IDC Scheme funds (restricted)

2009 2008 £m £m

Cash – IDC Scheme funds (restricted) 33.8 37.5

Cape Claims Services Limited (‘CCS’) is the Scheme company in which Scheme funding is accounted for (note 34). Under the terms of the Scheme, there is a funding agreement between Cape plc and CCS under which Cape plc has provided CCS with initial funding of £40 million. The fund held by CCS of £33.8 million (2008: £37.5 million) is restricted for use primarily in settling the Group’s UK asbestos-related liabilities.

21. Cash, cash equivalents and bank overdrafts

2009 2008 Note £m £m

Cash at bank and in hand 53.3 33.3Bank overdrafts 22 (0.4) (2.8)Cash, cash equivalents and bank overdrafts in the statement of cash fl ows 52.9 30.5

22. Borrowings

2009 2008 Notes £m £m

Non current Finance leases 9.2 12.1Bank loans 125.4 147.5Cumulative preference shares 0.3 0.3 134.9 159.9Current Finance leases 5.4 8.6Loan notes 32 – 3.7Bank loans 26.2 23.8Bank overdrafts 21 0.4 2.8 32.0 38.9Total borrowings 166.9 198.8

Bank borrowingsThe bank loans and overdrafts of £152.0 million (2008: £174.1 million) are secured by fi xed and fl oating charges over the assets of the Group. Bank loans are stated net of unamortised issue costs of £2.1 million (2008: £2.8 million). The Group incurred issue costs of £3.9 million in respect of the fi ve-year facility entered into in September 2007 (amended December 2007 and July 2008) under which amounts were drawn down to part fund the acquisitions in Australia. These issue costs together with the interest expense are allocated to the income statement over the fi ve-year term of the facility at a constant rate on the carrying amount.

The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows:

2009 2008 £m £m

6 months or less 43.4 66.96 to 12 months 5.4 8.61 to 5 years 117.8 123.0Over 5 years 0.3 0.3 166.9 198.8


Annual Report 2009

22. Borrowings (continued)The carrying amounts and fair value of the non current borrowings are as follows:

Carrying amount Fair value 2009 2008 2009 2008 £m £m £m £m

Finance lease obligations 9.2 12.1 8.1 10.1Bank loans 125.4 147.5 105.5 116.2Cumulative preference shares 0.3 0.3 0.2 0.2 134.9 159.9 113.8 126.5

The fair value of current borrowings equals their carrying amount, as the impact of discounting is not signifi cant. The fair values are based on cash fl ows discounted using a rate based on the borrowing rate of 7.3% (2008: 8.1%).

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

2009 2008 £m £m

Australian dollar 25.7 47.9GB pound 122.6 130.0US dollar 18.6 20.9 166.9 198.8 The Group has the following undrawn borrowing facilities:

2009 2008 £m £m

Floating rate: – Expiring beyond 1 year 13.4 2.8

3.5% cumulative preference shares The Company has in issue 250,000 cumulative preference shares of £1 with a fi xed cumulative preferential dividend of 3.5% per annum, payable half yearly in arrears on 31 March and 30 September over the last fi ve years. The dividends have been deferred and the shares have no redemption entitlement.

Finance lease liabilitiesFinance lease liabilities are payable as follows:

Present Present Future value of Future value of minimum minimum minimum minimum lease lease lease lease payments Interest payments payments Interest payments 2009 2009 2009 2008 2008 2008 £m £m £m £m £m £m

Less than 1 year 6.4 1.0 5.4 10.4 1.8 8.6Between 1 and 5 years 10.0 0.8 9.2 13.5 1.4 12.1 16.4 1.8 14.6 23.9 3.2 20.7



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23. Financial instruments Details of fi nancial instruments are set out below.

Financial instruments by category Other fi nancial Loans and Derivatives used liabilities at receivables for hedging amortised cost Total31 December 2009 £m £m £m £m

Assets as per balance sheet Trade and other receivables (excluding prepayments) 149.8 – – 149.8Cash and cash equivalents 52.9 – – 52.9Cash – IDC Scheme funds (restricted) 33.8 – – 33.8 236.5 – – 236.5Liabilities as per balance sheet Borrowings (excluding fi nance lease liabilities) – – (152.3) (152.3)Finance lease liabilities – – (14.6) (14.6)Derivative fi nancial instruments – (4.4) – (4.4)Trade and other payables (excluding statutory liabilities) – – (76.6) (76.6) – (4.4) (243.5) (247.9)

Financial instruments by category Other fi nancial Loans and Derivatives used liabilities at receivables for hedging amortised cost Total31 December 2008 £m £m £m £m

Assets as per balance sheet Trade and other receivables (excluding prepayments) 176.6 – – 176.6Cash and cash equivalents 30.5 – – 30.5Cash – IDC Scheme funds (restricted) 37.5 – – 37.5 244.6 – – 244.6Liabilities as per balance sheet Borrowings (excluding fi nance lease liabilities) – – (178.1) (178.1)Finance lease liabilities – – (20.7) (20.7)Derivative fi nancial instruments – (6.9) – (6.9)Trade and other payables (excluding statutory liabilities) – – (107.4) (107.4) – (6.9) (306.2) (313.1)

Disclosures in respect of the Group’s fi nancial risks are set out below.

Financial risk managementThe Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, cash fl ow interest rate risk and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the Group’s fi nancial performance. The Group uses derivative fi nancial instruments to hedge certain risk exposures.

Risk management is carried out by the Group treasury department under policies approved by the Board of Directors. Group treasury identifi es, evaluates and hedges fi nancial risks in close cooperation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specifi c areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative fi nancial instruments and non-derivative fi nancial instruments, and investment of excess liquidity.

(a) Market risk(i) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Australian dollar and the GB pound. The primary exposure to the Group in terms of foreign currency risk is translation of the subsidiary results. This risk is managed primarily through borrowings denominated in the relevant foreign currencies. No sensitivity analysis has been performed for the purposes of these accounts as under IFRS 7 translation related risk is not taken into account. Foreign currency transaction exposure arising on normal trade fl ows is not hedged. The exposure of overseas operating subsidiaries to transaction risk is minimised by matching functional currency income with functional currency costs. Group management has completed a sensitivity analysis on the exposure of the Group to reasonable movements in the main functional currencies used by the subsidiaries and conclude that the impact on profi t and equity is minimal.


Annual Report 2009

23. Financial instruments (continued) (ii) Cash fl ow and fair value interest rate riskThe Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk. Borrowings issued at fi xed rates expose the Group to fair value interest rate risk.

As at 31 December 2009, the Group’s debt was denominated in GB pounds, US dollars and Australian dollars and was all at a fl oating rate. The Group has interest rate swaps in place for both the US dollar denominated debt and a proportion of the GB pound debt.

The Group reviews its interest rate exposure, taking into consideration refi nancing, renewal of existing positions and alternative fi nancing and hedging.

Based on various scenarios, the Group manages its cash fl ow interest rate risk by using fl oating to fi xed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from fl oating to fi xed rates. Under interest rate swaps, the Group has entered into transactions to exchange, at specifi ed intervals (primarily quarterly), the difference between fi xed contract rates and fl oating rate interest amounts calculated by reference to the agreed notional amounts.

Management has performed a sensitivity analysis on the impact of reasonable movements in interest rates on Group profi t and equity and consider that the impact is negligible.

(b) Credit riskCredit risk is the risk of fi nancial loss to the Group if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations, and arise principally from the Group’s receivables from customers and deposits with fi nancial institutions.

The Group’s exposure to credit risk (see note 19 for additional information) is infl uenced mainly by the individual characteristics of each customer. The Group has an established credit policy under which each new customer is analysed for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, and in some cases bank references. (c) Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due (see note 22 for additional information). The Group’s approach to managing liquidity is to ensure that it will always have suffi cient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or damage to the Group’s reputation.

