Cape - Joe 90 and the Caped Crusader

Cape: CEO Joe Oatley rescued Cape from a near death experience when he arrived in 2012. He now finds himself running a services group focussed on the energy and mineral sectors, just when the industry is in a vicious bear phase. So it is to his credit that these annual results to 31^st December 2014 show such solid progress. Continuing revenue is up 3.5% to almost £700m, whilst order intake is up 22% to leave the order book 15% up at £746m. Adjusted pre-tax profits were £45.3m, sharply up on £35.1m, to leave eps at 29.9p, up 28.3%. The annual dividend was held at 14p and is now twice covered. Adjusted net debt was up from £60.2m to £101.0m, due to acquisitions, and higher working capital as revenues built, with cash conversion dropping from 151% to 65%. Net debt at this level is 2x EBITA, which is not overly demanding in a recovery phase. In such a bear market it is reassuring to see that the more resilient maintenance revenue stream is now 70% of total revenues, helped by the £36.6m Motherwell Bridge acquisition last year. A further help is the lack of exposure to North American shale, whilst key areas such as Saudi Arabia are still active.

Looking forward, the group acknowledges the uncertainties in the oil and gas construction market in particular. So they are shooting for a similar 2015 outcome to 2014, but with the second half being more uncertain than the first half. So if they reach 29p (a small reduction on 2014’s 29.9p) then, at today’s perky 235p share price, that is a PE of 8.1x and a same again 14p dividend is a 6% yield. This seems undemanding and only a little more improvement in sentiment would be needed for a 10x PE to be justified for a 290p share price (when the yield would still be 4.8%). This is clearly not a stock without risks, but the rewards are there for the more adventurous income hunter. (Neil Cumming^, 18^th March 2015)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower