Interim Results

RNS Number : 3927Q

Devro PLC

03 August 2010

 

For Immediate Release

3 August 2010

 

DEVRO PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

Devro plc ("Devro" or the "Group"), the world's leading manufacturer of collagen products for the food industry, is pleased to announce its interim results for the six months ended 30 June 2010.

 

Highlights

 

·; Strong trading performance:

- Sales up 11% to £116.1 million (2009: £105.0 million)

- Operating profit before exceptional items up 73% to £18.1 million (2009: £10.4 million)

- PBT (pre-exceptional items) up 86% to £17.1 million (2009: £9.2 million)

- EPS (pre-exceptional items) up 86% to 7.8p (2009: 4.2p)

- PBT up 56% to £17.1 million (2009: £11.0 million)

 

·; Interim dividend increased by 40% to 2.0p per share (2009: 1.425p)

 

·; Strong growth across the majority of our geographic markets

 

·; Favourable shift to higher-margin sales

 

·; Installation of new high speed lines at our Czech and Australian facilities completed on time

 

·; Substantial productivity improvements made during the period

- Better savings than forecast from 2009 investment in Czech facility

- Improved manufacturing efficiencies in all other plants

 

·; Net debt reduced significantly at 30 June 2010 to £17.1 million (June 2009: £29.2 million)

 

·; Positive outlook for the rest of the year

 

Steve Hannam, Chairman of Devro, commented:

"We are very encouraged by the improvement in Devro's performance in the first half of this year.

"The Board expects the good performance to continue for the rest of the year, supported by the additional production capacity recently commissioned in our Czech and Australian facilities.

"Looking further forward, our markets are continuing to provide growth opportunities. The Group is well placed to take advantage of new product development and improvements in operational efficiency."

For further information contact:

Peter Page	Chief Executive	0207 466 5000 on 3 August
Peter Williams	Finance Director	01236 879191 thereafter
Diane Stewart Carrie Clement	Buchanan Communications	0207 466 5000

 

There will be a presentation today at 11.00am for investment analysts. This will be held at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE. A live audio feed will be available to those unable to attend this meeting in person. To connect to the web cast facility, please go to http://mediaserve.buchanan.uk.com/2010/devro030810/registration.asp approximately 10 minutes (10.50am) before the start of the briefing. The presentation will also be available on the company's website.

 

Chairman's statement

 

The sales and production trends seen in the second half of 2009 have continued. I am therefore pleased to report that in the six months to 30 June 2010 the Group achieved significant increases in sales volumes, sales revenues and operating profit compared with the corresponding period in 2009.

 

Business review

 

The global market for collagen casings continues to grow at an estimated 5% per annum, driven primarily by economic expansion and increased meat consumption in emerging markets. The continuing high cost and reduced availability of gut casing is also increasing the demand for collagen casings through increased substitution.

 

Sales revenue for the period was £116.1 million, compared with £105.0 million in 2009, an increase of 10.6 %. On a constant currency basis, revenue rose by 10.1% to £115.5 million. Total sales volumes for all products were ahead of prior year by 5.8%, within which edible collagen volumes finished the period 7.1% ahead. Volume increases were particularly strong in the UK, US, Russia and Japan.

 

Price increases and changes in customer mix resulted in 4.3% of the uplift in revenue. Ensuring that we have sales prices which will sustain the successful future development of Devro remains a high priority for the management team.

 

Operating profit before exceptional items increased by 73.3 % to £18.1 million (2009: £10.4 million). During the period we were successful in increasing volumes, gaining sales at higher-margin accounts, and increasing sales prices. Compared to the first half of 2009, we benefited from some reductions in energy and hide costs, although other operating costs increased to support our continuing investment in marketing and technical development. Overall, these factors delivered a substantial improvement in operating margin before exceptional items, rising from 9.9% in the first half of 2009 to 15.6% in 2010.

 

Basic earnings per share before exceptional items increased by 85.7% from 4.2 pence to 7.8 pence.