(d) Capital managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(e) Accounting for derivative fi nancial instruments and hedging activitiesOn inception derivatives are accounted and measured at fair value and subsequently remeasured at fair value. The gain or loss on remeasurement is taken to the income statement except where the derivative is a designated hedging instrument when it is recognised in equity. The accounting treatment of derivatives classifi ed as hedges depends on their designations, which occurs on the date that the derivative contract is committed to. The Group designates derivatives as:

– a hedge of the income/cost of a highly probable forecasted transaction or commitment (‘cash fl ow hedge’);– a hedge of the net investment in a foreign entity (‘net investment hedge’); and– a hedge of the fair value of an asset or liability (‘fair value hedge’).

In order to qualify for hedge accounting, the Group documents in advance the relationship between the item being hedged and the hedging instrument and demonstrates the relationship between the hedged item and the hedging instrument, to show that the hedge will be effective on an on-going basis. Testing the effectiveness of the hedging instrument is performed bi-annually.

In order to qualify for hedge accounting, the Group documents in advance the relationship between the item being hedged and the hedging instrument and demonstrates the relationship between the hedged item and the hedging instrument, to show that the hedge will be effective on an on-going basis. Testing the effectiveness of the hedging instrument is performed bi-annually.



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23. Financial instruments (continued) Gains or losses on cash fl ow hedges that are regarded as highly effective are recognised in equity. Where the forecast transaction results in a fi nancial asset or liability, the gains or losses previously recognised in equity are reclassifi ed to the income statement in the same period as the asset or liability affects income or expenditure. Where the forecasted transaction or commitment results in a non-fi nancial asset or a liability, then any gains or losses previously deferred in equity are included in the cost of the related asset or liability. If the forecasted transaction or commitment results in future income or expenditure, gains or losses deferred in equity are transferred to the income statement in the same period as the underlying income or expenditure.

For the portion of hedges deemed ineffective or transactions that do not qualify for hedge accounting under IAS 39, any change in assets or liabilities is recognised immediately in the income statement. Where a hedge no longer meets the effectiveness criteria, any gains or losses deferred in equity are only transferred to the income statement when the committed or forecasted transaction is recognised in the income statement. However, where the Group applied cash fl ow hedge accounting for a forecasted or committed transaction that is no longer expected to occur, then the cumulative gain or loss that has been recorded in equity is transferred to the income statement. When a hedging instrument expires or is sold, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement.

Where the Group hedges net investments in foreign entities through currency borrowings that are regarded as highly effective, the gains or losses on the translation of the borrowings are recognised in equity. If the Group uses derivatives as the hedging instrument, the effective portion of the hedge is recognised in equity with any ineffective portion recognised in the income statement. On disposal of the foreign operation gains and losses accumulated in equity are transferred to the Income Statement.

The Group has not entered into any fair value hedges.

The fair values of short-term deposits, loans and other borrowings with a maturity of less than one year are assumed to approximate to their book values. In the case of the bank loans and other borrowings due in more than one year, the fair value of fi nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash fl ows at the current market interest rate available to the Group for similar fi nancial instruments.

2009 2008

Assets Liabilities Assets Liabilities £m £m £m £m

Interest rate swaps – cash fl ow hedges – (4.4) – (6.3)Forward foreign exchange contracts – cash fl ow hedges – – – (0.6)Total – (4.4) – (6.9)

There was no ineffectiveness to be recorded from net investment in foreign entity hedges.

The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet.

(i) Interest rate swapsThe notional principal amounts of the outstanding interest rate swap contracts at 31 December 2009 were £85.6 million (2008: £109.5 million).

At 31 December 2009 the main fl oating rates were UK LIBOR, US LIBOR and Australian inter bank rate. Interest rate swaps were in place which swapped fl oating LIBOR amounts for fi xed rates. UK LIBOR was swapped for a fi xed rate of 5.145% on £60 million of the sterling debt and 5.66% on £7 million of the sterling debt. US LIBOR was swapped for a fi xed rate of 3.23% on $30 million of US dollar denominated debt.

(ii) Forward foreign exchange contractsThe notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2009 were £nil (2008: £4.8 million).

Gains and losses recognised through the statement of changes in equity on forward foreign exchange contracts as of 31 December 2008 are recognised in the income statement in the period or periods during which the hedged forecast transaction affects the income statement, which is generally within 12 months from the balance sheet date unless the gain or loss is included in the initial recognition of a fi nancial asset in which case recognition is over the lifetime of the asset.


Annual Report 2009

24. Trade and other payables

2009 2008 Note £m £m

Payments received on account 18 3.5 7.3Trade payables 30.0 43.4Social security and other taxes 19.1 25.6Other payables 24.3 29.3Payables to associated companies 0.6 0.1Accrued expenses 18.2 27.3 95.7 133.0

Other payables include £0.9 million (2008: £1.2 million) in respect of deferred contingent consideration.

25. Current tax liabilities

2009 2008 £m £m

UK taxation 5.3 3.8Overseas taxation 6.0 5.6 11.3 9.4

26. Provisions for Industrial Disease ClaimsThe total Industrial Disease Claims provision of £80.2 million (2008: £9.7 million) is comprised as follows:

2009 2008 £m £m

Provision for notifi ed claims 9.7 9.7Provision for future liabilities 70.5 –Total IDC provision 80.2 9.7

Following further work from independent actuaries in the fi nal quarter of last year, the Board consider that the value of the total future asbestos-related liabilities can be estimated with suffi cient reliability to enable a provision to be recorded. The Group has previously provided for the estimated costs of notifi ed claims only and disclosed by way of a contingent liability the range of low and high estimates of £48 million and £203 million provided by the actuarial review as at 31 December 2007.

Following the most recent review it was concluded that a reasonable estimate would lie in the range of £60 million to £100 million with a central estimate of £79 million. In the context of the increased net assets of the Group to £319 million, excluding the provision for future IDC liabilities (net of tax), the Board considers the range of reasonable estimates has reduced the level of uncertainty associated with recognising the liability for potential future claims. With the increased confi dence provided, an additional provision of £70.5 million has been recognised. The Board considers that by recognising a provision for the total estimated discounted liability on balance sheet, the Group’s fi nancial statements are more informative and meaningful.

The range of reasonable estimates of £60 million to £100 million is contained within the range of low and high estimates of £48m to £203m respectively.

In coming to this decision, the Board have considered the key variables that could infl uence this liability in advance of the next full actuarial review which will be as at 31 December 2010. Although not an exhaustive list, the key variables are:

(a) Actual versus Expected claims experience – actual claims experience has broadly tracked to forecast contained in the most recent triennial actuarial review at 31 December 2007.

(b) Changes in underlying model assumptions – the Health and Safety Executive (HSE) and the GIRO Institute of Actuaries UK Asbestos Working Party (AWP) have recently published updated benchmarks which could impact the reasonable range of estimated liability. There are a number of key changes which could impact:

(i) Propensity to claim – this is a major assumption change to the AWP model and estimates how the propensity for individuals to claim for damages has increased over time. However, given the high profi le of Cape and the Scheme of Arrangement this is thought to be less signifi cant to Cape in comparison to other involved parties.



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26. Provisions for Industrial Disease Claims (continued)(ii) Future population mortality – the latest AWP models exclude the impact of past and future migration as well as using the latest projections for mortality. Although the assumptions will be updated for the 2010 review, the 2007 review already excluded migration impacts and therefore this change should again be less signifi cant.

(iii) Exposure to asbestos over time – the AWP has changed its assumptions on the relative exposure per head of the UK population. Although this will impact Cape’s third party and contractor claims it will impact the employee claims to a lesser extent, which account for a large proportion of total claims, since the relative exposure per head of employees is based on location specifi c rather than general population assumptions.

(iv) Projection for years after 2040 – the initial AWP study excluded these years, however, the 2007 Cape review projected liabilities to 2070 and so this will not impact the 2010 review.

(c) Changes in the legal, social or economic environment that may impact claims – there is no view that there has been any signifi cant change to the legal, social or economic environment that could materially impact the provision.

