TIDMDVO
RNS Number : 3968U
Devro PLC
29 July 2020
For Immediate Release 29 July 2020
Devro plc
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
Good progress despite Covid-19 impact, dividend reinstated
Devro plc ("Devro" or the "Group"), one of the world's leading
manufacturers of collagen products for the food industry, announces
its unaudited half year results for the six months ended 30 June
2020.
Underlying results* Statutory results
H1 2020 H1 2019 H1 2020 H1 2019
Revenue (GBPm) 119.0 119.2 119.0 119.2
Operating profit (GBPm) 18.5 17.8 17.2 17.4
Operating profit margin 15.5% 14.9% 14.5% 14.6%
Profit before tax (GBPm) 15.6 14.9 13.5 13.6
Basic earnings per share
(pence) 7.5p 7.0p 6.6p 6.5p
Interim dividend per share
(pence) 2.7p 2.7p 2.7p 2.7p
Second interim dividend per
share (pence) 6.3p - 6.3p -
* Underlying figures are stated before exceptional items and net
finance cost on pensions (see Alternative Performance Measures
section of the Half Year Results Update for definition, explanation
and reconciliation to equivalent statutory measures).
Financial Highlights
-- Volumes of edible collagen casings up 1.4%, good underlying
momentum adversely affected by Covid-19 in Q2
o First half Covid-19 impact estimated at (1.5%)
o Emerging market volume up 19% driven by our growth agenda in
Latin America, Russia and South East Asia
o Mature markets volume down 6% impacted by European distributor
destocking (as previously highlighted) and Covid-19 headwinds seen
during May and June in North America, the UK & Ireland and
Australia, particularly in food service
-- Group revenue marginally lower than prior year due to other products
-- Improved underlying operating profit of GBP18.5m (H1 2019:
GBP17.8m) and operating margin increased to 15.5% (H1 2019: 14.9%)
benefiting from cost savings
-- Underlying basic earnings per share up 7% to 7.5p (H1 2019: 7.0p)
-- Improved free cash flow generation of GBP7.2m (H1 2019: GBP4.3m)
-- Covenant net debt i of GBP121.5m (H1 2019: GBP148.2m, FY 2019
GBP123.8m), representing net debt to
EBITDA ii of 1.9x (H1 2019: 2.3x, FY 2019: 1.9x)
-- Given the Group's financial position, trading performance and
outlook the Board has resolved to declare the postponed 2019 final
dividend of 6.3p, in the form of an interim dividend paid in
October 2020, in addition to the 2020 interim dividend of 2.7p,
flat on the prior year.
Strategic Highlights
-- Continued progress on 3Cs strategy including:
o Three-year plans delivering underlying growth
o Bellshill closed on time and on budget
o Continued delivery of cost savings and operational
improvements
o Integrated business planning now operational
o Further building on ESG policies and plans
Covid-19 response
-- Priority remains the health and safety of our colleagues and the communities we live in
-- Continue to contribute positively to the food supply chain
-- Temporary additional costs to manage and maintain supply in Q2
-- Cash mitigation actions taken to retain a robust financial position
-- All sites have operated throughout the pandemic - production maintained at planned levels
Rutger Helbing, Chief Executive Officer of Devro, commented:
"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.
Whilst trading conditions remain uncertain due to Covid-19, the
Board expects, based on underlying growth momentum and supported by
cost savings actions, and FX at current rates, to make progress
during 2020.
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."
Contacts
Rutger Helbing Chief Executive Officer 020 3727 1340
Jackie Callaway Chief Financial Officer 020 3727 1340
Richard Mountain/Nick Hasell FTI Consulting 020 3727 1340
The audiocast and presentation will be available from 7:00am on
Wednesday 29 July 2020 and will be accessible using the link:
https://streamstudio.world-television.com/943-1289-24809/en
The presentation will also be available on the company's
website.
www.devro.com
_______________
i Covenant net debt is shown before the impact of IFRS 16; see
Alternative Performance Measures section of the Financial Review
for definition and explanation.
ii EBITDA for covenant purposes is shown on underlying basis
(before exceptional items) and before the impact of IFRS 16; see
Alternative Performance Measures section of the Financial Review
for definition and explanation.
HALF YEAR REVIEW
CEO REVIEW
Our first half priorities, in the face of Covid-19, were to
support our employees and the communities in which we live, to
contribute positively to the food supply chain and to maintain a
robust financial position. It is through the dedication and
response of our people that we have been able to deliver on these
priorities.
Following the outbreak of the pandemic we introduced strict
protective measures including health and safety rules and
guidelines for quarantine processes. The early learnings we gained
from our site in China were rolled out to our other locations as
soon as the pandemic started to spread around the world. As a
minimum, we followed the protective measures laid out in government
guidelines and, in many cases, applied more stringent measures.
With these measures in place we were able to operate our sites at
normal capacity and fulfill our customers' demands.
At this moment these measures remain in place and, indeed, some
we intend to integrate into our normal operating procedures going
forward.
At the end of Q1 2020 we saw Covid-19 related elevated demand
due to a surge in sales of sausages in the retail channel. As
expected in Q2 2020 demand in retail stabilised, however, the
adverse impact of lower food service demand became more pronounced
as lockdowns were deployed in many parts of the world. We also saw
an adverse impact of temporary customer production interruptions in
North America as a result of Covid-19 issues in parts of the meat
supply chain. We estimate that our volumes in the first half were
negatively impacted by 1.5%.
In Q2 2020 we also faced some supply issues, mainly related to
hides, but due to our global base and long-standing relationships
with suppliers we were able to maintain supply. This was at a
temporary higher cost which was offset by additional cost
savings.
With the robust nature of our business and our strong financial
position we decided not to take advantage of any Covid-19 UK
Government support schemes.
Despite the Covid-19 related challenges in the half year we
continued to make good progress on our 3Cs strategy, supporting
delivery of a good overall performance for the first half.
Looking at each element of our 3Cs strategy in turn, we
demonstrated good progress on the Customer component. Our
structured approach to sales cycle management and three-year plans
were a major contributor to our strong growth in emerging markets,
with volumes up 19%. In our mature markets we saw continued growth
in snacking in North America despite some temporary Covid-19
customer supply interruptions. Our structured approach to sales
cycle management is at the heart of our delivery of growth
opportunities, which we identify based on our category plans and
commercial insights. We continue to see good progress on these
opportunities. To further support future growth we continued to
invest in our emerging markets go-to-market resources, train our
commercial colleagues to enhance the account management
competencies and upgrade our global commercial organisation where
needed including an extended focus on commercial excellence.