 

There were no exceptional items during the period.

 

Sales

 

Collagen casings

 

Europe

 

Edible collagen volumes in Europe have shown positive growth in the period. The performance in all markets has been strong, particularly at the start of the year as several Eastern European economies recovered from the impact of the financial crisis. UK sales benefited from market growth and increased gut conversion, particularly to our porcine casings.

 

Non-edible collagen volumes in the region showed improvement in both volume and value.

 

Americas

 

Edible collagen casing sales in the Americas showed strong growth, with a major customer in the US taking more collagen casing instead of gel for co-extrusion. Latin America continues to grow, based on the successful conversion of a number of customers from gut to collagen casings, following a strong marketing drive in the region.

 

Asia/Pacific

 

In the Asia/Pacific region, volumes increased in all markets except for China, where volumes were temporarily reduced in order to satisfy strong demand elsewhere.

 

 

New products

 

Production and market trials of Select, our new generation of products which closely replicate the properties of gut, have proceeded well following their launch at the IFFA trade fair in May.

 

Distributed products

 

Sales of distributed products showed a 1.5% revenue increase compared to 2009, on volumes which showed little change year on year. Price increases and exchange rates were the cause of the higher sterling value of sales.

 

Other products

 

Revenues from other products increased by 4.7% compared to H1 2009, mainly due to higher sales of collagen film. Gel sales maintained volumes in the US, as additional business has been established with innovative customers, while one account partially reverted to the use of casings.

 

Productivity improvements

 

New production lines, which were installed at our Czech plant in Jilemnice in May last year to replace old and inefficient capacity, have exceeded forecasts to yield annual savings in energy and operating costs of approximately £3 million.

 

New lines installed in this plant between March and May 2010 will provide additional capacity for the second half of this year.

 

Additional capacity from a new line in Australia came on stream in March this year.

 

In 2009, our US operation experienced changes in hide supply which led to a temporary reduction in efficiencies and lower yields. These issues have largely been resolved, leading to improvements in manufacturing output from the US plant.

 

Improvements in manufacturing efficiencies in our operations will continue to enhance Group profitability.

 

Input prices/costs

 

Compared to H1 2009 our energy costs have been significantly lower, as higher priced contracts expired in April and May last year. Current contracts are protecting the level of energy costs for the rest of 2010.

 

2009 was also adversely impacted by limited availability of hides and higher raw material prices. In 2010 the situation has much improved, but prices remain higher than before the financial crisis.

 

Other costs increased by £3.6 million compared to H1 2009, as we continued to invest in new products, manufacturing technology, and marketing. This included investment to enhance our long term market position in China.

 

Capital investment

 

Capital investment in the period was £9.7 million (2009: £7.1 million). Total investment for 2010 will be ahead of the previously announced £25 million, as we are bringing forward new capacity projects to meet increased demand.

 

Foreign currency

 

Devro operates worldwide and with multiple currencies. Major transactional exposures arise from sales in euro, US dollars, and Japanese yen whereas manufacturing costs are in Australian dollars, Czech koruna, US dollars and sterling. Translational exposures arise from the conversion of the results of all our businesses into sterling. The net impact of exchange rate movements on operating profit in the six months to June 2010 was a gain of £0.8 million compared to 2009.

 

Finance

 

Net interest expense in the period was £0.4 million (2009: £0.5 million). Net finance expense on pension assets and liabilities amounted to £0.6 million compared with £0.7 million in the corresponding period in 2009.

 

The Group's tax charge for the period before exceptional items was £4.4 million (2009: £2.4 million), an effective rate of 25.6% (2009: 26.5%). This reflects the anticipated effective rate for the year ending 31 December 2010.

 

Earnings attributable to shareholders before exceptional items have increased to £12.7 million from £6.8 million in 2009. Earnings per share before exceptional items have increased to 7.8 pence (2009: 4.2 pence).

