Overcapacity in the banknote market and rising usage of online payment systems forced De La Rue (DLAR) to rethink its strategy in May 2015. The first year of the five-year plan to overhaul the business appears to have restored some investor trust.
A chunk of good news came one day prior to results day, when De La Rue announced the disposal of its underperforming cash processing solutions (CPS) unit for £3.6m, with a further payment contingent on performance. Factor in CPS's sluggish performance and underlying operating profit crashed a tenth to £62.5m in the year to 26 March - without it a more respectable 2 per cent gain was achieved.
Other positive developments included the arrival of several new senior staff, the enhancing of service offerings and the simplification of the business structure, which involved slashing a tenth of the workforce. Reducing banknote capacity by a quarter, and projecting £13m of related cost savings, also impressed.
A strong operational performance from its core currency business was key to De La Rue delivering on its upgraded guidance. The divisional order book swelled 85 per cent to £278m in the reported period, as banknote volumes surged off overspill contracts and its polymer substrate Safeguard proved popular with customers.
Broker Investec nudged up its forecasts and now expects pre-tax profits of £50.6m for the year to March 2017, giving EPS of 39.7p (from £58.5m and 47.5p in FY2016).
DE LA RUE (DLAR) | ||||
---|---|---|---|---|
ORD PRICE: | 577.5p | MARKET VALUE: | £586m | |
TOUCH: | 577-578p | 12-MONTH HIGH: | 577.5p | LOW: 396p |
DIVIDEND YIELD: | 4.3% | PE RATIO: | 12 | |
NET ASSET VALUE: | * | NET DEBT: | £106m |
Year to 26 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
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 (restated) | 423 | 40.6 | 31.8 | 25.0 |
2016 | 455 | 54.9 | 46.8 | 25.0 |
% change | +7 | +35 | +47 | - |
Ex-div: 23 Jun Payment: 3 Aug *Negative shareholders' equity |