After considering the potential impact of the above variables the Board consider the value of the liability at 31 December 2009 can be estimated with suffi cient reliability to recognise the provision for future industrial disease liabilities.

The total provision for industrial disease related liabilities at 31 December 2009 is £80.2 million and includes estimated costs of £9.7 million (2008: £9.7 million) in respect of notifi ed claims. The provision for future liabilities of £70.5 million refl ects the central estimate of £79 million adjusted for cash settlements and the unwinding of the discount since the last full actuarial review. A deferred tax asset of £19.7 million has also been recognised in respect of the provision for future liabilities. The impact on the Group’s balance sheet position at 31 December 2009 is an additional net liability of £50.8 million.

Due to the inherent uncertainty regarding the timing of settlement, all provisions have been classed as non current.

The £74.2 million income statement charge consists of £3.7 million (2008: £5.7 million) in respect of notifi ed claims and £70.5 million in respect of the provision for future liabilities. A deferred tax benefi t of £19.7 million has been recorded in the tax line in the income statement.

27. Provisions for other liabilities and charges

2009 2008 £m £m

At 1 January 4.7 4.9Additional provisions charged to the income statement 0.8 0.2Utilised during year (0.1) (0.4)At 31 December 5.4 4.7


Other provisions relate to the decision made in 2002 to sell and close the Calsil business and provisions for property dilapidations and national insurance on share options.

28. Commitments(a) Capital commitmentsCapital expenditure contracted for at the balance sheet date but not yet incurred:

2009 2008 £m £m

Property, plant and equipment 1.5 1.5

These commitments are expected to be settled in the following fi nancial year.


Annual Report 2009

28. Commitments (continued)(b) Operating lease commitmentsThe Group leases various properties, plant and machinery under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The lease expenditure charged to the income statement during the year was £3.2 million (2008: £1.8 million) property leases, and £14.1 million (2008: £14.7 million) plant and equipment leases.

The future aggregate minimum lease payments under non-cancellable operating leases are due:

Plant and Plant and Property equipment Property equipment 2009 2009 2008 2008 £m £m £m £m

Within 1 year 2.6 2.1 1.9 1.2Later than 1 year and less than 5 years 3.9 2.4 4.2 2.4After 5 years 0.9 – 1.1 – 7.4 4.5 7.2 3.6

29. Share capital

2009 2008(a) Authorised £m £m

200,000,000 ordinary shares of 25p each (2008: 153,600,000 ordinary shares of 25p) 50.0 38.4431,906,031 deferred shares of 1p each (2008: 431,906,031) 4.3 4.31 plc scheme share (2008: 1) – – 54.3 42.7

The increase in authorised share capital was approved at the AGM on 20 May 2009.

2009 2009 2008 2008(b) Issued and fully paid Shares £m Shares £m

Ordinary shares of 25p each At 1 January 114,989,087 28.8 113,837,618 28.5Issue of shares and options in settlement of deferred consideration 677,726 0.1 – –Exercise of share options 362,269 0.1 1,151,469 0.3At 31 December 116,029,082 29.0 114,989,087 28.8 Deferred shares of 1p each At 1 January and 31 December 431,906,031 4.3 431,906,031 4.3 plc Scheme share At 1 January and 31 December 1 – 1 – 33.3 33.1

Deferred sharesThe holders have no dividend rights, redemption entitlement or voting rights. On a winding up the holders are entitled to repayment of capital only after ordinary shareholders have received £100 for each ordinary share.

plc Scheme ShareThe plc Scheme Share is held by the Law Debenture Trust Corporation plc on behalf of the Scheme creditors.

The rights attaching to the share are designed to ensure that Scheme assets are only used to settle Scheme claims and ancillary costs and do not confer any right to receive a distribution or return of surplus capital save that the holder will have the right to require the Company to redeem the share at par value on or at any time after the termination of the Scheme.

The share carries two votes for every vote which the holders of the other classes of shares in issue are entitled to exercise on any resolution proposed during the life of the Scheme to engage in certain activities specifi ed in the Company’s Articles of Association.

The Company will not be permitted to engage in certain activities specifi ed in the Company’s Articles of Association without the prior consent of the holder of the share.



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29. Share capital (continued)Share based paymentsThe Group has a savings related share option scheme (‘Sharesave plan’) which entitles employees of the Group to buy shares in the Company. Grants of share options under this scheme are offered to employees periodically and the options are usually awarded at a 20% discount to the market price at the date the options are offered to employees. These options must be exercised within six months of the vesting date.

The Employee Incentive Plan (EIP) allows the Group to grant options to Directors and senior employees. The EIP carries a non-market based performance criteria. The contractual life of the options is 10 years. The options become exercisable on the third anniversary of the date of grant, subject to a growth in earnings per share over that period exceeding an average 3% compounded annually above the growth in the consumer price index over the same period. Exercise of an option is subject to continued employment.

The Performance Share Plan (PSP) is the award of Ordinary Shares at no cost to the participant employees or Executive Directors of the Group. Awards are made upon the terms set out in the plan and such other additional terms as the Board shall determine. PSP awards are conditional awards granted at no cost to the participant. Awards are made upon the terms set out in the plan and such other additional terms as the Board shall determine. Vesting of these awards is subject to Cape plc adjusted diluted Earnings Per Share (EPS) meeting the specifi ed performance criteria over a three-year vesting period. The performance criteria is adjusted diluted EPS growth of the Retail Price Index (‘RPI’) plus 3% for the minimum of 30% of the shares awarded to vest, and EPS growth of RPI plus 10% for all of the shares awarded to vest. The contractual life of the award is three years and is subject to continued employment.

Options are valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation for the current and preceding year are as follows:

Employee 3-year 5-year Incentive Plan Sharesave plan Sharesave plan

Weighted average fair value at measurement date 80.9p 87.5p 110.0pShare price at grant date 269.0p 266.0p 266.0pExercise price 269.0p 230.0p 230.0pVesting period 3 years 3 years 5 yearsExpected option life 3.95 years 3.25 years 5.25 yearsRisk free interest rate 4.97% 4.89% 4.89%Expected share price volatility 28% 27% 28%

The expected share price volatility is based on historic volatility. The expected option life is the average expected period to exercise. The risk free rate of return is the yield on a fi ve-year zero coupon UK Government bond. The assumed dividend yield is zero.

The shares issued under the PSP, are deemed to have a fair value equivalent to the share price on the day of grant. Therefore the shares granted in April and July 2009 have fair values of 118.0 pence and 212.25 pence respectively.

The number and weighted average exercise price of the share options under the EIP and Sharesave plan and the share awards under the PSP are as follows:

Weighted average Number of Weighted average Number of exercise price share options exercise price share options 2009 2009 2008 2008Employee Incentive Plan (pence) (pence)

Outstanding at 1 January 223.1 2,182,500 195.3 3,980,000Granted – – 269.0 100,000Exercised 147.3 (215,000) 110.1 (1,120,000)Forfeited 217.2 (402,500) 249.5 (777,500)Outstanding at 31 December 235.0 1,565,000 223.1 2,182,500

Out of the 1,565,000 outstanding options (2008: 2,182,500 options), 562,500 options (2008: 125,000) were exercisable. Options exercised in 2009 resulted in nil shares (2008: 505,000 shares) being issued at £0.60 each, 110,000 shares (2008: 280,000 shares) being issued at £1.20 each, 105,000 shares (2008: 330,000) being issued at £1.76 each and nil shares (2008: 5,000) being issued at £2.69 each. The options were exercised on a regular basis during the year. The average share price in 2009 was £1.57 (2008: £2.03).


Annual Report 2009

29. Share capital (continued)

Weighted average Number of Weighted average Number of exercise price share options exercise price share options 2009 2009 2008 2008Sharesave plan (pence) (pence)

Outstanding at 1 January 173.4 1,352,023 173.0 1,823,112Exercised 135.6 (147,269) 138.8 (31,469)Forfeited 177.4 (281,969) 174.4 (439,620)Outstanding at 31 December 178.2 922,785 173.4 1,352,023

Out of the 922,785 outstanding options (2008: 1,352,023 options), 35,620 options (2008: nil) were exercisable. Options exercised in 2009 resulted in 146,377 shares (2008: 30,209 shares) being issued at £1.35 each and 892 shares (2008: 1,260) being issued at £2.30.

