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De La Rue turns the corner

RESULTS: A cost reduction programme is starting to pay off at De La Rue and profits should grow significantly going forward
November 26, 2013

De La Rue's (DLAR) shares rose nearly 10 per cent on the back of these half-year figures after the specialist printer boosted operating profit 18 per cent to £39.1m. The rise came despite a fall in turnover and significantly reflects the group's ongoing success at cutting costs. Moreover, and while current over-capacity in the bank note paper market is putting pressure on prices, the group's forward order book has risen by £25m since the end of March to £232m - management expects a 40 per cent rise in full-year operating profit to around £90m

IC TIP: Hold at 918p

Finances have been turned around, too, with cash inflow from operating activities up from £11.7m to £43.9m. Trading on the banknote side remains tough, however, with print volumes having fallen 10 per cent to 2.6bn notes, although divisional operating profit before exceptional items edged up 6 per cent to £23.7m. Turnover also fell 12 per cent to £95.3m in the solutions division, but divisional profits jumped 43 per cent to £15.4m - reflecting the completion of a number of overseas contracts in identity systems that pushed that unit's profits up by 135 per cent to £13.4m.

Broker Investec Securities expects adjusted pre-tax profit of £77.8m for 2014, giving EPS of 59.1p (from £51.3m and 38p in 2013).

DE LA RUE (DLAR)
ORD PRICE:918pMARKET VALUE:£916m
TOUCH:917-919p12-MONTH HIGH:1,053pLOW: 808p
DIVIDEND YIELD:4.6%PE RATIO:25
NET ASSET VALUE:*NET DEBT:£88.7m

Half-year to 28 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201224523.822.114.1
201323428.421.914.1
% change-4+19-1-

Ex-div: 4 Dec

Payment: 8 Jan

*Negative equity shareholders' funds