Devro profits sizzle despite fall in sales volumes
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Chief executive Peter Page also said the firm, which has completed the start-up of new manufacturing plants in China and the US, would be focusing on “increasing revenue to regain market share” under an investment plan aimed at saving up £16 million a year by 2019.
But the strategy, dubbed “Devro 100”, will lead to exceptional costs of between £10m and £12m over the next two years, plus capital investments of between £7m and £8m, along with a focus on reducing debt levels, which stood at £156.2 million as of the end of December.
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Page said: “Following the significant capital investments we have made in recent years, we are now focused on using our high-technology assets to supply a growing global market. Overall demand remains strong and we continue to see many attractive opportunities to grow the business.
“In 2017, we will focus on increasing revenue to regain market share, achieving cost savings across our global operations and commencing the launch of new, differentiated products, as part of the Devro 100 programme.”
He added: “Combined with our upgraded global manufacturing asset base, we are confident this will deliver long term growth.” Page’s comments came as Devro reported an underlying operating profit of £38.1m for 2016, up from £33.3m a year earlier, on revenues 4.7 per cent higher at £241.1m.
Sales volumes were down 6.6 per cent year-on-year, but Page said that earnings increased thanks to lower input prices and exchange rate benefits, and the firm has taken steps to “ensure a return to growth in 2017 and beyond”.
Devro’s board has recommended an unchanged final dividend of 6.1p a share, to be paid on 12 May, leaving the total payout for the year unchanged at 8.8p.
The group also announced that Paul Neep, the former chairman and chief executive of Scotch distiller Glenmorangie, will be retiring as its senior independent director at the annual meeting on 26 April following 12 years on the board. He will be succeeded by non-executive Paul Withers.