Interim Results 2012
(M2 PressWIRE Via Acquire Media NewsEdge) Scapa Group plc, a global manufacturer of bonding materials and solutions, today announces its Interim Results for the half year ended 30 September 2012.
o Revenue increased 5% to 103.2m (2011: 98.6m)
o Trading profit* increased 30% to 6.5m (2011: 5.0m)
o Profit margin* improved to 6.3% (2011: 5.1%)
o Profit before tax* increased 31% to 5.9m (2011: 4.5m)
o Adjusted earnings per share* grew 39% to 2.5p (2011: 1.8p)
o Strong working capital management continues to improve net cash, which increased to 8.5m (31 March 2012: 7.0m)
*Before exceptional items and amortisation of intangible assets
o Focus on self-help measures and higher quality revenue mix delivering margin improvement
o Continued repositioning of the Industrial business towards a resilient portfolio focused on market share gain and expanded product offering. Diversity of geography and markets is helping the business navigate the current economic environment
o Good progress in transformation of the Healthcare business into a turn-key solution provider and strategic partner to our customers; WEBTEC performing well and integration on plan
o The Electronics business has moved further towards profitability, driven by the improving product mix
o Strategic initiative to acquire global blue chip customers through application specific products is underpinning future opportunities
o Strong new business pipeline developed across all business units
Commenting on the results Chief Executive, Heejae Chae, said:
"The Group has reported another solid set of results and continues to see growth in profit, margins and cash. Our strategy of creating a more balanced market position by expanding our presence in higher value markets, concentrating on our customers and value, and focussing internally on self-help and efficiency, continues to be successful.
"While mindful of the current economic climate the Board is confident that the Group has the right strategy for future growth and will meet its profit expectations for the full year."
For further information:
Scapa Group plc Heejae Chae -- Chief Executive Tel: 0161 301 7430
Scapa Group plc Paul Edwards -- Finance Director Tel: 0161 301 7430
Arden Partners Chris Hardie Tel: 0207 614 5917
Weber Shandwick Nick Oborne Tel: 0207 067 0700
For full press release and presentation see
Interim Management Report
We are pleased to report a solid performance for the six months to September 2012. Revenue increased 4.7% supported by the acquisition of WEBTEC, the Healthcare business acquired in December 2011, offsetting weakness in the European Industrial business. Trading profits increased 30% to 6.5m and we continue to make further progress on increasing our margins through development programmes for improving efficiency, cost reduction and focus on higher quality revenue streams.
Revenue and profits
Group revenue increased 4.6m to 103.2m (2011/12: 98.6m). Adjusting for the effect of exchange rates, revenue growth was 7.4m. WEBTEC contributed 12.1m, with pre-acquisition underlying revenue contracting by 4.7m.
Group operating profits were ahead of the prior year at 6.9m (2011/12: 6.0m). This included a pension settlement gain of 1.1m which has been presented as an exceptional item (2011/12: 1.0m) and is stated after amortisation costs of 0.7m (2011/12: Nil). Trading profits were 6.5m (2011/12: 5.0m) which further improved our profit margin to 6.3% (2011/12: 5.1%) as our focus on self-help measures of efficiency and cost reduction continue to improve performance.
Interest income and expense
Net interest payable was 0.5m (2011/12: Nil) and relates to our banking facility drawings that were used to acquire WEBTEC. Other finance charges of 0.1m (2011/12: 0.1m) relate to the unwinding of the discount on the product liability provision (2011/12: 0.1m). IAS 19 finance costs were Nil (2011/12: 0.4m) with the reduction due to the low discount rate used to impute interest on the liabilities.
The tax charge for the period is 2.4m (2011/12: 2.3m). This is a combination of a current tax charge of 1.1m (2011/12: 0.6m) and a deferred tax charge of 1.3m (2011/12: 1.7m). The deferred tax charge is affected by the change in rate of UK corporation tax from 24% to 23%, giving a 0.2m charge in the period (2011/12: 0.1m). Coupled with fixed tax payable on activity or presence in certain jurisdictions, this gives the Group a headline effective rate of 38% (2011/12: 42%), which is above the UK corporation tax rate of 24%. Removing the exceptional income and change in UK corporation tax the underlying effective tax rate for the period is 37% (2011/12: 40%).
Earnings per share
The profit attributable to shareholders for the current period amounts to 3.9m (2011/12: 3.2m). This equates to basic earnings per share of 2.7p (2011/12: 2.2p) and earnings per share, adjusted for exceptional items and amortisation, of 2.5p (2011/12: 1.8p).
The net cash balance at 30 September 2012 was 8.5m (31 March 2012: 7.0m). Cash flow from operating activities before exceptional items was healthy at 6.3m (2011/12: 3.8m). Total spend against exceptional items was 0.5m (2011/12: 0.3m); these relate to items recognised in the income statement in prior years and include asbestos litigation and environmental provisions. Capital investment in the period was 2.0m (2011/12: 1.0m) reflecting investment in cost out and efficiency opportunities. Tax cash outflow was 1.8m (2011/12: 0.5m), an increase on the prior year as in certain jurisdictions carried forward losses have been fully utilised and we have moved to payments on account. The Group still carries significant historical losses and expects cash tax outflow to be under the tax charge for some time.
