Interim Results

4th Aug 2009 07:00



For Immediate Release

4 August 2009

 

 

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009

Devro plc (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 2009. 

 

Highlights

-  Sales up 26.9% to £105.0 million (2008: £82.7 million)

-  Operating profit before exceptional items up 18.0% to £10.4 million (2008: £8.8 million)

-  PBT (pre-exceptional items) up 16.9% to £9.2 million (2008: £7.9 million)

-  EPS (pre-exceptional items) up 27.3% to 4.2p (2008: 3.3p)

- PBT up 120.4% to £11.0 million (2008: £5.0 million)

- EPS up 157.9% to 4.9p (2008:1.9p)

Substantial productivity improvements made during the period

-  Installation of new high speed lines at our Czech facility completed on time

-  Manufacturing efficiencies in our Scottish and Australian plants 

Interim dividend maintained at 1.425p

Confident 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 improving performance to continue through the second half. Although fluctuating currencies create a background of uncertainty, the second half will be helped by reduced input costs and the start up of the new production lines in our Czech operations. 

"Looking further forward the market is continuing to provide growth opportunities. The group is well placed to take advantage of new product development and recent improvements in operational efficiency."

For further information contact:

Peter Page	Chief Executive	0207 466 5000 on 4 August
Peter Williams	Finance Director	01236 879191 thereafter
Diane Stewart Carrie Clement Charles Ryland	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/2009/devro041009/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

This is my first statement as Chairman of Devro. I am pleased to report that in the six months to 30 June 2009 the group achieved significant increases in sales volumes, sales revenues and operating profit compared with the corresponding period in 2008. 

Business review

Operating profit before exceptional items increased by 18.0% to £10.4 million (2008: £8.8 million). 2008 operating profit has been restated to reflect the change in accounting treatment of net pension finance income and expense, resulting in a reduction of £0.3 million. While we were successful in increasing sales prices, we were adversely impacted, as anticipated, by energy and hide costs during the period. The overall impact was a reduction in operating margin from 10.7% in the first half of 2008 to 9.9% in 2009.

The global market for collagen casings continues to grow, driven primarily by economic expansion and increased meat consumption in emerging markets. The continuing high cost and reduced availability of gut casing is also contributing to the demand for collagen casings.

Sales revenue for the period was £105.0 million, compared with £82.7 million in 2008, an increase of 26.9%. On a constant currency basis, revenue rose by 10.0% to £91.0 million.  Total sales volumes for all products were ahead of prior year by 5.6%, within which edible collagen volumes finished the period 7.0% ahead. Volume increases were particularly strong in China, Japan and Latin America. 

Price increases resulted in a 4.4% 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.  

Earnings per share before exceptional items increased by 27.3% from 3.3 pence to 4.2 pence.

Exceptional credit

During the period, the plan under which post-retirement health care benefits were provided to certain retired employees in the United States was closed. An exceptional gain of £1.8 million has been realised, reflecting the release of the provision for these costs. 

Sales

Collagen casings

Europe

Edible collagen volumes in Europe have shown modest growth in the period. The performance in the UK and Germany has been encouraging, but the overall growth rate was held back by the difficult economic conditions in Eastern Europe, particularly Russia. 

Non-edible collagen volumes in the region were broadly unchanged compared with prior year, with sales having stabilised following the decline in 2008.

Americas

Edible collagen casing sales in the Americas continue to show strong growth primarily in Latin America, where volumes were up by 38% compared to the same period in 2008.  This was driven mainly by successful conversion of a number of customers from gut to collagen casings.

Asia/Pacific

In the Asia/Pacific region, volumes have again increased significantly. This continues to be driven by strong growth in the Chinese market, combined with a large increase in sales in Japan where active promotion of collagen has encouraged more conversion from gut casings. Other South East Asian markets are also showing volume increases. 

 

Distributed products

Sales of distributed products showed a 23% revenue increase compared to 2008, 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

The sterling value of these sales also showed a strong increase compared to 2008, which was based on currency movements and price increases. Sales of collagen gel will be adversely impacted in the short term as a result of fire damage to the processing plant of a major customer, but we do not anticipate that this will have a material impact on our results.