For the Core profitability part of the strategy, our focus on
ongoing operational improvements and cost savings delivered GBP4.7m
of benefit in the first half, more than offsetting inflationary
pressures and temporary additional Covid-19 related costs. We also
closed our Bellshill factory at the end of June 2020 and the
overall project is on track. While this will generate further cost
savings from H2 2020, it will also provide more flexibility in our
supply chain and better align available capacity to the Group's
growth ambitions, when completed in 2021.
We further strengthened our Competencies, the third part of our
strategy, through the successful roll-out of our Integrated
Business Planning (IBP). IBP is a global process to deliver our
strategy. As part as our response to Covid-19 we also significantly
increased our employee communication activities, including a new
intranet and regular company progress updates led by senior
management. We intend to continue with these activities, as well as
increasing our other engagement activities with employees. We
continue to deliver against our existing ESG plans and policies
and, in addition, we have started a global Sustainability
initiative. In this initiative we engage with our employees, as one
of the key stakeholder groups, through a 'crowdsourcing' approach
to help to prioritise our initial ideas for future focus. There is
much still to do and we remain committed to our ESG agenda.
While Covid-19 brings uncertainty, the 3Cs strategy underpins
our growth ambition and we expect further strategic progress in
2020.
HALF YEAR FINANCIAL RESULTS UPDATE
For the six months ended June 2020 edible collagen casings
volumes increased 1.4% with good underlying growth offset by
Covid-19 headwinds arising in the second quarter. In line with our
3Cs strategy and growth agenda, volumes in emerging markets grew
19% driven by Latin America, Russia and South East Asia. We are
particularly pleased with the strong growth achieved in Brazil, up
significantly compared to the prior year, due to new customer wins
in that country. Volumes in mature markets were down 6%, due to
European distributor destocking (as previously highlighted) and
Covid-19 headwinds in May and June, a reversal from the first
quarter trend. The North American market suffered from temporary
supply chain interruptions in Q2 but, despite that, continued to
show good growth in the first half. The UK & Ireland and
Australia were impacted from lower demand in the food service
industry. We estimate that our volumes in the first half have been
negatively impacted by Covid-19 by 1.5%.
Underlying operating profit of GBP18.5m was 4% higher than the
prior year (H1 2019: GBP17.8m) and the underlying operating profit
margin was up 60 basis points to 15.5% (H1 2019: 14.9%), benefiting
from continued cost savings and lower depreciation.
As a result, underlying basic earnings per share increased to 7.5 pence (H1 2019: 7.0 pence)
Free cash flow of GBP7.2m (H1 2019: GBP4.3m) benefited from
lower cash exceptional items and lower tax payments compared to
prior year. Covenant net debt reduced to GBP121.5m and 1.9 times
EBITDA.
REVENUE
H1 2020 H1 2019 Change Change at
GBPm GBPm constant currency
Revenue 119.0 119.2 -0.2% -1.5%
-------- -------- ------- -------------------
REVENUE BRIDGE
H1 2020 vs H1 2019 vs
% change H1 2019 H1 2018
Volume (EC*) 1.4% -1.1%
Country/product mix (EC*) -1.8% -0.7%
Other products -1.1% -1.2%
Foreign exchange 1.3% 2.2%
----------- -----------
Total -0.2% -0.8%
----------- -----------
*EC - Edible Collagen
Reported revenue decreased 0.2%. Whilst edible collagen casings
increased 0.9%, revenue from other products fell 1.1%. At constant
currency, revenue from edible collagen casings decreased 0.4%.
Adverse country and product mix was mainly driven by lower average
selling prices in emerging markets and the renewal of long-term
sales contracts. The decrease in other products reflected general
weakness in the non-edible collagen market in Europe and the
negative impact of Covid-19 in bio-medical. Foreign exchange
movements positively impacted revenue, mainly due to the
strengthening of the JPY and USD.
EDIBLE COLLAGEN VOLUMES
Group volumes were up 1.4% in H1 2020 with 19% growth in
emerging markets largely offset by a 6% decline in mature
markets.
Emerging markets growth was driven by new business wins in Latin
America, specifically Brazil, a recovery in Chile and market share
gains with existing customers. In Russia, the Group saw a good
recovery, albeit this is likely to moderate in the second half, and
in South East Asia new business wins were secured in Singapore and
Vietnam. China delivered modest growth in a market disrupted by
Covid-19.
Mature markets were impacted by two main factors. The Group has
been experiencing distributor de-stocking in Continental Europe
since H2 2019 and this continued in the first half. Continental
Europe was down 19% due to distributor de-stocking in H1 2020,
which represents most of the weakness seen in the region. Elsewhere
in mature markets, we experienced Covid-19 headwinds in May and
June, which was a reversal of the positive contribution seen during
Q1 2020. North America grew 11% in H1 2020 due to strong snacking
growth in Q1,but was impacted in Q2 due to temporary customer
supply chain interruptions including meat and labour shortages
resulting in a flat performance for the quarter. UK & Ireland
was down 8% in the period, impacted by lower food service revenues
in May and June and a loss of a customer account. For the full year
we expect market share in the UK & Ireland to be broadly flat
year on year due to a customer win, with supply commencing early in
H2. Australia & New Zealand, up 2% in the period, performed
satisfactorily although also impacted by lower food service
revenues in Q2 due to Covid-19. Japan was marginally down (3%) due
to the timing of shipments.
Analysis of emerging and mature markets edible collagen is set
out below:
% change Volume Price/Mix Foreign
exchange
Mature -6% -1% 1%
------- ---------- ----------
Emerging 19% 0% 3%
------- ---------- ----------
In volume terms mature markets account for circa two thirds and
emerging markets account for around one third of Group's
volume.
Analysis of changes to edible collagen volumes sales per segment
is as follows:
% change H1 2020
Americas 24%
--------
EMEA -10%
--------
Asia Pacific 6%
--------
Furthers details of revenue by segment is available in note
5.
