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Scapa in rude health

Adhesives and tapes maker Scapa has turned in a profit for the first time since 2008, driven partly by improved sales at the group's higher-margin medical business. A new management team has done well, picking Scapa up following a savage recession. It has overseen a 29 per cent jump in full-year medical sales and 6 per cent rise at the larger industrial business, driving revenues up 15 per cent in North America and 5.5 per cent in Europe, Scapa's two biggest markets.

Price increases and cost cutting boosted operating margins to 4.2 per cent. It was 7.3 per cent in North America, compared with 2.1 per cent a year ago, and an increased focus on higher-margin medical products and sales growth in electronics could get that figure back to 10 per cent. Group operating margins should hit 4.6 per cent this year and 5 per cent in 2012-13, according to house broker Arden Partners. Analysts there believe Scapa could also cruise past pre-credit-crunch levels to 8 per cent in the medium term.

And there's been good progress on the pension deficit. Although still hefty, it is down to £35m - a nine-year low - from £38.6m in 2010. Arden expects 2012 EPS of 3.6p, rising to 4.3p in 2013 (2.4p in 2011).

SCAPA (SCPA)

ORD PRICE:49pMARKET VALUE:£70m
TOUCH:48-49p12-MONTH HIGH:52pLOW: 11.5p
DIVIDEND YIELD:NILPE RATIO:20
NET ASSET VALUE:47pNET CASH*: £18.8m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200718412.99.2nil
20081707.43.10.75
2009174-9.37.5nil
2010177-5.2-1.9nil
20111926.12.4nil
% change+9---

*Includes restricted cash of £6.3m. Aim: chemicals

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More analysis of company results

IC View

Much of the latest news was flagged in April and the shares have risen sharply since, so initial reaction to the results has been muted. But more upgrades are likely if margins keep improving and, trading on a forward PE ratio of 14, falling to 11.5 for 2013, the shares are good value.

Last IC view: Fairly priced, 29p, 30 May 2008

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