Double boost for De La Rue: Banknote orders and disposals push interim results ahead 44%

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The Independent Online
PRINTING a record number of banknotes combined with increased profits from the sale of businesses to push pre-tax profits of De La Rue, the security printing and payment systems group, up 44 per cent to pounds 66.1m at the interim stage.

The group also continued to generate cash, with bank balances rising by pounds 30m to pounds 201m. Jeremy Marshall, chief executive, said the group had a 'list of target acquisitions and we hope some of them will come home eventually'.

But he added that finding targets that fitted with the group's businesses, and were for sale, was difficult. A number were under consideration, but no deal was likely within six months. The company would prefer businesses in the US or northern Europe, and Mr Marshall said: 'The more exciting opportunities are in payment systems.'

De La Rue is earning an average of 5.7 per cent on its cash balances, well below the margins on security printing and payment systems. Mr Marshall said the group had considered giving the cash back to shareholders as a special dividend, as Reuters had done.

'But, unlike Reuters, we would suffer severe advance corporation tax penalties as we do not have spare ACT capacity,' he added.

The group printed 23.6 per cent more banknotes during the six months to September, with the bulk of the growth coming from its traditional markets rather than eastern Europe, where it has recently been winning business. That helped to compensate for a decline in cheque printing as consumers moved to debit cards, and the division's profits rose by 32 per cent to pounds 25.7m.

The bumper year for banknotes also helped to boost margins from 17.8 to 24.8 per cent. The group warned that margins in the second half would be lower, but the full year should still be ahead of the 18.8 per cent achieved last year.

The payment systems business, where products include automatic cash machines and equipment for sorting banknotes, suffered from the economic downturn in Germany, where profits dropped 20 per cent. Although the division's profits were 4.7 per cent ahead at pounds 17.7m, that was only after a pounds 2.7m benefit from exchange rates and an extra pounds 1.9m profit from Garny, the company acquired last year.

Overall, exchange fluctuations added pounds 4.6m to profits. Interest receivable increased marginally to pounds 5.7m. There was also a pounds 9.5m profit on the disposal of a Brazilian security printing operation.

Earnings per share rose 45.9 per cent to 24.8p, although with profits on disposals excluded, the rise was 29.6 per cent. The interim dividend was increased from 3.85p to 6p, partly to get a better balance between the interim and final payments. The shares rose 18p to 772p.

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