Industrial service group Cape saw nearly 37% wiped off the value of its shares yesterday after it said losses on a liquefied natural gas project in Algeria would hurt profits.
Cape, which has offices in Aberdeen and employs around 1,200 people in the North Sea, said it would take a one-off charge of £14million – equivalent to more than one-quarter of its profits last year – after a review of the GL3-Z LNG development at Arzew, Algeria, unearthed additional costs likely to result in significant losses.
The FTSE 250 company, which left its full-year revenue outlook unchanged, made pre-tax profits of £61.9million in 2011.
Its shares slumped 36.6% – their biggest single-day drop in more than four years – to end the session at 205p.
GL3-Z is one of Cape’s largest contracts. An operational audit by acting chief executive Brendan Connolly earlier this month identified the additional costs.
Analyst John Cummings at wealth manager W.H. Ireland said: “The fact that such serious problems have now been identified on one of the group’s two largest contracts raises numerous concerns.
“While this clearly raises questions about the wider project base across the group, we believe this to be an isolated incident, and no other projects being undertaken would be expected to have a similar level of impact.”
Cape, which provides insulation, painting, coatings, and industrial cleaning services to plant operators in the energy and mining sectors, said in March that work on GL3-Z had been slower than anticipated.
An update from the firm yesterday said: “The board has instigated a plan to mitigate the potential losses on the Arzew project, including the injection of a new project team, the introduction of additional skilled workforce and the rigorous application of Cape processes.”