TIDMDVO
RNS Number : 8323G
Devro PLC
29 July 2021
For Immediate Release 29 July 2021
Devro plc
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Growth accelerating ,
momentum set to continue
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
2021.
Underlying results* Statutory results
H1 2020
H1 2021 (restated) H1 2021 H1 2020
Revenue (GBPm) 119.9 119.0 119.9 119.0
Operating profit (GBPm) 20.3 18.5 21.0 17.2
Operating profit margin 16.9% 15.5% 17.5% 14.5%
Profit before tax (GBPm) 17.7 14.8 18.4 13.5
Basic earnings per share
(pence) 8.7p 7.2p 9.3p 6.6p
Interim dividend per share
(pence) 2.8p 2.7p 2.8p 2.7p
Final dividend per share
(pence) 6.3p 6.3p
* Underlying figures are stated before exceptional items (see
Alternative Performance Measures section of the Half Year Financial
Results Update for definitions, reconciliation to equivalent
statutory measures and explanation of restatement). Restatement of
prior period results relates to net finance cost on pensions,
previously included within the non-underlying, now included within
the underlying results.
Financial Highlights
-- Group constant currency revenue up 3.1% to GBP122.7m on the
prior year primarily driven by market share gains and improving
pricing discipline reflecting the continued success in the
execution of our growth strategy. Reported revenue marginally
higher reflecting foreign exchange headwinds.
-- Volumes of edible collagen casings up 4.2%.
-- Emerging market volume up 10% driven by South East Asia, China and Latin America.
-- Mature markets volume up 1% driven by strong growth in North
America offset by weaker market conditions in UK & Ireland and
Australia.
-- Underlying operating profit of GBP20.3m, up 9.7%, and
operating margin increased to 16.9% (H1 2020: 15.5%) benefiting
from revenue growth, improving price/mix and ongoing cost savings
which were partially offset by inflationary pressures.
-- Underlying basic earnings per share up 20.8% to 8.7p.
-- Improved free cash flow generation of GBP9.4m (H1 2020: GBP7.2m).
-- Covenant net debt (i) of GBP103.1m (H1 2020: GBP121.5m, FY
2020: GBP109.5m), representing net debt to
EBITDA ii of 1.6x (H1 2020: 1.9x, FY 2020: 1.8x). Further progress expected in H2 2021.
-- Given the Group's financial position, trading performance and
outlook, the Board has declared a modestly increased interim
dividend of 2.8p.
Strategic Highlights
Continued progress on 3Cs strategy including:
-- Targeted sales initiatives delivering profitable growth.
-- Bellshill anticipated savings being realised.
-- New product development pipeline building and now focused on
both core and alternative technologies and products.
-- ESG targets in place, inaugural CDP submission and new purpose launched internally.
-- Planning for an investor seminar in late September focused on
purpose, values and sustainability.
Commenting on the outlook Rutger Helbing, Chief Executive
Officer of Devro, 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."
Contacts
Rutger Helbing Chief Executive Officer 020 3727 1340
Rohan Cummings Chief Financial Officer 020 3727 1340
Richard Mountain FTI Consulting 020 3727 1340
The audiocast and presentation will be available from 7:00am on
Thursday 29 July 2021 and will be accessible using the link:
https://streamstudio.world-television.com/943-1289-29481/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 Half Year Financial
Results Update 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 Half Year Financial
Results Update for definition and explanation.
HALF YEAR REVIEW
CEO REVIEW
We are pleased with the first half performance , which
demonstrates what the Group is capable of achieving. While we are
mindful of ongoing challenges, we are well positioned for the full
year 2021 and have a strong platform for long term growth driven by
our clear and consistent strategy.
The performance in the first half of the year highlighted good
constant currency revenue growth, strong profit growth and ongoing
robust cash generation. The significant multi-functional
improvements we have made since 2018 in our structure, processes
and competencies, has enabled us to continue to make strong
progress against our strategic and financial priorities.
In the first half Group constant currency revenue growth was
3.1% to GBP122.7m, with edible casings volumes up 4.2%, improving
price/mix, offset by a small decline in other products sales. In
edible casings we saw volume growth in both emerging (+10%) and
mature (+1%) markets. Our emerging markets showed good growth in H1
2021 with the exception of Russia and East where the performance
was impacted by weakening currencies. In mature markets, North
America (+19%) continues to drive our performance and in
Continental Europe (+1%) we benefited from more favorable
comparatives (impacted by de-stocking in H1 2020). Our reported
results were impacted by the strengthening of Sterling against a
basket of currencies, particularly US dollars, and revenue in the
half was at GBP119.9m, up 0.8%. Underlying operating profit
increased by 9.7% to GBP20.3m benefiting from operating leverage on
higher revenue and further annualised cost savings (including from
the closure of our Bellshill site at the end of June 2020). Free
cash generation was GBP2.2m ahead of the prior year, and our
covenant net debt/EBITDA ratio improved further to 1.6 times, from
1.8 times at year end 2020.
The Group has responded well to the ongoing challenges posed by
COVID-19. Despite being faced by numerous challenges, we have
continued to be able to safely operate our manufacturing sites as
normal and have been able to meet all customer demand. We continue
to operate our precautionary measures and our policy to be
'behind-the-curve' in terms of relaxation of those measures. In the
first half there have not been material additional costs associated
with COVID-19. From a revenue perspective we have seen some benefit
in the year on year comparisons in China but only limited recovery
in mature markets, with foodservice still impacted by lockdowns,
particularly in the UK and Continental Europe.
