Buoyant Devro to hit the acquisition trail

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The Independent Online
DEVRO, the sausage skin manufacturer that came to the market in June, is considering acquisitions to complement the organic growth it expects from its business.

Graeme Alexander, chief executive, said they were likely to be of companies which would take the group into new markets for casings or extend its use of the collagen technology for sausage skins.

The board was still considering whether to make acquisitions, so had not started evaluating targets - although it had been flooded with offers from merchant banks.

The group ended the year with cash of pounds 4.2m, compared with pro forma borrowings of pounds 17.6m at the time of the flotation.

Mr Alexander said it was too early to say whether a rights issue would be required to finance an acquisition. The group made pre-tax profits of pounds 25.6m, up from a pro forma pounds 20.1m last time, on sales 14 per cent higher at pounds 94.4m. A fall in the tax rate from 29.3 to 24.9 per cent meant that earnings per share were 41 per cent higher at 14.8p. The final dividend is 4.17p.

The advance in sales and profits was despite a 'conservative pricing policy'. The group estimates it has about 56 per cent of the market for collagen sausage skins. Operating margins widened from 26.7 to 27.8 per cent. The shares fell 12.5p to 244.5p, compared with a flotation price of 170p.