Scottish sausage skin maker Devro makes shareholder pledge as sales hold firm

Devro, the Scottish ­sausage-skin and food ­casings maker, has reported “good progress” despite the impact of the global pandemic and reinstated its shareholder dividend.

The Scottish group is a leading manufacturer of collagen products for the food industry. Picture: John Devlin

Releasing results for the six months to the end of June, the group said revenues had dipped to £119 million from £119.2m a year earlier.

Underlying operating profit came in at £18.5m, up from £17.8m, while operating margin increased to 15.5 per cent from 14.9 per cent as the firm benefited from cost savings. Moodiesburn-based Devro said the closure of its Bellshill plant, as previously flagged, was on track.

Highlighting its “robust” trading performance, the group declared the postponed 2019 final dividend of 6.3p per share which will be paid by way of an interim dividend on 2 October.

Taken together with the 2019 interim dividend, this results in a total payment for 2019 of 9p per share – in line with the year before. In addition, a 2020 interim dividend of 2.7p was announced, flat on the prior year. This further interim dividend will be paid on 15 January.

Chief executive Rutger Helbing said: “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.”

He added: “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.”

Meanwhile, Devro announced that its chief financial officer Jackie Callaway was leaving the group to take up the same post at Coats Group.

A process to determine a successor is now underway, the firm added.

Darren Shirley, an analyst at Shore Capital, noted: “We see Devro valuations as far too low for a well invested business, with strong global market positions, healthy and attractive margins and strong underlying cash generation.

“We reiterate our ‘buy’ recommendation, and can see considerable scope for ratings expansion and yield compression.”

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