Sausage skin maker Devro raises divi as H1 results gain steam

Moodiesburn-based sausage-skin and food casings maker Devro has upped its dividend for the first time in four years after seeing first-half profits warm up.

It said that in the six months ended June 30, pre-tax profit grew to £17.7 million on an underlying basis, compared to £14.8m in the same period last year – with its interim dividend per share increasing “modestly” to 2.8p from 2.7p, “given the group's financial position, trading performance and outlook”.

Volumes of edible collagen casings were up 4.2 per cent, with emerging market volume up 10 per cent driven by South-east Asia, China and Latin America, while mature markets volume grew 1 per cent, driven by strong growth in North America offset by weaker market conditions in the UK and Ireland as well as Australia.

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Scots sausage skin maker Devro turnaround story 'undervalued'
The firm said it is increasing its interim dividend 'given the group's financial position, trading performance and outlook'. Picture: John Devlin.

Group constant currency revenue experienced a year-on-year jump of 3.1 per cent to £122.7m, and chief executive Rutger Helbing said: "Devro's constant currency revenue growth has accelerated and has driven significant profit growth in the first half, demonstrating the successful execution of the strategy, and we enter the second half with good momentum across the business, and confidence in our future prospects.

"In the shorter term, for the second half we expect the strong underlying performance to continue, however reflecting the uncertainties relating to Covid-19 pandemic and foreign exchange headwinds, the board's full-year expectations are unchanged.

"The board's confidence in the group's prospects and the continued strengthening of the balance sheet has resulted in an increase in the dividend for the first time in four years, as well as an incremental increase in investments required to facilitate the sustainable growth we foresee based on underlying market dynamics, as well as our targeted sales actions."

Analysts Darren Shirley and Clive Black of Shore Capital deemed the results “very encouraging", adding that they “in our view represent something of breakout for the group after a period of significant investment, followed by years in the volume and sales doldrums before a new group strategy took hold”.

The pair also reiterated their “buy” recommendation on Devro’s stock, “which we see as undervalued, an investment case supported by strong cash-generation, a very well-invested global manufacturing infrastructure, attractive margins with high barriers to entry, and a trading/business strategy that is starting to gain traction with high encouraging results

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