With the significant progress we have made in our structure,
processes and competencies, and the growth engine delivering
momentum, we have started to prepare for the next phase of our
development. An important foundation for this is the unearthing of
our Purpose, Vision, Mission and Values. With the help of our
employees, through an extensive engagement process, we have defined
Devro's purpose as:
Creating the Added Layer of Value
Together Responsibly Better
Our Purpose will help us to broaden our business over time and
to support that we are investing in product development for
alternative technologies and markets.
We will further update on Purpose including corresponding values
framework, and sustainability initiatives and efforts, at a
separate investor event planned for the end of the third quarter of
this year.
With our robust actionable growth plans, a strong operational
platform and the longer-term market dynamics looking positive, we
are confident that our strategy is working and that we will deliver
sustainable long term growth. We also expect profit growth will
continue to convert into robust cash generation allowing the Group
to invest in incrementally growing and upgrading its manufacturing
capacity to meet future needs, as well as in initiatives to further
broaden our business while continuing to de-lever the balance sheet
and paying a dividend.
HALF YEAR FINANCIAL RESULTS UPDATE
The Group delivered a positive performance in H1 2021 with a
significant improvement in revenue growth, excellent profit
leverage and ongoing robust cash generation.
For the six months ended June 2021 the Group achieved volume
growth of 4.2% in edible collagen casings. Volumes in emerging
markets grew 10% driven by South East Asia, China and Latin
America. Volumes in mature markets were up by 1%, mainly driven by
North America with continued growth in the Snacks category. The UK
& Ireland and Australia were impacted from lower demand in the
food service industry and generally weak market conditions.
Group revenue was up 3.1% on a constant currency basis and up
0.8% on a reported basis to GBP119.9m due to foreign exchange
headwinds. The Group was encouraged by the positive progress made
on price and mix especially during the second quarter. This
reflects the better geographical mix, as well as price increases
and targeted actions undertaken by the Group.
Underlying operating profit of GBP20.3m was 9.7% higher than the
prior year (H1 2020: GBP18.5m) and the underlying operating profit
margin was up 140 basis points to 16.9% (H1 2020: 15.5%),
benefiting from revenue growth, improving price/mix and continued
cost savings which were partially offset by inflationary
pressures.
After a review, the Group decided this year, to include net
pension costs in the underlying results to better reflect the
nature of these costs. Our full year total finance charge guidance
including net pension finance cost remains unchanged.
The half-year underlying tax charge of GBP3.1m (H1 2020: charge
of GBP2.8m) corresponds to a tax rate of 18% on underlying profits.
The tax charge benefited from a one off revaluation of the UK
deferred tax asset due to the change in the UK tax rate from 19% to
25% effective from 2023. Excluding this one off benefit the
effective rate was 24%.
Underlying basic earnings per share increased 20.8% to 8.7 pence (H1 2020: 7.2 pence).
Free cash flow of GBP9.4m (H1 2020: GBP7.2m) reflects strong
ongoing cash generation. Covenant net debt reduced to GBP103.1m and
1.6 times EBITDA.
REVENUE
Constant
Reported Currency Reported Change at Change at
H1 2021 H1 2021 H1 2020 reported constant
GBPm GBPm GBPm currency currency
Revenue 119.9 122.7 119.0 +0.8% +3.1%
--------- ---------- --------- ---------- ----------
REVENUE BRIDGE
H1 2021 vs H1 2020 vs
% change H1 2020 H1 2019
Volume (EC*) 3.5% 1.4%
Price/country/product mix (EC*) -0.1% -1.8%
Other products -0.3% -1.1%
Foreign exchange -2.3% 1.3%
----------- -----------
Total 0.8% -0.2%
----------- -----------
*EC - Edible Collagen
Reported revenue increased 0.8% and was significantly impacted
by currency translation. Constant currency revenue grew 3.1% as a
result of edible collagen casings increasing by 3.5%, with emerging
markets growing faster than mature markets. The decrease in other
products reflected weaker collagen co-extrusion markets in Europe.
Foreign exchange movements are mainly related to the strengthening
of Sterling against the US Dollar and Japanese Yen.
EDIBLE COLLAGEN VOLUMES
Overall Group volumes grew by 4.2% in the first half. Emerging
markets volume growth of +10% was driven by new business wins along
with market share gains with existing customers in several target
geographies. Our strongest growth in volumes were seen in South
East Asia (+28%), China (+18%), and Latin America (+8%). Russia
& East declined -21% due to foreign exchange headwinds
impacting our competitiveness. Emerging markets contributed 31% to
Group edible collagen revenues, 100 bps increase year on year.
Mature markets volume growth of +1% was driven by North America
(+19%) from incremental business with existing customers.
Continental Europe and Japan both saw a volume uplift of (+1%).
This increase was offset by declines in the UK (-13%) and Australia
and New Zealand (-7%), impacted by weaker collagen market
conditions and the continuing adverse COVID-19 impact on
foodservice channels.
