Cape profits soar and shareholders celebrate dividend

AIM-listed Cape, which has its UK operations in Wakefield, provides insulation, industrial cleaning and training services to the energy and mineral resources sectors.

Cape's shares closed up nearly 6 per cent last night, a rise of 17p to 313p, after the group reported a steep increase in first-half profits, boosted by its Australian and Asian operations.

The company, which counts EDF, BP and National Grid among its customers, said adjusted pre-tax profits rose by 17.5 per cent to 35.5m for the first six months of 2010.

Cape said it is confident that full-year 2010 results will meet targets and it anticipates a good first half in 2011 and substantial growth from then on.

Chief executive Martin May said recent large contract wins will boost results from next year onwards.

"I think it's from the second half of 2011 you're going to see a return to reasonably strong organic growth," he said.

"I think 2012, 2013 and 2014 internationally will be golden years for Cape, given the investment that's going on in Australia, Asia and the Caspian."

Recent contract wins include last month's 22.5m deal to provide insulation works for a liquefied natural gas (LNG) project in Algeria. Work on the contract, awarded by Algerian company Snamprogetti Chiyoda, will start in the first quarter of 2011 with completion scheduled for the first half of 2012.

In July, Cape won a 12m contract to provide thermal insulation works on a petrochemical project in Ruwais in Abu Dhabi.

The group's profit margin rose to 12.1 per cent from 10.5 per cent a year earlier on flat revenues, which Evolution analyst Adrian Kearsey called a strong performance, raising his target price for the stock to 400p from 350p.

Mr Kearsey said Cape is continuing to move forward and is benefiting from its broad geographic reach, pursuit of bundled services and keen management of costs.

"The move onto the dividend list will also spark interest in the shares, especially given the four per cent prospective yield," he said.

Cape said it would pay an interim dividend of 4p per share after a 10-year hiatus.

Collins Stewart analyst Michael O'Brien said: "The shares have performed strongly over the summer, and we would not be surprised to see short-term profit-taking, in spite of the continued attraction of the valuation and the long-term investment case."

Cape said it would seek a move in the second quarter of 2011 to the main market of the London Stock Exchange. Mr May said that if the company was to move now it would become part of the midcap index.

Cape also said it would look to make selective acquisitions after it reduced net debt by 37.2 per cent to 95.1m from a year earlier.

The group is expected to make full-year pre-tax profits of around 64m.