During 2019 we continued to execute our growth plans as set out in our 3cs strategy, defending and building upon our strong market positions in mature markets and targeting to increase our share in emerging markets.

We are targeting edible collagen growth on average of 2-4% per annum, with mature markets growing on average between 0-2% per annum and emerging markets growing on average between 6-10% per annum. Our three year plan and global structure are in place and we are well positioned to deliver on this range, recognising however that year on year growth can be impacted by specific market events.

Business Performance

We continued to execute our growth plans throughout the year, defending and building upon our strong market positions in mature markets and targeting to increase our share in emerging markets. Once again, we increased the share of emerging markets as a percentage of our total edible collagen volumes. Emerging markets growth for the year was 7%, markedly different from the decline of 3% in mature markets where the demand environment was weaker. After a slow start to the year, we saw modest edible collagen volume growth from the second quarter onwards, resulting in Group volumes for the full year being flat. Group revenue was down 1% on 2018 impacted by less favourable country/product mix, and some declines in other product revenues that were partly offset by favourable FX.

Mature markets

In 2019 we experienced strong performance of snacking in North America where volumes were up 7%. Given the heritage of the Group we have strong positions in mature markets, notably the UK & Ireland, Western Europe and Australia & NZ. In 2019 market demand in these regions was challenging, primarily driven by an increase in pork prices due to African Swine Fever. This resulted in reduced promotional activity by our customers and, where our route to market is via distributors (as in Western Europe), we also saw some destocking by our distributor partners to reflect the lower activity levels. Consequently, we saw volume declines in UK & Ireland and Western Europe. Volumes also declined in Japan, due to the continued impact of lower sheep gut prices.

Emerging markets

In 2019 emerging markets share of Group volumes increased by two percentage points, aligned with our overall growth ambition. Whilst volumes for the year were up 7%, there was a particularly strong performance in the second half, with volumes up 13%. Sales momentum improved in most of the emerging markets and performance was particularly strong in China, with a second half volume increase of 41% and of 33% for the full year. Latin America momentum also improved with key customer wins achieved in the latter part of the year expected to contribute into 2020. In South East Asia we saw good performance in Singapore and Vietnam and modest growth for the year. Middle East and Africa had a strong year with volumes up 20%, where markets recovered from the listeria outbreak in 2018.

Financial performance

Underlying operating profit for the year was marginally below 2018, with positive impact of costs savings and FX offset by the impact of less favourable country mix, sales from other products delivering an underlying operating profit before non-recurring items of £39.1 million versus £40.0 million for 2018.

Underlying basic earnings per share increased by 4% to 15.2 pence.

Cash generation for the year was strong and the covenant net debt/EBITDA ratio finished the year at 1.9 times.

Non-cash impairments

In the second half of 2019 the Group undertook a review of its global manufacturing footprint with the aim to access further efficiency improvements, as well as to better align available capacity to the Group’s growth plans. As a result of this review, the Group will close its Bellshill site in Scotland during 2020. Whilst this initiative improves the cash generation capability of the Group, it also triggered an impairment review which resulted in the revision of key assumptions underpinning calculations of net present value from cash flow forecasts for US and China manufacturing operations. As a consequence, in the year we made a non-cash impairment write down associated with those operations and the closure of the Bellshill site of £45.9 million.


In 2019, we continued to roll out the Hearts & Minds programme and we had our second Group-wide safety month. Whilst the Group safety performance continues to be well ahead of the average in comparable industries, we are committed to driving further improvement and the objectives continue to be to ‘Think Safe, Work Safe and Go Home Safe, owning our Zero’.

Environmental, Social and Governance

Devro recognises that in combination with a strong financial performance it has a responsibility to its people, suppliers, customers, the environment and wider stakeholders. It takes these responsibilities very seriously. The Group continues to take specific actions to improve its ESG credentials. During 2020 we intend to build more detailed Group-wide ESG plans and report on these going forward on a regular basis.


