Scapa

Global technical tape supplier Scapa, a recent GCI Company Watch recommendation at 21.5p, is to book a well flagged-up investment write down of up to £60m. Although the write down will mean a deficit in distributable reserves, it won't affect Scapa's cash position. At the AGM in July, Scapa will seek approval for a capital reduction which will eliminate its distributable reserves deficit and allow it to resume dividend payments. In terms of the actual business, chief executive Tony Watson says pre-tax profits before goodwill and exceptionals will meet market forecasts for the year - this sent the shares above our recommendation price. Merrill Lynch suggests profits of £5m on turnover of £187.6m for 2003, giving an eps of 2.38p, with profits improving to £6.2m for 2004. In the half to September, Scapa reported underlying profits of £3.3m, virtually half the comparable figure for the first half of 2001. Watson also says over the past six months the company has been successful in getting more than 25 dismissals from cases in the USA resulting from 'the alleged' exposure of papermill workers to asbestos. It must be pointed out that this exposure came from a product that was part of a business sold back in 1999, and no Scapa company has ever admitted liability or paid a plaintiff. Hold.

Sector: Chemicals

Companies: Scapa

Market cap: £32m

PE Forecast: 9.2

Share price: 22p

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