Devro Plc – Half-Year Report

Devro plc

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

Good progress despite Covid-19 impact, dividend reinstated

Devro plc (“Devro” or the “Group”), one of the world's leading manufacturers of collagen products for the food industry, announces its unaudited half year results for the six months ended 30 June 2020.

*   Underlying figures are stated before exceptional items and net finance cost on pensions (see Alternative Performance Measures section of the Half Year Results Update for definition, explanation and reconciliation to equivalent statutory measures).

Financial Highlights

Volumes of edible collagen casings up 1.4%, good underlying momentum adversely affected by Covid-19 in Q2

• First half Covid-19 impact estimated at (1.5%)
• Emerging market volume up 19% driven by our growth agenda in Latin America, Russia and South East Asia
• Mature markets volume down 6% impacted by European distributor destocking (as previously highlighted) and Covid-19 headwinds seen during May and June in North America, the UK & Ireland and Australia, particularly in food service

Group revenue marginally lower than prior year due to other products

Improved underlying operating profit of £18.5m (H1 2019: £17.8m) and operating margin increased to 15.5% (H1 2019: 14.9%) benefiting from cost savings

Underlying basic earnings per share up 7% to 7.5p (H1 2019: 7.0p)

Improved free cash flow generation of £7.2m (H1 2019: £4.3m)

Covenant net debt   i of £121.5m (H1 2019: £148.2m, FY 2019 £123.8m), representing net debt to EBITDA   ii of 1.9x (H1 2019: 2.3x, FY 2019: 1.9x)

Given the Group's financial position, trading performance and outlook the Board has resolved to declare the postponed 2019 final dividend of 6.3p, in the form of an interim dividend paid in October 2020, in addition to the 2020 interim dividend of 2.7p, flat on the prior year. 

Strategic Highlights

Continued progress on 3Cs strategy including:

• Three-year plans delivering underlying growth
• Bellshill closed on time and on budget
• Continued delivery of cost savings and operational improvements
• Integrated business planning now operational
• Further building on ESG policies and plans

Covid-19 response

Priority remains the health and safety of our colleagues and the communities we live in

Continue to contribute positively to the food supply chain

Temporary additional costs to manage and maintain supply in Q2

Cash mitigation actions taken to retain a robust financial position

All sites have operated throughout the pandemic – production maintained at planned levels

Rutger Helbing, Chief Executive Officer of Devro, commented:

“I would like to express my gratitude to all my colleagues who, in these challenging circumstances, have ensured that our sites continued to operate, servicing our customers and fulfilling our role in the food supply chain.

Our H1 2020 performance demonstrates the robust nature of our business and the progress made on our strategic priorities. We generated strong growth in emerging markets by leveraging our product and service strengths through our structured approach, underpinned by our three-year commercial plans. The business continues to deliver cost savings and operational improvements which have offset the impact of additional Covid-19 related costs; and the closure of the Bellshill site is on track.

Whilst trading conditions remain uncertain due to Covid-19, the Board expects, based on underlying growth momentum and supported by cost savings actions, and FX at current rates, to make progress during 2020.

We are also pleased to declare both an interim dividend, as well as the postponed 2019 final, reflecting our financial position and robust trading performance.”