Devro will be valued at 224m pounds on market debut

DEVRO, the sausage skin maker due to be floated on the Stock Exchange at the end of this month, will have an initial market capitalisation of pounds 224m, writes Robert Cole.

Directors are selling about 25 per cent of their combined holdings. Together they will realise about pounds 3.5m. Frank de Angelli, the chief executive who will retire after the flotation, is set to realise more than pounds 1m.

The company will get pounds 77m of new money in the issue. It will use the cash to repay debt and to redeem preference shares. After the flotation Devro will be left with borrowings of pounds 17m, 50 per cent of net assets.

Demand for the issue is expected to be strong. The initial price will be 170p, a multiple of 16.2 times Devro's adjusted earnings per share of 10.5p for the year to 31 December 1992.

The earnings per share figure was adjusted to reduce the interest bill as if Devro had the benefit of the flotation proceeds last year.

Brokers estimate that Devro will make profits of between pounds 22m and pounds 26m this year. Earnings per share are expected to be about 13.5p, making a prospective p/e ratio of 12.6.

The company also said that if it had been a public company in 1992 it would have paid a dividend of 5.5p, equivalent to a gross yield of 4 per cent.