 

Net debt of £17.1 million at 30 June 2010 compares with £29.2 million at 30 June 2009, reflecting the strong cash generation of the Group. Cash outflow in respect of capital expenditure was £10.3 million (2009: £6.8 million). The Group's financial gearing was 15.4% at 30 June 2010 (2009: 30.2%).

 

Pensions

The Group's retirement benefit obligations of £42.3 million have increased from £31.8 million reported at 31 December 2009. This is due mainly to lower discount rates at 30 June 2010. We are in a process of consultation with employees and pensioners in the UK scheme related to proposals to limit future exposure to pension increases.

 

Dividend

 

The Board is pleased to announce a 40.4% increase in the interim dividend to 2.0 pence per share (2009: 1.425 pence). It will be paid on 1 October 2010 to shareholders on the register at 3 September 2010.

 

Principal risks and uncertainties

 

The Group set out in its 2009 Annual Report and Financial Statements the principal risks and uncertainties that could impact its performance. These remain unchanged since the Annual Report was published.

 

The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

 

The main areas of potential risk and uncertainty are disruption to supply and increases in price of key raw materials, foreign exchange rate movements, customer credit risks, increased funding of pension schemes, the impact of changes in regulations affecting food production, increases in energy costs, loss of market share/profit margins due to increased competitive pressures and development of non-casing technologies.

 

These risks, together with examples of mitigating activity, are set out in more detail on pages 14 and 15 of the 2009 Annual Report which is available on the Devro plc website: www.devro.plc.uk.

 

Outlook

 

We are very encouraged by the improvement in Devro's performance in the first half of this year. The Board expects the good performance to continue for the rest of the year, supported by the additional production capacity recently commissioned in our Czech and Australian facilities. Looking further forward, our markets are continuing to provide growth opportunities. The Group is well placed to take advantage of new product development and improvements in operational efficiency.

 

 

 

Steve Hannam Chairman

3 August 2010

 

 

Financial highlights

six months ended 30 June 2010 (unaudited)

 

 

	30 June 2010	30 June 2009
Revenue	£116.1m	£105.0m
Operating profit before exceptional items	£18.1m	£10.4m
Operating margin before exceptional items	15.6%	9.9%
Exceptional items	-	£1.8m
Profit before tax	£17.1m	£11.0m
Earnings per share	7.8p	4.9p
Earnings per share before exceptional items	7.8p	4.2p
Interim dividend per share	2.0p	1.425p
Net debt	£17.1m	£29.2m

 

Consolidated income statement

for the six months ended 30 June 2010

 

	6 months ended 30 June 2010  (unaudited)   £'000	6 months ended 30 June 2009 (unaudited)   £'000
Revenue (note 4)	116,093	104,970
Operating profit before exceptional items	18,081	10,431
Exceptional items (note 5)	-	1,788
Operating profit	18,081	12,219
Finance income	39	44
Finance expense	(363)	(511)
Net finance expense on pension and post-retirement health plan assets and liabilities	(628)	(746)
Profit before tax	17,129	11,006
Taxation (note 6)	(4,385)	(3,087)
Profit for the period	12,744	7,919
Earnings per share (note 7)
- Basic	7.8p	4.9p
- Diluted	7.7p	4.8p
- Basic before exceptional items	7.8p	4.2p

 

Profit for the period was all generated from continuing operations

 

 

Consolidated statement of comprehensive income

for the six months ended 30 June 2010

 

	6 months ended 30 June	6 months ended 30 June
	2010 (unaudited) £'000	2009 (unaudited) £'000
Other comprehensive income/(expense)
Cash flow hedges:
- net fair value (losses)/gains	(246)	892
- reclassified and reported in operating profit	61	1,245
- movement in deferred tax	52	(593)
Group pension schemes:
- actuarial loss recognised	(10,543)	(15,236)
- movement in deferred tax	3,333	4,077
Net exchange adjustments	(3,322)	(8,281)
Other comprehensive expense for the period	(10,665)	(17,896)
Profit for the period	12,744	7,919
Total comprehensive income/(expense) for the period	2,079	(9,977)

