Overcapacity within the banknote printing and paper market continued to put pressure on margins at De La Rue's (DLAR) core currency division. While banknote print volumes were up 5 per cent, a fall in print prices meant full-year operating profit for the segment fell 17 per cent to £50.5m. Matters weren't helped by poor performances from the group's identity systems and security products businesses. As a result, the group's underlying operating profit was down by just over a fifth to £69.5m.
Management at De La Rue - the world's largest banknote printer - has announced a dual strategy in response to the deterioration in market conditions. The group has grouped its product lines into two strands - effectively those it will 'optimise and flex' and those it will 'invest and build'. Management will focus on improving cash flow and profitability by reducing costs and increasing operational efficiency.
The group achieved £7m in savings via streamlining its operations in the period under review and chief executive Martin Sutherland expects to achieve a similar reduction through optimisation measures this year. Alternatively, the group will invest in its higher-value polymer substrate, in response to growing global demand for non-paper currency. It will also grow its security and identity products such as holograms, while building on recent product launches.
Broker Investec Securities expects adjusted EPS of 33.5p for the March 2016 year-end, down from 44.7p in 2015.
DE LA RUE (DLAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 504p | MARKET VALUE: | £509m | |
| TOUCH: | 502-504p | 12-MONTH HIGH: | 892p | LOW: 467p |
| DIVIDEND YIELD: | 5% | PE RATIO: | 15 | |
| NET ASSET VALUE: | * | NET DEBT: | £111m | |
| Year to 28 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 464 | 72.8 | 67.6 | 42.3 |
| 2012 | 528 | 32.9 | 31.8 | 42.3 |
| 2013 | 484 | 43.7 | 37.4 | 42.3 |
| 2014 | 513 | 59.8 | 47.3 | 42.3 |
| 2015 | 472 | 38.9 | 34.0 | 25.0 |
| % change | -8 | -35 | -28 | -41 |
Ex-div: 2 Jul Payment: 3 Aug *Negative shareholders' equity | ||||
