Wound care group announces £30m share placing and warns on 2021 results

Manchester wound care specialist Scapa Group announced plans to raise £30m through a share placing launched today (May 14).

In a trading update the group also revealed it expects to announce record revenues for the last financial year, although the first two quarters of the current fiscal period have been impacted by the coronavirus outbreak.

Scapa said the share placing will strengthen the group’s balance sheet and provide flexibility to support future growth initiatives post-COVID-19.

Chief executive Heejae Chae and non-executive directors David Blackwood, Brendan McAtamney and Tim Miller, as well as certain members of the senior management team, intend to subscribe for new ordinary shares, contributing approximately £335,000 in aggregate.

Scapa also announced today that it has received credit committee approval from its existing banking syndicate for a new £15m short-term facility to sit alongside the group’s existing £80m revolving credit facility to provide additional liquidity, and for certain temporary revisions to its existing covenant arrangements.

Today’s update revealed that Scapa is expected to deliver record revenues for the year ended March 31, 2020, despite the loss of its ConvaTec contract. Statutory group revenue increased 2.8% to £320.6m.

Healthcare revenues grew 5.1% on a continuing basis (two per cent constant foreign exchange basis) for the year.

Excluding ConvaTec, healthcare revenues grew 29.8% on a continuing basis (26.3% constant FX) with the full year impact of Systagenix revenues being the main driver.

Industrial revenues were 1.1% below prior year (-1.9% constant FX), due to adverse macroeconomic conditions, particularly in the automotive and specialty products markets.

Trading profit for 2020 is expected to be approximately £28m, as announced in the trading update on February 12, 2020.

Adjusted net debt as at March 31, 2020, of £54.4m excludes the impact of IFRS16 Finance Leases and includes the impact of deferring £2m of payments to the group’s pension schemes.

The board has also decided to suspend payment of the final dividend, which would have been paid in July.

The group expects to announce its results for fiscal year 2020 on June 23.

For the current financial year, the group has modelled a significant downside scenario that reflects the ongoing and potential disruption to its business due to COVID-19.

It is expecting a period where revenues will be substantially impacted, particularly in the first quarter and in early second quarter trading, before returning to more normal levels, and in line with management’s pre-COVID-19 budget, from quarter three onwards.

Under its COVID-19 scenario, Scapa is expecting to generate revenue of around £272m for the 2021 financial year, approximately 80% of the previously budgeted revenues for the year, and generating around half the trading profit that was originally forecast in management’s pre-COVID-19 budget.

Chief executive Heejae Chae said: “We believe there are strong tailwinds emerging in our two business segments, healthcare and industrial, and a strengthened balance sheet will provide flexibility to fully realise potential opportunities in a post-COVID-19 environment.

“We are confident that both the proposed placing and debt re-financing, alongside cost saving initiatives, will enable Scapa to cement its strong market position, trusted partner status and ability to quickly support its customers.”

Scapa was advised on its placing by an Addleshaw Goddard team led by corporate partner Richard Lee.