Scapa Group PLC - Half-year Report

Group Financial Highlights:

•          Revenue decreased 3.4% to £140.7m (2017: £145.6m); 1.2% reduction at constant fx

•          Trading profit* increased 2.4% to £17.1m (2017: £16.7m); 6.2% constant fx

•          Trading profit* margins further improved to 12.2% (2017: 11.5%)

•          Adjusted earnings per share** remained constant at 8.3p (2017: 8.3p)

•          Basic earnings per share of 4.3p (2017: 7.5p)

•          Net debt of £5.2m (31 March 2018: £3.8m); excludes £31.4m paid on 1 October 2018 for acquisition of the Systagenix manufacturing facility

•          Pension deficit reduced to £9.8m (31 March 2018: £21.0m)


•          Revenue increased 0.2% to £57.8m (2017: £57.7m); 3.4% constant fx

•          Trading margins at 14.2% (2017: 16.1%) in line with H2 FY18 margin

•          Trading profit decreased 11.8% to £8.2m (2017: £9.3m); 8.9% reduction at constant fx, reflecting the incremental investment made to execute technology transfers

•          Acquired in October 2018 the development and manufacturing assets of Systagenix from Acelity for £31.4m and entered an exclusive five-year development and supply agreement for Systagenix advanced wound care products to Acelity

•          The three technology transfers completed in the last twelve months bring aggregate incremental annualised revenue exceeding £40m

•          Announced the closure of the facility in Dunstable, UK

•          BioMed, acquired in March 2018, has enhanced Healthcare's product portfolio and is performing in line with expectations

•          Previously announced technology transfers and new programmes anticipated to start to benefit revenues in H2    


•          Revenue decreased 5.7% to £82.9m (2017: £87.9m); 4.2% reduction at constant fx

•          Trading profit grew 8.9% to £11.0m (2017: £10.1m); 12.2% constant fx

•          Margins increased to 13.3% (2017: 11.5%), on target to reach 15%

•          Announced the closure of the facility in Liverpool, New York

•          Revenue in India increased by 30.0% in local currency driven by consumer and automotive markets

•          Integration of Markel is nearly complete, with synergy benefits anticipated to start in H2  

Commenting on the results Chief Executive, Heejae Chae said:

"The first half has delivered a solid trading performance and continued good progress in the transformation of Scapa from an industrial tape company to a group with two businesses that are global and market leaders.  The Industrial business is one of the leading global tape companies with strong profit margins and cash flow.  The Healthcare business is now a world leading strategic turn-key partner to major global healthcare companies.

The acquisition, by way of a technology transfer, of the R&D and manufacturing assets of Systagenix and the exclusive five-year development and supply agreement for Systagenix advanced wound care products to Acelity is a milestone in Scapa's development, completing our Healthcare journey from a roll stock supplier to a fully integrated healthcare company with extensive technologies and capabilities in the markets we serve.  We have now completed three technology transfers in the last twelve months with an aggregate annualised revenue exceeding £40m.  We believe that further opportunities to partner with our healthcare customers exist as the medical device sector undergoes disruption. 

Whilst the macro environment remains challenging, we anticipate the profit for the year will be in line with expectations, excluding the impact of the Systagenix healthcare transaction.  This transformative transaction is expected to be modestly earnings dilutive in the current year and materially accretive from FY20 onwards."

Group Results

For the half year ended 30 September 2018 (unaudited)


All on continuing operations


Half year ended

30 Sept



Half year ended

30 Sept



Year ended

31 Mar








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Scapa has delivered a solid first half performance, driven by revenue growth in Healthcare (up 3.4% at constant currency) and continued margin improvement in Industrial.  Group trading profit1 for the period increased 2.4% to £17.1m (2017: £16.7m), increasing the overall Group trading margins to 12.2% (2017: 11.5%). Group revenue for the period decreased 3.4% to £140.7m (2017: £145.6m), primarily reflecting adverse currency movements. Adjusting for the effects of exchange rates, revenue decreased 1.2% (2017: 1.6%) and trading profit increased 6.2% (2017: 21.9%).

Operating profit for the period decreased to £10.5m (2017: £16.3m) and profit before tax decreased to £9.7m (2017: £15.4m). Taxation charges for the period were £3.1m (2017: £3.9m), with the underlying effective tax rate2 for the period at 23.0% (2017: 21.1%). The basic earnings per share was 4.3p (2017: 7.5p). When adjusted for exceptional items, pension administration costs, amortisation and non-cash interest, earnings per share was 8.3p (2017: 8.3p).

Exceptional items (note 4) in the period totalled £4.1m (2017: gain of £1.4m); £2.2m related to the expected closure of the Dunstable UK manufacturing site and £1.9m for acquisition related costs for the acquisition of Systagenix Wound Management Manufacturing Limited which completed on 1 October 2018.

The results include the impact of Markel Industries (acquired in August 2017) and BioMed Laboratories (acquired in March 2018).

Strategic Priorities and Business Objectives

 Scapa is organised into two business units serving the Healthcare and Industrial markets, primarily in Europe and North America.  Each business unit has a specific strategy that it follows:

·  Healthcare continues to build its relationships with key market leading customers as the turn-key partner of choice, as it leverages its know-how in development and manufacturing processes together with materials expertise, in a market with favourable demographic and outsourcing trends. Healthcare remains Scapa's primary acquisition focus.

·  Industrial has further opportunities to drive improved margins through consolidation and efficiency, and is also focused on growth in selected areas where it has a competitive advantage.

Summary and outlook

Scapa has again delivered a solid first half performance with growth in trading profit and margins. There are further significant opportunities for both business units to improve both sales and margin performance through rigorous execution of the strategy, in both the short and longer term. The Board remains confident of delivering its full year expectations and in the Company's ability to drive shareholder value.

L C Pentz


20 November 2018