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Devro makes slow start to the year

The collagen casing maker saw volumes decline in the first half, but expects a recovery by year end
August 2, 2019

Collagen casing producer Devro (DVO) had a sluggish start to the year, with a 1.3 per cent decline in volumes sold. However, the contraction was confined to January, as sales through the remainder of the period were in positive territory. Fine Ultra, a thinner version of the collagen casing launched in continental EU, but its success was offset by weakening market sentiment, lower promotional activity due to higher pork prices, the reversal of some Brexit-related stockpiling, and poor weather. “Modest growth” is expected in the second half.

IC TIP: Hold at 209p

Encouragingly, the Devro 100 cost savings programme is delivering ahead of target. It’s now expected to save around £5.5m in annual costs by the end of the current financial year, compared to the original target of £4.5m. These cost savings, combined with a reduction in operating expenses following the implementation of a more efficient global operating model, are expected to boost full-year operating profit by around £7m. At the interim, underlying operating profit was 7.4 per cent higher at £17.4m.

Analysts at Numis expect pre-tax profits of £34.8m during 2019, giving EPS of 17.1p, increasing to £37.5m and 18.8p next year.

DEVRO (DVO)   
ORD PRICE:209pMARKET VALUE:£ 348m
TOUCH:203-209p12-MONTH HIGH:222pLOW: 151p
DIVIDEND YIELD:3.3%PE RATIO:31
NET ASSET VALUE:87pNET DEBT:103%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201812010.94.72.7
201911913.66.52.7
% change-1+25+38-
Ex-div:22 Aug   
Payment:04 Oct