Devro Plc Annual Report and Accounts 2015 Accounts and Report Annual
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Devro plc Devro Annual Report and Accounts 2015 Devro plc Annual Report and Accounts 2015 Highlights of the year Devro is one of Group revenue* (£m) the world’s leading £230.2m 2015 230.2 manufacturers of 232.3 2014 collagen products for 2013 242.7 2012 241.1 the food industry 2011 227.7 Operating profit before exceptional items* (£m) £33.3m 2015 33.3 2014 30.3 2013 42.1 2012 42.4 2011 42.5 Earnings per share before exceptional items* (pence) 15.4p 2015 15.4 2014 13.7 2013 20.8 2012 19.4 2011 19.9 Dividends per share (pence) 8.8p 2015 8.8 2014 8.8 2013 8.8 2012 8.5 2011 8.0 * Continuing operations, and restated for revised pensions devro.com/investors/annualreport2015 accounting rules (IAS 19R) where relevant. 2015 WAS A YEAR OF NOTABLE Report Strategic PROGRESS WITH OUR TRANSFORMATION ON TRACK FOR COMPLETION IN 2016 Directors’ ReportDirectors’ We’re focused on revenue growth Page 8 in developed and emerging markets, while optimising manufacturing efficiency Page 10 Page 12 and ensuring product differentiation Statements Financial through research and development. Shareholder Information Shareholder Strategic Directors’ Financial Shareholder Report Report Statements Information Highlights of the year .......................IFC Directors and Senior Consolidated Notice of Annual Devro at a glance ............................... 2 Management ...................................... 34 income statement ............................63 General Meeting ..............................118 Understanding our markets ..........4 Corporate Governance Consolidated statement Explanatory notes Report ................................................... 36 of comprehensive income........... 64 to the AGM notice ..........................120 Our strategy .......................................... 6 Audit Committee Report ............. 43 Balance sheets...................................65 Shareholder information.............124 Our strategy in action ...................... 7 Directors’ Remuneration Statements of changes Directors and Advisers....................IBC Chairman’s Statement ....................14 Report ................................................... 45 in equity ............................................... 66 Chief Executive’s Review ...............16 Directors’ Report ..............................59 Cash flow statements .................... 68 Financial Review ................................18 Notes to the Principal Risks ....................................22 financial statements ....................... 69 Key Performance Indicators .......26 Independent Auditors’ Corporate Social Report ...................................................114 Responsibility Report ....................28 Financial Summary ......................... 117 Devro plc 1 Annual Report and Accounts 2015 Strategic Report Devro at a glance WE AIM TO MANUFACTURE BETTER CASING FOR EVERY SAUSAGE Our mission: Operating safely, to provide the world’s food manufacturers with a safe and secure supply of consistently better collagen products, helping them optimise efficiency and enhancing the value of their offering. Our business process Extracting collagen Applied technology Manufacture Collagen used for casing and gel The production of collagen casing Devro is a world leader in the is taken from the hides of carefully is a complex technological process. manufacturing technology of this selected animals – officially approved Devro combines expertise and highly sophisticated process. Our for human consumption. innovation to produce casings that casings are consistent, reliable and allow our customers to make versatile to suit the needs of both better sausage. sausage manufacturers and consumer preferences. Our business model Why our business exists What our customers do Who we sell to Devro’s collagen casing is used to Devro’s customers manufacture Devro’s revenue comes primarily from manufacture all varieties of sausage. branded and own-label sausage products the sale of collagen products directly Historically, animal intestines were used worldwide, reaching consumers through to food manufacturers and, in some as casing for sausage, but over the past retail and food service outlets. markets, local distributors. Devro sells 50 years the use of collagen casing has to over 1,500 customers in more than significantly increased, as it enables How we create value 100 countries, with a product range in food manufacturers to automate Devro creates value by converting a excess of 500 individual items, covering production and reduce costs. It is better basic raw material, collagen, from the eight principal types of application. suited to contemporary food hygiene inner layer of cattle and sow hides, into and traceability requirements, and a homogeneous gel and extruding it to Approximately one-third of Devro’s technical specifications can be tightly controlled dimensions, before being sales are in emerging markets and determined in advance. compressed and packed for supply to two-thirds are in developed markets. customers. Devro’s manufacturing Over 100 Devro employees work in processes are unique and have evolved customer-facing operations as sales over many years of technical development. and technical advisers. 2 Devro plc Annual Report and Accounts 2015 Strategic Report Strategic Directors’ ReportDirectors’ 3D X-ray scanned image of shirred casing. Financial Statements Financial Sales, marketing Customer products Reinvesting in & distribution to consumers our business Devro products are sold across all Devro’s innovation and casing Devro has a successful track record continents in over 100 countries. We performance allow our customers to of applied research and development sell directly to food manufacturers produce differentiated products for the and focused capital investment. Information Shareholder and via agents and distributors. consumer. Our casings consistently score highly for appearance, colour, bite and overall acceptance in independent research and consumer testing. The market we are in What makes us different Why our customers choose Devro Devro is one of five significant global Devro differentiates itself from To satisfy our customers’ demands, producers of collagen casing in the competitors by developing innovative we use our knowledge of how to world market, with a number of smaller new products, by working closely manipulate the complex chemistry of local or regional competitors. Additional with customers to enhance their collagen to balance the requirements value is created for the customer by manufacturing efficiencies and by of food producers for strength and size collaborating with specialist food providing high-quality technical stability with consumer preferences machinery manufacturers and support to customers. for tenderness and bite. suppliers of food ingredients to optimise product performance. Devro plc 3 Annual Report and Accounts 2015 Strategic Report Understanding our markets A GLOBAL FOOTPRINT IN CHANGING TIMES From our creation over 50 years ago, Devro has evolved into an established leading supplier of edible collagen casing throughout the world. INTRODUCTION Maintaining a detailed understanding The growth in global population There have been many improvements of our markets and our customers has continues to be a key driver, particularly in edible collagen casing over the past been, and continues to be, a key aspect in relation to the rapid increase in the 50 years; some as a result of technical of our business philosophy. rate of urbanisation. Consumers are developments and others as a result of being exposed to a much wider choice improved plant manufacturing systems. GROWTH and better availability of sausage within The continued significant investment Lower cost opportunities for sausage the urban environment, compared to over many years by Devro has enabled producers and consumer acceptance those who are living in rural areas. the provision of a unique, modern, safe continue to drive the demand for edible and secure edible collagen casing that collagen casings. The global population living in an urban runs more efficiently on sausage environment has surpassed that of rural production lines at much higher speeds Over the past ten years there has and is forecast to continue to rise and produces better sausage products been a steady increase in the volume steeply. This urbanisation trend that are widely accepted by consumers. of edible collagen casing used in contributes significantly towards sausage production. improved living standards and rising Today, Devro products are sold by incomes which in turn influence the our dedicated commercial teams, in TRENDS affordability of sausage and processed association with our experienced There are numerous social and meat products. distributor network, to over 100 demographic factors that are individual markets and are used in the contributing to the growth in the The improvement in the availability of production of a huge variety of regional consumption of sausage, and sausage and processed meat products and national sausage types. consequently an increased growth in the gives rise then to increased average use of edible collagen casings, across meat consumption across both both developed and emerging markets. developed and emerging markets. GDP growth Global urban population Global meat consumption (US$’000 per capita) (million) (kg per capita per year) +24% in decade to 2015 +10% in decade to 2015 4,500 54.5 4,000 66.5 65.0 63.6 45.7 40.0 3,500 1 1 9 34. 35.0 8 31. 6 27. 26. 19.3