Following the outbreak of Covid-19 in China, our main priority is the health and safety of our colleagues. We are committed to put in place all measures we can to help to contain the outbreak and support the wellbeing of our employees.

We are closely monitoring the current and potential impacts of the Covid-19 on our manufacturing and commercial operations and global supply chain. At this point in time our manufacturing location in Nantong, China, is operating at normal capacity and is not facing labour or supply shortages. We have put in place precautionary measures and are reviewing our business continuity plans for the Group.

Strategic Priorities (3Cs)

Our growth strategy is built around our 3Cs strategy, and good progress in the year was made in many areas.

Win With The Winning Customers

On the commercial side, the new organisation has been fully embedded and three-year commercial plans have been completed for each of the regional sales areas. These plans have been developed in the context of our category strategy which, taking into account consumer mega trends, is built around our growth pillars of snacking & convenience, yield quality & performance; and clean & sustainable. Based on these pillars and overall drivers of market growth (being in particular GDP per capita growth and urbanisation) our plans are to target an increase in our share of sales from emerging markets, as well as selected growth opportunities in mature markets, particularly in snacking and gut conversion. To deliver our growth plans, the alignment of resources behind the most significant growth opportunities remains key. Furthermore, with the implementation of our global operating model during 2019, we have been able to invest in commercial resources to strengthen our platform for growth. Additionally, innovation continues to be an important part of our growth delivery and in 2019 we launched Avem™, the first poultry collagen gel available in any market, and we fully commercialised our Fine Ultra range in Europe.

Focus On The Core Profitability Drivers

We continue to focus on incremental capacity and ongoing efficiency projects at all manufacturing sites. In our US manufacturing facility we tested a reconfiguration of our modern lines to provide further capacity for growth. The project was successfully completed in the fourth quarter with initial results demonstrating performance in line with our expectations. We intend to roll this out in our other sites over the medium term, utilising current footprints to provide further capacity for growth. These projects can provide up to 25% additional capacity over the next few years and should help to further improve our cost competitiveness.

During the year we achieved cost savings of £7.4 million, of which £6.2 million relates to our Devro 100 (D100) programme and £1.2 million to operating cost savings as a result of the new global operating model. For the D100 programme we have now achieved total savings over the three year period of £17.7 million which is ahead of the original guidance of between £13.0 – £16.0 million. 2019 was the last year of our D100 programme, however we have created a cost saving culture across the Group and will continue to look for savings opportunities that will largely mitigate inflationary cost pressures.
In the second half of the year we undertook a review of our global manufacturing footprint with the aim to pursue further efficiency improvements, as well as to align available capacity to the Group’s growth plans. As a result, we announced our intention to close our Bellshill site in Scotland, which will result in £5.0 million of annualised cost savings, and these will be fully realised in 2021.

Strengthening Competencies

In the later part of 2019, we reviewed the longer-term vision for the Group. Opportunities were identified to defend and grow the current core business, which continues to be the focus of the 3Cs strategy, but we also identified potential adjacent areas for growth and potential extensions beyond the current core business. These opportunities will be further developed in 2020 and beyond. In 2019 we also designed and piloted the Integrated Business Planning process for Devro. This is our vehicle to manage the global business more efficiently and effectively and it further underpins the delivery of our strategy. We continue to focus on improving our capabilities across the business and we appointed new postholders in 20% of the roles reporting directly into the Executive Management Team through a combination of recruitment of external talent and internal promotion.


In 2020 we expect to achieve good volume growth in emerging markets. In our mature markets we expect volume growth in the North American snacking market and, whilst we anticipate a continuation of the challenging market conditions in the UK and Europe (particularly in the first half), we expect Group volumes to be ahead of 2019. In addition, cost savings are expected to more than offset inflationary cost pressures. Absent any material adverse impact of Covid-19, the Board expects good progress in 2020.

Rutger Helbing
Chief Executive Officer


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