 

 

Consolidated balance sheet

at 30 June 2010

	30 June 2010 (unaudited) £'000	31 December 2009 (audited) £'000	30 June 2009 (unaudited) £'000
ASSETS
Non-current assets
Intangible assets (note 9)	1,937	1,635	1,840
Property, plant and equipment (note 10)	138,372	138,071	128,451
Deferred tax assets	17,021	13,612	12,614
Other receivables	-	-	25
	157,330	153,318	142,930
Current assets
Inventories	27,103	25,986	27,892
Current tax assets	69	388	-
Trade and other receivables	30,183	28,802	27,548
Financial assets
- Derivative financial instruments	520	462	1,491
Cash and cash equivalents	9,491	10,059	9,058
	67,366	65,697	65,989
LIABILITIES
Current liabilities
Financial liabilities
- Borrowings	559	316	3,304
- Derivative financial instruments	970	441	337
Trade and other payables	27,677	29,806	23,622
Current tax liabilities	3,369	3,972	1,082
	32,575	34,535	28,345
Net current assets	34,791	31,162	37,644
Non-current liabilities
Financial liabilities
- Borrowings	25,993	25,388	34,976
Deferred tax liabilities	12,291	12,383	10,536
Retirement benefit obligations (note 12)	42,250	31,833	37,683
Other non-current liabilities	737	805	487
	81,271	70,409	83,682
Net assets	110,850	114,071	96,892
EQUITY
Capital and reserves attributable to equity holders
Ordinary shares	16,361	16,287	16,287
Share premium	6,773	6,097	6,097
Other reserves	74,971	78,690	75,006
Retained earnings/(losses)	12,745	12,997	(498)
Total equity	110,850	114,071	96,892

 

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

 

 

Consolidated statement of changes in shareholders' equity

for the six months ended 30 June 2010

 

	Share capital	Share premium	Other reserves	Retained earnings/ (losses)	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 30 June 2010
At 1 January 2010	16,287	6,097	78,690	12,997	114,071
Exchange adjustments	-	-	(3,322)	-	(3,322)
Cash flow hedges, net of tax	-	-	(133)	-	(133)
Retirement benefit obligations, net of tax	-	-	-	(7,210)	(7,210)
Issue of share capital	74	676	-	-	750
Dividends paid	-	-	-	(5,786)	(5,786)
Performance share plan charge	-	-	476	-	476
Performance share plan credit in respect of shares vested	-	-	(740)	-	(740)
Profit for the period	-	-	-	12,744	12,744
At 30 June 2010	16,361	6,773	74,971	12,745	110,850
Six months ended 30 June 2009
At 1 January 2009	16,287	6,097	81,283	7,651	111,318
Exchange adjustments	-	-	(8,281)	-	(8,281)
Cash flow hedges, net of tax	-	-	1,544	-	1,544
Retirement benefit obligations, net of tax	-	-	-	(11,159)	(11,159)
Dividends paid	-	-	-	(4,909)	(4,909)
Performance share plan charge	-	-	460	-	460
Profit for the period	-	-	-	7,919	7,919
At 30 June 2009	16,287	6,097	75,006	(498)	96,892

 

 

 

Consolidated cash flow statement

for the six months ended 30 June 2010

 

	6 months ended 30 June 2010 (unaudited) £'000	6 months ended 30 June 2009 (unaudited) £'000
Cash flows from operating activities
Cash generated from operating activities (note 14)	19,065	9,504
Interest received	39	44
Interest paid	(364)	(522)
Tax paid	(4,058)	(1,993)
Net cash from operating activities	14,682	7,033
Cash flows from investing activities
Purchase of property, plant and equipment	(9,869)	(6,492)
Proceeds from sale of property, plant and equipment	110	27
Purchase of intangible assets	(580)	(299)
Net cash used in investing activities	(10,339)	(6,764)
Cash flows from financing activities
Proceeds from issue of share capital	750	-
Net borrowing under the loan facilities	616	6,977
Dividends paid to shareholders	(5,786)	(4,909)
Net cash (used in)/from financing activities	(4,420)	2,068
Net (decrease)/increase in cash and cash equivalents	(77)	2,337
Net cash and cash equivalents at beginning of period	9,743	4,243
Exchange (losses)/gains on cash and cash equivalents	(734)	(47)
Cash and cash equivalents	9,491	9,058
Bank overdrafts	(559)	(2,525)
Net cash and cash equivalents at end of period	8,932	6,533

