De La Rue (DLAR) Lost A Contract To Produce “Blue Brexit Passport”

  • Jun 03, 2019 BST
  • Team Kalkine
De La Rue (DLAR) Lost A Contract To Produce “Blue Brexit Passport”

De La Rue Plc is a papermaker and commercial security printer. The company offers printed banknotes, banknote paper, banknote security components and polymer substrate. Its areas of operations are divided into segments like Currency, Identity solutions and Product Authentication and Traceability.

Recently the company lost out a contract worth £490 mn to print blue passport post-Brexit. The pre-tax profits of the company plunged by 77 per cent. As per the IFRA accounting system, earnings per share of the company declined to 18.8 pence against the earnings of 93.7 pence per share in the year-ago period. Reported earnings per share in FY2019 recorded a plunge of 80 per cent against the FY18 data. After this poor performance, the Chief Executive of the company, Martin Sutherland has announced his departure as Chief and director from the De La Rue board as the company recorded a major plunge in its bottom line in the wake of the contract loss.

The outgoing chief of the company said that, in the wake of the contract loss from the British government to made blue passport, we have set out a three-year cost-reduction plan with the aim to contribute in excess of £20mn, in annual savings by FY22.

Last year, the British government allocated this contract to a Gemalto, a Franco-Dutch rival of the De La Rue. This reflects that a symbolic document will be produced in France rather than on the UK soil as they are currently.

One of the conservative member Jacob Rees-Mogg said that "it was odd to have a national symbol produced abroad."

Group's revenue, excluding paper, recorded a growth of 12 per cent and stood at £516.6mn and adjusted operating profit increased to £60.1mn and reported a growth of 6% on a YoY basis.

The FY19 balance sheet of the company shows an increased net debt to £107.5mn against £49.9mn of debt recorded in the last financial year. Despite a major plunge in the bottom-line of the group, the board of the company recommended a final dividend of 16.7 pence per share and including final dividend, full-year dividend per share stood at 25.0pence per share, which was in line with the last year's dividend.

Share Price Performance

In the last five trading sessions, shares of the DLAR took a nosedive and was down by around 28% and on a yearly basis, the stock was down by approximately 41%. 

Daily Price Chart (as on June 03, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (as on June 03, 2019 at 09:57 AM GMT), shares of DLAR were quoting at GBX 305.5 and trading marginally below the previous day’s closing price of GBX 306.0. In the past 52-wks, the stock has touched a high of GBX 567 and a low of GBX 282.

From the simple moving average standpoint, shares were quoting considerably below its 200-days, 60-days and 30-days simple moving average prices, which is a bearish technical indicator for the stock and indicates that stock could fall further from the current trading levels.

3-days, 9-days and 14-days Relative Strength Index of the stock stood at 14.21, 21.24 and 24.29 which indicates that the script has been oversold at the LSE.

The outstanding market capitalisation of the company stood at around £317.76 mn with a dividend yield of 8.17%.

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