20645_Scapa_AR_160504

STRATEGIC REPORT
OUR STRATEGY
2015/16 PERFORMANCE
The Industrial performance this year was
mixed; the North American market remained
resilient as Europe and Asia were affected by
the uncertainty around the macro-economic
conditions. Currency headwinds impacted
the business over the year as a whole but
improved significantly towards the end of the
year as concerns around the UK exiting
Europe have weakened Sterling. Revenue
decreased 5.4% to £153.4m or 3.3% at
constant exchange rates.
Trading profit increased strongly by 7.0% to
£10.7m or 16.3% at constant exchange rates.
Margins also increased for the sixth
consecutive year to 7.0%. As we consolidate
our operations we look to also improve the
quality of our business, driving returns
through increasing margins and reducing
costs through better asset utilisation and
capital allocation.
OUTLOOK
This year has seen the business
demonstrate its resilience through its
diversification and ability to drive returns
and improve its margins. It remains well
placed to take advantage of future structural
growth and, maintaining the current strategy,
it has further opportunity to deliver improved
margins and returns. While staying
conscious of macro conditions the
future prospects remain positive.
CASE STUDY CHALLENGE: CONSOLIDATION OF TWO FACILITIES TO ENHANCE OUR RETURN ON CAPITAL EMPLOYED
also the supporting mixing, solvent handling
and utilities equipment. New buildings were
erected at Palissy to increase the
warehousing and production floor space.
During the moving process the coating lines
were upgraded to accommodate a wider
range of our customer needs and to further
increase our capacity.
Now that all of our equipment is based on
one site, we enjoy significantly better
efficiencies, improved capabilities and a
reduced environmental impact. The transfer
project was completed safely, on time and
to budget, without any effect on customer
service.
For many years our French business
has operated out of two plants; the
main coating plant at Branly and the
conversion facility at Palissy, which
were approximately 10km apart. The
solvent coating facility was situated in
the middle of a residential area in
buildings dating back to the 1930s and
while the site was owned it required
ongoing maintenance and capital
investment. Palissy was a more modern
site, better situated but lacked space
and capacity. While the opportunity to
consolidate the plants was obvious the
risk attached to executing the process
and the cost of doing so remained
significant barriers.
Given the location the valuation of Branly as
an Industrial site was limited. It took the
French team up to eighteen months working
with the local planning authorities and the
town hall to get the site re-zoned and
planning permission granted for residential
developments. Following this process, the
valuation of the land was significantly
increased and the plot presold, effectively
making the process of consolidating the two
facilities self-funding and removing the
financial risk.
Having agreed the sale of this site, we set
about transferring the coating lines to our
Palissy slitting facility. This required us to
transfer not only the lines themselves, but
SUCCESS:
This new modern facility enables us to grow
while providing a host of benefits, including:
> > Increased efficiency; with equipment
consolidation
> > Additional capability; with newly
designed and enhanced equipment
> > Improved ROCE; with new plant layout
and equipment utilisation
> > New and improved safety and
environmental features; with state-of
the-art chemical handling
Just eighteen months later, our dedicated
team completed this project on-time and onbudget,
whilst maintaining customer
satisfaction levels.
27
ANNUAL REPORT AND ACCOUNTS 2016 SCAPA GROUP PLC