As De La Rue updates the market with its interim results, we explain what it means for investors.
De La Rue plummets into the red and suspends dividend payments
- Loss of UK passports contract, Venezuela not paying their fees, an SFO investigation and rising competition in the money printing business all factors contributing to today’s poor results.
- Group paid no interim dividend as it sank to £9.2mn, compared to £10.1mn profit this time last year.
- Over the last few years the share price has dropped from over £6 a share and now trade below £1.45 after this mornings near 20% plunge.
- Adjusted revenues fell by 15% mainly due to astonishing 30% fall in sales of its money printing business.
- Recommendation: The Share Centre doesn’t currently have a view on the stock but a great deal of uncertainty for the money printing side of the business remains and therefore it’s a company we feel that should be avoided.
We don’t see much of a turnaround coming in its key money printing business in the short to medium term as the industry adjusts from the demand overspill of the last few years and increasing competition. For the longer term we also have to question how large this market can be in an increasingly digitalised world. It is therefore of the utmost importance costs are reigned back and on this, there must be some hope with Clive Vacher now in place as the CEO with his reputation as a turnaround specialist, along with a new management team. The interim dividend has been cut and despite management sounding more confident for the second half, there is still a great deal of restructuring to do before the business can be deemed “healthy” and we do not expect an immediate resumption of the dividend payouts.
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