OPERATING PROFIT
H1 2020 H1 2019
GBPm GBPm % change
Underlying operating profit 18.5 17.8 +3.9%
Exceptional items (1.3) (0.4)
-------- -------- ---------
Operating profit 17.2 17.4 -1.1%
-------- -------- ---------
Underlying operating profit of GBP18.5m was GBP0.7m higher than
the prior year, comprising a multitude of factors summarised
below:
GBPm
Underlying operating profit H1 2019 17.8
Volume (EC*) +0.5
Country/product mix (EC*) -2.2
Contribution from other products -0.5
Cost savings +4.7
Cost inflation -1.2
Temporary additional Covid-19 costs -1.8
Lower depreciation +1.4
Foreign exchange +0.7
Other -0.9
Underlying operating profit H1 2020 18.5
------
* EC - Edible Collagen
Commentary on volumes, country/product mix and other products is
set out in the revenue section above.
Cost savings of GBP4.7m were ahead of our expectations and
across all aspects of the supply chain offsetting salary inflation
in China and the Czech Republic and temporary additional Covid-19
costs mainly related to securing hide supply during the second
quarter. The temporary Covid-19 costs are expected to reduce
substantially in the second half of 2020.
H1 2020 underlying operating profit benefited from a lower
depreciation charge (GBP1.4m) due to the asset impairments in
2019.
Foreign exchange benefited from the strengthening of the JPY and
USD.
Reported statutory operating profit of GBP17.2m was marginally
lower than H1 2019 (GBP17.4m) due to higher income statement
exceptional items.
EXCEPTIONAL ITEMS
Income statement exceptional costs totalled GBP1.3m and related
to the closure of the plant in Bellshill (GBP0.9m) and the final
stage of implementation of the new global operating model (H1 2020:
GBP0.4m, H1 2019: GBP0.4m). Further details of exceptional items
are set out in note 6 to these Interim Financial Statements.
FINANCE COSTS
The net finance cost for the period was GBP2.9m, in line with
the prior year. FY 2020 charge is expected to be in line with the
previously guided charge of GBP5.5m.
Net finance cost on pensions for the period reduced to GBP0.8m
(H1 2019: GBP0.9m), due to lower interest rates.
TAX
The Group's underlying tax charge for the period was GBP3.0m (H1
2019: GBP3.2m). The Group expects a full year underlying effective
tax rate of between 22% and 25%.
EARNINGS PER SHARE
To provide a better indication of the underlying performance of
the Group, underlying earnings per share excludes exceptional items
and net finance costs on pensions.
H1 2020 H1 2019
Underlying basic earnings per share 7.5p 7.0p
Basic earnings per share 6.6p 6.5p
-------- --------
Underlying basic earnings per share were 7.5 pence, up on H1
2019 due to a higher underlying operating profit in H1 2020.
Basic earnings per share increased slightly due to lower tax
charges.
CASH FLOW AND NET DEBT
The Group delivered good cash generation in the first half.
As usual, the Group absorbed working capital in H1 2020
(GBP6.8m) as inventory was built to support growth in H2 and due to
buffer stock being secured in preparation for the closure of the
Bellshill site in Scotland. We expect the H1 inventory build to
largely unwind in the second half.
As part of the Group's Covid-19 cash mitigation actions all
non-essential capital expenditure was deferred to H2. Capital
expenditure in H1 2020 was GBP6.3m with our full year expectations
at circa GBP15.0m to GBP17.0m.
The H1 2020 cash exceptional costs of GBP1.5m relate to the
closure of our plant in Bellshill and the final stage of the
implementation of the new global operating model. We continue to
expect cash exceptional costs to be second half weighted given that
the closure of Bellshill occurred on 30 June 2020. Full year cash
exceptional spend is still expected to be around GBP9.0m, as
previously guided. In 2021 we do not expect material cash
exceptional items.
Tax payments of GBP3.4m were lower than the prior year (H1 2019:
GBP5.0m) due to payment timing differences.
The Group deferred payment of the 2019 final dividend and as
such no dividend was paid in H1 2020.
Covenant net debt reduced at 30 June 2020 to GBP121.5m, from
GBP148.2m at June 2019 and GBP123.8m at December 2019. The covenant
net debt /EBITDA ratio remains at the December 2019 level of 1.9
times compared with 2.3 times at 30 June 2019.
The covenant net debt/EBITDA ratio for December 2020 is expected
to be circa 1.9 times, consistent with previous guidance.
DIVID
Further to the announcement on 23 April 2020, and given the
Group's financial position and robust trading performance, the
Board has resolved to declare the postponed 2019 final dividend of
6.3p per share which will be paid by way of an interim dividend on
2 October 2020 to shareholders on the register as at 21 August
2020. Taken together with the 2019 interim dividend, this results
in a total dividend payment for FY 2019 of 9.0p per share (as
compared to 9.0p per share for the previous year). In addition, the
Board has resolved to declare a 2020 interim dividend of 2.7p, flat
on the prior year. This further interim dividend will be paid on 15
January to shareholders on the register at 4 December 2020.
PENSIONS
The Group's net pension obligations increased to GBP82.2m at 30
June 2020, from GBP64.1m at 31 December 2019. This primarily
related to a decrease in discount rates impacting the valuation of
UK and US schemes. The triennial review of the UK scheme is
underway and expected to be finalised in early 2021.
Pension deficit funding of GBP0.6m was lower than GBP1.1m in H1
2019 due to the deferral of the US deficit payment to the second
half of 2020. These payments were deferred as part of the Group's
Covid-19 cash mitigation actions. In line with prior guidance total
pension deficit payments for 2020 are expected to be circa
GBP7.5m.
Devro plays an active role in managing its pension schemes and
related liabilities, ensuring that the assets are appropriately
invested and that additional contributions are made where necessary
to ensure all obligations are met as they fall due.
SUMMARY & OUTLOOK
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.
Whilst trading conditions remain uncertain due to Covid-19, the
Board expects, based on underlying growth momentum and supported by
cost savings actions, and FX at current rates, to make progress
during 2020.
PRINCIPAL RISKS
The Group operates a structured risk management process, which
identifies and evaluates risks that could impact its performance,
as well as reviewing mitigation activity. The principal risks
identified in the Group's 2019 Annual Report and Accounts were:
loss of market share/profit margins due to increased competitive
pressures, disruption to supply or increase in price of key raw
materials, food regulatory risk, downturn in consumer demand, IT
systems/cyber risk, development of non-casing technologies, foreign
exchange risk, Brexit, shortage of people with relevant expertise
and failure by management to engage with all employees risks
obstacles to the delivery of the company's strategy, increased
funding requirements of pension schemes, operational disruption and
product contamination. No new key risks have been identified since
the 2019 Annual Report was published but all risks have been
reviewed in the light of Covid-19 and the following risks were
identified as having a materially greater impact on the business
for the duration of the pandemic:
-- Operational disruption: We have protected all our production
facilities by removing all non-critical employees (to set them up
to work from home) and visitors from the manufacturing sites, and
by imposing social distancing and entry checks.
