Exceptionals take their toll on Scapa profits

Scapa Group, the Manchester-based wound care specialist, reported record revenues for the year to March 31, but made a loss after charging for exceptional items.

Revenues increased 2.8% to £320.6m, but the group made a loss before tax of £51m, compared with a pre-tax profit of £14.9m the previous year.

It said this was due to the loss of its ConvaTec contract, ongoing operational footprint improvements, and goodwill and intangible asset impairments. The group said impairments totalled £54.6m.

On a trading profit basis, Scapa said this was down 27.2% to £27.8m following the loss of the ConvaTec contract.

Scapa was told by US business partner ConvaTec in June last year that it was cancelling a supply agreement worth £23m a year.

Three years of the five-year deal still remained.

In May this year Scapa achieved the 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.

It also 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.

Year-to-date trading is better than initially forecast under Scapa’s COVID-19 scenario, but recovery is at a slower pace, it said.

Scapa also announced today that it has 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 August 7.

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.”

He added: “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.”