Cape - trading in line and net debt down again
Cape Plc (LON:CIU) , the international provider of services to the energy and mineral resources sectors has confirmed that trading in the year to 31 December 2010 was in line with expectations (Consensus pre-tax profit of £68m and earnings per share of 41p).
The Group’s overall activity and revenue levels have remained broadly consistent with the prior year and they have continued to benefit from their international footprint across important growth markets within the energy sector. On a regional basis, the pattern seen in the first half of 2010 continued through the rest of the year with higher activity levels in the Far East/Pacific Rim region offsetting the expected lower activity levels in the Gulf/Middle East and UK regions.Cash generation has again been strong with net debt expected to have halved in the year to less than £57m at the year end. Many forecasts were for c£70m so that looks a decent result.They have also announced the successful refinancing of banking facilities on favourable terms through to June 2015. With a new £220m syndicated credit facility with Lloyds Banking Group, Barclays Bank, National Australia Bank and HSBC.
Management now expects a return to sustained organic revenue growth from the second half of 2011, as capital expenditure in the global energy sector begins to increase.
The further reduction in net debt is encouraging, however, some may have been looking for a more bullish sentiment on the Outlook for 2011. A move to the Full List (considered several years ago!), reclassification into the oil service sector and return to paying dividends could help boost the share price further, although it’s had a decent run from the lows of 18p back in March 2009 – a buyer back then would be looking at a return of over 2000% at the current price! The rating still looks modest for an oil services business in the current market, however, the lack of organic growth would appear to support this. A few months ago all the focus was on debt reduction now many will be looking at where the growth will come from!
Look out for the results on 2nd March 2011.
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1 comment
Posted this elsewhere, but possibly of interest here:
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Seems to me that the pullback is a little overdone, in reaction to the trouble in the MENA region.
Revenues from the 'CIS, Mediterranean & N.Africa' represent the smallest amount of Cape's revenue, and Libya an even smaller proportion of that, whilst 'Gulf/Middle East' revenue represents approx one quarter.
This from the 2009 Annual Report:
No mention of Libya in the Interim results, but this statement was provided in the January Trading Update:
Bahrain revenues fell in H1 due to completion of large projects, but Cape was awarded project works with Samsung Engineering on the BAPCO refinery in Bahrain. This should contribute to revenue in the second half, though we need to see if there is an impact post-31-Dec.
So 'Far East/Pacific Rim' work is offsetting lower work elsewhere, but whether this is a complete substitution remains to be seen. However, not long to wait to find out as the Final Results are due next Wednesday 2 March, and the Outlook statement will be eagerly awaited.
SM