-- Disruption to supply or increase in price of key raw
materials: We have re-assessed our raw material supply
vulnerabilities and developed mitigation plans for our hide and
glycerol supply which have been most impacted.
-- Sales downturn due to disruption to the businesses of some of
our customers: We have assessed the impact on our customers and
markets following lock down measures, primarily due to operational
difficulties experienced by some of them, the closure of food
service and increase in retail demand.
So far all of our sites have continued to manufacture product to
meet our customer demands with no shortages. Covid-19 impact has
eased at all of our sites, except US. We continue to maintain
Covid-19 controls at all of our sites.
Given the current situation, these risks are carefully monitored
and managed. Further details are set out on pages 32 to 36 of the
2019 Annual Report and Accounts which is available on the Devro plc
website: www.devro.com.
ALTERNATIVE PERFORMANCE MEASURES
In addition to statutory financial measures, management uses
certain alternative performance measures (which are not defined by
IFRS) to assess the operating performance and financial position of
the Group. These measures are anticipated to provide stakeholders
with additional useful information to better assess the underlying
trading performance of the Group. The alternative performance
measures that Devro uses are 'constant exchange rates',
'underlying', 'non-recurring items', 'earnings before interest,
tax, depreciation and amortisation (EBITDA)', covenant EBITDA, 'net
debt', 'covenant net debt' and 'return on capital employed
(ROCE)'.
Constant exchange rates
The Group has worldwide operations transacting in multiple
currencies and is exposed to foreign exchange rate fluctuation
risks. As a result, the Group's reported revenue will be impacted
by movements in actual exchange rates. The Group presents revenue
growth on a constant currency basis in order to eliminate the
effect of foreign exchange rate movements, enabling investors to
better understand the underlying performance of the Group.
Revenue growth at constant currency is calculated by presenting
both the current and prior year local currency amounts using the
prior period average exchange rates.
Underlying
Underlying figures are stated before exceptional items and net
finance cost on pensions. In the second half of 2019 the Group
undertook a review of its global manufacturing footprint which
resulted in a decision to close Bellshill site. In 2018, a
restructuring programme was initiated to implement the new global
operating model to align the operating cost base with the global
structure. The costs associated with both programmes are
significant and incremental to on-going business, and as a result
have been classified as exceptional items.
Net finance cost of pensions have been excluded on the basis
that these costs are volatile, given that they are dependent upon
the pension position at 31 December each year which is subject to
market fluctuations.
A reconciliation from the underlying figures to the equivalent
reported figures is presented below:
H1 2020
GBP'm Exceptional Net finance
unless stated otherwise Underlying items cost on pensions Reported
----------- ------------ ------------------ ---------
Operating profit 18.5 (1.3) - 17.2
Operating profit margin
% 15.5% (1.0)% - 14.5%
Profit before tax 15.6 (1.3) (0.8) 13.5
Profit after tax 12.6 (0.9) (0.6) 11.1
Basic earnings per share
(p) 7.5 (0.5) (0.4) 6.6
----------- ------------ ------------------ ---------
H1 2019
GBP'm Exceptional Net finance
unless stated otherwise Underlying items cost on pensions Reported
----------- ------------ ------------------ ---------
Operating profit 17.8 (0.4) - 17.4
Operating profit margin
% 14.9% (0.3)% - 14.6%
Profit before tax 14.9 (0.4) (0.9) 13.6
Profit after tax 11.7 (0.3) (0.6) 10.8
Basic earnings per share
(p) 7.0 (0.1) (0.4) 6.5
----------- ------------ ------------------ ---------
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
EBITDA is defined as operating profit excluding depreciation and
amortisation. This measure is used by management to assess
operational efficiency and, given that it excludes non-cash
depreciation and amortisation, it is a useful approximation for
cash generation from operations. This measure is in common use
elsewhere and a reconciliation from reported figures is shown
below:
H1 2020 H1 2019
GBP'm Exceptional Exceptional
unless stated otherwise Underlying items Reported Underlying items Reported
----------- ------------ --------- ----------- ------------ ---------
Operating profit 18.5 (1.3) 17.2 17.8 (0.4) 17.4
Depreciation & amortisation 11.0 - 11.0 12.8 - 12.8
----------- ------------ --------- ----------- ------------ ---------
EBITDA 29.5 (1.3) 28.2 30.6 (0.4) 30.2
EBITDA margin (%) 24.8% 23.7% 25.7% 25.3%
Less: impact of IFRS
16 (0.3) (0.3)
----------- ------------ --------- ----------- ------------ ---------
Covenant EBITDA 29.2 30.3
----------- ------------ --------- ----------- ------------ ---------
Net debt
Net debt is defined as the excess of total borrowings over cash
and cash equivalents. It is a measure that provides additional
information on the Group's financial position and is a measure in
common use elsewhere. A reconciliation from reported figures is
presented below:
June 2020 December 2019 June 2019
GBP'm GBP'm GBP'm
---------- -------------- ----------
Current borrowings (21.8) (1.2) (5.3)
Non-current borrowings (134.4) (148.1) (157.9)
---------- -------------- ----------
Total borrowings (156.2) (149.3) (163.2)
Cash and cash equivalents 34.1 24.7 14.0
---------- -------------- ----------
Net debt (122.1) (124.6) (149.2)
---------- -------------- ----------
Add back impact of IFRS
16 0.6 0.8 1.0
---------- -------------- ----------
Covenant net debt (121.5) (123.8) (148.2)
---------- -------------- ----------
Rutger Helbing Jackie Callaway
Chief Executive Officer Chief Financial Officer
28 July 2020
CONSOLIDATED INCOME STATEMENT ( UNAUDITED)
for the six months ended 30 June 2020
6 months ended 30 June 6 months ended 30 June
2020 2019
Non- Non-
underlying underlying
Underlying items Reported Underlying items Reported
Note GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue 5 119.0 - 119.0 119.2 - 119.2
--------------------- ---- ------------ ----------- ---------- ------------ ----------- ----------
Operating profit 5 18.5 (1.3) 17.2 17.8 (0.4) 17.4
Finance cost (2.9) - (2.9) (2.9) - (2.9)
Net finance cost
on pensions - (0.8) (0.8) - (0.9) (0.9)
--------------------- ---- ------------ ----------- ---------- ------------ ----------- ----------
Profit before
tax 15.6 (2.1) 13.5 14.9 (1.3) 13.6
Tax 7 (3.0) 0.6 (2.4) (3.2) 0.4 (2.8)
--------------------- ---- ------------ ----------- ---------- ------------ ----------- ----------
Profit for the
period attributable
to owners of the
Company 12.6 (1.5) 11.1 11.7 (0.9) 10.8
--------------------- ---- ------------ ----------- ---------- ------------ ----------- ----------
Earnings per share
Basic 8 6.6p 6.5p
Diluted 8 6.6p 6.4p
All results relate to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the 6 months ended 30 June 2020