Productivity improvements

In the 2008 interim report, we announced that we would be restructuring our Czech manufacturing facilities by installing new high-speed lines to replace an old plant at Korenov. This was completed within the planned budget and timeframe. The new lines installed at Jilemnice, our most modern plant, will yield significant savings in energy and operating costs, starting in the second half of 2009, and building up to £2 million in a full year.  

Manufacturing efficiencies in our Scottish and Australian plants have improved. Together these have made a significant additional contribution to group profits.

Input prices

Due to the impact of higher-priced contracts, some of them for fixed terms, energy costs in the period increased by £3.0 million compared with 2008. The high-priced fixed agreements have now expired and we will see a reduction in energy costs in the second half. 

We previously indicated that the worldwide decline in leather production for the automobile industry had caused problems for one of our operations in obtaining adequate quantities of collagen raw material. The combined impact of supply shortages and price increases has cost the group £3.6 million in the first half compared to the same period in 2008. Management actions to secure supplies of collagen have been effective, and we do not envisage any further interruptions in 2009. There will be a continuing though reduced impact on collagen costs in the second half, approximately £1.5 million higher than the second half of 2008. 

Foreign currency

Devro operates worldwide and with multiple currencies. Its major transactional exposures arise from sales in euro, US dollars, and Japanese yen where the manufacturing costs are in Australian dollars, Czech koruna, US dollars and sterling. Translational exposures arise from the conversion of the results of overseas companies into sterling, The last few months have seen unprecedented volatility in foreign exchange markets. Despite this volatility, the impact of exchange rate movements on EBIT in the 6 months to June 2009 has been relatively insignificant, amounting to a gain of  £0.6 million compared to 2008. 

Finance

Net interest expense in the period was £0.5 million, a substantial reduction compared to the same period last year. Because of the increased deficit in the group pension schemes, net finance expense on pension assets and liabilities amounted to £0.7 million compared with net finance income of £0.3 million in the corresponding period in 2008.

 

Net debt of £29.2 million at 30 June 2009 compares with £34.5 million at 30 June 2008, reflecting the strong cash generation of the group. Cash outflow in respect of capital expenditure was £6.8 million (2008: £6.0 million). The group's financial gearing was 30.2% at 30 June 2009 (2008: 35.7%).

 Pensions

The group's retirement benefit obligations of £37.7 million have increased from £27.7 million reported at 31 December 2008. This is due mainly to falls in equity markets, since a significant proportion of the group's pension fund assets are invested in equities, and changes to the inflation assumptions used to value the pension fund liabilities. 

Dividend

The Board is pleased to announce that the interim dividend will be maintained at 1.425 pence per share (2008: 1.425 pence). It will be paid on 16 October 2009 to shareholders on the register at 18 September 2009.

Principal risks

Each of our operations considers their risk profile and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The group's principal risks and uncertainties are largely unchanged from those set out in detail in our last Annual Report. The risks considered particularly relevant to the remaining six months of this financial year are, however, foreign exchange rate movements and customer credit risk.

A continuation or reversal of the recent trend of large movements in certain exchange rates could have a significant impact on group profits. While we have seen little evidence in the first half of 2009 that the difficult economic climate around the world is affecting the financial stability of our major customers, credit risk continues to be closely monitored. 

Outlook

We are very encouraged by the improvement in Devro's performance in the first half of this year.  The Board expects the improving performance to continue through the second half. Although fluctuating currencies create a background of uncertainty, the second half will be helped by reduced input costs and the start up of the new production lines in our Czech operations. 

Looking further forward, the market is continuing to provide growth opportunities. The group is well placed to take advantage of new product development and recent improvements in operational efficiency. 

Steve Hannam

Chairman

4 August 2009 

Pat Barrett

It is with great sadness that we have to report the recent death of Pat Barrett OBE. As you know, I took over as Chairman of Devro plc from Pat in May of this year after his 8 years in the role. Pat had made sure that he handed over Devro in sound order and with a reinvigorated management. It is very sad that he will not see the results of his efforts.

