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Scapa master of its own destiny, but healthcare shift helps

Streamlining industrial operations, while focusing on new products and acquisitions in healthcare, triggered another healthy year for the maker of adhesive and tape
May 25, 2016

Six consecutive years of operating margin growth in an underwhelming economic environment proved once again that Scapa 's (SCPA) self-help strategy has made it, in the words of chief Heejae Chae, "master of its own destiny". But investors have become accustomed to impressive performances, and were more excited about the acquisition of wound care business Euromed on results day.

IC TIP: Hold at 252p

The acquisition allows the group to offer a full suite of adhesive solutions, says Mr Chae. This should help Scapa to secure extra multi-year outsourcing contracts from healthcare organisations, which in the year to 31 March triggered a 26 per cent rise in revenues and adjusted operating profit at the division.

As expected, the industrial arm encountered a more challenging trading environment. But, while a combination of sluggish global economic growth and weaker commodity prices weighed on the top line, divisional adjusted operating profit soared 16 per cent at constant currencies. This result was delivered by consolidation of Scapa's facilities, although the associated costs did weigh on statutory figures.

Management is confident that the self-help journey has further to run, too. By continuing to optimise return on capital employed, divisional operating margins are predicted to hit double digits.

Broker Numis expects pre-tax profit of £23.7m for the year to March 2017, giving EPS of 12.1p (from £20.6m and 10.6p in FY2016).

 

SCAPA (SCPA)
ORD PRICE:252pMARKET VALUE:£378m
TOUCH:251-252p12-MONTH HIGH:258pLOW: 170p
DIVIDEND YIELD:0.7%PE RATIO:61
NET ASSET VALUE:52p*NET DEBT:3%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201219610.54.5nil
20132099.60.80.50
201422611.2-4.61.00
201523613.76.51.50
20162479.84.11.75
% change+5-28-37+17

Ex-div: 21 Jul

Payment: 19 Aug

*Includes intangible assets of £38.1m, or 25p a share