Cape crashes a third on fourth profits warning

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Energy support services group Cape is down 32% to 178p this morning following the revelation that it has discovered accounting irregularities at its Australian business and as a result has initiated “a detailed analysis of all balance sheet items group-wide” as well as warning of further potential cost overruns at its Algerian Arzew liquefied natural gas project.

The company said that “The trading performance of the group’s businesses in the UK, CIS/Mediterranean & North Africa and Gulf/Middle East regions and Asia was in line with expectations. However, the Group’s operating margin was impacted by a substantial deterioration in the performance of the group’s onshore Australian business driven by both a further downturn in current trading and the recognition of a number of legacy issues.”

In March the shares were trading as high as 472p before a series of profit warnings. Todays news, makes it the third profit warning of the year and four in a row, with a write off relating to rig maintenance contracts in November 2011, following  by a £14 million charge against the Arzew project in May and issues with its Australian business announced in August.

Richard Bingham, its group chief financial officer, is resigning immediately and the company warned that  “Until the detailed review of balance sheet items is complete there remains uncertainty in the eventual outcome of the full-year performance.”

At the end of June, Joe Oatley become Group Chief Executive, joining from Hamworthy, replacing Martin May who left in March. Following today’s news, Oatley will have plenty on his plate to think about to avoid the same fate as May. With the full impact of the accounting review not due for some weeks and the potential for further gremlins to be uncovered, caution looks to be advisable. 

Contrarian Investor UK

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