Weighted average Number of Weighted average Number of exercise price share options exercise price share options 2009 2009 2008 2008Performance Share Plan (pence) (pence)

Outstanding at 1 January – 900,201 – –Granted – 2,648,712 – 900,201Forfeited – (185,527) – –Outstanding at 31 December – 3,363,386 – 900,201

Out of the 3,363,386 outstanding PSP awards (2008: 900,201 awards), no awards vested during 2009 (2008: nil).

Share options and awards outstanding at the end of the year have the following expiry date and exercise prices:

Exercise price per Number of share optionsEmployee Incentive Plan share (pence) 2009 2008

7 May 2014 60.0 – 35,00024 October 2015 120.0 5,000 170,0007 July 2016 176.0 557,500 720,0001 April 2017 269.0 1,002,500 1,157,5008 January 2018 269.0 – 100,000 1,565,000 2,182,500

Exercise price per Number of share optionsSharesave plan share (pence) 2009 2008

1 March 2010 135.0 35,620 207,3851 June 2011 230.0 465,073 595,8661 March 2012 135.0 170,363 221,3821 June 2013 230.0 251,729 327,390 922,785 1,352,023

Exercise price per Number of share optionsPerformance Share Plan share (pence) 2009 2008

28 April 2011 – 582,296 696,02623 September 2011 – 150,216 204,17530 April 2012 – 2,144,630 –29 July 2012 – 486,244 – – 3,363,386 900,201

On 30 April 2009 and 29 July 2009, 2,162,468 share awards and 486,244 share awards respectively were awarded to Directors and employees under the PSP which vest after three years subject to performance criteria being met. If the criteria are met, the awards vest at no cost to the employees and Directors. The awards allocated to employees on 29 July 2009 were approved in principle on 30 April 2009.

The total charge for the year relating to employee share based payment plans was £1.6 million (2008: £1.2 million), all of which related to equity settled share based payment transactions.



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30. Cash generated from operations(a) Reconciliation of Group operating profi t to net operating cash fl ow from operating activities

2009 2008 £m £m

Cash fl ows from operating activities Continuing operations Operating (loss)/profi t for the year (6.5) 52.5Depreciation 15.8 15.3Amortisation of intangibles 2.9 2.7Share option charge 1.6 1.2Loss/(profi t) on sale of property, plant and equipment 1.4 (0.8)Difference between pension charge and cash contributions (0.5) (0.5)Share of profi t of associates 1.6 0.5Changes in working capital (excluding effects of exchange adjustments on consolidation) (Increase)/decrease in inventories (0.5) 1.4Decrease/(increase) in trade and other receivables 22.4 (21.6)(Decrease)/increase in trade and other payables (29.2) 15.2Increase in provisions (excluding deferred tax) 71.2 2.4Industrial disease costs paid 4.2 3.6Cash generated from continuing operations 84.4 71.9 Discontinued operations Loss for the year – (0.2)Increase in trade and other receivables – (0.1)Decrease in trade and other payables – (0.7)Cash outfl ow from discontinued operations – (1.0) Cash generated from operating activities 84.4 70.9

In the statement of cash fl ows, proceeds from sale of property, plant and equipment comprise:

2009 2008 £m £m

Net book amount 2.5 1.9(Loss)/profi t on disposal of property, plant and equipment (1.4) 0.8Proceeds from disposal of property, plant and equipment 1.1 2.7

(b) Analysis of cash fl ows relating to restricted funds

2009 2008 £m £m

At 1 January 37.5 39.1Payment of Scheme creditors (4.1) (3.4)Operating costs (0.1) (0.2)Interest received 0.5 2.0At 31 December 33.8 37.5


Annual Report 2009


30. Cash generated from operations (continued)(c) Reconciliation of free cash fl ow to cash fl ow from operating activities as defi ned by IFRS 1

2009 2008 £m £m

Cash generated from operating activities 84.4 70.9Increase in Industrial disease related provision (70.5) (2.4)Industrial disease costs paid (4.2) (3.6)Industrial disease income statement charge 74.2 5.7Exceptional charge – 4.1Interest paid (11.4) (17.0)Bank fee paid – (1.5)Amortisation of bank fee (0.7) (0.7)Interest received (non scheme) 0.7 0.6Tax (7.6) (4.8)Capital expenditure – cash (10.0) (19.9)Capital expenditure – fi nance leases (1.6) (6.3)Cash received from sale of fi xed assets 1.1 2.7Capital expenditure – intangible asset (0.3) –Exceptional costs paid – (4.1)Free cash fl ow1 54.1 23.7Scheduled repayment under Group’s Senior debt facility (15.0) (20.0)Free cash after servicing Senior debt 39.1 3.7

Adjusted EBITDAAdjusted operating profi t 72.2 65.5Depreciation 15.8 15.3Adjusted EBITDA 88.0 80.8

Operating cash conversion2 95.9% 87.7%

1 Free cash fl ow is defi ned as cash generated from operations adjusted for the impact of industrial disease costs, interest, tax, net capital expenditure and exceptional items paid.2 Operating cash conversion is defi ned as cash generated from operating activities divided by adjusted EBITDA.

31. Repayment of borrowingsThe repayment of borrowings shown in the cash fl ow statement represents a £15.0 million (2008: £20.0 million) scheduled repayment under the Group’s Senior Debt facility, in addition to a £5.4 million (2008: £nil) reduction of the revolving facility in the UK and Australia which could be redrawn at the discretion of Cape.

32. Settlement of loan notesThe loan notes of £3.7 million relate to deferred consideration payable for the acquisition of the DBI Group which took place during 2006. These loan notes were settled during January 2009.

33. Contingencies(a) There is a history of industrial disease claims being lodged against the Group for a number of years. Where the Group has determined that it is appropriate to do so, settlement has been made. Based on this experience, it is likely that similar claims will continue to be received for the foreseeable future. However, there is signifi cant uncertainty over the number, nature, timing and validity of such future claims. This is as a result of, inter alia, uncertainties concerning the population that may have been exposed to asbestos and that may develop asbestos-related diseases, the nature and timing of the diseases that may develop, the impact of other factors which might have contributed to the claimant’s condition, changes in the legal environment and to the typical cost of settlement. These factors affect considerations of liability and the quantum of settlements. Experience to date is that some of these claims will be at least partially covered by insurance policies but the amount of cover will not be known until the details of the claims are available.

In order to provide for the long-term fi nancing of a great majority of all future asbestos-related claims likely to be made successfully against the Group, Cape plc has put in place the Scheme details of which are set out in note 34. The Scheme became effective in relation to Cape plc and 12 of its wholly-owned subsidiaries on 14 June 2006. The Scheme companies are listed in note 34.


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33. Contingencies (continued)In accordance with the terms of the Scheme, the Directors have commissioned independent actuaries to review and provide an estimate of certain of the Group’s unpaid and uninsured UK asbestos-related claims as at 31 December 2007. Estimates of unpaid asbestos-related claims are inherently uncertain. Although the review did not take account of all potential claims against the Group, it covers, in the opinion of the Directors, the overwhelming majority of all UK asbestos-related claims likely to be made against the Group. The actuaries’ central estimate of the aggregate projected discounted value, net of insurance recoveries, of the unpaid UK asbestos-related claims they reviewed is £74.0 million (2008: £74.0 million). This estimate is contained within a range of low and high estimates of £48.0 million (2008: £48.0 million) and £203.0 million (2008: £203.0 million) respectively, although there can be no certainty that the total cost of such claims will fall within the range of such estimates. The discount rate applied is 5%. Claims not covered by the review include, inter alia, overseas claims and certain potential claims for reimbursement from insurers and others.

