Cape has mixed first six months due to weak UK business

Cape, an international provider of industrial services to the energy and natural resources sector, reported mixed results for the first half of the year due to weaknesses in the UK business, but maintained that full-year expectations were unchanged.

For the six months ended 3 July, order intake decreased by about 23% to £309m, compared to the same period last year, largely due to the timing of key contract awards which resulted in an order book of £820m.

Revenue increased by 10% to £396.3m due to a small benefit from exchange rate movements and from the Redhall Engineering Solutions acquisition in May 2015. At constant currency, organic revenues increased by 6%.

The increase in sales was driven by the company's operation in the Asia Pacific, which partially offset weaker than expected margins in the UK resulting in 25% reduction in group operating profit.

UK operating margins were affected by weakness in the offshore North Sea and thermal coal power generation markets, and poor commercial performance on the ExxonMobil contract at Fawley.

The Asia Pacific business performed above expectation driven by increased project activity in Australia, South Korea and Singapore. The Middle East business delivered a strong contribution from the SOCAR-Cape joint venture in Azerbaijan, which mitigated the increased cost pressures from clients in the region.

The Group achieved cash conversion of 73% and adjusted net debt of £113.7m.

Adjusted diluted earnings per share was 8.9p, down from 13.2p in 2015.

Industrial disease claim provisions increased by £8.7m due to the result of recent litigation from Aviva about employer liability claims.

Expectations for the full year unchanged with a higher profit weighting in the second half driven by increasing project activity in Asia Pacific and the Middle East, the effects of the restructuring in the UK and the benefit of foreign exchange tailwinds. The company is restructuring the UK business to maximise growth by using all of it services to its customer base whilst reducing overhead costs.

Chief executive Joe Oatley, said: "The first half results demonstrate the value of Cape's strategy of developing a balanced business across the maintenance and new construction segments with a broad geographical spread.

“Although we have seen a deterioration in a number of our markets, overall the group has delivered solid top-line growth, highlighting the resilience of our business. We continue to invest in order to deliver on strategic goals whilst adapting our cost base where necessary to match market conditions. Despite the challenges in many of our markets, our expectation of the financial result for the full year is unchanged."

The interim dividend was maintained at 4.5p per share·

Shares in Cape were down 3.32% to 182p at 12:02 BST.