The impact of price-mix and foreign exchange on edible collagen
revenue in emerging and mature markets is set out below:
Price/Mix Foreign
exchange
Emerging -5% -3%
---------- ----------
Mature 2% -2%
---------- ----------
OPERATING PROFIT
Operating profit for the six months ended 30 June 2021 can be
analysed as follows:
2021 2020
GBPm GBPm Change
------- -------
Underlying EBITDA 31.0 29.5 5.1%
Depreciation & amortisation (10.7) (11.0) 2.7%
------- ------- -------
Underlying operating profit 20.3 18.5 9.7%
------- ------- -------
Exceptional items 0.7 (1.3)
------- ------- -------
Operating profit 21.0 17.2 22.1%
------- ------- -------
Underlying operating profit of GBP20.3m (H1 2020: GBP18.5m) was
up by 9.7%. An increase in volumes and ongoing cost savings, led to
strong operating profit growth.
Statutory operating profit of GBP21.0m (H1 2020: GBP17.2m)
included GBP0.7m of exceptional income largely related to profit
recognised on sale of Bellshill site.
An analysis of the overall movement in underlying operating
profit is set out below:
GBPm
Underlying profit for H1 2020 18.5
Price/country/product mix (EC*) -
Volumes (EC*) 1.5
Contribution from other products (0.2)
Manufacturing cost savings 4.5
Inflation (2.7)
Operating expenses (0.5)
Foreign exchange and other (0.8)
----------------------------------------- ------
Underlying operating profit for H1 2021 20.3
----------------------------------------- ------
* EC - Edible Collagen
Inflation represents an increase in salary costs, raw materials
and other manufacturing costs.
These were offset by cost savings of GBP4.5m, which included
savings from the closure of Bellshill site and manufacturing
initiatives focused on sourcing alternatives, cost reduction and
efficiency programmes.
EXCEPTIONAL ITEMS
Exceptional income included in operating profit was GBP0.7m (H1
2020: charges of GBP1.3m). The 2021 income included profit
recognised on sale of Bellshill site. Further details of
exceptional items are set out in note 6 of these Interim
Consolidated Financial Statements.
FINANCE COSTS
The finance cost for the period was GBP2.2m (H1 2020: GBP2.9m),
lower as result of repayment of $25m private placement tranche in
April 2021.
Net finance cost on pensions for the period reduced to GBP0.4m
(H1 2020: GBP0.8m), due to lower interest rates at the start of the
period. Total finance costs amounted to GBP2.6m.
Refer to Alternative Performance Measures section for more
detail on restatement of the underlying results for the net finance
cost on pensions.
TAX
The Group's underlying tax charge for the period was GBP3.1m (H1
2020: GBP2.8m) and reflected an impact of the revaluation of the UK
deferred tax assets, given the UK corporation tax rate change from
19% to 25%.
EARNINGS PER SHARE
To provide a better indication of the underlying performance of
the Group, underlying earnings per share exclude exceptional
items.
pence H1 2021 H1 2020
Underlying basic earnings per share 8.7p 7.2p
Basic earnings per share 9.3p 6.6p
-------- --------
Underlying basic earnings per share were 8.7 pence, up 20.8% on
H1 2020 due to a higher underlying operating profit in H1 2021 and
lower total finance costs.
Basic earnings per share increased further due to exceptional
profits recognised in the first half of 2021 compared to
exceptional losses in prior year.
CASH FLOW AND NET DEBT
The Group delivered strong cashflows in the first half. As
usual, in the first half of the year the Group's working capital
increased by GBP6.4m (H1 2020: GBP6.9m).
Capital expenditure in H1 2021 was GBP7.6m, up from GBP6.3m in
H1 2020, as a part of the Group's COVID-19 cash mitigation actions
all non-essential capital expenditure was deferred to H2 2020. The
Group is likely to spend close to depreciation on capital
expenditure in full year 2021 as it invests to facilitate future
growth.
The H1 2021 net cash exceptional inflow of GBP2.8m relates to
the sale of our plant in Bellshill for GBP3.8m offset by cost
associated with closure of this site.
The Group repaid the US$25m private placement in April 2021
using a combination of available cash resources and drawings under
the existing borrowing facilities. Post this repayment, the Group
maintains significant liquidity.
Tax payments of GBP5.4m were higher than the prior year (H1
2020: GBP3.4m) due to timing of payments.
Covenant net debt reduced in June 2021 to GBP103.1m, from
GBP121.5m in June 2020 and GBP109.5m in December 2020. The covenant
net debt /EBITDA ratio improved to 1.6 times as compared to 1.8
times at the December 2020 and 1.9 times at June 2020.
The covenant net debt/EBITDA ratio for December 2021 is expected
to be circa 1.5 times.
DIVID
The final dividend for FY 2020 was paid on 20 July 2021. The
Board has recommended an interim dividend of 2.8 pence which will
be paid on 14 January 2022 to shareholders on the register at 3
December 2021.
PENSIONS
The Group's net pension obligations decreased to GBP41.2m in
June 2021, from GBP55.2m in December 2020. This primarily related
to an increase in discount rates positively impacting the valuation
of UK and US schemes liabilities. The triennial review of the UK
scheme was completed in April 2021.
Pension deficit funding of GBP1.7m paid in H1 2021 was higher
than GBP0.6m in H1 2020 due to the deferral of the US deficit
payment to the second half of 2020. In line with prior guidance,
the total pension deficit payments for 2021 are expected to be
circa GBP7m.
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.
