Cape ready to reap the rewards of cost control policy

SUPPORT services group Cape said it will beat expectations thanks to tight cost control and favourable currency movements.

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

It said strong activity in the Far East has offset lower activity in the Middle East.

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While revenues have been broadly stable, margins have improved thanks to tight cost control and currency movements. Net debt is expected to fall below 100m by the end of July.

"As a result of cumulative trading and reduced finance costs in the first half, the board anticipates that the company's performance for the year... will be ahead of their previous expectations," said the group.

Even so, shares dipped 0.65 per cent to close at 231p.

AIM-listed Cape saw a potential buyer walk away at the end of last month, sending shares down heavily, but has since been busy winning new international work.

Earlier this week it said it will expand its Abu Dhabi operations after winning a 12m contract to provide thermal insulation work on a petrochemical project in Ruwais in Abu Dhabi.

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It also recently set up a joint venture with Azerbaijan's state oil company to develop the country's oil and gas sector.

It formed the partnership with the State Oil Company of Azerbaijan (Socar), which it hopes will give it high-level access to major projects.

Evolution Securities expects the group to report profits of 65m this year, on flat sales of 655m. Analyst Adrian Kearsey at Evolution said: "For some time guidance has been for a flat top-line in 2010, principally reflecting phasing of activity in Middle East.

"Interestingly sales in the Far East are materially ahead of the first half in 2009.

"This was an area the bears feared would collapse, so (the) announcement should calm investor nerves."

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