Following further work from independent actuaries in the fi nal quarter of 2009, the Board consider that the value of the total future asbestos-related liabilities can be estimated with suffi cient reliability to enable a provision to be recognised. Previously, the Group has provided only for the estimated costs of notifi ed claims only, however, following the most recent review it was concluded that a reasonable estimate would lie in the region of £60 million to £100 million with a revised central estimate of £79 million. In the context of the increased net assets of the Group to £319 million, excluding the provision for future IDC liabilities (net of tax), the Board considers the range of reasonable estimates has reduced the level of uncertainty associated with recognising the liability for potential future claims. With the increased confi dence provided, an additional provision of £70.5 million has been recognised. The Board considers that by recognising a provision for the total estimated discounted liability on balance sheet, the Group’s fi nancial statements are more informative and meaningful.

The range of reasonable estimates of £60 million to £100 million is contained within the range of low and high estimates of £48 million to £203 million respectively.

There remains uncertainty over the net present value of the future claim settlements which could occur over a period of more than 40 years. However, in aggregate they are unlikely to exceed the amount of the net assets included in the current Group balance sheet. Based on the recent history of settlements, the Directors anticipate that, assuming there is no material deterioration in the Group’s trading performance nor a signifi cant increase in either the number of asbestos-related claims or the quantum of damages or costs the Group has to settle, nor any signifi cant shortfall in the recoveries that the Directors expect the Group to make from its insurers and under third-party indemnities and the Scheme fund achieves investment returns in line with current expectations, the Group will be able to ensure that (i) its subsidiary Cape Claims Services Limited (‘CCS’) will be suffi ciently funded to satisfy all Scheme claims and (ii) the Group will be suffi ciently funded to satisfy any UK asbestos-related claims falling outside the Scheme. Should the future pattern as regards timing and quantum of claims prove to be materially and adversely different from the historic trend, this could impact on the Group’s fi nancial position.

(b) The Company was the defendant in proceedings brought by some 7,500 South African residents who claimed that they suffered injury as the result of mining activities in South Africa undertaken by former subsidiaries of Cape plc. The Company entered into an agreement on 13 March 2003 with the claimants in the group action and new claimants who had come forward in 2002.

It is possible that claims could arise in the future from claimants who were not included in the group action, or who claim they have developed an asbestos-related disease since the date of the settlement and as a result of the Group’s former mining activities in South Africa. There is a signifi cant uncertainty as to whether such future claims will be made and as to the number, nature, timing and validity of such claims. However, no such claims have been received to date.

(c) Certain companies in the Group continue to be named, along with several asbestos fi bre and asbestos product suppliers, as defendants in a number of legal actions in North America. The plaintiffs in such actions are claiming substantial damages as a result of the use of these products. The Company has received legal advice in the UK that default judgments obtained in North America against Companies within the Group which are not present in North America, would not be enforceable in the UK. Consequently the Directors believe that the above-mentioned matters are unlikely to have a material effect on the Group’s fi nancial position.

(d) The Group has contingent liabilities in respect of guarantees and bonds entered into in the normal course of business, in respect of which no loss is expected.


Annual Report 2009


34. The Scheme of ArrangementOn 14 June 2006, the Scheme became effective and binding upon Cape plc and the following 12 of its wholly-owned subsidiaries:

Cape Building Products LimitedCape Calsil Systems LimitedCape Contracts International LimitedCape Durasteel LimitedCape East LimitedCape Industrial Services LimitedCape Industries LimitedCape Insulation LimitedCape Specialist Coatings LimitedPredart LimitedSomewatch LimitedSomewin Limited

The detailed terms of the Scheme are set out in the Scheme itself, a copy of which has been fi led with the Registrar of Companies, the Articles of Association of Cape and Cape Claims Services Limited (‘CCS’) and a number of other ancillary agreements. The effect of the Scheme as a whole can be summarised as follows:

(a) While Scheme creditors retain their rights against Scheme companies, and may bring proceedings against Scheme companies for declaratory relief to determine whether they have a claim and, if so, of what amount, their rights, subject as provided in sub paragraphs (k) and (m) below are only enforceable against CCS under the terms of the Scheme guarantee;

(b) CCS was funded in the fi rst instance with a sum of £40 million which represented what was considered to be a suffi cient sum to discharge CCS’s liabilities to Scheme creditors which became payable over at least eight years from 1 January 2006;

(c) Every three years there is an assessment of the projected Scheme claims against Scheme companies payable by CCS over the following nine years, by reference to which the Funding Requirement, is established;

(d) The use of Scheme funds is restricted to the payment of established Scheme claims and Scheme creditor costs;

(e) In the event that an assessment reveals a shortfall between the Scheme assets and the Funding Requirement, the Company will top up CCS’s funding over the following three years provided that suffi cient cash is available, Cape’s obligation being limited to 70% of the Group’s consolidated adjusted operational cash fl ow (including, for example, adjustments to take account of acquisitions, an element of capital expenditure and repayment of borrowing facilities);

(f) Should the Company not be able to meet its top up obligation in any one year, it will be required to make good the shortfall in the next year, again subject to suffi cient cash being available;

(g) Alongside the Funding Requirement there is the Scheme Funding Requirement which is assessed every year by reference to projected Scheme claims against Scheme companies payable by CCS over the next six years;

(h) If at any time the ratio of the Scheme assets to the Scheme Funding Requirement (the Scheme Funding Percentage) falls below 60%, CCS will have the ability to reduce the percentage (the Payment Percentage) of each established claim which it pays to Scheme creditors until such time as the Scheme Funding Percentage is restored to 60%;

(i) Cape is permitted to pay dividends provided that at the time of payment (i) the Scheme Funding Percentage in relation to the last preceding fi nancial year was certifi ed to be not less than 110%, (ii) the Directors of Cape certify that they anticipate that the Scheme Funding Percentage for the current and following fi nancial year will be not less than 110% and (iii) the Payment Percentage has not at any time within the previous 40 business days been below 100%. Any distribution which Cape proposes to make to its shareholders may not, without the consent of the Scheme Shareholder, exceed the greater of (i) 50% of the consolidated operating profi ts of the Group for the last preceding fi nancial year and (ii) the aggregate of any permitted dividends made in the preceding fi nancial year. This restriction therefore places a cap on the amount of dividends that the Company may pay in any one year;

(j) There have been established special voting shares (the Scheme Shares) in CCS and Cape which are held by an independent third party (the Scheme Shareholder) on trust for Scheme creditors. The Scheme Shares have special rights which are designed to enable the Scheme Shareholder to protect the interests of Scheme creditors;


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34. The Scheme of Arrangement (continued)(k) In the case of certain Scheme creditors (Recourse Scheme Creditors), who are those Scheme creditors whose claims are in whole or in part the subject of a contract of insurance (Recourse Scheme Claims) their rights to enforce their Recourse Scheme Claims against a relevant Scheme company will revive in certain circumstances. These circumstances are where the relevant Scheme company is insolvent or where there has been a specifi ed reduction in the Payment Percentage and if the Scheme creditor was able to bring about the insolvency of the relevant Scheme company he would be able to recover greater compensation from the FSCS (‘Financial Services Compensation Scheme’) or, in certain circumstances, from a solvent insurer than is available from CCS at that time under the Scheme. There will be a specifi ed reduction if either (i) the Payment Percentage has been reduced below 100% but above 50% and the Scheme creditor has not been paid in full after 12 months or (ii) the Payment Percentage is reduced to 50% or below;

(l) Each Scheme company will agree to hold on trust for any Scheme creditor concerned the proceeds of any policy of insurance (or any compensation received from the FSCS) referable to that Scheme claim;

(m) The restriction described in sub-paragraph (a) above will not apply to proceedings to enforce the right to confer under sub-paragraph (l) above; and

(n) There are provisions contained in two reimbursement agreements which preserve certain rights of proof by CCS and Cape respectively in any insolvency of Cape or any of the other Scheme companies.

