Don't be too concerned by the apparent slide in profits at banknote printer
With new countries such as South Sudan needing banknotes, then the group's currency division looks well placed. That unit saw operating profit rise 7 per cent in the period to £22.9bn - as banknote volumes grew 12 per cent to 2.8bn. A strong order book meant that full-year banknote volumes are expected to be around 6.5bn - up 10 per cent on last year. Meanwhile, in the solutions division, a lucrative UK passport printing contract pushed operating profit up 37 per cent to £8.6m. The divisional order book rose 6 per cent to £66m, too.
The strong performance helped deliver cash inflow of £33.2m in the half, although weak equity conditions saw the pension deficit increase to £117.5m from £100.5m at the full-year stage. Investec Securities expects adjusted full-year pre-tax profit of £56.2m, giving EPS of 41.3p (2011: £33.3m/23.9p).
|DE LA RUE (DLAR)|
|ORD PRICE:||876p||MARKET VALUE:||£869.7m|
|TOUCH:||876-877p||12-MONTH HIGH:||915p||LOW: 541p|
|DIVIDEND YIELD:||4.8%||PE RATIO:||42|
|NET ASSET VALUE:||*||NET DEBT:||£39m|
|Half-year to 24 Sep||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 7 Dec
Payment: 11 Jan
*Negative equity shareholders' funds
De La Rue is performing well and management will look to identify further cost savings in the second half to mitigate stubbornly high cotton prices - a key raw material in banknote production. Still, a toppy looking forward PE ratio of 21 leaves that good news looking factored-in. Fairly priced.
Last IC view: High enough, 840p, 24 May 2011