Steve Hannam

  Financial highlights

six months ended 30 June 2009 (unaudited)

	30 June 2009	30 June 2008* (as restated)
Revenue	£105.0m	£82.7m
Operating profit before exceptional items	£10.4m	£8.8m
Operating margin before exceptional items	9.9%	10.7%
Exceptional items	£1.8m	£(2.9)m
Profit before tax	£11.0m	£5.0m
Earnings per share	4.9p	1.9p
Earnings per share before exceptional items	4.2p	3.3p
Interim dividend per share	1.425p	1.425p
Net debt	£29.2m	£34.5m

* Restated for net finance income on pension and post-retirement health plan assets and liabilities as explained in note 4.

  Consolidated income statement

for the six months ended 30 June 2009

	6 months ended 30 June 2009  (unaudited) £'000	6 months ended 30 June 2008  (as restated) (unaudited) £'000
Revenue (note 5)	104,970	82,706
Operating profit before exceptional items	10,431	8,843
Exceptional items (note 6)	1,788	(2,893)
Operating profit	12,219	5,950
Finance income	44	137
Finance expense	(511)	(1,409)
Net finance (expense)/income on pension and post-retirement health plan assets and liabilities	(746)	315
Profit before tax	11,006	4,993
Taxation (note 7)	(3,087)	(1,946)
Profit for the period	7,919	3,047
Earnings per share (note 9)
- Basic	4.9p	1.9p
- Diluted	4.8p	1.9p
- Basic before exceptional items	4.2p	3.3p

Profit for the period was all generated from continuing operations

Consolidated statement of comprehensive income

for the six months ended 30 June 2009

	6 months ended 30 June	6 months ended 30 June
	2009 (unaudited) £'000	2008 (unaudited) £'000
Other comprehensive (expense)/income
Cash flow hedges:
- net fair value gains, net of tax	648	1,207
- reclassified and reported in operating profit	896	(676)
Actuarial loss recognised in group pension schemes	(15,236)	(15,629)
Actuarial loss recognised in post-retirement health plan	-	36
Movement in deferred tax on retirement benefit obligations	4,077	4,578
Net exchange adjustments	(8,281)	13,867
Other comprehensive (expense)/income for the period	(17,896)	3,383
Profit for the period	7,919	3,047
Total comprehensive (expense)/income for the period	(9,977)	6,430

 

Consolidated balance sheet

at 30 June 2009

	30 June 2009 (unaudited) £'000	31 December 2008 (audited) £'000	30 June 2008 (unaudited) £'000
ASSETS
Non-current assets
Intangible assets (note 10)	1,840	1,799	1,938
Property, plant and equipment (note 11)	128,451	134,729	123,844
Deferred tax assets	12,614	11,300	8,996
Other receivables	25	61	86
	142,930	147,889	134,864
Current assets
Inventories	27,892	25,753	27,629
Current tax assets	-	603	-
Trade and other receivables	27,548	33,067	24,243
Derivative financial instruments	1,491	709	1,865
Cash and cash equivalents	9,058	6,690	13,682
	65,989	66,822	67,419
LIABILITIES
Current liabilities
Financial liabilities
- Borrowings	3,304	3,135	4,567
- Derivative financial instruments	337	2,550	380
Trade and other payables	23,622	28,811	20,820
Current tax liabilities	1,082	1,955	2,913
	28,345	36,451	28,680
Net current assets	37,644	30,371	38,739
Non-current liabilities
Financial liabilities
- Borrowings	34,976	27,531	43,615
Deferred tax liabilities	10,536	11,564	11,605
Retirement benefit obligations (note 12)	37,683	27,688	21,608
Other non-current liabilities	487	159	197
	83,682	66,942	77,025
Net assets	96,892	111,318	96,578
EQUITY
Capital and reserves attributable to equity holders
Ordinary shares	16,287	16,287	16,287
Share premium	6,097	6,097	6,097
Other reserves	75,006	81,283	72,249
Retained (losses)/earnings	(498)	7,651	1,945
Total equity	96,892	111,318	96,578

The notes on pages 11 to 19 are an integral part of these consolidated interim financial statements.