Markets and regions
Industrial revenue was 69.9m (2011/12: 76.6m), a decrease of 8.7% on the prior year. At a constant exchange rate, revenue was down 4.8%. This reflects both the continued deliberate rationalisation of the product range and the macroeconomic environment, which continues to be challenging, particularly in Europe, and impacted demand in Automotive and Infrastructure sectors. Our Consumer business, however, has continued to grow driven by our Consumable strategy which is to expand our product portfolio beyond tapes and gain market share by increasing our points of sale. During the year, we launched Barnier Deco line to address the Paint and Decorative market following the successful launch of our Barnier System portfolio.
Despite the challenging environment we have continued our focus on improving operational efficiency which has seen the Industrial trading profit margin improve to 5.4% (2011/12: 4.8%).
Healthcare revenue increased 73.9% to 28.0m (2011/12: 16.1m). Excluding WEBTEC, Healthcare revenue was 15.9m. The integration of WEBTEC continues to progress well and the new product launch for a global woundcare company in this half year has been both well executed and well received. Leveraging the success, we have developed a strong and growing pipeline of opportunities to provide our OEM partners with turn-key solutions and wider product offerings, albeit we are also seeing customers tighten their supply chains and remove safety stock on the back of weakening demand for some of their consumer products which we anticipate will continue into the second half of the year. We have continued to invest in the Healthcare business in both R&D and customer account management to expand our capabilities as we pursue the turn-key strategy which addresses the growing trend for outsourcing in the Healthcare market. Trading profit for the period significantly increased to 3.4m (2011/12: 2.3m) with the margin reducing to 12.1% from 14.3% in the prior year reflecting the upfront investments.
Electronics revenue was 5.3m (2011/12: 5.9m). On a slightly lower revenue base, the loss on operations reduced from 0.4m to 0.2m as we continue to reposition Asia towards the Electronics market and transition away from commodity-based products. While revenue has been broadly flat the mix of the revenue and customer portfolio has significantly improved, with the investment in a new production line and R&D facility underpinning future opportunities. We continue to see pleasing successes, being designed into major OEM electronic devices, and working on a number of new opportunities covering hand-held devices, flat screen TVs, mobile phones and a broader range of white goods. While there has been a slowdown in the Consumer Electronics market and Asia, particularly in China, we remain excited at the potential and the opportunities in the region and remain confident in our strategy.
North America delivered a strong performance with trading profit of 5.4m (2011/12: 3.9m) on revenue of 49.0m (2011/12: 36.9m). WEBTEC contributed 12.1m with a margin of 12.4%, meaning that the underlying business saw flat year-on-year sales of 36.9m (2011/12: 36.9m) and profit of 3.9m (2011/12: 3.9m). The contribution of WEBTEC helped increase the North American margin to 11.0% (2011/12: 10.6%).
Sales in Europe of 48.4m (2011/12: 55.8m) decreased 7.4m or 13.3%. When adjusted for the effect of exchange rate movements, the decrease was 7.8%. Europe delivered a trading profit of 1.9m (2011/12: 2.2m) maintaining margins at 3.9%.
The pension deficit at 30 September 2012 increased by 11.1m to 50.0m (31 March 2012: 38.9m) driven by a large increase in the UK liabilities of 10.1m as result of a reduction in the rate used to discount the future commitments to 4.3% (31 March 2012: 4.75%). Asset values in the UK schemes remained relatively flat. During the first half, we have continued to execute the roadmap to address our pension deficit which has helped to partially offset the increase. The liability increases would have been higher had it not been for the merger of two of the UK schemes in the period. As part of the merger a number of liabilities were extinguished, a settlement gain of 1.1m being recognised on these transactions. The next phase of our UK pension plan is to review the asset strategy for the schemes. The overseas schemes also saw liability increases owing to discount rate reductions, and the combined deficits on these schemes increased 0.7m to 7.2m (31 March 2012: 6.5m).
During the period the Group made cash payments in excess of the operating charge of 3.2m (2011/12: 3.0m). The cash payments include 1.9m of normal contributions and 0.5m of catch-up contributions as the company exceeded targets agreed with the Trustees at the last valuation, the residual 0.8m of cash being PPF and other administration costs associated with managing the liability.
The position with regard to the asbestos claim liability has been reviewed in light of the six months' experience since March 2012. The conclusion of the Board is that the provision recognised at 31 March 2012 remains appropriate. The 0.1m movement in the corresponding asset and liability to 20.6m (31 March 2012: 20.5m) relates to exchange rate movements in the US Dollar and unwind of the discount.
Principal risks and uncertainties
The principal risks and uncertainties affecting the Group remain those set out in the 2012 Annual Report. Those which are most likely to impact the performance of the Group in the remaining months of the financial year are movements in exchange rates and global commodity prices. Due to the global nature of the Group, a large proportion of its revenue is derived from overseas, of which a significant amount is generated in US Dollars and Euros. As a consequence, the Group could be affected by movements in exchange rates. The Group uses a number of commodity type products in its core production operations, predominantly cloths, rubbers and resins and, with limited buying power influence in the very short term, the Group could be affected by sharp movements in the global prices for these commodities.
The Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Board continues to adopt the going concern basis in preparing the financial statements.
The Group has reported another solid set of results and continues to see growth in profit, margins and cash. Our strategy of creating a more balanced market position by expanding our presence in higher value markets, concentrating on our customers and value, and our focussing internally on self-help and efficiency, continues to be successful. While mindful of the current economic climate the Board is confident that the Group has the right strategy for future growth and will meet its profit expectations for the full year.
James A S Wallace
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(c) 2012 M2 COMMUNICATIONS
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