De La Rue grows profits 18% but may fall short on targets

Bank note printer De La Rue, which has a factory at the Team Valley, Gateshead, has reported estimated operating profits of £39m for the first half of the current financial year

De La Rue has a factory on Team Valley
De La Rue has a factory on Team Valley

Bank note printer De La Rue, which has a factory at the Team Valley, Gateshead, has reported estimated operating profits of £39m for the first half of the current financial year.

The figure, posted in a trading update for the six months to September 28, represents an 18% increase on the same period last year, on marginally lower revenues.

The performance was described as being in line with expectations.

“This improvement, despite more challenging trading conditions, reflects the good progress made on the ongoing cost reduction programme which is on track to meet the targets for the year,” the trading update said.

Within the currency division, banknote print volumes in the first half were down 10% at 2.6bn notes, while banknote paper volumes increased by 4% to 4,700 tonnes, notwithstanding the challenging market.

“The continuing overcapacity in the banknote paper market has led to a worsening pricing environment in the printed banknote market with recently confirmed orders, for delivery in the second half of 2013/14 and in the 2014/15 financial year, reflecting this pricing pressure,” the update said.

The company’s Solutions division, meanwhile, enjoyed strong trade, with the Identity Systems business delivering a good performance.

However, the decline in trading results seen in the second half of 2012/13 in the Cash Processing Solutions (CPS) business has continued into the first half of 2013/14.

As a result, this business will report an operating loss in the first half.

Management action to reduce costs further has commenced, but it is expected that CPS will report a loss for the full year, with a target of achieving break even in 2014/15.

The group’s 12-month order book at September 28 was £232m, up £25m since the start of the year.

The update concluded: “In light of the more difficult trading conditions in the Currency division and the CPS business, the Board considers it appropriate to guide that operating profits for the Group for 2013/14 (before IAS19 adjustments) will be c£90m.

“Although this is an increase of over 40% on the previous financial year, it is below the three year Improvement Plan target which was to raise operating profit from £40m in 2010/11 to £100m by 2013/14.

“The Board is pleased with the level of order intake in the Currency division but anticipates that the pricing environment in the second half of 2013/14 will continue throughout 2014/15.”

As the world’s largest integrated commercial banknote printer, De La Rue is partnered with governments, central banks, issuing authorities and commercial organisations around the world and has been involved in the design or production of over 150 national currencies

It also produces a wide range of security documents, manufactures cash sorting and inspection equipment, and offers a range of specialist services and software solutions.

The group, which is listed on the London Stock Exchange, employs approximately 4,000 people and also has sites in Basingstoke, Loughton, Essex, Bathford and Somerset.

It will announce its interim results on November 26.

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