 

 

Consolidated statement of changes in shareholders' equity

for the six months ended 30 June 2009

	Share capital	Share premium	Other reserves	Retained earnings/ (losses)	Total
	£'000	£'000	£'000	£'000	£'000
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 fair value gains, 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
Six months ended 30 June 2008
At 1 January 2008	16,287	6,097	57,836	14,840	95,060
Exchange adjustments	-	-	13,867	-	13,867
Cash flow hedges  - net fair value gains, net of tax	-	-	531	-	531
Retirement benefit obligations, net of tax	-	-	-	(11,015)	(11,015)
Dividends paid	-	-	-	(4,927)	(4,927)
Performance share plan charge	-	-	15	-	15
Profit for the period	-	-	-	3,047	3,047
At 30 June 2008	16,287	6,097	72,249	1,945	96,578

 

 

Consolidated cash flow statement

for the six months ended 30 June 2009

	6 months ended 30 June 2009 (unaudited) £'000	6 months ended 30 June 2008 (unaudited) £'000
Cash flows from operating activities
Cash generated from operating activities (note 13)	9,504	7,674
Interest received	44	137
Interest paid	(522)	(1,520)
Tax paid	(1,993)	(2,734)
Net cash from operating activities	7,033	3,557
Cash flows from investing activities
Purchase of property, plant and equipment	(6,492)	(5,864)
Proceeds from sale of property, plant and equipment	27	45
Purchase of intangible assets	(299)	(162)
Payments to former minority shareholders of Cutisin a.s.	-	(1)
Net cash used in investing activities	(6,764)	(5,982)
Cash flows from financing activities
Net borrowing under the loan facilities	6,977	7,495
Dividends paid to shareholders	(4,909)	(4,927)
Net cash from financing activities	2,068	2,568
Net increase in cash and cash equivalents	2,337	143
Net cash and cash equivalents at beginning of period	4,243	9,495
Exchange (losses)/gains on cash and cash equivalents	(47)	992
Cash and cash equivalents	9,058	13,682
Bank overdrafts	(2,525)	(3,052)
Net cash and cash equivalents at end of period	6,533	10,630

 

 

Notes to the consolidated interim financial information

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 4 August 2009.

This consolidated interim financial information does not constitute 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 20. Statutory accounts for the year ended 31 December 2008 were approved by the Board of Directors on 23 March 2009 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 2009 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 report should be read in conjunction with the annual financial statements for the year ended 31 December 2008 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 2008, 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 2009.

IAS 1 (revised)

Presentation of financial statements

Effective 1 January 2009

The revised standard prohibits the presentation of items of income and expenses (that is non-owner changes in equity) in the statement of changes in equity, requiring non-owner changes in equity to be presented separately from owner changes in equity. All non-owner changes in equity are required to be shown in a performance statement.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

The group has elected to present two statements: an income statement and a statement of comprehensive income.

IFRS 8

Operating segments

Effective 1 January 2009

IFRS 8 replaces IAS 14, Segment reporting. It requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in any material changes in the operating segments reported by the group.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, as described in note 5.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant for the group.

		Effective Date
IAS 23 (revised)	Borrowing costs	1 January 2009
IAS 32 (amended)	Financial instruments: Presentation and	1 January 2009
and IAS 1 (amended)	Presentation of financial statements on Puttable financial instruments and obligations arising on liquidation
IAS 39 (amended)	Financial instruments: Recognition and	1 January 2009
and IFRS 7 (amended)	Measurement and Financial instruments: Disclosures on the Re-classification of Financial assets
IFRS 2 (amended)	Share-based payments on Vesting conditions and cancellations	1 January 2009
IFRIC 13	Customer loyalty programme relating to IAS 18, Revenue   Effective 1 July 2008 but EU endorsed for use 1 January 2009
IFRIC 14	IAS 19 - The limit on a defined benefit asset, Minimum funding requirements and their interaction  Effective 1 January 2008 but EU endorsed for use 1 January 2009
IFRIC 15	Agreements for construction of real estates	1 January 2009

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted.

		Effective Date
IAS 27 (revised)	Consolidated and separate financial statements 1 July 2009	1 July 2009
IFRS 1 (amended)	First time adoption of IFRS	1 July 2009
IFRS 3 (amended)	Business combinations	1 July 2009
IFRIC 17	Distributions of non-cash assets to owners	1 July 2009
IFRIC 18	Transfers of assets from customers	1 July 2009

 

The directors do not anticipate that the adoption of the standards or interpretations listed above will have a material impact on the group's financial statements in the period of initial application.

