De La Rue shares dive

Security slip: Second profits warning of the year sends investors scurrying
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MAGNUS GRIMOND

De La Rue, the world's biggest banknote printer, sent investors reeling yesterday with its second profits warning this year. The news triggered a free fall in the shares, which dived 182p to 718p, leaving them nearly a third lower than the year's high of pounds 10.52 hit in February.

The company said headline earnings per share would fall below last year's level after being hit by a fall in business in the main security printing operation and two other parts of the group. Having braced the market as recently as July to expect modest earnings growth this year, the latest estimate from the company sent analysts scurrying to slash forecasts. Pre-tax profits are now expected to be as much as pounds 25m lower than expected, leaving an outturn of between pounds 140m and pounds 150m, compared with pounds 147m last year.

Sonia Falaschi of brokers UBS described the latest warning as "disappointing, not disastrous". She said De La Rue was "a defensive stock, which had got overblown on expectations of growth which has been exceptional over the past few years". But another analyst said the shares could still be vulnerable to further bad news.

In early March the shares sank 143p in one day after the company reined back profits expectations in the wake of the pounds 682m acquisition of Portals, the security paper maker. Jeremy Marshall, chief executive, said he understood the market's reaction yesterday after the second disappointment this year.

But despite unveiling a drop in interim profits from pounds 72.8m to pounds 69.1m in the six months to September, Mr Marshall said the fundamentals of the business had not changed.

He said that "a number of micro factors rather than one macro factor" had changed the forecast. In the main banknote operation it had lost some business from countries which needed to top up their own production. This had now emerged and order books stretched out for 10 months, but it would be too late for this year, knocking pounds 10m from profit expectations. A fall in deliveries of banknote machinery made by the Giori associate would shave another pounds 10m from the figures.

Investment Column, page 26

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