Scapa Group

The recovery at adhesive tapes supplier Scapa (SCPA) continues apace, with news that operating profits for the year to March 2011 will be ahead of expectations. Scapa manufactures a wide range of technical tapes to sectors spanning electronics, medical, transport and industrial. The overall market is estimated to be worth $26.5bn and is growing in the region of 5% a year.

The AIM listed group has embarked on a major restructuring exercise over recent years, a move that has helped boost its efficiency. Though its recovery has lagged others in the industrial space, Scapa is well on track to increase its operating margins to nearer the double digit levels enjoyed by peers such as 3M. This will be driven by increasing efforts to pass on the hike in raw materials to its customers.

In the six months to 30 September an improvement in trading helped Scapa return to the black with a £2.7m profits (2009: £3.1m loss). A successful cost reduction programme has stripped £11m from overheads, and strong cash flow has led Scapa to a net cash balance of £18.6m.

House broker Arden Partners has upped its 2011 forecasts to pre-tax profits of £5.6m and EPS of 2.7p. The focus for Scapa is to expand sales of highly engineered products in growth markets, particularly in the areas of medical and electronics. With plenty of asset backing and an improving outlook the shares are attractive at current levels.