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Scapa slumps on weak markets and slow cost cuts

The adhesive products specialist is locked in a legal dispute over a former contract
February 12, 2020

Scapa (SCPA) now expects its full-year trading profit to sit around £28m, below previous consensus forecasts of approximately £34m. The adhesive products specialist will fail to match expectations for its industrial turnover, while it is also making slower-than-expected progress on cutting costs in its healthcare arm.

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Scapa expects its industrial revenue to come in at around £168m. While this is only about 2 per cent behind Berenberg forecasts, it will have a material impact on the group’s overall trading profit. Scapa blamed a difficult macroeconomic backdrop, “particularly in the automotive and specialty products markets”. It expects challenges to remain in some of its industrial markets.

While the group’s healthcare revenues of £139m will sit slightly ahead of analyst forecasts, its divisional trading profit will also underperform expectations. Scapa admitted that it has taken longer than envisaged to reduce costs in its healthcare outfit. The segment’s turnover is, however, ahead of last year, despite its loss of a $30m (£23m) contract with ConvaTec (CTEC), which it is legally contesting. Scapa filed for damages in excess of $83m in July 2019.

Scapa’s debt levels are also understood to be above 2020 consensus forecasts, but inside its net debt to cash profits (Ebitda) covenant, which has a limit of three times Ebitda.