6 months 6 months
ended ended
30 June 30 June
2020 2019
GBP'm GBP'm
Profit for the period attributable to the
owners of the Company 11.1 10.8
Other comprehensive income/(expense) for
the period
Items that will not be reclassified to the
profit or loss
Pension obligations:
* re-measurements (15.1) (6.1)
* movement in deferred tax 3.6 1.1
------------------------------------------------------ -------- --------
(11.5) (5.0)
Items that are or may be reclassified subsequently
to profit or loss
Cash flow hedges:
- net fair value (losses)/gains (0.8) 0.9
- tax on fair value movements 0.2 (0.1)
Net investment hedges:
- fair value (losses)/gains (6.3) 0.6
- tax on fair value movements (0.6) (0.1)
Net exchange adjustments 10.1 1.2
2.6 2.5
Other comprehensive expense for the period,
net of tax (8.9) (2.5)
------------------------------------------------------ -------- --------
Total comprehensive income for the period
attributable to the owners of the Company 2.2 8.3
------------------------------------------------------ -------- --------
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
as at 30 June 2020
30 June 31 December 30 June
2020 2019 2019
Note GBP'm GBP'm GBP'm
ASSETS
Non-current assets
Property, plant and equipment 10 215.5 213.8 272.9
Intangible assets 10.7 10.5 10.5
Deferred tax assets 31.9 25.5 37.6
Trade and other receivables 3.7 3.9 5.2
261.8 253.7 326.2
Current assets
Inventories 46.8 39.1 45.5
Trade and other receivables 30.3 27.9 34.4
Derivative financial instruments 4 1.2 1.4 0.5
Current tax assets - - 0.7
Cash and cash equivalents 14 34.1 24.7 14.0
112.4 93.1 95.1
----------------------------------- ----- -------- ------------ --------
Total assets 374.2 346.8 421.3
----------------------------------- ----- -------- ------------ --------
LIABILITIES
Current liabilities
Trade and other payables (27.0) (29.4) (25.1)
Current tax liabilities (3.1) (1.6) -
Borrowings 14 (21.8) (1.2) (5.3)
Derivative financial instruments 4 (1.5) (0.6) (0.8)
Provisions for other liabilities
and charges (5.1) (5.6) (1.6)
(58.5) (38.4) (32.8)
Non-current liabilities
Borrowings 14 (134.4) (148.1) (157.9)
Pension obligations 11 (82.2) (64.1) (60.5)
Deferred tax liabilities (16.2) (16.0) (18.8)
Other payables (2.5) (2.5) (3.1)
Provisions for other liabilities
and charges (2.8) (2.8) (3.7)
(238.1) (233.5) (244.0)
Total liabilities (296.6) (271.9) (276.8)
----------------------------------- ----- -------- ------------ --------
Net assets 77.6 74.9 144.5
----------------------------------- ----- -------- ------------ --------
EQUITY
Ordinary shares 16.7 16.7 16.7
Share premium 9.3 9.3 9.3
Other reserves 75.1 72.2 79.1
Retained earnings (23.5) (23.3) 39.4
Equity attributable to the owners
of the Company 77.6 74.9 144.5
----------------------------------- ----- -------- ------------ --------
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
for the six months ended 30 June 2020
Ordinary Share Other Retained Total
shares premium reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------------- -------- -------- --------- --------- -------
Balance at 1 January 2020 16.7 9.3 72.2 (23.3) 74.9
-------------------------------------- -------- -------- --------- --------- -------
Comprehensive income/(expense)
Profit for the period - - - 11.1 11.1
Other comprehensive income/(expense) - - 2.6 (11.5) (8.9)
-------------------------------------- -------- -------- --------- --------- -------
Total comprehensive income/(expense) - - 2.6 (0.4) 2.2
-------------------------------------- -------- -------- --------- --------- -------
Transactions with owners
of the Company
Performance Share Plan charge,
net of tax - - 0.5 - 0.5
Performance Share Plan credit
in respect of awards lapsed - - (0.2) 0.2 -
Total transactions with owners
of the Company - - 0.3 0.2 0.5
Balance at 30 June 2020 16.7 9.3 75.1 (23.5) 77.6
-------------------------------------- -------- -------- --------- --------- -------
Balance at 1 January 2019 16.7 9.3 77.1 43.5 146.6
-------------------------------------- -------- -------- --------- --------- -------
Comprehensive income/(expense)
Profit for the period - - - 10.8 10.8
Other comprehensive income/(expense) - - 2.5 (5.0) (2.5)
-------------------------------------- -------- -------- --------- --------- -------
Total comprehensive income/(expense) - - 2.5 5.8 8.3
-------------------------------------- -------- -------- --------- --------- -------
Transactions with owners
Performance Share Plan charge,
net of tax - - 0.1 - 0.1
Performance Share Plan credit
in respect of awards lapsed - - (0.6) 0.6 -
Dividends paid - - - (10.5) (10.5)
-------------------------------------- -------- -------- --------- --------- -------
Total transactions with owners
of the Company - - (0.5) (9.9) (10.4)
Balance at 30 June 2019 16.7 9.3 79.1 39.4 144.5
-------------------------------------- -------- -------- --------- --------- -------
INTERIM CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
for the six months ended 30 June 2020
6 months 6 months
ended ended
30 June 30 June
2020 2019
Note GBP'm GBP'm
------------------------------------------- ---- -------- --------
Cash flows from operating activities
Cash generated from operations 13 20.5 18.6
Interest paid (2.8) (2.7)
Tax paid (3.4) (5.0)
------------------------------------------- ---- -------- --------
Net cash generated from operating
activities 14.3 10.9
------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (6.0) (5.4)
Purchase of intangible assets (0.3) (0.5)
Net cash used in investing activities (6.3) (5.9)
------------------------------------------- ---- -------- --------
Cash flows from financing activities
Proceeds from borrowings 1.0 10.1
Payment on settlement of derivatives (0.7) (0.5)
Payment of lease liabilities (0.3) (0.3)
Dividends paid - (10.5)
------------------------------------------- ---- -------- --------
Net cash used in financing activities - (1.2)
------------------------------------------- ---- -------- --------
Net increase in cash and cash equivalents 8.0 3.8
------------------------------------------- ---- -------- --------
Net cash and cash equivalents at
1 January 23.9 5.2
Net increase in cash and cash equivalents 8.0 3.8
Exchange gain on cash and cash equivalents 1.1 0.1
------------------------------------------- ---- -------- --------
Net cash and cash equivalents at
30 June 33.0 9.1
------------------------------------------- ---- -------- --------
Cash and cash equivalents 34.1 14.0
Bank overdrafts (1.1) (4.9)
------------------------------------------- ---- -------- --------
Net cash and cash equivalents at
30 June 33.0 9.1
------------------------------------------- ---- -------- --------
Notes to the condensed interim consolidated Financial Statements
(unaudited)
for the six months ended 30 June 2020
1. General Information
Devro plc (the Company) and its subsidiaries (the Group) is one
of the world's leading manufacturers of collagen products for the
food industry. Collagen is one of the most common forms of protein,
which is transformed into strong but flexible edible casings and
other related products by highly sophisticated biochemical
processing technologies.
