Devro Plc - Current Trading Update
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Devro plc ("Devro" or the "Company"), one of the world's leading manufacturers of collagen products for the food industry, issues the following trading update for the period 1 January 2020 to the current date ahead of its Annual General Meeting on 30 April 2020.
The Group remains focused on protecting the well-being of its employees, their families and the wider community. Our teams have responded well to the Covid-19 crisis and their efforts and dedication have resulted in us being able to maintain the safety and continuity of our global operations.
Current trading and Covid-19 impacts
Q1 2020 edible collagen volumes increased by c. 2% compared to the prior year, driven by continued execution of growth initiatives and elevated short-term demand relating to Covid-19.
Emerging markets were up 13% led by strong growth in Latin America, Russia and East and South East Asia. Mature markets declined 3% mainly due to ongoing distributor destocking in Continental EU & West and a weaker demand environment during January and February in the UK & Ireland. North America continued to grow.
Our people are working hard to service customers in the food supply chain and all sites are currently operating. We continue to closely monitor Covid-19 developments with the key risks being preserving supply chain continuity and employee well-being, together with the potential for the nature and duration of global containment measures to affect demand. In recent weeks some suppliers have experienced disruption in their end markets. We acted decisively to secure supply, but this has resulted in some raw material inflation, which we are working to mitigate through targeted cost savings.
The Group has also instigated cash mitigation actions in response to Covid-19, including cutting all discretionary capital and operating expenditure. The company is currently not taking advantage of any Covid-19 UK government support schemes.
Devro has a strong financial position with substantial liquidity and long-term banking facilities. The Group's debt facilities consist of a committed £105 million Revolving Credit Facility (RCF), which expires in 2023, and US$100 million of private placements expiring in 2021 (US$25 million), 2024 (US$50 million) and 2026 (US$25 million). As of Friday 17 April 2020, the Group had net debt of £130 million, comprising gross debt of £156 million and cash of £26 million. As at the date of this announcement the Group has available liquidity of c. £59 million comprising of cash and undrawn committed facilities.
The Board is mindful of the uncertainty as to the potential for future disruption as a result of Covid-19. As a precautionary measure the Board has therefore decided to delay payment of its 2019 final dividend by withdrawing the proposed recommendation to pay a final 2019 dividend of 6.3 pence per share (c.£10.5 million cash cost) from the resolutions being put at the AGM on 30 April. Based on the Board's current knowledge, it intends to pay an additional interim dividend of the same amount in the second half of 2020. The Board will keep this under review as the Covid-19 pandemic unfolds.
Despite our good volume growth performance in Q1, we do not envisage any change to prior volume guidance for 2020. As such, and absent any negative Covid-19 impact, the Board's expectation for good progress in 2020 is unchanged.
Devro is a global business, integrated into the crucial food supply chain and has a robust balance sheet leaving it well positioned to succeed in these uncertain times.