i'm buying on the blips

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Numis Add 949.25 945.00 1,009.00 1,070.00 Upgrades

I missed this earlier.

Trading Update

De La Rue plc (DLAR.L/DLAR.LN) is today updating the market on trading for the six months to 28 September 2013 and its outlook for the remainder of the current financial year.

The Group's performance in the first half of the current financial year was in line with expectations with Group operating profits estimated to be c£39m, up 18% on the six months to 29 September 2012, on marginally lower revenues. This improvement, despite more challenging trading conditions, reflects the good progress made on the ongoing cost reduction programme which is on track to meet the targets for the year.

Within the Currency division, banknote print volumes in the first half were down 10% at 2.6bn notes while banknote paper volumes increased by 4% to 4,700 tonnes notwithstanding the challenging market. The continuing overcapacity in the banknote paper market has led to a worsening pricing environment in the printed banknote market with recently confirmed orders, for delivery in the second half of 2013/14 and in the 2014/15 financial year, reflecting this pricing pressure.

The Solutions division overall has traded well with the Identity Systems business delivering a strong performance. In the Cash Processing Solutions (CPS) business the decline in the trading results seen in the second half of 2012/13 has continued into the first half of 2013/14 and as a result this business will report an operating loss in the first half. Management action to reduce costs further has commenced, but it is expected that CPS will report a loss for the full year, with a target of achieving break even in 2014/15.

The Group's 12 month order book at 28 September 2013 was £232m up £25m since the start of the year.

In light of the more difficult trading conditions in the Currency division and the CPS business, the Board considers it appropriate to guide that operating profits for the Group for 2013/14 (before IAS19 adjustments) will be c£90m. Although this is an increase of over 40% on the previous financial year it is below the three year Improvement Plan target which was to raise operating profit from £40m in 2010/11 to £100m by 2013/14.

The Board is pleased with the level of order intake in the Currency division but anticipates that the pricing environment in the second half of 2013/14 will continue throughout 2014/15.

De La Rue will announce its interim results on 26 November 2013.

Interim Management Statement

HEADLINES

· Operating profit up 18% to £39.1m

· Improvement Plan benefits of £10m realised in the period

· Banknote print volumes down 10% to 2.6bn notes reflecting the timing of shipments between the first and second half of the current year

· Banknote paper volumes up 4% to 4,700 tonnes

· Headline EPS up 24% at 25.7p

· Group 12 month order book up £25m at £232m, of which Currency orders up 14% at £180m

· Continuous improvement programme on track to deliver full year target cost savings

Citibank note:
"Cut to Neutral, £10 TP — While we remain admirers of De La Rue’s strong franchise and its shares’ optionality on geopolitical dislocation, we have to respect the change in its core currency market economics with competitor price discounting.
Currency price war — The outsourced banknote manufacturer oligopoly seems currently disrupted by price discounting originating (according to De La Rue) from Oberthur, the number three banknote print operator, which previously unsuccessfully bid for De La Rue and is now advised by De La Rue’s ex-CEO James Hussey. The industry has historically seen periods of overcapacity and price discounting (e.g. during the late 1990s) and usually it has passed within a couple of years. While it happens, however, it can be a painful experience in such an operationally geared business model.
Sensible corporate strategy — We are encouraged that De La Rue’s management team does not seem tempted to spend De La Rue’s typically impressive cash generation on strategic acquisitions (unlike some of their predecessors). Instead, the focus seems to be primarily organic around existing strengths. We expect De La Rue’s R&D banknote market leadership (50 R&D employees) to be an increasingly important EPS driver in areas such as polymer bank notes and deeper monetisation of patents and knowhow through the banknote and passport supply chains. The large Bangladesh passport contract win adds credibility to this strategy
New forecasts — Reflecting confirmation of management’s lowered financial guidance, we cut our 2014-2016E EPS estimates by 15-23%. This is principally on the back of banknote price discounting but also reflects a poor period of sales for CPS. These EPS downgrades drive a target price cut from 1055p to 1000p. With insufficient ETR we lower our rating to Neutral."

CEO resigns.

Ex-divi wed 2nd July (28.2p)

Rising quietly.

Nice chart.

Recent Broker recs :-

25 Jul 14 Numis Add 749.50 845.00 845.00 Upgrades

24 Jul 14 Investec Buy 749.50 915.00 915.00 Reiterates

New CEO

Aug 31: Numis: Add - TP held: 845p

Preferred bidder for new BoE 10-year contract

Sept 8: Investec; Buy - TP: 915p

Sept 18: Citigroup: Neutral - TP: 820p.

StockMarketWire.com
De La Rue (DLAR) has forecast that profits in the current financial year will be around £20m lower than those in 2013/2014.

As a result it has said it is looking to cut the dividend that will be paid.

It says that overall the Group's performance for the first half of the current financial year will be broadly in line with the Board's expectations at that time. However, trading conditions across the Group have deteriorated such that expectations for the current and next financial year are now lower. In the previous financial year underlying profit before tax was £77.3m but based on recent orders and current trends within both the currency and solutions divisions the Board expects the current difficult market conditions to continue into the 2015/2016 financial year.

The effect of the more recent pricing pressures together with certain contractual price reductions, which will come into effect in 2015/2016, on a number of long-term contracts will impact margins and profitability further.

In light of this more difficult trading environment the Board says it intends to reappraise the level of the company's dividend for the full year and expects to announce in November an interim dividend of 8.3p per share (2013/14: 14.1p).

Philip Rogerson Chairman said: "While disappointing to announce this trading update De La Rue, as the market leading banknote printer, remains a strong, profitable and cash generative business. We will continue to pursue efficiency gains, invest in the business and in R&D for the future."

Share price decimated .

Sept 26:
Investec: Hold - TP: 600p
Numis: Hold - TP: 540p
JP Morgan: Underweight - TP: 600p

HARRYCAT - FWIW, IMHO,
[DLAR] may recover as others have suggested, but the message appears to be a LT profit reduction with 2016 " . . . and probably further" - so I expect to see a gradual slide as the regular investors fall away. That's not to say there won't be a sp recovery - Markets will likely to bounce wildly - and who knows - a Bid might be rumoured!

10-year new contract with BoE signed

StockMarketWire.com
Banknote printer De La Rue's revenues and underlying profits fell in the six months to 27 September.

Revenues were down 8% at £214.9m while underlying operating and pre-tax profits fell by 31% and 37% to £26.6m and £20.6m respectively.

Reported pre-tax profits were down 36% at £18.1m.

Chairman Philip Rogerson, Chairman said: "While market conditions have resulted in lower revenues, we have partially mitigated the impact in the first half through cost savings from operational efficiencies and have commenced a further rationalisation of our manufacturing footprint.

"As previously announced, we expect the challenging trading conditions within the currency market to continue and this, together with lower than expected new business in our Solutions division, has impacted our outlook for 2014/15 and 2015/16.

"The Board continues to believe that, while current conditions are tough, De La Rue remains a strong, profitable and cash generative business in a market with good medium and long term growth prospects."

Nov 25: Investec : Add - TP: 560p