Scapa Group plc (LON:SCPA) said the costs of a transformative acquisition and contracting margins at its healthcare division led to slump in first half earnings, sending its shares tumbling.
The company, which supplies bonding and adhesive products to healthcare and industrial markets, reported a 37% fall in first half pretax profit to £9.7mln in the six months to the end of September on revenues 3.4% lower at £140.7mln.
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Scapa’s profit was partially dented by £4.1mln in exceptional costs, made up of £2mln for the closure of a site and a further £1.9mln in acquisition costs. Margins at its healthcare unit also fell to 14.2% from 16.1% a year ago.
The adhesives group acquired Systagenix’s manufacturing operations from Acelity for £31mln in September.
"The first half has delivered a solid trading performance and continued good progress in the transformation of Scapa from an industrial tape company to a group with two businesses that are global and market leaders," Scapa CEO Heejae Chae said in a statement.
"We have now completed three technology transfers in the last twelve months with an aggregate annualised revenue exceeding £40mln. We believe that further opportunities to partner with our healthcare customers exist as the medical device sector undergoes disruption."
Chae added that while the macro environment remained challenging, Scapa expects annual profit to be in line with expectations, excluding the impact of the Systagenix deal, which is expected to be modestly earnings dilutive in the current year and materially accretive from financial 2020 onwards."
Shares in Scapa were 13.2 down at 373.20p in afternoon trade.