Cape looks to 'golden years' as trade improves

ENERGY services group Cape is confident about future trading as capital expenditure in the global energy sector picks up in the second half of the year.

Cape, which has its UK operations in Wakefield, said it expects a return to sustained organic revenue growth from the second half of 2011.

It added that trading in 2010 was in line with expectations and revenue levels have remained broadly consistent with the previous year.

Cape provides a range of industrial services including access systems, insulation, painting, coatings, blasting, industrial cleaning, training and assessment to both industrial plant operators and major international engineering and construction companies.

The group has seen higher activity levels in the Far East and Pacific Rim region, which has offset the expected lower activity levels in the Gulf, Middle East and UK regions.

Cape added that it has refinanced its banking facilities on favourable terms through to June 2015. It said that the new 220m syndicated credit facility with Lloyds Banking Group, Barclays Bank, National Australia Bank and HSBC provides the company with a strong financial platform and the flexibility to support future growth.

Cape's shares rose 0.90p to 412.68p last night. The shares have rocketed since September when the group cheered shareholders with the first dividend payment in 10 years and outlined plans to move on to the main London market this year. The group, which is currently listed on AIM, reported a steep increase in first-half profits in the six months to the end of June, 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 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 this 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 a 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 this year with completion scheduled for the first half of 2012.

Cape has also won a 12m contract to provide thermal insulation works on a petrochemical project in Ruwais in Abu Dhabi

Analysts said the group is continuing to move forward and is benefiting from its broad geographic reach, pursuit of bundled services and keen management of costs.

They believe that the move onto the dividend list will spark interest in the shares. Cape said it would pay an interim dividend of 4p per share after a 10-year hiatus.

Cape said it would seek a move in the second quarter of 2011 to the main market of the London Stock Exchange. 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.

New non-exec director named

Cape has appointed Michael Merton as a non-executive director with effect from January 10.

The group said that Mr Merton is a chartered accountant with significant experience in the international resources industry, having spent the majority of his executive career at Rio Tinto.

He held a number of senior operational roles around the world at Rio Tinto, including head of global business services from 2005 to 2009 and was a member of the executive committee.

He is currently a non-executive director of BlackRock Commodities Income Investment Trust plc, and a trustee of the Rio Tinto Pension Fund and the HALO Trust.