 

4 Restatement of income statement for the six months ended 30 June 2008

The income statement previously reported for the six months ended 30 June 2008 has been restated as follows:

Net finance income/expense on pension and post-retirement health plan assets and liabilities was previously included in pension costs in operating profit. As noted in the accounts for the year ended 31 December 2008, it is now included as a separate element of finance income and expense. The impact on operating profit is as follows:

	£'000
Operating profit before exceptional items as previously reported	9,158
Net finance income on pensions and post-retirement health plan assets and liabilities	(315)
Restated operating profit before exceptional items	8,843
Exceptional items	(2,893)
Restated operating profit	5,950

 

 5 Segment information

Primary reporting format - Business segments

The chief operating decision maker ("CODM") has been identified as the Board.

The CODM 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 CODM 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, such as income from the sale of land, impairment charges where the impairment is the result of a one-off, non-recurring event, and restructuring and plant closure costs.

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 CODM.

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

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

  

	Collagen casings		Distributed products		Other segments		Total group
	30 June 2009	30 June  2008 (as restated)	30 June 2009	30 June 2008 (as restated)	30 June 2009	30 June 2008 (as restated)	30 June 2009	30 June 2008 (as  restated)
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Sales to external customers	83,101	64,902	12,564	10,181	9,305	7,623	104,970	82,706
Adjusted EBIT	9,104	8,113	283	175	2,694	2,336	12,081	10,624
Corporate overheads							(1,650)	(1,781)
EBIT before exceptional items							10,431	8,843
Closure of post-retirement health care plan							1,788	-
Proceeds from the sale of land							-	238
Impairment of fixed assets							-	(3,131)
EBIT after exceptional items							12,219	5,950
Finance income							44	137
Finance expense							(511)	(1,409)
Net finance (expense)/income on pension and post-retirement health plan assets and liabilities							(746)	315
Profit before tax							11,006	4,993
Segment assets	177,344	172,675	5,360	4,146	15,053	15,400	197,757	192,221
Corporate assets net of pooled bank overdraft							(1,452)	1,066
Taxation							12,614	8,996
Total assets							208,919	202,283

6 Exceptional items

The following exceptional items are included in the operating profit of £12,219,000 (2008: £5,950,000):

	6 months ended 30 June 2009	6 months ended 30 June 2008
	£'000	£'000
Closure of post-retirement health care plan (a) below	1,788	-
Provision for impairment of fixed assets (b) below	-	(3,131)
Proceeds from the sale of land (c) below	-	238
	1,788	(2,893)

  

(a)  As disclosed in the statutory accounts for the year ended 31 December 2008, the group's  post- retirement health care plan in the United States was closed on 30 January 2009. The  elimination of the liability under the plan has resulted in an exceptional credit of £1,788,000 (£1,144,000 after tax) during the six months to 30 June 2009.

 

(b) An operational review of the Korenov plant in the Czech Republic was undertaken to assess the carrying value of the assets of that facility. Management determined that the future cash flow from this plant no longer justified the carrying value of the assets. As a result, an impairment charge of £3,131,000 (£2,539,000 after tax) was recorded in the income statement for the six months ended 30 June 2008.

 

The plant closed on 28 May 2009.

(c) Under the terms of the contract for the sale of the land at Moodiesburn in 2005, additional income of £238,000 (£170,000 after tax) arose during the six months ended 30 June 2008.

7 Taxation

The charge for taxation for the six months ended 30 June 2009 corresponds to a rate of tax of 28.0% on the profit for the period (2008: 39.0%). The rate reflects an anticipated effective rate of 26.5% on profits excluding exceptional items for the year ending 31 December 2009, adjusted for the tax impact of the exceptional item. The charge for taxation comprises a UK corporation tax credit of £10,000 (2008: £46,000) and a foreign tax charge of £3,097,000 (2008: £1,992,000).

8 Dividends

The interim dividend of 1.425 pence per share, which will absorb an estimated £2,321,000 of shareholders' funds, will be paid on 16 October 2009 to shareholders on the register at 18 September 2009. This compares with the interim dividend of 1.425 pence and a full year dividend of 4.45 pence in respect of 2008, which absorbed shareholders' funds of £2,321,000 and £7,245,000 respectively.

