A lack of manufacturing capacity and adverse currency movements were the main impediments to significant top-line growth for sausage skin maker Devro last year - sales, on constant currency basis, rose 8.1 per cent. "The long-term outlook is so positive," says chief executive Peter Page. "It's great for us to be in an industry where demand is strong in emerging markets and we have all these opportunities in developed markets."
Demand is benefiting from Devro’s push to increase edible collagen skin sales which now represent 87 per cent of overall sales. In developed markets sales of edible collagen rose 8 per cent helped by the high-end "Select" sausage-skin range, which is designed to mimic sheep gut. Select sales accounted for 8.4 per cent of edible collagen-skin sales in 2012 compared with 4.3 per cent the year before. In emerging markets, urbanisation and rising consumer incomes are driving growth and sales rose 7.8 per cent in 2012.
To keep up with demand, Devro is investing up to £35m in new capacity and updating technology this year, which follows a £33m spend last year. A handsome dividend increase also underlines confidence. Meanwhile, price increases and efficiency improvements should help mitigate the impact of margin-eroding cost increases from 2012.
Broker Panmure Gordon forecasts 2013 pre-tax profits of £45m and EPS of 21.8p (2012: £42.2m/20.7p).
| DEVRO (DVO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 346p | MARKET VALUE: | £573m | |
| TOUCH: | 345-346p | 12-MONTH HIGH: | 382p | LOW: 278p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 89p | NET DEBT: | 18% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 183 | 15.3 | 7.60 | 5.00 |
| 2009 | 220 | 26.9 | 12.4 | 5.00 |
| 2010 | 214 | 54.0 | 25.4 | 7.00 |
| 2011 | 228 | 43.0 | 20.8 | 8.00 |
| 2012 | 241 | 40.8 | 20.0 | 8.50 |
| % change | +6 | -5 | -4 | +6 |
Ex-div: 27 Mar Payment: 3 May | ||||
