De La Rue offers little of note; The Investment Column
Wednesday 05 June 1996
The problem is that, despite its commanding position in the world's commercial market for bank notes, the group is being hammered by cheap competition. The situation is not necessarily immediately apparent from last year's figures, which are distorted by Portals' first full contribution of pounds 25m and a number of other one-off factors.
Pre-tax profits crept up nearly 1 per cent to pounds 148m in the 12 months to March, but underlying earnings per share, down 22 per cent to 42.5p, give a better clue to the state of the underlying business. De La Rue managed to claw back most of the near-20 per cent first-half decline in bank note volumes, but the 12 per cent up-tick in the second six months was won at some cost. Prices fell throughout the year, ending 10 per cent down. With an overall 4.4 per cent fall in volume on top, it is little wonder profits from banknote printing slumped by pounds 17m last year.
The company is cautiously optimistic that the price slide has bottomed out and says the order book, extending out seven months, has not been built on the back of lower prices. The difficulty is, however, that its hi-tech, forgery-resistant bank notes are expensive for third world countries when the world is awash with capacity in the wake of the break-up of the Soviet bloc. The recently-created eastern European countries have largely satisfied their demand for new currency notes and some, like the Ukraine, are also building their own capacity with the assistance of De La Rue.
The group has moved to deal with the problems identified last year at the cash handling systems operation, where profits dipped from pounds 38.5m to pounds 38m before an pounds 18.3m provision for the cash costs of shaking up the business over the next two years. Management has been changed and Mr Marshall reckons the payback on the total pounds 20.9m cost of the exercise will come within that period. But the German recession and US bank mergers which have hit the business continue to affect growth.
Meanwhile, the one-off boost from the stake in Camelot, the National Lottery group, will not be repeated this year. That chipped in pounds 17.4m, up from pounds 2.4m last time. Assuming group profits of around pounds 140m this year, the shares, down 65p at 656p, stand on a prospective p/e of 14. The brave will see that as representing a buying opportunity, but the more cautious may want to hold off for now.
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 3 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 4 Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
9 reasons Greece's experiment with the radical left is doomed to failure
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...