Cape full-year profit up 6% despite challenging backdrop

Cape reported a 6% jump in full-year profit as it expressed confidence over its prospects for 2017.

In the year to 31 December, adjusted pre-tax profit rose to £47.4m from £44.7m on revenue of £863.5m, up 21.4% from 2015.

Adjusted diluted earnings per share were steady compared to the previous year at 29.9p.

Numis said clean EPS is 9% above its estimate, while revenue is 3% higher than it expected.

Cape, which provides critical industrial services to the energy and natural resources sectors, said the strong trading performance was driven by increased activity in Asia Pacific and favourable foreign exchange.

In the UK, margins were adversely impacted by oil price driven weakness in the North Sea, reduced demand from the coal-fired power generation market and a small number of commercial issues. However, Cape said corrective measures have been implemented and the business is expected to deliver a much improved performance in 2017.

In the Middle East, the business delivered a solid performance. Cape said several key contract wins and increased activity in the Kingdom of Saudi Arabia, combined with a strong performance from the SOCAR-Cape joint venture in Azerbaijan mitigated the effect of increased cost pressures, slowdowns and deferrals from customers in other parts of the region.

Meanwhile, the Asia Pacific business benefitted from “excellent” operational performance on increased project activity in Australia, South Korea and Singapore, which more than offset continuing low levels of demand in the Australian mining sector, and competition across the whole Asia Pacific region.

The company said it had a record closing order book, up 6.5% to £917.6m. However, the full-year dividend per share was halved to 7p.

Chief executive Joe Oatley said: “I am delighted to report we have delivered strong top line growth and solid earnings per share despite the challenging market backdrop, demonstrating the resilience of our strategy. The settlement of the insurer product liability litigation on 12 March 2017 has removed a significant risk to the business and its stakeholders. In light of that litigation, our focus during 2016 has been on the delivery of our organic growth strategy and I am pleased to report that this is yielding results.

“Whilst market pressures are expected to persist for the near-term, with a strong order book and a good start to 2017, the board is confident that the business will deliver another strong trading performance in 2017. We continue to invest in our strategy and I remain convinced that it will deliver increased shareholder value over the medium to long-term."

At 0928 GMT, Cape shares were up 3.6% to 181.25p.