It’s doubtful Scapa (SCPA) chief executive Heejae Chae was braced for the market reaction to these first-half results when he described them as indicative of "a solid trading performance and continued good progress". Trading may be "in line" with full-year expectations and analysts may have retained their bullishness, but shares in the adhesive products business fell a fifth after investors decided that a "challenging macro environment" outweighed the promise of a string of recent acquisitions.
The fearful had several numbers to cite in the half-year results. First was a fall in the top line, most keenly felt in the larger industrial division, where revenue dropped 4.2 per cent at constant currencies. Second was a contraction in trading profit in the healthcare division to £8.2m, even if the heavily adjusted figure edged up at the group level.
Mr Chae and his team will hope the stock sell-off proves to be an overreaction to a stuttering in normally robust growth, rather than a vote against Scapa’s acquisitive strategy. In short, the group has seen increasing competition and slowing growth among its medical technology clients, and intends to act as a turn-key manufacturing partner. The most recent deal – the purchase of Acelity’s woundcare product division – is expected to be "materially accretive" to earnings from FY2020, and means Scapa has completed three such technology transfer deals in the past year.
On average, analysts expect earnings per share (EPS) to hit 19p for the year to March 2019, and 20.6p in 2020.
SCAPA (SCPA) | ||||
ORD PRICE: | 315p | MARKET VALUE: | £536m | |
TOUCH: | 315-316p | 12-MONTH HIGH: | 510p | LOW: 357p |
DIVIDEND YIELD: | 0.7% | PE RATIO: | 28 | |
NET ASSET VALUE: | 90p* | NET DEBT: | 4% |
Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 146 | 15.4 | 7.5 | nil |
2018 | 141 | 9.7 | 4.3 | nil |
% change | -3 | -37 | -43 | - |
Ex-div: | n/a | |||
Payment: | n/a | |||
*Includes intangible assets of £80.8m, or 52p a share. |