PRINCIPAL RISKS
The Group operates a structured risk management process, which
identifies and evaluates risks that could impact its performance,
as well as conducts reviews of mitigation activity. The principal
risks continue to be those we identified in the Group's 2020 Annual
Report and Accounts: loss of profit margins/ volume due to
increased competitive pressures, development of non-casing
technologies, IT systems/cyber risk, disruption to supply or
increase in price of key raw materials, food regulatory risk,
changes in consumer demand, foreign exchange risk, operational
disruption, employee engagement and the shortage of employees with
relevant expertise, increases in pension funding requirements,
product contamination and Brexit.
We also highlighted in our 2020 Annual Report aspects of the
foregoing risks which we considered pertinent to the impact of the
COVID-19 pandemic on our business both currently and in the
longer-term, all of which continue to be relevant. Prudent pandemic
controls continue to be maintained at our production sites and we
remain able to meet our customer demands without any shortages.
Since our 2020 Annual Report was published, we have assessed
that the severity of our Brexit risk has reduced but we consider it
still has potential to cause operational disruption (exacerbated by
COVID-19) due, in particular, to labour shortages in the UK
affecting the meat and haulage industries. Like other political
risks, we also recognise the scope for further uncertainty in the
relationship between the UK and EU risking further restrictions on
cross-border trade and affecting how we conduct sales. We address
this, by keeping abreast of any such political uncertainties and
deploying our incident management processes to address specific
risks, if they materialise.
No other new key risks have been identified but we have embarked
on a programme to gain a greater understanding of any emerging
environmental risks to our business. In the first instance, the
programme entails a survey of current baseline energy consumption,
product life cycle analysis and a materiality assessment, the
findings from which we expect to be available by the year end.
Further details are set out on pages 36 to 40 of the 2020 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
Adopted IFRS) to assess the operating performance and financial
position of the Group. The alternative performance measures that
Devro uses are 'constant exchange rates', 'underlying', 'earnings
before interest, tax, depreciation and amortisation (EBITDA)',
'covenant EBITDA', 'net debt', 'covenant net debt', 'free cash
flow' 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.
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, and including the impact from
cash flow hedges. Constant exchange rates are used in the Half Year
Financial Results Update in the revenue section on pages 4 and
5.
Underlying
Underlying figures are stated before exceptional items (Note 6).
Exceptional items are those significant items which are incremental
to normal operations and are separately disclosed by virtue of
their nature or size to enable a better understanding of the
Group's underlying financial performance. Devro has undergone a
major transformation including implementation of a new global
structure initiated in 2018 and the closure of the Bellshill site
which was completed in 2020. The site was sold in January 2021. The
closure of the Bellshill site coincided with a transfer of its
trade and assets to other manufacturing sites in the Group notably
to the Group's sites in Czech Republic. This restructuring transfer
incurred a number of costs which have been recognised as
exceptional costs.
In 2018, a decision was made to disclose the pension finance
costs as a non-underlying cost in the annual report and half year
results. The exclusion of net finance cost on pensions followed a
review which concluded that the costs were volatile, given that
they are dependent upon the pension position at 31 December each
year which is subject to market fluctuations. A review in 2021
concluded that whilst not driven by the performance of the
business, pension finance costs are an inevitable and ongoing cost
for any business with defined benefit schemes and hence are no
longer treated as non-underlying. The 2020 underlying figures had
excluded net finance cost on pensions and therefore were restated
where applicable.
A reconciliation from the underlying figures to the equivalent
statutory figures is presented below
H1 2021 H1 2020
GBPm Exceptional Underlying Exceptional
unless stated otherwise Underlying items Statutory (restated) items Statutory
----------- ------------ ---------- ------------ ------------ ----------
Operating profit 20.3 0.7 21.0 18.5 (1.3) 17.2
Operating profit margin
% 16.9% 0.6% 17.5% 15.5% -1.0% 14.5%
Finance cost (2.2) - (2.2) (2.9) - (2.9)
Net finance cost on
pensions (0.4) - (0.4) (0.8) - (0.8)
----------- ------------ ---------- ------------ ------------ ----------
Profit before tax 17.7 0.7 18.4 14.8 (1.3) 13.5
Income tax (3.1) 0.2 (2.9) (2.8) 0.4 (2.4)
----------- ------------ ---------- ------------ ------------ ----------
Profit attributable
to owners of the company 14.6 0.9 15.5 12.0 (0.9) 11.1
----------- ------------ ---------- ------------ ------------ ----------
Basic earnings per
share (p) 8.7 0.6 9.3 7.2 (0.6) 6.6
----------- ------------ ---------- ------------ ------------ ----------
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
H1 2021 H1 2020
GBPm Exceptional Exceptional
unless stated otherwise Underlying items Reported Underlying items Reported
----------- ------------ --------- ----------- ------------ ---------
Operating profit 20.3 0.7 21.0 18.5 (1.3) 17.2
Depreciation & amortisation 10.7 - 10.7 11.0 - 11.0
----------- ------------ --------- ----------- ------------ ---------
EBITDA 31.0 0.7 31.7 29.5 (1.3) 28.2
EBITDA margin (%) 25.9% 26.4% 24.8% 23.7%
Less: impact of IFRS
16 (0.2) (0.3)
----------- ------------ --------- ----------- ------------ ---------
Covenant EBITDA 30.8 29.2
----------- ------------ --------- ----------- ------------ ---------
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.
