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Devro Plc - Full Year Results 2019

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Devro plc

AUDITED FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

Growth in emerging markets, strong cash generation and focus on sustainable revenue growth

Devro plc ("Devro" or the "Group"), one of the world's leading manufacturers of collagen products for the food industry, announces its results for the year ended 31 December 2019.

 

Underlying results i

Statutory results

 

2019 ii

2018

2019 ii

2018

 

 

 

 

 

Revenue (£m)

250.0

253.4

250.0

253.4

Operating profit/(loss)

before non-recurring itemsiii (£m)

-

39.1

-

40.0

(14.0)

-

26.9

-

Operating profit margin

before non-recurring itemsiii (%)

-

15.6%

-

15.8%

(5.6)%

-

10.6%

-

Profit/(loss) before tax (£m)iv

33.1

32.1

(21.8)

17.5

Basic earnings per share (pence)iv

15.2p

14.6p

(24.8)p

7.5p

Total dividend per share (pence)

9.0p

9.0p

9.0p

9.0p

Highlights

Volumes:

  • Strong growth in emerging markets v , up 13% in the second  half and 7% for the full year
  • Continued strong growth in North America, offset by a weak demand environment in the UK, Japan and Europe, with mature marketsv declining 3% for the full year
  • Full year edible collagen volumes were flat, with the Group delivering volume growth of 1% in the second half

Cost savings of £7.4 million achieved - ahead of original expectations

Underlying operating profit £39.1 million and operating margin 15.6% marginally below 2018 with the benefit of cost savings and FX offset by less favourable country mix and sales from other products

Underlying basic earnings per share increased by 4% to 15.2 pence

Strong free cash flow generation with covenant net debtvi/ EBITDAvii ratio reducing to 1.9 times at 31 December 2019 (2018: 2.2 times). Improved free cash flow of £30.8 million (2018: £11.2 million)

Statutory loss before tax includes Bellshill closure cost and a non-cash impairment charge of £45.9 million primarily related to the US and China plants

Continued progress on building organisational capabilities to deliver:

Sustainable revenue growth

Cost effective capacity enhancements to support growth ambition

Further efficiency savings

Rutger Helbing, Chief Executive Officer of Devro, commented:

"We continued to focus on our growth plans throughout the year, defending and building upon our strong market positions in mature markets and targeting to increase our share in emerging markets. Once again, and in line with our strategy, we increased our sales in emerging markets as a percentage of Group volumes. Emerging markets growth for the year was 7%, markedly different from the decline of 3% in mature markets where the demand environment was weaker. After a slow start to the year, we saw modest edible collagen volume growth from the second quarter onwards, resulting in Group volumes for the year being flat.

"The 2019 progress in executing our 3Cs strategy further underpinned the Devro difference, with our focus on collagen, customer intimacy, technical expertise and as a globally integrated player. We are confident that our growth plans, combined with a continued focus on cost savings and ability to provide the capacity required for growth utilising our current footprint, further support the strong cash generative nature of the business and our attractive margins.

"In 2020 we expect to achieve good volume growth in emerging markets. In our mature markets we expect volume growth in the North American snacking market and, whilst we anticipate a continuation of the challenging market conditions in the UK and Europe (particularly in the first half), we expect Group volumes to be ahead of 2019. In addition, cost savings are expected to more than offset inflationary cost pressures. Absent any material adverse impact of Covid-19, the Board expects good progress in 2020."