 

 

Notes to the consolidated interim financial statements

for the six months ended 30 June 2009 (unaudited)

 

1 General information

The company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is Moodiesburn, Chryston, Scotland, G69 0JE.

The company is listed on the London Stock Exchange.

This condensed consolidated interim financial information was approved for issue on 3 August 2010.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. This interim financial information is unaudited but has been reviewed by our auditors and their report is set out on page 18. Statutory accounts for the year ended 31 December 2009 were approved by the Board of Directors on 29 March 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard ("IAS") 34, "Interim financial reporting" as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009 which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

 

3 Accounting policies

 

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2009, as described in those annual financial statements.

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for accounting periods beginning on or after 1 January 2010. They either were not relevant for the group or had no material impact on the financial statements of the group.

 

 

		Effective Date
IFRS 3 (revised)	Business combinations	1 January 2010
IAS 27 (amended)	Consolidated and separate financial statements	1 January 2010
IAS 28 (amended)	Investments in associates	1 January 2010
IAS 31 (amended)	Interests in joint ventures	1 January 2010
IFRIC 17	Distribution of non-cash assets to owners	1 January 2010
IFRIC 18	Transfers of assets from customers	1 January 2010
IFRS 1 (amendment)	Additional exemptions for first-time adopters	1 January 2010

 

Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective date varies by standard but most are effective 1 January 2010.

 

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2010 and have not been early adopted.

 

		Effective Date
IFRS 9	Financial instruments	1 January 2013
IAS 24 (revised)	Related party disclosures	1 January 2011
IAS 32 - amendment	Classification of rights issues	1 January 2011
IFRIC 14 - amendments	Prepayments of a minimum funding requirement	1 January 2011
IFRIC 19	Extinguishing financial liabilities with equity instruments	1 January 2011

 

Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective date varies by standard but most are effective 1 January 2011.

 

It is expected that the group will adopt these standards, amendments to standards and interpretations on their effective dates. The directors do not anticipate that the adoption of these standards, amendments to standards or interpretations will have a material impact on the financial statements of the group.

 

4 Segment information

The chief operating decision maker has been identified as the Board.

The Board reviews the group's financial results on a product basis in order to assess performance and allocate resources. Operating segments have been determined accordingly. These are as follows:

Collagen casings, which includes the three edible collagen brands, Devro, Coria and Cutisin, and Cutisin non-edible collagen casings.

Distributed products, which comprises Visko-Teepak cellulose, Krehalon plastics and other ancillary products.

Other segments, which includes the non-reportable segments of collagen film, collagen gel, Cutisin plastic casings and collagen for medical use.

The Board assesses the performance of the operating segments based on a measure of adjusted earnings before interest and tax ("Adjusted EBIT"). This measurement basis excludes the effects of exceptional income and expenditure from the operating segments.

Finance income and expense, including that arising on pension and post-retirement health plan assets and liabilities, is not included in the segment results that are reviewed by the Board.

Segment assets exclude tax assets, which are managed on a central basis.

Information provided to the Board is consistent with that in the financial statements.