Earnings per share ('EPS')
The underlying earnings per share measure, which excludes
exceptional items, is used to provide a better indication of the
underlying performance of the Group. Underlying basic earnings per
share is calculated by dividing the underlying profit attributable
to ordinary shareholders by shares, being the weighted average
number of shares in issue throughout the year (H1 2021:
166,949,022; H1 2020: 166,949,022). Underlying diluted earnings per
share is calculated by dividing the underlying profit for the year
attributable to ordinary shareholders by the average number of
shares, including the effect of all dilutive potential shares (H1
2021: 168,683,690; H1 2020: 168,907,148). Shares arising from the
Performance Share Plan are only treated as dilutive where the
effect is to reduce earnings per share (H1 2021: 1,734,668; H1
2020: 1,958,126).
H1 2021 H1 2020
Underlying
Underlying Statutory (restated) Statutory
----------- ------------ ----------
Profit attributable to
owners of the company (GBPm) 14.6 15.5 12.0 11.1
Earnings per share
- Basic (pence) 8.7p 9.3p 7.2p 6.6p
- Diluted (pence) 8.7p 9.2p 7.1p 6.6p
----------- ---------- ------------ ----------
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. Whilst net debt is calculated using balances
reported under adopted IFRS, the Group's covenants are based on net
debt as accounted prior to the implementation of IFRS 16 and its
impact on accounting for leases. A reconciliation from statutory
figures to 'covenant net debt' is presented below:
December
June 2021 2020 June 2020
GBPm GBPm GBPm
---------- --------- ----------
Current borrowings (2.9) (20.8) (21.8)
Non-current borrowings (115.8) (112.9) (134.4)
---------- --------- ----------
Total borrowings (118.7) (133.7) (156.2)
Cash and cash equivalents 14.3 23.7 34.1
---------- --------- ----------
Net debt (104.4) (110.0) (122.1)
---------- --------- ----------
Add back impact of IFRS 16 1.3 0.5 0.6
---------- --------- ----------
Covenant net debt (103.1) (109.5) (121.5)
---------- --------- ----------
Cash flow
Underlying operating cash flow and free cash flow provide
management with important information, in respect with how the
underlying business is performing (underlying operating cash flow)
and what cash is available for dividend payments (free cash flow).
The table below provides a reconciliation from underlying operating
cash flow to free cash flow adjusting for items which management
view are outside of their discretion.
H1 2021 H1 2020
GBPm GBPm
-------- --------
Underlying EBITDA 31.0 29.5
Working capital/other (6.4) (6.9)
-------- --------
Underlying operating cash flow 24.6 22.6
-------- --------
Capital expenditure (7.6) (6.3)
Cash exceptional items 2.8 (1.5)
Pension deficit funding (1.7) (0.6)
Interest paid (2.3) (2.8)
Tax paid (5.4) (3.4)
Other (1.0) (0.8)
-------- --------
Free cash flow 9.4 7.2
-------- --------
Dividends paid (4.5) -
FX movements 0.7 (4.7)
Movement in net debt 5.6 2.5
Rutger Helbing Rohan Cummings
Chief Executive Officer Chief Financial Officer
28 July 2021
INTERIM CONSOLIDATED INCOME STATEMENT ( UNAUDITED)
for the six months ended 30 June
2021 2020
Note GBPm GBPm
Revenue 5 119.9 119.0
------------------------------------------- ---- ----- -----
Operating profit 5 21.0 17.2
Finance cost (2.2) (2.9)
Net finance cost on pensions (0.4) (0.8)
------------------------------------------- ---- ----- -----
Profit before tax 18.4 13.5
Income tax 7 (2.9) (2.4)
Profit for the year attributable to owners
of the Company 15.5 11.1
------------------------------------------- ---- ----- -------
Earnings per share
Basic 8 9.3p 6.6p
Diluted 8 9.2p 6.6p
All results relate to continuing operations.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
for the six months ended 30 June
2021 2020
GBPm GBPm
Profit for the period attributable to the
owners of the Company 15.5 11.1
Other comprehensive income/(expense) for
the period
Items that will not be reclassified to the
profit or loss
Pension obligations:
* re-measurements 12.4 (15.1)
* movement in deferred tax (1.1) 3.6
---------------------------------------------------- ------ ------
11.3 (11.5)
Items that are or may be reclassified subsequently
to profit or loss
Cash flow hedges:
- net fair value (losses)/gains (1.7) (0.8)
- tax on fair value movements 0.4 0.2
Net investment hedges:
- fair value gains/(losses) 1.3 (6.3)
- tax on fair value movements - (0.6)
Net exchange adjustments (3.6) 10.1
(3.6) 2.6
Other comprehensive expense for the period,
net of tax 7.7 (8.9)
---------------------------------------------------- ------ ------
Total comprehensive income for the period
attributable to the owners of the Company 23.2 2.2
---------------------------------------------------- ------ ------
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 31 December 30 June
2021 2020 2020
(unaudited) (audited) (unaudited)
Note GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 10 201.1 209.2 215.5
Intangible assets 9.5 10.2 10.7
Deferred tax assets 29.0 27.3 31.9
Trade and other receivables 1.7 1.7 3.7
241.3 248.4 261.8
Current assets
Inventories 38.2 37.8 46.8
Trade and other receivables 33.7 29.7 30.3
Derivative financial instruments 4 2.0 3.2 1.2
Cash and cash equivalents 14 14.3 23.7 34.1
Assets held for sale - 2.5 -
----------------------------------- ----- ------------- ------------ -------------
88.2 96.9 112.4
Total assets 329.5 345.3 374.2
----------------------------------- ----- ------------- ------------ -------------
LIABILITIES
Current liabilities
Trade and other payables (26.9) (32.0) (27.0)
Dividend payable 9 (10.5) - -
Current tax liabilities (1.2) (3.2) (3.1)
Borrowings 14 (2.9) (20.8) (21.8)
Derivative financial instruments 4 (0.3) (0.1) (1.5)
Provisions for other liabilities