The Company is a public limited company which is listed on the
London Stock Exchange and is incorporated and domiciled in
Scotland. The address of its registered office is Moodiesburn,
Chryston, Scotland, G69 0JE.
These condensed interim consolidated Financial Statements were
approved for issue on 28 July 2020.
These condensed interim consolidated Financial Statements do not
comprise statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The condensed interim consolidated
Financial Statements are unaudited but have been reviewed by our
auditors and their report is set out on page 24. Statutory accounts
for the year ended 31 December 2019 were approved by the Board of
Directors on 3 March 2020 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was
unqualified, did not contain a material uncertainty related to
going concern and did not contain any statement under Section 498
of the Companies Act 2006.
2. Basis of Preparation
These condensed interim consolidated Financial Statements for
the six months ended 30 June 2020 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with International Accounting Standard ("IAS") 34,
"Interim financial reporting" as adopted by the European Union. The
condensed interim consolidated Financial Statements should be read
in conjunction with the annual Financial Statements for the year
ended 31 December 2019 which have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union.
Critical estimates and judgments
The preparation of Financial Statements in conformity with IFRSs
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
Financial Statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best assessments of amounts, events or
actions, actual results ultimately may differ from those estimates.
The key uncertainties that have a significant risk of causing
material adjustment to the carrying amounts of assets and
liabilities within the next six months relate to accounting for the
carrying value of property, plant and equipment and deferred tax
asset. Taking into account Covid-19, management does not consider
that any reasonably foreseeable change in the source of estimation
would have a material impact on the carrying value of plant,
property and equipment and deferred tax asset in the Group's
financial statements.
Going concern basis
This Half Year Results Update sets out the Group's performance
for the period and financial position at period end, together with
factors likely to affect its future development, performance and
position. The 2019 Annual Report outlines the business activities
of the Group and note 23 describes the Group's objectives and
procedures for managing its capital, its financial risk management
policies, details of financial instruments and exposure to market,
credit and liquidity risk.
At 30 June 2020 the Group was operating within the banking
covenants related to its revolving credit facility and US private
placement facilities. The Group's detailed financial forecasts
indicate that there is sufficient headroom in the facilities for
the 18 months from the date of approval of this statement and that
they can be repaid in line with the expected terms. The Directors
have a reasonable expectation that the Group has adequate resources
to continue in operation for the 18 months from the date of
approval of this statement. For this reason, they continue to adopt
the going concern basis in preparing the financial statements.
In making this assessment the impact of Covid-19 has been
considered and a range of possible scenarios have been analysed
which model different levels of impact on revenue, profit and cash,
and the offsetting effect of controllable mitigating actions over
the course of 18 months from the end of July 2020. These include a
range of estimated impacts primarily based on the length of time
various levels of restrictions will be in place and the severity of
the consequent impact of those restrictions on most exposed areas:
raw material inflation (primarily hides), disruption to supply
chain and lower food service demand.
For each of our businesses we have sensitised the revenue (circa
2% - 3% reduction in year on year revenues), profit and cash flow
impact of reduced trading activity. In line with the impacts noted
above, the scenarios are most sensitive to the assumptions made
predominantly in food services markets. We have not assumed any
uplift in any market under any level of restrictions for the
purpose of the scenario modelling.
The scenarios include an assumption of economic recession
lasting until the end of 2021. This conservative view assumes slow
decline in our market during this time. While Covid-19 is
anticipated to impact our profits and cash generation, as the
economies come out of recession, so should the profits and cash
recover. As we exit both lockdown and our busiest trading periods,
the forecasted Covid-19 impact should also reduce.
Under each scenario, mitigating actions are all within
management control, can be initiated as they relate to
discretionary spend, and do not impact our ability to meet demand.
These actions include reduced opex spend and stopping all
non-essential and non-committed capex in the forecasted period. We
believe that the risk of enforced factory closure is low and have
implemented additional health and safety measures in each of our
factories to reduce the risk of a major supply disruption. Please
refer to principal risks section for further details. We have
assumed no significant structural changes to the business will be
needed in any of the scenarios modelled.
In all the scenarios, significant liquidity headroom under our
existing debt facilities remains at each month end, including the
assumption that repayment of the US dollar private placement
tranche of $25.0m in April 2021 will be made out of existing
facilities. At the half year, the net debt position was GBP121.1m
and our covenant net debt to EBITDA ratio was 1.9 times with a
covenant EBITDA to net interest payable ratio of 11 times. Undrawn
facilities were GBP37m with GBP34.1m of cash holdings as at 30 June
2020. Since the half year date there were no changes to our
borrowing facilities. Covenants are set at less than 3.0 times Net
debt to EBITDA and more than 4.0 times EBITDA to Net Interest
Payable in all our lending agreements.
