Davy starts coverage of De La Rue at 'outperform'

Davy said the sale of the Authentication business for £300m "will transform the financial profile of the remaining De La Rue currency business".

It said the continuing group will have a significant net cash pile for organic - and maybe inorganic - investment, a minimal pension liability profile and an improving currency design and print order book.

"De La Rue has been one of the world’s leading designers and manufacturers of currency for many decades," it said.

"With few listed peers and cyclical demand from its mainly government/central bank customer base, the last few post-Covid years have been tough."

Davy said the ongoing switch from cotton-based banknotes to polymer and the current technology lead that De La Rue has provide significant revenue and volume growth opportunities as well as a key reason why acquirers will continue to circle.

"We see material upside, driven by an initial re-rating to reflect the improved financial position," Davy said.

"Further organic investment and acquisitions could aid revenue and profit growth; once the pension liabilities have been further derisked, a potential sale of the business is possible."

De La Rue’s interim results are due on 28 November.

At 1250 GMT, the shares were up 2.7% at 98.40p.