and charges (0.8) (1.0) (5.1)
(42.6) (57.1) (58.5)
Non-current liabilities
Borrowings 14 (115.8) (112.9) (134.4)
Pension obligations 11 (41.2) (55.2) (82.2)
Deferred tax liabilities (17.0) (15.5) (16.2)
Other payables (3.1) (3.3) (2.5)
Provisions for other liabilities
and charges (2.2) (2.3) (2.8)
----------------------------------- ----- ------------- ------------ -------------
(179.3) (189.2) (238.1)
Total liabilities (221.9) (246.3) (296.6)
----------------------------------- ----- ------------- ------------ -------------
Net assets 107.6 99.0 77.6
----------------------------------- ----- ------------- ------------ -------------
EQUITY
Ordinary shares 16.7 16.7 16.7
Share premium 9.3 9.3 9.3
Other reserves 76.7 80.1 75.1
Retained earnings 4.9 (7.1) (23.5)
Equity attributable to the owners
of the Company 107.6 99.0 77.6
----------------------------------- ----- ------------- ------------ -------------
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
for the six months ended 30 June
Ordinary Share Other Retained Total
shares premium reserves earnings Equity
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --- -------- -------- --------- --------- -------
Balance at 1 January 2021 16.7 9.3 80.1 (7.1) 99.0
--------------------------------------- --- -------- -------- --------- --------- -------
Comprehensive income/(expense)
Profit for the period - - - 15.5 15.5
Other comprehensive income/(expense) - - (3.6) 11.3 7.7
--------------------------------------- --- -------- -------- --------- --------- -------
Total comprehensive income/(expense) - - (3.6) 26.8 23.2
--------------------------------------- --- -------- -------- --------- --------- -------
Transactions with owners
of the Company
Performance Share Plan
charge
net of tax - - 0.4 - 0.4
Performance Share Plan
credit in respect of awards
lapsed - - (0.2) 0.2 -
Dividend paid - - - (4.5) (4.5)
Dividend payable - - - (10.5) (10.5)
Total transactions with
owners of the Company - - 0.2 (14.8) (14.6)
--------------------------------------- --- -------- -------- --------- --------- -------
Balance at 30 June 2021 16.7 9.3 76.7 4.9 107.6
--------------------------------------- --- -------- -------- --------- --------- -------
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
--------------------------------------- --- -------- -------- --------- --------- -------
INTERIM CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
for the six months ended 30 June
2021 2020
Note GBPm GBPm
----------------------------------------------------- ---- ------ -----
Cash flows from operating activities
Cash generated from operations 13 21.9 20.5
Interest paid (2.3) (2.8)
Tax paid (5.4) (3.4)
----------------------------------------------------- ---- ------ -----
Net cash generated from operating activities 14.2 14.3
----------------------------------------------------- ---- ------ -----
Cash flows from investing activities
Purchase of property, plant and equipment (7.5) (6.0)
Purchase of intangible assets (0.1) (0.3)
Proceeds from disposal of property, plant
and equipment 3.8 -
Net cash used in investing activities (3.8) (6.3)
----------------------------------------------------- ---- ------ -----
Cash flows from financing activities
Proceeds from borrowings 5.5 1.0
Repayment of borrowings (20.7) -
Proceeds from/(payment) on settlement of derivatives 0.2 (0.7)
Payment of lease liabilities (0.2) (0.3)
Dividend paid (4.5) -
----------------------------------------------------- ---- ------ -----
Net cash used in financing activities (19.7) -
----------------------------------------------------- ---- ------ -----
Net (decrease)/increase in cash and cash equivalents (9.3) 8.0
----------------------------------------------------- ---- ------ -----
Net cash and cash equivalents at 1 January 21.5 23.9
Net (decrease)/increase in cash and cash equivalents (9.3) 8.0
Exchange (loss)/gain on cash and cash equivalents (0.4) 1.1
----------------------------------------------------- ---- ------ -----
Net cash and cash equivalents at 30 June 11.8 33.0
----------------------------------------------------- ---- ------ -----
Cash and cash equivalents 14.3 34.1
Bank overdrafts (2.5) (1.1)
----------------------------------------------------- ---- ------ -----
Net cash and cash equivalents at 30 June 11.8 33.0
----------------------------------------------------- ---- ------ -----
Notes to the condensed Interim Consolidated Financial Statements
(unaudited)
for the six months ended 30 June 2021
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 2021.
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 2020 were approved by the Board of
Directors on 1 March 2021 were 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 2021 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 for use in the UK. The
condensed interim consolidated Financial Statements should be read
in conjunction with the annual Financial Statements for the year
ended 31 December 2020 which have been prepared in accordance with
international financial reporting standards (IFRSs) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in 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 2020 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 2021 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 at
least 12 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 at least 12 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 in a range of possible levels of impact on revenue,
profit and cash, and the offsetting effect of controllable
mitigating actions over the course of at least 12 months from the
date of approval of this statement. These include 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: disruption to supply chain and lower food service
demand.
