Shares in Devro (DVO) rallied by more than 5 per cent on the day of these half-year results, suggesting the worst might be over for the maker of sausage casings. The past 18 months have been turbulent, as Devro has battled high raw material costs and disruption at its manufacturing plants. It's also still in the middle of a major restructuring programme that will incur £23m of exceptional costs this year.
However, investment projects in manufacturing facilities in the US and China are well underway, on time and on budget. The sames goes for the decommissioning of operations in Scotland. By mid-2015, these initiatives will create substantial annual cost savings. Chief executive Peter Page says the company is "very much on track", pointing out that the launch of the new Chinese factory in particular will transform the cost base and hence profitability.
Meanwhile, currency headwinds knocked sales growth in the half year. At constant exchange rates, revenue was broadly flat, but returned to growth in the second quarter. Operating profit before £10.8m of exceptional costs fell by a fifth to £14.1m, but strip out the currency drag and it would have been £2.2m higher.
Broker Investec Securities expects pre-tax profit of £28.5m for the full year, giving EPS of 14p, down from £41m and 22p in 2013.
| DEVRO (DVO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 254p | MARKET VALUE: | £424m | |
| TOUCH: | 253-254p | 12-MONTH HIGH: | 340p | LOW: 205p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 85p | NET DEBT: | 37% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 119 | 16.2 | 8.2 | 2.7 |
| 2014 | 110 | 1.6 | 1.4 | 2.7 |
| % change | -8 | -90 | -83 | - |
Ex-div: 27 Aug Payment: 3 Oct | ||||
