Scapa Group Plc – Preliminary Results 2020

Scapa Group plc

(“Scapa”, the “Company” or the “Group”)

Preliminary Results

Scapa Group plc (AIM: SCPA), the diversified Healthcare and Industrial company focused on bringing best-in-class innovation, design and manufacturing solutions to its customers, today announces its preliminary results for the 12 months ended 31 March 2020.

Group Financial Highlights

• Group revenue increased 2.8% to £320.6m (2019: £311.8m)
• Trading profit¹ down 27.2% to £27.8m (2019: £38.2m) following the loss of the ConvaTec contract
• Group operating loss of £47.3m following exceptional items of £68.4m including impairments of £54.6m, site closure costs of £8.0m and contract-specific exceptional costs of £7.2m associated with the loss of the ConvaTec contract
• EBITDA² down 13.5% to £39.7m (2019: £45.9m)
• Adjusted earnings per share³ decreased 34.4% to 12.4p (2019: 18.9p) ; basic loss per share 31.9p (2019: earnings of 5.3p)
• Adjusted net debt⁴ of £54.4m (2019: £43.7m)

Divisional Highlights

Healthcare

• Revenue increased 7.6% to £152.0m (2019: £141.3m); 4.5% on a constant currency basis⁵, despite the loss of the ConvaTec contract
• On a continuing basis⁶, revenue increased 5.1% to £144.7m (2019: £137.7m); 2.0% on a constant currency basis⁵
• Trading profit¹ of £13.7m (2019: £20.9m) is 34.4% lower, largely due to the loss of the ConvaTec contract and a weaker performance at our BioMed site in Dallas, which was impacted by higher one-off costs following major investments in capacity and systems including consultant and subsequent validation costs.  On a continuing basis ⁶ trading profit was £6.4m (2019: £17.3m)
• Continued focus on operational efficiencies through the consolidation of four separate sites into the centres of excellence in Gargrave, UK, and Knoxville, US
• Leveraged manufacturing, technology and development expertise to deliver over 100 programmes in the development pipeline delivering £11.7m in FY20
• Completed two new technology transfers with existing leading consumer healthcare customers

Industrial

• Revenue of £168.6m (2019: £170.5m) was 1.1% lower due to adverse macro conditions; 1.9% lower on a constant currency basis⁵
• Trading profit¹ of £19.5m (2019: £22.3m), with trading profit margin reducing to 11.6% (2019: 13.1%) due to product mix
• 10% revenue growth in Asia made up shortfalls in Europe and North America across the Consumer portfolio
• Delivered 5.5% revenue growth in Cable segment driven by Europe
• Delivered 2.8% revenue growth in European Automotive segment and achieved 5% revenue growth in North American Construction segment, despite overall slowdown across these markets   
• Specialty segment declined in revenue due to product rationalisation and reduction in volume at key accounts
• Invested in new coating line and distribution facility in India to support growth and migration to more value added businesses

COVID-19 Update and Outlook

• Successful completion of a placing and subscription of new ordinary shares to raise gross proceeds of £32.6m, together with the Board proposing a suspension of the dividend this year to further strengthen the Balance Sheet
• Secured a new £15m short-term facility to sit alongside the Group's existing £80m revolving credit facility and for certain temporary revisions to its existing covenant arrangements
• Pro forma net debt⁷ following the placing of £22.9m which is 0.58x 2020 EBITDA
• Continue to execute a well-developed COVID-19 action plan focused on cost efficiencies, managing cash and preserving liquidity
• Received a US government grant of US$5m under the Paycheck Protection Program
• Year-to-date trading better than initially forecast under Scapa's COVID-19 scenario, but recovery is at a slower pace
• Continue to execute against the COVID-19 scenario and expect trading to be in line with the outlook provided at the time of the placing
• Appointed Chris Brinsmead as Non-Executive Chairman to succeed Larry Pentz, who will step down after three years as Chairman at the Company's AGM on 7 August 2020. Chris's appointment will be effective from 7 August 2020 (see separate announcement)
• Scapa would like to recognise its employees who have gone above and beyond during the global pandemic. The Group has managed to maintain full production at all of its European and North American sites. Their dedication and commitment to supporting Scapa's customers during these unprecedented times is greatly appreciated

Commenting on the results Chief Executive, Heejae Chae, said:

“I am pleased to report a resilient financial and operational performance during the year, despite the significant impact of the loss of the ConvaTec contract. We have delivered record revenue and made good progress on our operational footprint plans for integrating and streamlining the business. In Healthcare, we continue to focus on operational efficiencies to optimise assets, enhance capabilities and develop a strong pipeline. In Industrial, despite substantial market contraction in our key market segments, especially in the second half of the year, we delivered a trading profit margin in the top tier of overall performance by our peers.

“As we navigate through the COVID-19 pandemic, it is difficult to predict how long the restrictions will last or the shape of the recovery. Regardless of the 'new normal', our strategy is to position ourselves to react decisively and quickly to take advantage of the opportunities that will emerge. To provide flexibility to fully realise these opportunities, in May 2020 we strengthened our Balance Sheet through a successful placing and subscription, as well as a debt-refinancing to provide additional liquidity. Whilst we recognise the past year has been difficult, we are confident these actions, alongside cost saving initiatives, will enable Scapa to cement its strong market position, trusted outsource partner status and ability to quickly support its customers as we continue to focus on rigorous execution of our strategy in the short, medium and long-term.”