DEVRO, the collagen casing group, has seen reported profits more than half because of investment committed to counter under-utilisation of available global capacity.
Following a profit warning in November, the group has implemented Devro 100, a three-pronged strategic programme focusing on revenue growth, manufacturing efficiency and introducing a next generation of differentiated products.
Pre-tax profit for the year to December 31 was £6.2 million, down from £15.1m in 2015, but incorporating a £22.7m exceptional charge in comparison to £14.1m.
Revenue was up 4.7 per cent to £241.1m, with lower volumes being offset by beneficial currency exchange rates.
“Whilst volumes declined by 6.6 per cent year-on-year, underlying operating profit increased due to lower input prices and exchange rate benefits,” said chief executive Peter Page. “The decline in sales volumes in 2016 was due to a series of region-specific factors. We have taken actions to ensure a return to growth in 2017 and beyond.”
To underpin the Devro 100 programme, the group has moved from local sales and manufacturing responsibilities to three sales-focused commercial regions, supported by global business development and global supply chain operations.
The further exceptional costs of this programme are expected to be between £10m to £12m over the next two years, plus capital investments of between £7m and £8m. Annualised benefits are expected to be between £13m to £16m by 2019.
“Combined with our upgraded global manufacturing asset base, we are confident this will deliver long term growth,” said Mr Page.
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