For all 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 our markets under any level of restrictions for the
purpose of the scenario modelling.
The scenarios include an assumption of economic recession
lasting another 12 months. 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, profits and cash should recover.
As we exit both lockdown and our busiest trading periods, the
forecasted COVID-19 impact should also reduce.
In our modelling, 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 operating expenses and stopping all non-essential and
non-committed capex spend 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 are
assuming no significant structural changes to the business will be
needed.
In all the scenarios, significant liquidity headroom under our
existing debt facilities remains at each month end. The Group
repaid the US$25m private placement in April 2021 using a
combination of available cash resources and drawings under existing
borrowing facilities. Post this repayment the Group retained
significant liquidity.
At 30 June 2021, the net debt position was GBP104.4m and our
covenant net debt to EBITDA ratio was 1.6 times with a covenant
EBITDA to net interest payable ratio of 14 times. Undrawn
facilities were GBP48.2m with GBP14.3m of cash holdings as at 30
June 2021. 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.
Under all the scenarios modelled, after taking mitigating
actions as required, forecasts did not indicate breach of covenants
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 2020, 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 2020.
Fair value of derivative financial instruments
The fair values of derivative financial instruments are as
follows:
Assets Liabilities
GBPm GBPm
At 30 June 2021
Forward foreign currency contracts
- cash flow hedge 2.0 (0.3)
------------------------------------- ------- ------------
At 30 June 2020
Forward foreign currency contracts
- cash flow hedge 1.2 (1.3)
- net investment hedge - (0.2)
------------------------------------- ------- ------------
1.2 (1.5)
------------------------------------- ------- ------------
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 2021
(31 December 2020: 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 market
segment basis because they require different products and marketing
strategies, with two identifiable operating segments:
-- Emerging markets: Latin America, Russia & East, Middle
East & Africa, South East Asia and China
-- Mature markets: North America, Continental EU, UK &
Ireland, Japan and Australia & New Zealand.
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 the 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 reflected
in these Financial Statements.
Segment information for the six months ended:
Mature Emerging Total Group
30 June 30 June 30 June 30 June 30 June 30 June
2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ -------- -------- -------- -------- -------- --------
Revenue from external
customers 85.7 85.9 34.2 33.1 119.9 119.0
------------------------------ -------- -------- -------- -------- -------- --------
Underlying operating
profit 20.3 18.5
Exceptional items 0.7 (1.3)
Operating profit 21.0 17.2
Finance cost (2.2) (2.9)
Net finance cost on pensions (0.4) (0.8)
------------------------------ -------- -------- -------- -------- -------- --------
Profit before tax 18.4 13.5
------------------------------ -------- -------- -------- -------- -------- --------
6. Exceptional items
Exceptional income included in operating profit for the six
months ended 30 June 2021 was GBP0.7m (six months ended 30 June
2020: charge of GBP1.3m). The 2021 income related to profit
recognised on sale of Bellshill site of GBP1.3m and remaining costs
associated closure of this site of GBP0.6m. The 2020 costs related
to the closure of Bellshill (GBP0.9m) and the final stage of
implementing the new global operating model (GBP0.4m). This
involved restructuring the business support activities into global
functions to realign the cost base for operating expenses with
strategic priorities.
Costs associated with implementation of these transformation
programmes were significant and incremental to the usual business
activities, and as a result were classified as exceptional items.
Exceptional charges comprise redundancy costs and other incremental
external costs, including professional fees.
7. Tax
The tax charge for the reporting period of GBP2.9m (six months
ended 30 June 2020: charge of GBP2.4m) corresponds to a tax rate of
16% (six months ended 30 June 2020: 18%). It comprises of the UK
tax credit of GBP1.5m (six months ended 30 June 2020: GBP1.2m) and
a foreign tax charge of GBP4.4m (six months ended 30 June 2020:
charge of GBP3.6m).
As announced by the UK Government, the UK corporation tax rate
will increase from 19% to 25% on 1 April 2023. The Group's deferred
tax balances were remeasured to reflect this change. The
remeasurement resulted in a tax credit of GBP1.1m reflected in the
Interim Consolidated Income Statement and a credit of GBP1.9m
presented in the Interim Consolidated Statement of Other
Comprehensive Income.
The tax charge for the reporting period was calculated by
applying the tax rate applicable to the total projected annual
earning. As the full tax credit related to the UK tax rates changes
was recognised in the first half of the year, this resulted in the
tax rate for the reported period of 16% being lower than the
projected rate for the year of 19%.
No additional deferred tax assets have been recognised on losses
and other timing differences in the US and China and other
territories as a result of uncertainty over recoverability.
8. Earnings per share
six months six months
ended ended
30 June 30 June
2021 2020
GBPm GBPm
Profit attributable to equity holders 15.5 11.1
Earnings per share
- Basic 9.3p 6.6p
- Diluted 9.2p 6.6p
Shares in issue
Weighted average number of shares through
the period (millions) 166.9 166.9
Adjustments for:
- Performance Share Plan (millions) 1.8 2.0
-------------------------------------------- ----------- -----------
Weighted average number of shares adjusted
for potential dilution (millions) 168.7 168.9
-------------------------------------------- ----------- -----------
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
The final dividend of 6.3 pence per share in respect of the year
ended 31 December 2020 was paid on 20 July 2021 and amounted to
GBP10.5m. This is shown as dividend payable in these accounts.
