Cost savings and a solid rise in volumes pushed shares in sausage casing maker Devro (DVO) up strongly on the release of its half-year numbers, as the Scottish company's restructuring plan started to yield results. Savings made at home and in its Australian operations were the biggest driver of adjusted operating profits in the period, accounting for £2.5m of the overall £15.6m operating profit (H1 2014: £14.1m). Increased volumes - particularly in China, Japan and North America - also contributed £1.9m.
The inefficiency of ageing manufacturing equipment in the US acted as a drag on the numbers, but with the group's three-year retructuring plan in full swing, new plants in America and China are expected to be in operation by 2016. Investment in these projects is now likely to be £100m but will lead to lower production costs. Chief executive Peter Page said the China plant would be the company's "most modern and efficient" and so would offset the potential headwind of wage inflation in the country. These projects mean exceptional costs will rise in the second half to £16m-£18m for the full year, before dropping in 2016.
Subsequent to these results, Devro acquired PV Industries, a manufacturer of collagen gel products, which Mr Page said would improve the company's research and development capabilities.
Analysts at Investec expect pre-tax profits of £30.5m, leading to EPS of 15.5p this financial year, up from £28.1m and 14.8p in FY14.
| DEVRO (DVO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 313p | MARKET VALUE: | £523m | |
| TOUCH: | 312.3-314p | 12-MONTH HIGH: | 328p | LOW: 230p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 56 | |
| NET ASSET VALUE: | 79p | NET DEBT: | 80.0% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 109.7 | 1.6 | 1.4 | 2.70 |
| 2015 | 112.7 | 9.6 | 4.4 | 2.70 |
| % change | +3 | +500 | +214 | |
Ex-div: 27 Aug Payment: 2 Oct | ||||