35. Related party transactionsThe Company has taken advantage of the exemption available under IAS 24 not to disclose any transactions or balances between Group entities that have been eliminated on consolidation.

2009 2008 £000 £000

(a) Key management compensation Salaries and other short-term employee benefi ts 2,363 2,021Post-employment benefi ts 163 149Share based payments 743 295 3,269 2,465 (b) Directors Aggregate emoluments 1,903 1,512Company contributions to defi ned benefi t pension scheme – 11Company contributions to defi ned contribution pension scheme 117 91 2,020 1,614 Highest paid director Aggregate emoluments 1,066 933Defi ned contribution pension scheme: Contributions in year 70 65

The key management of the Group are considered to be the Group Directors and the head offi ce Group management team.

No Directors (2008: one) accrued benefi ts under the Group’s defi ned benefi t pension scheme.

There were no termination payments during the year (2008: £0.4 million).

(c) Other related party transactionsThere have been no material transactions with related parties during the year. As at the year end there was a balance of £0.4 million (2008: £0.2 million) owed by associate undertakings.

36. Post balance sheet eventThere have not been any signifi cant events after the year end.


Annual Report 2009

2009 2008 Notes £m £m

Fixed assets Investments 4 31.3 31.3 31.3 31.3

Current assets Debtors 5 147.3 137.9Cash at bank and in hand – 0.4 147.3 138.3 Creditors: amounts falling due within one year Short-term borrowings 7 (40.1) (32.1)Other creditors 7 (2.5) (1.5)Derivative fi nancial liabilities 7 (4.4) (6.9) (47.0) (40.5)Net current assets 100.3 97.8 Total assets less current liabilities 131.6 129.1 Creditors: amounts falling due after more than one year 8 (108.2) (114.5) Provisions for Industrial Disease Claims 9 (4.7) (4.7)Provisions for other liabilities and charges 10 (4.3) (3.8) Net assets excluding pension liability 14.4 6.1Pension liability (0.3) (0.3)Net assets including pension liability 14.1 5.8 Capital and reserves Called up share capital 11 33.3 33.1Share premium 12 9.2 8.4Special reserve 12 1.0 1.0Retained defi cit 12 (29.4) (36.7)Total shareholders’ funds 14.1 5.8

These accounts were approved by the Board of Directors on 15 April 2010 and were signed on its behalf by:

Sean O’Connor ChairmanRichard Bingham Chief Financial Offi cer


Parent Company balance sheet (UK GAAP)at 31 December 2009


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1. Accounting policiesBasis of preparationThe fi nancial statements are prepared on the going concern basis under the historical cost convention and in accordance with the Companies Act 2006 and applicable accounting standards. The Company’s fi nancial statements have been prepared in accordance with accounting principles generally accepted in the United Kingdom and are therefore being presented separately from the consolidated fi nancial statements of Cape plc, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and International Financial Reporting Interpretations Committee (IFRIC) Interpretations.

As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own profi t and loss account for the year. In accordance with FRS 1 (revised 1996) and FRS 8 the Company has taken advantage of the exemptions not to prepare a cash fl ow statement and not to disclose related party transactions with entities that are part of the Cape plc Group or investees of the Cape plc Group. FRS 29 Financial instruments: Disclosures became effective from 1 January 2008. As the consolidated fi nancial statements have been prepared in accordance with IFRS 7, the Company is exempt from the disclosure requirements of FRS 29. Other new accounting standards issued by the Accounting Standards Board and effective from 1 January 2009 have had no impact on the accounts of the Company.

Fixed asset investmentsInvestments are held at cost less impairment.

Use of estimates and assumptionsThe preparation of these fi nancial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the fi nancial statements and the reported amounts of revenue during the reporting period. Actual results could differ from these estimates. Information about such judgements and estimation is contained in individual accounting policies.

Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are:

– review of carrying value of fi xed asset investments;– estimation of liabilities for pension and other post

retirement costs;– liabilities in relation to industrial disease claims; – liabilities in relation to central provisions; and– recoverability of deferred tax assets.

Compensation for industrial diseaseProvision is made for compensation for industrial disease where it is possible to estimate the liability with suffi cient reliability. This is in respect of both claims lodged and outstanding at the period end and future potential claims. Where this is not possible, a contingent liability is noted. Benefi t is recognised for insurance recoveries for claims provided when they are anticipated with virtual certainty.

ProvisionsProvisions for liabilities, except for those for industrial disease, are made where the timing or amount of settlement is uncertain. A provision is recognised when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outfl ow of resources will be required to settle the obligation and the amount has been reliably estimated.

Deferred income taxationDeferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less, tax in the future. Resultant deferred tax assets are recognised only to the extent that it is considered more likely than not that there will be suitable taxable profi ts from which the underlying timing differences can be deducted, or where there are deferred tax liabilities against which the assets can be recovered. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. BorrowingsBorrowings are recognised initially at the amount of the consideration received after deduction of issue costs. Issue costs together with fi nance costs are charged to the profi t and loss account over the term of the borrowings and represent a constant proportion of the balance of capital repayments outstanding.

Cumulative preference shares are classifi ed as liabilities. The dividends on these preference shares are recognised in the income statement as interest expense.

Borrowings are classifi ed as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Cash at bank and in handCash at bank and in hand include cash in hand, deposits held on call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

Share capitalOrdinary shares and deferred shares are classifi ed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Accounting for derivative fi nancial instruments and hedging activitiesThe Company has adopted FRS 26 and has accounted for derivative fi nancial instruments consistent with the method adopted by the Group shown on page 56 of the fi nancial statements.

Parent Company Notes to the fi nancial statements (UK GAAP)


Annual Report 2009

Share based paymentsThe Company issues equity settled share based payments to certain employees which must be measured at fair value and recognised as an expense in the profi t and loss account with a corresponding increase in equity. The fair values of these payments are measured at the dates of grant using option pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value is recognised over the period during which employees become unconditionally entitled to the awards subject to the Company’s estimate of the number of awards which will lapse, either due to employees leaving the Group prior to vesting or due to non-market based performance conditions not being met.

Proceeds received on the exercise of share options are credited to share capital and share premium.

PensionsThe Group operates two major pension schemes in the UK, one is a defi ned benefi t scheme and the other is a defi ned contribution scheme. The assets of the plan are held separately from those of the Company in an independently administered fund.

(a) Defi ned benefi t planThe Company is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as permitted by FRS 17, accounts for the plan as if it were a defi ned contribution plan. The consolidated fi nancial statements include full disclosures of the UK defi ned benefi t plan in accordance with IAS 19 which is similar to FRS 17 (note 16 to the Group fi nancial statements).

(b) Defi ned contribution planPayments to the defi ned contribution plan are charged as an expense as they fall due.

2. Loss of the CompanyThe retained loss for the fi nancial year attributable to the Company was £10.0 million (2008: £24.0 million).

Auditor remuneration is disclosed in note 9 to the Group fi nancial statements.

3. Employee and DirectorsDetails of Directors’ emoluments are shown in note 35 to the Group fi nancial statements.

(a) Average number of employees (including Executive Directors)

2009 2008

Number of employees 23 21

(b) Employment costs, including Directors’ emoluments

2009 2008 £m £m

Wages and salaries 4.0 3.9Social security 0.4 0.6Other pension costs 0.2 0.2Cost of employee share scheme 0.8 0.7 5.4 5.4

Details of share based payments are disclosed in note 29 to the Group accounts.

4. Fixed asset investments

2009 2008 £m £m

Cost 66.6 66.6Aggregate amounts provided (35.3) (35.3)Net book value 31.3 31.3

The principal subsidiary undertakings at 31 December 2009, which are all included in the Group consolidated fi nancial statements, are shown on page 95.

Parent Company Notes to the fi nancial statements (UK GAAP)continued


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5. Debtors

2009 2008 Note £m £m

Amounts owed by Group undertakings 134.6 128.6Other debtors 1.9 1.5Group relief receivable 3.4 –UK taxation 4.2 3.6Deferred tax 6 3.2 4.2 147.3 137.9

Amounts owed by Group undertakings are unsecured, have no fi xed date of repayment and are repayable on demand.

