De La Rue ups earnings forecast as polymer biz improves

Phil Taylor, 28-Jan-2021

Shares in De La Rue spiked today after the company raised its profit forecasts for the financial year, and announced an expansion of UK production that will create 70 jobs.

The banknote printer and authentication technology specialist now expects full-year operating for the year ended March 31 will be between £36m and £37m ($49m-$50m), ahead of analysts’ average predictions of £34m.

De La Rue said the raised forecast comes after a strong performance at its currency division, and also announced that its planned expansion of polymer banknote production will take place in the UK through an expansion of its operations in Westhoughton, near Bolton.

The decision follows rising demand for its SafeGuard polymer substrate, said the company. The expansion – in a new building adjacent to De La Rue’s current facility – will be operational by the end of the year and “more than double current polymer production capacity.”

Shares in the company were up almost 7 per cent in the wake of the announcement, as investors responded to a positive assessment of the company’s prospects during a turnaround plan under new chief executive Clive Vacher.

On the negative side, De La Rue did reveal that the pandemic is causing some delays in securing new government revenue solutions contracts with overseas governments by its authentication division, which it blames on disruption in procurement processes.

We have announced today a positive trading update and good progress on our polymer substrate expansion strategy #DLAR https://t.co/OOstKlBhvV pic.twitter.com/chXZ73VCIz
— De La Rue (@DeLaRuePlc) January 28, 2021

Spending on the polymer business will rise by £5m to £20m as a result, although the overall spend of around £80m on the revamp over the three-year plan is unchanged.

“I am pleased that we are able to report increased adjusted operating profit expectations for the year, due to positive trading,” said Vacher. “We remain focused on delivering shareholder value through the successful execution of our turnaround plan.”