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Scapa CEO stays to fight ConvaTec

The chief executive's planned departure was announced in May
June 10, 2019

Scapa (SCPA) chief executive Heejae Chae has reversed his decision to step down as chief executive of the adhesive products specialist, as the company readies legal action against medical technology group ConvaTec (CTEC) over a cancelled contract.

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Mr Chae’s planned departure was announced on 21 May, after a decade at the helm. The decision to retain him comes days after Scapa said that it would pursue legal action against ConvaTec, which exited a lucrative supply deal with Scapa Tapes North America in response to Scapa’s acquisition of Systagenix Wound Management in October 2018. ConvaTec said that Scapa’s acquisition of one of its competitors fell foul of a contract worth $30m (£23.7m) in annual revenues to Scapa’s healthcare arm. Scapa denies that it has breached the terms of the deal, which still has three years to run. 

Scapa has taken action to limit the fallout from the terminated contract. It has enacted “a reduction in direct labour” and, assuming no further mitigating actions, the expected hit to 2020 revenue and trading profit could be around £28m and £13m, respectively. The estimates include the impact on other facilities that supply materials for ConvaTec products in Knoxville. Scapa chairman Larry Pentz said, “we will not be distracted by the recent claims published by ConvaTec, which we will robustly contest”.

After Scapa announced its intention to pursue action against ConvaTec on 3 June, analysts at Berenberg tentatively forecast that the contract loss will see earnings downgrades of around 20 per cent on an adjusted basis.