6. Deferred taxation

2009 2008 Note £m £m

Deferred taxation asset comprises: Short-term timing differences 3.2 4.2 3.2 4.2

Net deferred taxation asset At 1 January 4.2 0.8Amount (debited)/credited to profi t and loss account 0.2 0.1Amount (debited)/credited to reserves 12 (1.2) 3.3At 31 December 3.2 4.2

7. Creditors: amounts falling due within one year

2009 2008 £m £m

Bank loans 20.0 15.0Bank overdrafts 20.1 17.1Short-term borrowings 40.1 32.1Payroll and other taxes, including social security 0.1 0.4Other creditors 0.9 0.3Accruals and deferred income 1.5 0.8 2.5 1.5Derivative fi nancial liabilities 4.4 6.9Total amounts falling due within one year 47.0 40.5

Details of the derivative fi nancial liabilities are disclosed in note 23 to the Group fi nancial statements.

8. Creditors: amounts falling due after more than one year

2009 2008 £m £m

Bank loans 107.9 114.2Cumulative preference shares 0.3 0.3Total amounts falling due after more than one year 108.2 114.5

The bank loans and overdrafts are secured by fi xed and fl oating charges over the assets of the Group.

3.5% cumulative preference shares The Company has in issue 250,000 cumulative preference shares of £1 each with a fi xed cumulative preferential dividend of 3.5% per annum, payable half yearly in arrears on 31 March and 30 September. Over the last fi ve years the dividends have been deferred and the shares have no redemption entitlement.


Annual Report 2009

9. Provisions for Industrial Disease Claims

2009 2008 £m £m

At 1 January 2009 4.7 3.6Additional provisions charged to the income statement 2.6 3.1Utilised during year (2.6) (2.0)At 31 December 2009 4.7 4.7


The provision for industrial disease represents the expected costs of claims. It is anticipated that most of these claims will be paid within the next two years. The charge to profi t for the compensation for industrial disease in the year net of insurance recoveries is £2.6 million (2008: £3.3 million). The provision charge is recognised within net operating expenses. Insurance recoveries of £1.3 million (2008: £0.7 million) are receivable against certain of these claims and are included in other debtors in the Parent Company balance sheet. The full disclosure regarding the provision in respect of notifi ed and future claims can be found in notes 26 and 33(i) to the Group fi nancial statements.

10. Provisions for other liabilities and charges

2009 2008 £m £m

At 1 January 3.8 4.0Additional provisions charged to the income statement 0.6 0.2Utilised during year (0.1) (0.4)At 31 December 4.3 3.8


Other provisions relate to the decision made in 2002 to sell and close the Calsil business and provisions for property dilapidations and national insurance on share options.

11. Share capital

2009 2008(a) Authorised £m £m


2009 2008(b) Called up, fully paid and allotted £m £m


For details of the rights of each class of the Company’s shares and the Company’s employee share option schemes refer to note 29 to the Group fi nancial statements.

Parent Company Notes to the fi nancial statements (UK GAAP)continued


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12. Capital and reserves

Share Share Special Retained Total capital premium reserve defi cit £m £m £m £m £m

At 1 January 2008 36.6 32.8 7.5 1.0 (4.7)Cash fl ow hedges – fair value losses in the period (6.5) – – – (6.5)Net investment hedges – fair value losses in the period (5.5) – – – (5.5)Deferred tax on hedges 3.3 – – – 3.3Loss for the year (24.0) – – – (24.0)Share options – proceeds from shares issued 1.2 0.3 0.9 – – – value of employee services 0.7 – – – 0.7At 31 December 2008 5.8 33.1 8.4 1.0 (36.7) At 1 January 2009 5.8 33.1 8.4 1.0 (36.7)Exchange loss, net of taxation (1.7) – – – (1.7)Cash fl ow hedges – fair value gains in the period 2.1 – – – 2.1Net investment hedges – fair value gains in the period 2.3 – – – 2.3Deferred tax on hedges (1.2) – – – (1.2)Loss for the year (10.0) – – – (10.0)Dividends received 15.0 – – – 15.0Share options – proceeds from shares issued 1.0 0.2 0.8 – – – value of employee services 0.8 – – – 0.8At 31 December 2009 14.1 33.3 9.2 1.0 (29.4)

13. Contingencies

(a) Full disclosure in respect of the Group’s contingent liability for industrial disease claims is detailed in note 33 to the Group fi nancial statements. The liability for potential future claims has been fully borne by other Scheme Companies and as such there is no longer a contingent liability in respect of the Parent Company. Accordingly, the Emphasis of Matter paragraph with regards to the fundamental uncertainty of future IDC liabilities is not required in respect of the 2009 Parent Company fi nancial statements.

(b) The Company was the defendant in proceedings brought by some 7,500 South African residents who claimed that they suffered injury as the result of mining activities in South Africa undertaken by former subsidiaries of Cape plc. The Company entered into an agreement on 13 March 2003 with the claimants in the group action and new claimants who had come forward in 2002.

It is possible that claims could arise in the future from claimants who were not included in the group action, or who claim they have developed an asbestos-related disease since the date of the settlement and as a result of the Group’s former mining activities in South Africa. There is a signifi cant uncertainty as to whether such future claims will be made and as to the number, nature, timing and validity of such claims. However, no such claims have been received to date.

(c) The Company continues to be named, along with several asbestos fi bre and asbestos product suppliers, as defendants in a number of legal actions in North America. The plaintiffs in such actions are claiming substantial damages as a result of the use of these products. The Company has received legal advice in the UK that default judgments obtained in North America against Companies within the Group which are not present in North America, would not be enforceable in the UK. Consequently the Directors believe that the above-mentioned matters are unlikely to have a material effect on the Company’s fi nancial position.

(d) The Company has contingent liabilities in respect of guarantees and bonds entered into in the normal course of business, in respect of which no loss is expected.


Annual Report 2009

IFRS IFRS IFRS IFRS UK GAAP Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 2009 2008 2007 2006 2005 £m £m £m £m £m

Income statement Continuing operations Revenue 655.1 622.7 428.8 274.0 229.8 Group operating profi t before other items 70.6 65.0 38.7 18.3 12.4Amortisation of intangibles (2.9) (2.7) (1.0) (0.1) –Industrial disease costs (74.2) (5.7) (1.6) (3.4) (4.6)Exceptional items – (4.1) (0.3) 1.0 (9.7)Group operating (loss)/profi t (6.5) 52.5 35.8 15.8 (1.9) (Loss)/profi t before tax (15.6) 37.8 33.0 15.6 (1.0) (Loss)/profi t from continuing operations (1.5) 31.9 27.6 13.6 (0.3) Discontinued operations – (0.2) (0.7) 1.1 0.3(Loss)/profi t for the year (1.5) 31.7 26.9 14.7 –Attributable to: Equity shareholders (4.1) 30.6 26.9 14.7 –Minority interest 2.6 1.1 – – – Balance Sheet Non current assets 389.3 352.9 299.4 60.4 35.5Net current assets 117.0 84.5 70.6 58.0 49.6Non current liabilities (238.6) (191.2) (189.3) (43.2) (20.9)Net assets 267.7 246.2 180.7 75.2 64.2(Loss)/earnings per share – Basic (3.5)p 26.7p 26.0p 17.6p –– Diluted (3.4)p 26.3p 25.5p 17.3p –

The amounts disclosed for 2005 and earlier periods are stated on the basis of UK GAAP because it is not practicable to restate amounts for periods prior to the date of transition to IFRS. 2009 2008 2007 2006 2005 £m £m £m £m £m

Key performance indicators (KPIs) Adjusted operating profi t margin (%) 10.8 10.4 9.0 6.6 5.4Return on managed assets (%) 32.0 29.4 32.0 34.8 25.1Operating cash conversion (%)* 95.9 87.7 37.6 N/A N/ALost Time Incidents (per 100,000 hours) 0.07 0.08 0.10 0.08 0.07

KPIs: defi nitions and analysisAdjusted operating profi t marginDefi ned as Group operating profi t before other items expressed as a percentage of revenue. The continued improvement in the margin over the last fi ve years represents the change in operations, including the exit from the manufacturing activities and increased international operations.

