De La Rue, the world’s largest bank note printer and payment systems company, can thank its associated companies and in particular De La Rue Giori, the Swiss company that designs and sells banknote printing equipment, for interim pre-tax profit growth beyond City predictions. Pre-tax profit rose 10.1% to UKP72.8m in the group, while profit from associated companies grew 87.7% to UKP13.7m. Indeed the results were even rosier if you remove the UKP9.5m exceptional gain last time from the sale of a Brazilian subsidiary, with earnings per share up 32.4% to 27.8 pence. However, De La Rue has predicted that this level of growth will not extend into the second half, though it will better the second half of last year. Such caution derives from a mix of exceptional items in the first half. Banknote printing was at an all-time high for a half-year, with strong demand from a broad range of customers. Turnover in this business was UKP25m, although the group is taking a conservative line to profits from this work. This has served to cut margins in the Security Printing operations to 24.0% from 26.1%, half on half, and such state printing works projects will continue to influence margins, the group said. De La Rue also recognised big improvement in the results of associated companies. Giori represents the bulk of the figures, but DAQ Electronics in the US, involved in remote security systems, and Ensec in Brazil also perfomed well. De La Rue also pointed to a 2.2% drop in its group tax rate plus interest receivable up UKP1.2m at UKP6.9m. Whereas UK corporation tax rose UKP2.7m to UKP4.1m, overseas tax paid fell UKP12.8m to UKP6.0m. This caution failed to dampen the city’s enthusiasm and De La Rue’s pushed up 28.8p to 1031.5 pence, ahead of the market. The only clouds on this particularly sunny afternoon were the difficult market conditions and stiffer competition in Germany faced by Garny in the payment systems business. Market opportunities resulting from the integration with eastern Germany have begun to dry up and the company suffered a downturn in profits. However, the rest of the Payment Services business, comprising LeFebure in the US and De La Rue Systems, performed well. Overall margins fell slightly to 10.7%, but the company expects margin growth in the second half. Overall operating profit for the security printing was 24.3% higher at UKP31.2m on turnover up 35.6% at UKP130.2m; transaction systems up 80% at UKP4.5m on turnover up 39.1% at UKP41.3m; payment systems up 3.1% at UKP16.5m on turnover up 4.1% at UKP155.1m. Net cash balances were UKP255.7m, down from UKP301.9m last time. Incoming cash in the half from operating activites was UKP30.7m, plus UKP10.7m in dividends from associated companies. Outgoings were UKP25.3m of dividends to shareholders, UKP10.1m for taxation, UKP13.1m invested in fixed assets and UKP11.2m paid for a 22.5% stake in the National Lottery, where De La Rue will procure the on-line printed items. The company will pay an interim dividend of 7 pence, up 16.7% on last time.
