Cape PLC (>> Cape plc), a provider of non-mechanical support services to the energy and mining sectors, said Friday its 2012 pretax profit will be around GBP14 million lower after the company took a hit on a contract, due to delays and increased costs.
The Arzew contract, awarded by Snamprogetti Chiyoda sas di Saipem SpA in August 2010, is for the provision of the total insulation works for the Sonatrach GL3-Z liquefied natural gas project in Arzew, Algeria.
Cape had valued the contract in excess of GBP22.5 million, with work planned to start in the first quarter of 2011 and scheduled for completion in the first half of 2012.
A project review in May, commissioned by acting Chief Executive Brendan Connolly, identified additional costs arising within the project, which as a result is now projected to produce a significant loss.
The board has instigated a plan to mitigate the potential losses, including the setting up of a new project team and the introduction of additional skilled workers.
Based on the latest available estimates, Cape intends to recognize a one-off charge of GBP14 million in respect of current and estimated future losses on the contract, which will be charged in its interim accounts for the six months ending June 30.
Cape reiterated its previous revenue guidance for 2012 of 10% growth over 2011 revenue.
Shares closed Thursday at 323.5 pence.
-By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; firstname.lastname@example.org