Return on managed assetsDefi ned as Group operating profi t before other items expressed as a percentage of managed assets**. The 2009 return is indicative of the signifi cant investment in the business over the last 3 years.

Operating cash conversion This is defi ned as cash generated from operating activities divided by adjusted EBITDA (see note 30 to the Group fi nancial statements). The conversion rate in 2009 demonstrates the effectiveness of the Group in turning profi t into cash.

Lost Time Incidents (LTI)Number of incidents per 100,000 man hours worked. Cape considers safety as a key part of the Group strategy and the improvement in the safety record demonstrates the achievements in this area.

* Cash conversion has only been considered as a KPI since 2008 (with 2007 comparative disclosed).** Managed assets are property, plant and equipment, inventories, trade and other receivables and trade and other payables.

Five-year fi nancial summary


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The Group’s principal trading subsidiaries are detailed below:

Country of incorporation Ownership Name of subsidiary or joint venture or registration interest % Principal activity

UK Cape Industrial Services Limited UK 100 Industrial services excluding industrial cleaningDBI Industrial Services Limited UK 100 Industrial cleaning Gulf/Middle East R B Hilton Limited Bahrain 100 Industrial servicesCape East General Contracting Company Kuwait 49 Industrial servicesCape East & Partners LLC Oman 65 Industrial servicesCape East WLL Qatar 49 Industrial servicesCape Industrial Company Ltd Saudi Arabia 100 Industrial servicesR B Hilton Saudi Arabia Limited Saudi Arabia 100 Industrial servicesCape East Limited WLL UAE 49 Industrial services CIS, Mediterranean & North Africa Cape Export Sales Limited Malta 100 Distribution of industrial materialsCape Industrial Services (Sakhalin) LLC Russia 100 Industrial services Far East/Pacifi c Rim Cape East Philippines Inc Philippines 100 Industrial servicesCape East Pte Ltd Singapore 100 Industrial servicesCape East (Thailand) Limited Thailand 100 Industrial servicesTotal Corrosion Control Pty Ltd Australia 100 Industrial servicesPCH Group Limited Australia 100 Access providerConcept Hire Limited Australia 100 Access provider

Industrial services includes access systems, insulation, painting, coatings, blasting, industrial cleaning, fi re protection, refractory, asbestos removal, training and assessment, and other essential non-mechanical services.

Notes:1. The principal subsidiary undertakings listed are those whose results, in the opinion of the Directors, principally affected the revenue or assets of the Group. The subsidiary

undertakings operate principally in the countries in which they are incorporated.2. There are no subsidiary undertakings that have been excluded from the consolidation.3. The Group’s associates are detailed in note 15 to the Group fi nancial statements.

Principal subsidiary undertakingsAs at 31 December 2009


Annual Report 2009

Sean O’Connor134

Non-Executive Chairman

Martin K May Chief Executive

Richard BinghamChief Financial Offi cer

David Robins12345

Non-Executive Director

David McManus1234

Non-Executive Director

Jeremy GormanGroup Company Secretary

Registered Offi ce 9 The SquareStockley ParkUxbridge Middlesex UB11 1FW

Cape plc is a company registered and domiciled in England and WalesRegistered number 40203

Head Offi ce9 The SquareStockley ParkUxbridge Middlesex UB11 1FW

1 Non-Executive2 Audit Committee3 Remuneration Committee4 Nomination Committee5 Senior Independent Non-Executive Director

Independent Auditors PricewaterhouseCoopers LLP Benson House33 Wellington StreetLeeds LS1 4JP

Solicitors Lawrence Graham LLP4 More London RiversideLondon SE1 2AU

BankersBarclays Bank plc Lloyds TSB Bank plc1 Churchill Place 10 Gresham StreetLondon E14 5HP London EC2V 7AE

National Australia Bank LimitedLevel 1250 St Georges TerracePerthWA 6000

RegistrarsCapita RegistrarsThe Registry, 34 Beckenham Road BeckenhamKent BR3 4TU

Nominated Adviser & Joint BrokerNumis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4 M7LT

Financial Adviser & BrokerMerrill Lynch InternationalMerrill Lynch Financial Centre2 King Edward StreetLondon EC1A 1HQ

Directors, offi cers and advisers

Adjusted operating profi t margin(2) improved to 10.8% (2008: 10.4%)

Free cash fl ow(4) up 128.3% to £54.1m (2008: £23.7m) with 95.9% (2008: 87.7%) operating cash conversion(5) at AER(10)

Net debt(6) reduced by 31.4% to £113.6m (2008: £165.5m), 1.3 times(7) adjusted EBITDA(8) (2008: 2.1 times adjusted EBITDA)

1 Adjusted PBT comprises loss before tax of £15.6m (2008: profi t of £37.8m), adjusted for exceptional items of nil (2008: £4.1m), IDC charge of £74.2m (2008: £5.7m), IDC fi nance income of £0.8m (2008: £2.0m) and amortisation of intangible assets of £2.9m (2008: £2.7m).

2 Adjusted operating profi t margin is calculated as adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) divided by revenue of £655.1m (2008: £622.7m).

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

4 Free cash fl ow is defi ned as cash generated from operations adjusted for the impact of industrial disease costs, interest, tax, net capital expenditure, amortisation of bank fee and exceptional costs paid.

5 Operating cash conversion is defi ned as cash generated from operating activities of £84.4m (2008: £70.9m) divided by adjusted EBITDA(8).

6 Net debt is calculated by deducting current borrowings of £32.0m (2008: £38.9m) and non current borrowings of £134.9m (2008: £159.9m) from cash and cash equivalents of £53.3m (2008: £33.3m).

7 Ratio of net debt to adjusted EBITDA(8) is calculated by dividing the net debt fi gure at the period end of £113.6m (2008: £165.5m) by the adjusted EBITDA(8) of £88.0m (2008: £80.8m).

8 Adjusted EBITDA is calculated by adding back depreciation of £15.8m (2008: £15.3m) to adjusted operating profi t of £72.2m (2008: £65.5m).

9 Based on 2010 consensus revenues.10 Constant currency fi gures refl ect actual 2009 results

retranslated using the foreign currency exchange rates used for the 2008 reporting. The average exchange rates for the year ended 31 December 2009 were GBP/AUD 1.98282 and GBP/USD 1.55135 (2008: GBP/AUD 2.19628 and GBP/USD 1.85175)

11 Adjusted operating profi t (EBITA) comprises loss before interest and taxation of £4.9m (2008: profi t of £53.0m), adjusted for exceptional items of £nil (2008: £4.1m), IDC charge of £74.2m (2008: £5.7m) and amortisation of intangible assets of £2.9m (2008: £2.7m).

12 Gearing is net debt divided by total equity.13 Return on Managed Assets (ROMA) is calculated as

adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) divided by managed assets.

14 Managed assets is calculated by deducting the trade and other payables of £95.7m (2008: £133.0m) from the sum of property, plant and equipment of £142.9m (2008: £152.3m), inventories of £17.3m (2008: £17.2m) and trade and other receivables of £156.0m (2008: £184.7m).

15 Interest cover is calculated by dividing the adjusted operating profi t (before share from joint ventures) of £70.6m (2008: £65.0m) by the fi nance costs of £12.3m (2008: £18.0m).

16 Reference to people includes employees and sub-contractors.

Intelligent ntelligent solutions solutionsCape is an international leader in the provision of essential non-mechanical industrial services focused on the energy and natural resources sectors. The range of multi-disciplinary services includes access systems, insulation, painting, coatings, blasting, industrial cleaning, training and assessment, throughout the life cycle of large secure industrial assets.

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Annual Report 2009

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Annual Report 2009

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