As part of cashflow modelling, we tested the possibility of the
debt covenants being breached in December 2020, June 2021, and
December 2021. June 2021 is the most sensitive test point as the
EBITDA modelling assumes a full 12 months of reduced trading and
supply chain impacts, the usual seasonal working capital peak and
normal dividend payment. Under all the scenarios modelled, after
taking mitigating actions as required, forecasts did not indicate
breach on any of those dates.
3. Accounting Policies
The accounting policies adopted are consistent with those of the
annual Financial Statements for the year ended 31 December 2019, as
described in those annual Financial Statements.
4. Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including interest rate risk and foreign
exchange risk), credit risk and liquidity risk.
The condensed interim consolidated Financial Statements do not
include all financial risk management information and disclosures
required in annual Financial Statements and should be read in
conjunction with the Group's annual Financial Statements for the
year ended 31 December 2019.
Fair value of derivative financial instruments
The fair values of derivative financial instruments are as
follows:
Assets Liabilities
GBP'm GBP'm
At 30 June 2020
Forward foreign currency contracts
- cash flow hedge 1.2 (1.3)
- net investment hedge - (0.2)
------------------------------------- ------- ------------
1.2 (1.5)
------------------------------------- ------- ------------
At 30 June 2019
Forward foreign currency contracts
- cash flow hedge 0.4 (0.8)
- net investment hedge 0.1 -
------------------------------------- ------- ------------
0.5 (0.8)
------------------------------------- ------- ------------
Derivative financial instruments that are measured at fair value
are disclosed by level of the following fair value measurement
hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2 - Inputs other than quoted prices included within level
1 that are observable for the asset or liability either directly
(that is, as prices) or indirectly (that is, derived from
prices)
Level 3 - Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs)
All of the Group's derivative financial instruments that are
measured at fair value are classified as Level 2 at 30 June 2020
(31 December 2019: Level 2) and comprise forward foreign exchange
contracts as disclosed in the table above. The valuation techniques
employed are consistent with the year-end annual report. There are
no financial instruments measured as Level 3. The carrying value of
non-derivative financial assets and liabilities, comprising cash
and cash equivalents, trade and other receivables, trade and other
payables and borrowings is considered to materially equate to their
fair value.
5. Segment information
The chief operating decision maker has been identified as the
Board. The Board reviews the Group's financial results on a
geographical segment basis because they require different products
and marketing strategies, with three identifiable operating
segments:
-- Americas: includes North America and Latin America
-- Asia Pacific: includes Australia & NZ, Japan, China and the rest of South East Asia
-- EMEA: includes Continental EU, Russia & East, UK & Ireland, Middle East & Africa
The Board assesses the performance of the operating segments
based on revenue generated from sales to external customers. Each
manufacturing site produces product for multiple sales areas and
performance cannot be allocated to operating segments; the Board
reviews performance by manufacturing plant regularly and manages
underlying operating profit before exceptional items at Group
level. Finance income and cost, and net finance cost of pensions,
are not included in the segment results that are reviewed by the
Board. Information provided to the Board is consistent with that in
the Financial Statements.
In the second half of 2020, the Board will also review Group
revenue and edible collagen volume between emerging markets and
mature markets where emerging markets include Latin America, Russia
& East, Middle East & Africa, South East Asia and China and
mature markets include North America, Continental EU, UK &
Ireland, Japan and Australia & NZ.
Segment information for the six months ended:
Americas Asia Pacific EMEA Total Group
30
30 June June 30 June 30 June 30 June 30 June 30 June 30 June
2020 2019 2020 2019 2020 2019 2020 2019
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Revenue
Sales to external
customers 34.2 29.1 39.3 38.4 45.5 51.7 119.0 119.2
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Underlying operating
profit 18.5 17.8
Exceptional items (1.3) (0.4)
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Operating profit 17.2 17.4
Finance cost (2.9) (2.9)
Net finance cost
on pensions (0.8) (0.9)
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Profit before
tax 13.5 13.6
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Recognition of sales to emerging and
mature markets:
30 June 30 June
2020 2019
GBP'm GBP'm
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
Mature 85.9 91.4
Emerging 33.1 27.8
---------------------- -------- ------ -------- -------- -------- -------- -------- --------
119.0 119.2
6. Exceptional items
Exceptional charges included in operating profit for the six
months ended 30 June 2020 were GBP1.3m (six months ended 30 June
2019: GBP0.4m). The 2020 costs relate to the closure of our plant
in Bellshill (GBP0.9m) and the final stage of implementing the new
global operating model (GBP0.4m). This involves restructuring the
business support activities into global functions to realign the
cost base for operating expenses with strategic priorities. The
2019 half year costs related to restructuring activities associated
with the new global operating model (GBP0.4m).
Costs associated with implementation of these transformation
programmes are significant and incremental to the usual business
activities, and as a result have been classified as exceptional
items. Exceptional charges comprise redundancy costs and other
incremental external cost, including professional fees.
7. Tax
The charge for tax for the six months ended 30 June 2020
corresponds to a rate of tax of 19% on underlying profit (six
months ended 30 June 2019: 22%). This is lower than the expected
tax rate for the full year due to the full impact of the change in
the UK tax rate from 19% to 17% reflected in the first half of 2020
and some other factors. The charge for tax comprises a UK
corporation tax credit for six months ended 30 June 2020 of GBP0.9m
(six months ended 30 June 2019: GBPnil) and a foreign tax charge
for six months ended 30 June 2020 of GBP3.8m (six months ended 30
June 2019: GBP2.8m).
8. Earnings per share
6 months 6 months
ended ended
30 June 30 June
2020 2019
GBP'm GBP'm
Profit attributable to equity holders 11.1 10.8
Underlying profit attributable to equity
holders 12.6 11.7
Earnings per share
- Basic 6.6p 6.5p
- Underlying basic 7.5p 7.0p
- Diluted 6.6p 6.4p
Shares in issue
Weighted average number of shares through
the period (millions) 166.9 166.9
Adjustments for:
- Performance Share Plan (millions) 2.0 0.9
-------------------------------------------- --------- ---------
Weighted average number of shares adjusted
for potential dilution (millions) 168.9 167.8
-------------------------------------------- --------- ---------
Share options are only treated as dilutive in the calculation of
diluted earnings per share if their exercise would result in the
issue of shares at less than the average market price of the shares
during the period. Shares arising from share options, the deferred
bonus scheme or the performance share plan are only treated as
dilutive where the effect is to reduce earnings per share.
