City forecasts were highly favourable ahead of the release of adhesive tape manufacturer Scapa Group 's (SCPA) half-year figures. But the strong rise in the share price suggests the market had underestimated the extent of the efficiency gains in the industrial division, where trading profits were up by a third at constant currencies.
Group revenues were up 3.7 per cent on the same basis, a respectable result, but the benefits of the incremental 'self-help' measures introduced by management do their job in the space between the top line and earnings. Even with integration costs linked to the marquee deal to acquire woundcare business EuroMed, the group trading margin increased by 100 basis points to 9.4 per cent.
The EuroMed acquisition firms up prospects for Scapa's healthcare division, although a 16.9 per cent rise in trading profits gives the impression that matters were ticking along nicely anyway. The industrials division grew trading profits from £5.1m to £7.6m on the back of improved returns on employed capital.
The £28.3m Scapa paid for the US company bumped up net debt, although the closing figure was still lower than cash profits through the period. However, the collapse in gilts has seen a 38 per cent increase in Scapa's pension deficit.
Numis sees pre-tax profits and EPS of £26.7m and 14p, respectively, for the March 2017 year-end (£20.6m and 10.6p in FY2016).
| SCAPA (SCPA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 315p | MARKET VALUE: | £476m | |
| TOUCH: | 314p-315p | 12-MONTH HIGH: | 317p | LOW: 175p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 44 | |
| NET ASSET VALUE: | 54p* | NET DEBT: | 36% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 119 | 3.3 | 1.4 | nil |
| 2016 | 135 | 8.5 | 4.5 | nil |
| % change | +13 | +158 | +221 | - |
Ex-div:- Payment:- *Includes intangible assets of £62.8m, or 42p a share | ||||
