Sausage-skin maker Devro open to appetising deals after H1 results deemed 'mixed' by analyst

Devro, the Moodiesburn-based sausage-skin maker, has said it is open to bolt-on acquisitions as it presented interim results – described by an analyst as “mixed” – and noted that its full-year expectations remain unchanged.

Underlying pre-tax profit for the period to June 30 fell to £15.9 million from £17.7m with basic earnings per share down to 7.5p from 8.7p. However, revenue increased to £129.8m on the same basis, up from £119.9m 12 months previously, with the increase mainly attributed to growth in mature markets, “reflecting continued success of our strategy, as we take market share, and the initial benefits of our pricing actions”. The firm said in a trading update in April that it was raising prices amid “inflationary headwinds”.

The firm has now flagged a 4.5 per cent jump in the volume of edible collagen casings, with the mature markets volume up 7.6 per cent, with a robust performance in Continental Europe and west, North America and the UK and Ireland offset by weaker market conditions in Japan and Australia. Emerging market volume was down 0.9 per cent.

London-listed Devro, which shuttered its Bellshill manufacturing facility, said: “Our balance-sheet strength provides us with the flexibility to fund our organic growth, make targeted investments, increase our dividend and consider strategically relevant bolt-on acquisitions while having significant comfort in our financial position.” It also announced an interim dividend of 2.9p, up from 2.8p.

Chief executive Rutger Helbing said: "The group performed well in the first half, building upon the track record of recent years, and reflecting our strong and improving growth platform. The results are particularly pleasing given the challenging macroeconomic backdrop with the group continuing to ably respond.

"Whilst we remain alert to global supply chain challenges and inflation, the board's expectations for the full year are unchanged. The group's robust first-half performance, solid order books, pricing action and ongoing momentum gives us confidence in the full year outturn. Current foreign exchange rates could provide upside if they prevail throughout the second half."

“Devro has presented mixed H122 results for the six months to 30 June that are a little ahead of Shore Capital expectations,” said analyst Darren Shirley of the brokerage. “We reiterate our ‘buy’ recommendation, though see scope for the stock to broadly tread water until further evidence of H2 delivery becomes clear.”