In a trading statement to accompany its AGM the company, which has a heavy bias towards the oil and gas industry, reports weaker than expected margins in all its core geographies, including the UK and Middle East.
In summary reduced utilisation in the North Sea and higher than expected costs at the Fawley refinery as well as delays in Oman and continuing pricing pressure in the UAE and Qatar are the main culprits. On a brighter note, business is brisk in Saudi Arabia and full year guidance is maintained.
It can often pay to be wary of situations where a company hopes for better second half trading to come to its rescue but it is worth noting that the current Cape management are pretty conservative. Also less than 5% of the group is directly exposed to upstream expenditure which is most pressured by the collapse in oil prices.
Arden, which reiterates its ‘buy’ take and 280p price target, comments: ‘The timing of recovery remains unclear and there could be downside for earnings and potentially the order book while we wait for this. What we are confident of is that the maintenance revenues will continue to support the dividend, making Cape a sensible play on oil market recovery given the dividend back-up if this continues to take time to come through.’