 

	Collagen casings		Distributed products		Other segments		Total group
	30 June 2010 £'000	30 June 2009 £'000	30 June 2010 £'000	30 June 2009 £'000	30 June 2010 £'000	30 June 2009 £'000	30 June 2010 £'000	30 June 2009 £'000
Revenue
Sales to external customers	93,597	83,101	12,750	12,564	9,746	9,305	116,093	104,970
Adjusted EBIT	17,020	9,104	537	283	3,025	2,694	20,582	12,081
Corporate overheads							(2,501)	(1,650)
EBIT before exceptional items							18,081	10,431
Closure of post-retirement health care plan							-	1,788
EBIT after exceptional items							18,081	12,219
Finance income							39	44
Finance expense							(363)	(511)
Net finance expense on pension and post-retirement health plan assets and liabilities							(628)	(746)
Profit before tax							17,129	11,006
Segment assets	185,868	177,344	5,570	5,360	14,300	15,053	205,738	197,757
Corporate assets net of pooled bank overdraft							1,868	(1,452)
Taxation							17,090	12,614
Total assets							224,696	208,919

 

5 Exceptional items

 

Operating profit for the six months to 30 June 2009 included an exceptional credit of £1,788,000 (£1,144,000 after tax) in respect of the elimination of the liability under the group's post-retirement health care plan in the United States which was closed on 30 January 2009.

 

6 Taxation

 

The charge for taxation for the six months ended 30 June 2010 corresponds to a rate of tax of 25.6% on the profit for the period (2009: 28.0%), which reflects the anticipated effective rate for the year ending 31 December 2010. The charge for taxation comprises a UK corporation tax credit of £24,000 (2009: £10,000) and a foreign tax charge of £4,409,000 (2009: £3,097,000).

 

In the Budget on 22 June 2010, the UK government announced its intention to reduce the UK rate of corporation tax by 1% per annum from 28% to 24& over a four-year period. At 30 June 2010 no change in the rate of tax had been substantively enacted. Had the initial reduction of 1% been substantively enacted, there would have been no significant impact on the financial statements.

 

  

 

7 Earnings per share

 

	6 months ended 30 June 2010	6 months ended 30 June 2009
	Pence	Pence
Basic	7.8	4.9
Diluted	7.7	4.8
Basic before exceptional items	7.8	4.2

 

Basic earnings per share for the six months ended 30 June 2010 was calculated by dividing the profit for the period attributable to equity shareholders by 163,265,333 (2009: 162,866,277) shares, being the weighted average number of shares in issue throughout the period.

 

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 or the performance share plan are only treated as dilutive where the effect is to reduce earnings per share. Diluted earnings per share was calculated by dividing the profit for the period attributable to equity shareholders by the average number of shares, including the effect of all dilutive potential shares, of 166,434,557 (2009: 165,960,772).

 

Earnings per share before exceptional items was calculated in order to eliminate the effect of the exceptional item after tax in 2009, being a credit of £1,144,000 on the results. Basic earnings per share before exceptional items was calculated by dividing the profit attributable to equity shareholders before exceptional items, after attributable tax, of £6,775,000) by 162,866,277 shares, being the weighted average number of shares in issue throughout the period.

 

8 Dividends

 

The interim dividend of 2.0 pence per share, which will absorb an estimated £3,272,000 of shareholders' funds, will be paid on 1 October 2010 to shareholders on the register at 3 September 2010. This compares with the interim dividend of 1.425 pence and a full year dividend of 5.0 pence in respect of 2009, which absorbed shareholders' funds of £2,313,000 and £8,099,000 respectively.

 

9 Intangible assets

 

Details of the movements in the group's intangible assets are summarised as follows:-

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000
Opening net book value at 1 January	1,635	1,799
Exchange differences	(17)	(52)
Additions	580	299
Disposals	(84)	-
Amortisation	(177)	(206)
Closing net book value at 30 June	1,937	1,840

 

 

 

10 Property, plant and equipment

 

Details of the movements in the group's property, plant and equipment are summarised as follows:-

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000
Opening net book value at 1 January	138,071	134,729
Exchange differences	(2,615)	(6,925)
Additions	9,115	6,767
Disposals	(381)	(546)
Depreciation	(5,818)	(5,574)
Closing net book value at 30 June	138,372	128,451

 

11 Capital commitments

 

