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Devro restructuring helps full-year numbers sizzle

The sausage casing maker sees a boost from cost savings and nears the end of its three-year overhaul.
March 1, 2016

A fair chunk of the meat in sausage casing maker Devro 's (DVO) results has undoubtedly come from its restructuring programme. Management is nearing the end of a three-year overhaul that has now realised £5.8m in annualised savings thanks to work carried out at its Scottish and Australian plants. The cost-efficient nature of these changes shaved more than a third off the exceptional items tally, injecting more life into the reported pre-tax profit figures.

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But chief executive Peter Page said he would "not underestimate" the sales effort behind the 1 per cent rise in volumes. He highlighted the 7 per cent sales volume growth in Japan and 13 per cent rise in southeast Asia as particularly healthy. Political and economic turmoil dented sales in Russia and surrounding countries as well as in Brazil.

Net debt spiked last year, but Mr Page says he never minds borrowing money "as long as it's for a reason". The main rationale is to fund the new plants that open this year - one in the US will replace an aging site and save Devro £8m a year, while the Chinese facility will give the company a manufacturing base there for the first time.

Analysts at Peel Hunt expect 2016 adjusted pre-tax profit of £36m, leading to EPS of 16.6p, up from £31.3m and 15.4p in 2015.

 

DEVRO (DVO)
ORD PRICE:305pMARKET VALUE:£509m
TOUCH:305p-310p12-MONTH HIGH:328pLOW: 265p
DIVIDEND YIELD:2.9%PE RATIO:35
NET ASSET VALUE:79pNET DEBT:96%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201122843.020.88.0
201224139.319.48.5
201324337.520.18.8
20142322.22.68.8
201523015.18.88.8
% change-1+586+238-

Ex-div: 28 Mar

Payment: 13 May