Scapa Group drops 13% in early trade

Tuesday, 21st May 2019 09:17 - by Rajan Dhall

Global healthcare company Scapa released their latest Preliminary Results for the year ended 31 March 2019.

The company delivered record revenue profits which grew 7.0% to GBP 311.8m (Prev GBP 291.5m). Here are some more of the most important highlights:

•      Revenue grew 7.0% to GBP 311.8m (2018: GBP 291.5m); 6.9% on a constant currency basis

•      Trading profit increased 10.7% to GBP 38.2m (2018: GBP 34.5m); 10.1% on a constant currency basis

•      Adjusted earnings per share increased 3.8% to 18.9p (2018: 18.2p)

•      Basic earnings per share of 5.3p (2018: 15.4p); reflecting business reorganisation and site closures

•      Adjusted net debt of GBP 43.7m (2018: GBP 3.8m) is after the acquisition of the Systagenix manufacturing facility for a cash consideration of GBP 34.0m and includes the one-off stock build of GBP 2.9m for the Dunstable and Knoxville site moves

•      Pension deficit significantly reduced to GBP 8.4m (2018: GBP 21.0m)

•      Final dividend increased 20.8% to 2.9p (2018: 2.4p)

Yet the share price has fallen 13% in early trade as CEO Heejae Chae is to stand down. Chairman Larry Pentz stated 'During his ten-year tenure, Heejae has delivered significant growth, greatly improved efficiency and built firm foundations, setting a strategic blueprint that will continue to drive future growth.'. So clearly the markets are worried about this. 

Nevertheless, the company has put in a solid performance as the results above show, but it's hard to see why Chae is leaving and if his successor will manage to continue to keep up the performance. The acquisition of the Systagenix is still yet to prove its worth and it seems that shareholders are looking wary. 

Looking at the daily chart below the last two sessions have seen price push toward the 300p level. Overall there was a strong consolidation between 500-400p and we have now broken lower and 271p looks to be the important area of support. If this level breaks we could see a profound move to the downside but 250p has been a strong level in the past. This has been a very strong sell-off in a strong company and once a new successor has been found we could see a move back up, although, it is important to wait for volume conformation. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.