Adhesive and tapes company Scapa is still in turnaround mode, but profits, margins and cash generation all improved sharply during the first half, and things are slowly clicking into place.
Cost cutting and efficiency gains continue to deliver rewards. True, exiting low-value commodity products cancelled benefits from high-value branded items and left revenue flat, but profit margins rose sharply from 3.7 per cent to 5.1 per cent – the best return since before the last recession in 2009 – and this pushed underlying operating profit up 39 per cent to £5m.
Perhaps surprisingly, the industrial division grew sales by over 3 per cent to £76.6m – three-quarters of the group total. Even more surprisingly, much of the growth came from the French construction industry where Scapa has been aggressively chasing opportunities and expanding its product range. The idea is that eventually all divisions will contribute evenly, but growth at the potentially lucrative medical unit was held back by one programme that plateaued after a product launch. And moving away from commoditised products knocked sales at the fledgling electronics business. Still, the benefits of work with one of China's largest white goods manufacturers and Korean mobile phone giant LG are yet to come through.
Broker Altium Securities expects full-year adjusted EPS of 3.5p (up from 2.5p).
SCAPA (SCPA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 49.5p | MARKET VALUE: | £72m | |
| TOUCH: | 48-51p | 12-MONTH HIGH: | 62.5p | Low: 27.5p |
| DIVIDEND YIELD: | NA | PE RATIO: | 15 | |
| NET ASSET VALUE: | 45p | NET CASH*: | £20.8m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 97.9 | 2.70 | 1.20 | nil |
| 2011 | 98.6 | 5.50 | 2.20 | nil |
| % change | +1 | +104 | +83 | – |
*Includes restricted cash of £6.4m | ||||