9 Earnings per share

	6 months ended 30 June 2009	6 months ended 30 June 2008
	Pence	Pence
Basic	4.9	1.9
Diluted	4.8	1.9
Basic before exceptional items	4.2	3.3

Basic earnings per share for the six months ended 30 June 2009 was calculated by dividing the profit for the period attributable to equity shareholders by 162,866,277 (2008: 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 165,960,772 (2008: 163,798,782).

Earnings per share before exceptional items was calculated in order to eliminate the effect of the exceptional items after tax in 2009, being a credit of £1,144,000 (2008: charge of £2,369,000) 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 (2008: £5,416,000), by 162,866,277 (2008: 162,866,277) shares, being the weighted average number of shares in issue throughout the period.

10 Intangible assets

 

	6 months ended 30 June 2009 £’000	6 months ended 30 June 2008 £’000
Opening net book value at 1 January	1,799	1,562
Exchange differences	(52)	109
Additions	299	470
Amortisation	(206)	(203)
Closing net book value at 30 June	1,840	1,938

	6 months ended 30 June 2009 £’000	6 months ended 30 June 2008 £’000
Opening net book value at 1 January	134,729	115,076
Exchange differences	(6,925)	12,605
Additions	6,767	4,619
Disposals	(546)	(7)
Depreciation	(5,574)	(5,318)
Provision for impairment (note 6)	-	(3,131)
Closing net book value at 30 June	128,451	123,844
Additions during the period included expenditure of £3,418,000 in respect of the installation of new production lines at Jilemnice in the Czech Republic.
	30 June 2009 £’000	30 June 2008 £’000
Contracts placed for future capital expenditure not provided in the financial statements	7,210	3,858

 

	30 June 2009 £’000	31 December 2008 £’000	30 June 2008 £’000
Retirement benefit obligations	37,683	27,688	21,608

	30 June 2009	31 December 2008	30 June 2008
Australia	5.00%	3.60%	5.80%
United Kingdom	6.25%	6.25%	6.10%
United States	6.80%	6.30%	6.75%

	6 months ended 30 June 2009	6 months ended 30 June 2008
	£’000	£’000
Profit for the period	7,919	3,047
Adjustments for:
Taxation	3,087	1,946
Net finance expense/(income) on pension and post-retirement health plan assets and liabilities	746	(315)
Finance income	(44)	(137)
Finance expense	511	1,409
Loss/(gain) on disposal of property, plant and equipment	519	(13)
Depreciation of property, plant and equipment	5,574	5,318
Impairment of property, plant and equipment	-	3,131
Amortisation of intangible assets	206	203
Performance share plan	460	15
Retirement benefit obligations	(4,304)	(2,453)
Changes in working capital:
Increase in inventories	(3,767)	(3,575)
Decrease in trade and other receivables	3,010	297
Decrease in trade and other payables	(4,413)	(1,199)
Cash generated from operating activities	9,504	7,674

 

	30 June 2009 £’000	31 December 2008 £’000	30 June 2008 £’000
Cash and cash equivalents	9,058	6,690	13,682
Bank overdrafts	(2,525)	(2,447)	(3,052)
Net cash and cash equivalents	6,533	4,243	10,630
Borrowings less bank overdrafts	(35,755)	(28,219)	(45,130)
	(29,222)	(23,976)	(34,500)

Statement of directors' responsibilities

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim financial reporting", as adopted by the European Union, and that the interim management report herein 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 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 2008, with the exception of the following changes in the period:

At the Annual General Meeting on 1 May 2009, Mr P A Barrett retired as Chairman. On the same day, Mr S J Hannam joined the company as his replacement. A list of the current directors is maintained on the website: www.devro.plc.uk.

By order of the Board

 

Peter Page

Chief Executive

4 August 2009

Independent Review Report to Devro plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial information in the interim financial report for the six months ended 30 June 2009, 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 condensed 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 condensed 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 condensed 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 condensed consolidated interim financial information in the interim financial report for the six months ended 30 June 2009 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 

4 August 2009

Notes

 

ENDIR ILFSRTVIVIIA

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