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magazineDevro’s turnaround is looking tasty
Devro (DVO) 233.85p
Gain to date: 41.3%
Original entry point: Buy at 165,5p, 22 December 2016
Sausage skin manufacturer Devro (DVO), one of our Top Ten for 2017 selections, has rewarded our faith with a tasty 41.3% gain. We’re staying positive on the food industry collagen products purveyor following encouraging half year results (2 Aug).
These revealed sales up 11% to £125.2m. The sales improvement reflected favourable currency moves and volume growth in China, where Devro’s new plant is building custom, South East Asia and Russia. While Devro is encountering pricing pressure in China, the country accounts for 40% of global collagen casings consumption and represents an exciting growth market.
CEO Peter Page also reported progress with the Devro 100 programme, running ahead of plan with £6m of cost savings expected this year, ahead of previous guidance of £3m-to-£4m. Page is confident about reducing Devro’s net debt levels over time – robust cash flows enabled Devro to hold the first half dividend at 2.7p - and is excited about a pipeline of new product launches.
Investec Securities’ Nicola Mallard has upgraded her price target from 236p to 278p. For calendar 2017, the analyst looks for improved adjusted pre-tax profit of £31.5m (2016: £31.2m) and a 9p dividend (2016: 8.8p), ahead of £38m and 9.2p in 2018.
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