De La Rue profits plunge less than predicted

Revenues declined 5% to £204.8m in the six months to 26 September, with underlying operating profit shrinking 29% to £18.9m and underlying pre-tax profit down 38% to £12.8m.

Underlying earnings fell 40% to 9.5p per share and the dividend was held flat at 8.3p per share.

On the upside, there were large state overspill orders for the print and paper segment, with progress in polymer with a three-year contract, while on the downside there was a deterioration in trading at cash processing solutions (CPS) and a loss of an important currency contract.

Chief executive Martin Sutherland said overall the performance was better than expected, let down by the CPS result.

"The Currency business has shown strength and resilience against the ongoing volatile market conditions. Identity and Security Products have also progressed well with the launch of the first digital solutions."

He said the success in winning large overspill orders in the period has strengthened the order book, giving confidence and visibility for the full-year performance.

The 12 month order book was 37% larger year-on-year at £405m, though Sutherland noted that market conditions remained volatile.

The five-year restructuring plan Sutherland set out in May has kicked off, with increased investment in product development and new technologies, and review of the manufacturing footprint to improve efficiency and reduce costs nearing completion.

The manufacturing review is expected to drive cost savings of £13m from the 2019 financial year but with an upfront investment in capex and restructuring charges.

"Whilst it will, of course, take time to deliver the full potential of the strategy, we are pleased with the progress made at this early stage," he added.

Analysts at Investec said the company was making progress, with both adjusted operating profit, PBT and EPS were ahead of its forecasts.

"While it is still early days in the restructuring program, there are encouraging signs that the new strategy is beginning to produce benefits. The situation at CPS is disappointing, but due to external factors which are difficult to predict.

"The launch of the first software solutions in both Identity and Security Products shows the strategic shift away from just physical tokens."