Capital expenditure contracted for but not provided in the financial statements:

 

	30 June 2010 £'000	30 June 2009 £'000
Property, plant and equipment	5,317	7,210
Intangible assets	7	-
	5,324	7,210

 

12 Retirement benefit obligations

 

The retirement benefit obligations disclosed as non-current liabilities in the balance sheet are as follows:

 

	30 June 2010 £'000	31 December 2009 £'000	30 June 2009 £'000
Retirement benefit obligations	42,250	31,833	37,683

 

The significant increase in the group's retirement benefit obligations at 30 June 2010 compared with 31 December 2009 was principally due to an increase in scheme liabilities as a result of lower discount rates.

 

A summary of the discount rates used in the principal countries is:-

 

	30 June 2010	31 December 2009	30 June 2009
Australia	4.60%	5.10%	5.00%
United Kingdom	5.40%	5.80%	6.25%
United States	5.30%	5.85%	6.80%

 

13 Equity securities issued

 

Details of ordinary shares of 10 pence each issued during the six months ended 30 June 2010 are as follows:

 

	6 months ended 30 June  2010 Shares	6 months  ended 30 June  2009 Shares	6 months ended 30 June  2010 £'000	6 months ended 30 June  2010 £'000
Shares vested under the Devro 2003 Performance Share Plan	742,730	-	750	-

 

14 Cash flows from operating activities

	6 months ended 30 June 2010	6 months ended 30 June 2009
	£'000	£'000
Profit for the period	12,744	7,919
Adjustments for:
Taxation	4,385	3,087
Finance income	(39)	(44)
Finance expense	363	511
Net finance expense on pension and post-retirement health plan assets and liabilities	628	746
Loss on disposal of property, plant and equipment	271	519
Loss on disposal of intangible assets	84	-
Depreciation of property, plant and equipment	5,818	5,574
Amortisation of intangible assets	177	206
Release from capital grants reserve	(20)	-
Retirement benefit obligations	(2,032)	(4,304)
Performance share plan	(264)	460
Changes in working capital:
Increase in inventories	(944)	(3,767)
(Increase)/decrease in trade and other receivables	(1,071)	3,010
Decrease in trade and other payables	(1,035)	(4,413)
Cash generated from operating activities	19,065	9,504

 

15 Analysis of net debt

	30 June 2010 £'000	31 December 2009 £'000	30 June 2009 £'000
Cash and cash equivalents	9,491	10,059	9,058
Bank overdrafts	(559)	(316)	(2,525)
Net cash and cash equivalents	8.932	9,743	6,533
Borrowings less bank overdrafts	(25,993)	(25,388)	(35,755)
	(17,061)	(15,645)	(29,222)

 

 

Statement of directors' responsibilities

 

The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim financial reporting", as adopted by the European Union. The interim management report includes a fair review of the information required by the Disclosure and Transparency Rules ("DTR") 4.2.7 and 4.2.8, namely:

 

·; an indication of important events that have occurred during the first six months and their impact on the condensed financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·; material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last annual report.

 

The directors of Devro plc are as listed in the Annual Report for the year ended 31 December 2009. A list of the current directors is maintained on the company's website: www.devro.plc.uk.

 

By order of the Board

 

 

 

Peter Page

Chief Executive

3 August 2010

 

 

Independent review report to Devro plc

 

 

Introduction

We have been engaged by the company to review the consolidated interim financial information in the interim financial report for the six months ended 30 June 2010, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in shareholders' equity, consolidated cash flow statement and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated interim financial information.

 

 

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As discussed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The consolidated interim financial information included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

 

Our responsibility

Our responsibility is to express to the company a conclusion on the consolidated interim financial information in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

 

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 United Kingdom. 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. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.

 

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information in the interim financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

Glasgow

3 August 2010

 

 

 

 

 

 

Notes

 

(a) The maintenance and integrity of the Devro plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

 

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This information is provided by RNS

The company news service from the London Stock Exchange