The interim dividend of 2.8 pence per share (2020 interim
dividend: 2.7 pence) will be payable on 14 January 2022 to ordinary
shareholders on the register at the close of business on 3 December
2021.
The estimated interim dividend to be paid is GBP4.7m and is not
recognised in these accounts.
10. Property, plant and equipment
Movements in property, plant and equipment are summarised as
follows:
six months six months
ended ended
30 June 30 June
2021 2020
GBPm GBPm
----------------------------------- ----------- -----------
Net book value at 1 January 209.2 213.8
Additions - right of use assets 1.0 -
Additions - other 4.5 3.8
Impairment (0.2) -
Depreciation (10.1) (10.4)
Exchange differences (3.3) 8.3
----------------------------------- ----------- -----------
Closing net book value at 30 June 201.1 215.5
----------------------------------- ----------- -----------
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
2021 2020 2020
GBPm GBPm GBPm
--------------------- -------- ------------ --------
Pension obligations 41.2 55.2 82.2
--------------------- -------- ------------ --------
The decrease in the Group's net pension obligations at 30 June
2021 compared with 31 December 2020 primarily reflects the changes
in financial conditions in the period resulting in changes to
actuarial assumptions, including an increase 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
2021 2020 2020
---------------- -------- ------------ --------
United Kingdom 1.80% 1.30% 1.45%
United States 2.45% 2.10% 2.25%
---------------- -------- ------------ --------
The net pension obligations moved as follows:
six months six months
ended ended
30 June 30 June
2021 2020
GBPm GBPm
---------------------------------- ----------- -----------
Opening net liability 55.2 64.1
Employer contributions (2.7) (1.5)
Service cost 0.5 0.6
Scheme administrative expenses 0.8 0.6
Net finance cost 0.4 0.8
Re-measurements (12.4) 15.1
Exchange losses (0.6) 2.5
---------------------------------- ----------- -----------
Closing net liability 41.2 82.2
---------------------------------- ----------- -----------
12. Equity securities issued
No ordinary shares were issued during the half year period
ending 30 June 2021.
13. Reconciliation of profit before tax to cash generated from
operations
six months six months
ended ended
30 June 30 June
2021 2020
GBPm GBPm
Profit before tax 18.4 13.5
Adjustments for:
Finance cost 2.2 2.9
Profit on disposal (1.3) -
Net finance cost on pensions 0.4 0.8
Pension cost adjustment for normal contributions 0.3 0.3
Depreciation of property, plant and equipment 10.1 10.4
Impairment of PPE 0.2 -
Amortisation of intangible assets 0.6 0.6
Release from capital grants balance (0.1) (0.1)
Pension deficit funding (1.7) (0.6)
Performance share plan 0.4 0.5
Changes in working capital:
Increase in inventories (1.5) (5.5)
Increase in trade and other receivables (4.8) (0.6)
Decrease in trade and other payables (1.0) (1.1)
Decrease in provisions (0.3) (0.6)
--------------------------------------------------- ----------- -----------
Cash generated from operations 21.9 20.5
--------------------------------------------------- ----------- -----------
Underlying operating cash flows (before pension
deficit funding) 24.6 22.6
Pension deficit funding (1.7) (0.6)
Exceptional items (1.0) (1.5)
--------------------------------------------------- ----------- -----------
Cash generated from operations 21.9 20.5
--------------------------------------------------- ----------- -----------
14. Analysis of net debt
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- -------- ------------ --------
Cash and cash equivalents 14.3 23.7 34.1
Bank overdrafts (2.5) (2.2) (1.1)
Net Cash and Cash Equivalents 11.8 21.5 33.0
Other bank borrowings (60.7) (57.7) (73.0)
US dollar private placement (54.2) (73.3) (81.5)
Leases (1.3) (0.5) (0.6)
------------------------------- -------- ------------ --------
Net debt (104.4) (110.0) (122.1)
------------------------------- -------- ------------ --------
Included within current borrowings amounting to GBP2.9m (31
December 2020: GBP20.8m) are bank overdrafts of GBP2.5m (31
December 2020: GBP2.2m), finance leases of GBP0.4m (31 December
2020: GBP0.3m) and US dollar private placement of NIL (31 December
2020: GBP18.3m). The current tranche of the US dollar private
placement of $25m was repaid in April 2021.
15. Related party transactions
The Group had no related party transactions other than key
management compensation during the six months ended 30 June 2021
and 30 June 2020.
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
-- these condensed interim consolidated Financial Statements for
the six months ended 30 June 2021 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority (the DTRs) and with International Accounting Standard
(IAS) 34, "Interim financial reporting" as adopted by the EU . The
condensed interim consolidated Financial Statements should be read
in conjunction with the annual Financial Statements for the year
ended 31 December 2020 which have been prepared in accordance with
interim financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union;
and
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the DTRs, 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 DTRs, 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:
Jeremy Burks
Chantal Cayuela
Rohan Cummings
Steve Good
Rutger Helbing
Lesley Jackson
Malcolm Swift
A list of the current directors is maintained on the Company's
website: www.devro.com .
By order of the Board
Rutger Helbing Rohan Cummings
Chief Executive Officer Chief Financial Officer
28 July 2021 28 July 2021
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 2021 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 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK 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 latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the next annual
financial statements will be prepared in accordance with UK-adopted
international accounting standards. 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 for use in the UK.
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
London
E14 5GL
28 July 2021
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IR DGGDRLBDDGBI
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