Analysts further warm to Devro's growth prospects after upbeat trading update

Devro, which manufactures sausage skins and other food casings, is expecting 2021 operating profit performance to be in line with expectations, amid sizzling revenue growth.

The London-listed, Moodiesburn-based firm, said in an unscheduled trading update that income growth for the full year was “encouraging,” with progress in volume, price and mix resulting in robust performances in both mature and emerging markets. It also said constant currency revenue growth for the year looks to be about 5 per cent.

“We anticipate 2021 operating profit performance to be in line with expectations, representing in excess of 10 per cent constant currency growth,” the firm stated, with earnings per share (EPS) “modestly” ahead of current, company-compiled consensus analyst expectations averaging 16.9p.

Devro describes itself as one of the world's leading manufacturers of collagen products for the food industry (file image). Picture: Scott Olson/Getty Images.

The group, which will serve up its full-year results on March 2, also said it delivered strong cash generation in the final quarter, with net debt at December 31 amounting to £90m.

Numis analyst Damian McNeela said: “We believe that the performance demonstrates further evidence of its underlying growth credentials, which we expect it to build on.”

Also commenting were Darren Shirley and Clive Black, analysts at Shore Capital Markets, who said they are keeping their above-consensus EPS forecast at 17.6p. “We have previously stated our growing confidence in the sustainability of Devro’s improved performance, and [the latest] update further underpins our conviction that a multi-year growth story is emerging.”

Devro in November published a third-quarter trading update, also citing “encouraging” trading, with constant currency revenue growth above the first half’s. That followed the company in July upping its dividend for the first time in four years after seeing first-half profits gain pace.

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