9. Dividends
Further to the announcement on 23 April 2020, and given the
Group's financial position and robust trading performance, the
Board has resolved to declare the postponed 2019 final dividend of
6.3p per share which will be paid by way of an interim dividend on
2 October 2020 to shareholders on the register as at 21 August
2020. Taken together with the 2019 interim dividend, this results
in a total dividend payment for FY 2019 of 9.0p per share (as
compared to 9.0p per share for the previous year). In addition, the
Board has resolved to declare a 2020 interim dividend of 2.7p, flat
on the prior year. This further interim dividend will be paid on 15
January to shareholders on the register at 4 December 2020.
10. Property, plant and equipment
Movements in property, plant and equipment are summarised as
follows:
6 months 6 months
ended ended
30 June 30 June
2020 2019
GBP'm GBP'm
----------------------------------- --------- ---------
Net book value at 1 January 213.8 280.0
Additions - right of use assets - 0.1
Additions - other 3.8 3.7
Depreciation (10.4) (12.3)
Exchange differences 8.3 1.4
----------------------------------- --------- ---------
Closing net book value at 30 June 215.5 272.9
----------------------------------- --------- ---------
11. Pension obligations
The net pension obligations disclosed as non-current liabilities
in the interim consolidated statement of financial position are as
follows:
30 June 31 December 30 June
2020 2019 2019
GBP'm GBP'm GBP'm
--------------------- -------- ------------ --------
Pension obligations 82.2 64.1 60.5
--------------------- -------- ------------ --------
The increase in the Group's net pension obligations at 30 June
2020 compared with 31 December 2019 primarily reflects the changes
in financial conditions in the period resulting in changes to
actuarial assumptions, including a decrease in discount rates in
the UK and US.
A summary of the discount rates used in the principal countries
is:
30 June 31 December 30 June
2020 2019 2019
---------------- ------------ ------------ ------------
United Kingdom 1.45% 1.95% 2.20%
United States 2.25% 2.95% 3.25%
---------------- ------------ ------------ ------------
The net pension obligations have moved as follows:
6 months
6 months ended ended
30 June 30 June
2020 2019
GBP'm GBP'm
---------------------------------- --------------- ---------
Opening net liability 64.1 54.4
Employer contributions (1.5) (2.5)
Service cost 0.6 0.6
Scheme administrative expenses 0.6 0.8
Net finance cost 0.8 0.9
Re-measurements 15.1 6.1
Exchange losses 2.5 0.2
---------------------------------- --------------- ---------
Closing net liability 82.2 60.5
---------------------------------- --------------- ---------
12. Equity securities issued
No ordinary shares were issued during the half year period
ending 30 June 2020.
13. Reconciliation of profit before tax to cash generated from
operations
6 months 6 months
ended ended
30 June 30 June
2020 2019
GBP'm GBP'm
Profit before tax 13.5 13.6
Adjustments for:
Finance cost 2.9 2.9
Net finance cost on pensions 0.8 0.9
Pension cost adjustment for normal contributions 0.3 -
Depreciation of property, plant and equipment 10.4 12.3
Amortisation of intangible assets 0.6 0.5
Release from capital grants balance (0.1) -
Pension deficit funding (0.6) (1.1)
Performance Share Plan 0.5 0.1
Changes in working capital:
Increase in inventories (5.5) (6.7)
(Increase)/decrease in trade and other receivables (0.6) 2.2
Decrease in trade and other payables (1.1) (2.5)
Decrease in provisions (0.6) (3.6)
----------------------------------------------------- --------- ---------
Cash generated from operations 20.5 18.6
----------------------------------------------------- --------- ---------
Underlying operating cash flows (before pension
deficit funding) 22.6 23.7
Pension deficit funding (0.6) (1.1)
Exceptional items (1.5) (4.0)
----------------------------------------------------- --------- ---------
Cash generated from operations 20.5 18.6
----------------------------------------------------- --------- ---------
14. Analysis of net debt
30 June 31 December 30 June
2020 2019 2019
GBP'm GBP'm GBP'm
------------------------------- -------- ------------ --------
Cash and cash equivalents 34.1 24.7 14.0
Bank overdrafts (1.1) (0.8) (4.9)
Net Cash and Cash Equivalents 33.0 23.9 9.1
Other bank borrowings (73.0) (72.0) (78.6)
US dollar private placement (81.5) (75.7) (78.7)
Leases (0.6) (0.8) (1.0)
------------------------------- -------- ------------ --------
Net debt (122.1) (124.6) (149.2)
------------------------------- -------- ------------ --------
Included within current borrowings amounting to GBP21.8m (31
December 2019: GBP1.2m) are bank overdrafts of GBP1.1m (31 December
2019: GBP0.8m), finance leases of GBP0.3m (31 December 2019:
GBP0.4m) and a tranche of US dollar private placement that expires
in April 2021 of $25.0m (GBP20.4m).
15. Related party transactions
The Group had no related party transactions other than key
management compensation during the six months ended 30 June 2020
and 30 June 2019.
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
-- the condensed set of Financial Statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of Financial Statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Devro plc are as listed below:
Steve Good
Rutger Helbing
Jackie Callaway
Paul Withers
Malcolm Swift
Jane Lodge (resigned 30 April 2020)
Lesley Jackson (appointed 1 May 2020)
Jeremy Burks (appointed 1 May 2020)
A list of the current directors is maintained on the Company's
website: www.devro.com .
By order of the Board
Rutger Helbing Jackie Callaway
Chief Executive Officer Chief Financial Officer
28 July 2020 28 July 2020
INDEPENDENT REVIEW REPORT TO DEVRO PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2020 which comprises Interim Consolidated
Income Statement, Interim Consolidated Statement of Comprehensive
Income, Interim Consolidated Statement of Financial Position,
Interim Consolidated Statements of Changes in Equity, Interim
Consolidated Cash Flow Statements and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
28 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GZGZNGRVGGZZ
(END) Dow Jones Newswires
July 29, 2020 02:00 ET (06:00 GMT)
Devro (LSE:DVO)
Historical Stock Chart
From Apr 2024 to May 2024
Devro (LSE:DVO)
Historical Stock Chart
From May 2023 to May 2024