Aston Martin non-exec gives £1m backing

Auto manufacturers seem to be falling over themselves to make the latest pledge on the electric vehicle front. Volvo is the latest carmaker to ditch internal combustion, opting instead for plans to sell only EVs by 2030.

Ford recently said that it would stop selling cars in the UK and Europe with any form of petrol-fuelled engine by 2030, at least in terms of passenger vehicles, while General Motors, plans to have all its cars emission-free by 2035.

Perhaps the announcement that raised most eyebrows was Jaguar’s pledge to become an electric-only brand from 2025 onwards. Admittedly, group sales have suffered in recent years due to an over-reliance on diesel powertrains and saloons, at a time when everyone seemed to be switching to SUVs. So the move might make more sense from a sales perspective than a purely environmental one. 

Has Jaguar’s move has set the precedent for luxury marques? Lawrence Stroll, the Canadian billionaire who led the bailout of Aston Martin Lagonda last year, told the Financial Times that the Warwickshire-based group will launch a new pure-electric sports car and SUV by 2025, both of which will be built in the UK. However, it will continue to make traditional engines for car enthusiasts, even though some countries are set to ban the sales of these types of vehicles from the end of the decade.

The practicalities of the industry switching en masse to EVs within such a limited timeframe could risk another lengthy period of economic disruption. Such a scenario does not appear to worry Michael de Picciotto, a non-executive director of the group, who has forked out close to £1m for 50,000 shares as part of his beneficial holding. That followed a separate hefty acquisition by fellow board member Robin Freestone. The market price has not changed appreciably since December’s share consolidation, and we remain circumspect over any near-term recovery prospects. 

“The love of sausages is global”, Devro’s website proclaims. Judging by last year’s resilient performance against the backdrop of a devastating pandemic, the company is not wrong.

Devro, which supplies collagen casings for meat products, endured a revenue decline of just 5 per cent to £248m for the year ending December 31, notwithstanding the havoc wreaked by the outbreak of Covid-19.

The group attributed its relative strength to the “divergent” trading patterns of its geographical regions. On the one hand, emerging market volumes rose 13 per cent. This was better than the 6-10 per cent annual growth rate targeted by management, as Devro benefited from new business wins and improving market share with existing customers. On the other hand, mature markets volumes dropped by 5 per cent as the coronavirus crisis and associated lockdowns tempered demand from food-service customers.

In turn, the group posted underlying operating profits of £40.8m, up 4 per cent, on a margin of 16.5 per cent — up from 15.6 per cent. Such progress was rooted in supply chain efficiency savings, despite the negative effects of Covid-19 related expenses.

Devro also achieved operating cash flows of £51.6m, down slightly from £59.7m but still sufficient to reduce its net debt pile from £125m to £110m.

The new year has started well, Devro said, although it is feasible that Covid-19 could throw further obstacles in its way. Investors may be reassured, therefore, that two directors bought shares in the days after the group delivered its full-year results. New chief financial officer Rohan Cummings bought 20,483 shares at £1.90 apiece for £38,918. Non-executive director Lesley Jackson purchased 13,099 shares totalling £24,862.

Brokerage Numis believes Devro’s volume growth will accelerate as markets normalise, fuelling operational gearing.