De La Rue plc (lon:dlar)
De La Rue – Oversold?

De La Rue plc Financials

ItemCurrent PeriodPrevious Period
Period12 Months12 Months
Adjusted Earnings
Adjusted EBITDA£79m£78m
Statutory Profit£31m£123m
Adjusted Profit£60m£57m
Total Debt
Net Debt£107m£50m

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De La Rue plc Share Price
Grade:No grade has been assigned to this company
Title: De La Rue – Oversold?
Company: DLAR - De La Rue plc
Share Price Then: 223p
Author: Ian Smith
Date: Mon 12 Aug 2019
Comments: De La Rue shares have had a horrible 12 months down from 450p-500p to 300p in almost a day and then from 300p to 230p in another day.

The big drop on the 30th of May down to 300p was due to a disappointing annual report and the drop on the 23rd of May was due to and SFO investigation into De La Rue’s business in Sudan.

De La Rue are in the very unsexy business of currency, ID documentation and Product Proof of Authenticity along with services related to these markets.

Two things scream out from the latest annual report, an increase in net debt by £50m and the massive change in the Statuary profits figures.
Unusually, it turns out that the adjusted figures are more reasonable than the statutory ones, as exceptional charges went from a gain of £60m in 2018 to a loss of £28m in 2019.

Most of the loss is £18m from a customer in Venezuela, it is possible but not all clear that this may be paid at a later date. The rest of the exceptional charges seems pretty normal and not indicative of anything to be specifically worried about.

The £60m gain was the result of the sale of Portals De La Rue the manufacturer of paper for bank notes.

So the change is profits is mostly one bad debt and no boost from selling a business.

This bad debt was also part of the £50m increase in net debt along with “bad timing” of other invoices, this worries me.

The loss of the UK Passport business is probably going to be a loss of around £40m of revenue per year, just how profitable this was is less clear and this division has now been sold for £42m.

The valuation of the Group’s UK defined benefit pension scheme is a deficit at 30 March 2018 of £76.8m, with £20 million paid in during 2019 and a similar amount will be due in 2020.

So the group has decided to refocus, concentrating on currency printing and Product Authentication Solutions, this leaves the company printing currency, selling the advanced security features that third parties might want to include on ID documents and providing anti counterfeit id and services to back up the id.

The company has credibility in the market but also slowly changing its focus, it may be that there is a big future in providing anti fraud technology, especially for more expensive items bought on line.
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