Overcapacity in the banknote market continued to squeeze De La Rue 's (DLAR) underlying margins during the first half. Strip out exceptional net income of £6.8m for the sale of surplus land and underlying pre-tax profit fell by almost a third to £18.9m. To remedy matters the banknote printer is restructuring its manufacturing processes, which management thinks will deliver annual savings of £13m from early 2019.
The group's currency business did actually benefit from high demand for bank notes in some countries. This boosted banknote paper volumes, although reduced demand from a key contract constricted profit growth. The identity systems division, which supplies products including e-passports, also saw operating profit dip due to a reduced contribution from a large contract.
However, the security products segment managed to grow its operating profit by 13 per cent after launching its first digital solution for the security products market. DLR Certify allows customers to authenticate their products and protect revenues.
Broker Investec Securities expects adjusted EPS of 32.9p for the March 2016 year-end, down from 44.7p in 2015.
DE LA RUE (DLAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 429p | MARKET VALUE: | £434m | |
| TOUCH: | 428.5-429.75p | 12-MONTH HIGH: | 606p | LOW: 426p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 11 | |
| NET ASSET VALUE: | * | NET DEBT: | £103m | |
| Half-year to 26 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 215 | 18.1 | 13.5 | 8.3 |
| 2015 | 205 | 19.6 | 19.2 | 8.3 |
| % change | -5 | +8 | +42 | - |
Ex-div: 3 Dec Payment: 6 Jan *Negative shareholders' equity | ||||
