Pricing pressure hits De La Rue

Overcapacity in the banknote paper market and pricing pressure in banknote printing cut operating profits in the larger currency division by 26 per cent to £17.2m. The cut-throat competitive environment will continue to bite into the next financial year, with three or four long-term deals subject to contractual reductions, management tells us. At least the group did manage to remove some uncertainty by signing a 10-year printing contract with the Bank of England in October.

The solutions business - the world's largest commercial supplier of passports - also suffered a torrid first half. Profits fell 39 per cent to £9.4m as key long-term contracts ended and new business was sluggish. A number of big prospective orders were not put out to tender as hoped, and the transition to machine-readable passports is also proving slow.

The group's short-term focus is on the bottom line, says new chief executive Martin Sutherland. A factory in Dulles, USA, was closed in June and its operations relocated to other sites. Broker JP Morgan Cazenove expects adjusted EPS of 44.4p this year, down from 59.5p in 2013-14.