Investment: Scapa hit by strong pound

THESE ARE sticky times for Scapa Group. The maker of Sellotapes and paper-making products yesterday joined the long list of UK manufacturers hit by the strong pound and the Asian crisis.

These two factors wiped more than pounds 10m from the company's pretax profit which, at pounds 61m, was almost 9 per cent below last year's level.

And there is more to come. With the overwhelming majority of its sales coming from overseas, Scapa is bracing itself for a combined pounds 5m hit on profits in the current year.

The company's response has been to attack its cost base by overhauling its three divisions and shedding some of the peripheral parts.

The restructuring is aimed at expanding high-value, high margin businesses such as tapes and filtration products through acquisitions, while at the same time trying to limit the damage in the paper products division until better times return.

So far the plan has produced a pounds 28m exceptional charge, which Scapa is confident of recouping over three years, and a 10 per cent cut in staff numbers.

The problem with Scapa's ambitions is that they are a bit too long-run for the market's liking. The shares fell 2p to 200p yesterday, reflecting investors' impatience with the company. True, the shares now trade on a measly 11 times house broker CSFB's pounds 66m profit forecast, a tempting 40 per cent discount to the market. But with trading conditions likely to remain tough for a while, Scapa's shares are only for the patient. Hold.