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25 Nov 2020 | 09:09

Costs cuts pay off for de La Rue as profits soar

(Sharecast News) - UK banknote and passport printer De La Rue reported a huge rise in first-half profit on Wednesday, driven by cost cuts under its turnaround plan and said it was in early talks with governments on Covid-19 immunity certificates. The company, which makes Britain's polymer £5, £10 and £20 pound notes, reported adjusted operating profits of £15.3m for the six months to September 28 compared with £2.2m a year earlier. Revenue fell 15.1% to £174.7m.

De La Rue, which lost the contract to make the UK's Brexit-symbolic new blue passports, said it was on track to save £23m from cost cuts in the 2021 financial year.

Its currency division continued to see strong ongoing global demand for cash as central banks seek to increase stock levels during the coronavirus pandemic.

"We expect to utilise 100% of our remaining available polymer and banknote printing capacity for full-year 2020/21 with the mix in banknotes delivering higher revenue and margin during the second half (of) 2020/21," the company said.

"We have a target of returning the company to a strong, financial position and an operating platform which will deliver sustainable growth at high operating margins and strong cash generation in the medium term."

"Following an initial period of cash outflow to fund the turnaround plan, by the end of the turnaround plan in full year 2022/23, we aim for the group to be generating positive free cash flow and capable of supporting sustainable cash dividends to shareholders."

Chief executive Clive Vacher said performance for the company's fiscal year 2021 had been positive and that outlook for revenue, profit and net debt for the year was in line with expectations.

He added that discussions with governments and private companies about the use of its technology to produce a Covid-19 immunity certificate were at an early stage. The company's authentication arm already provides tax stamps and track-and-trace solutions for tobacco and alcohol markets.

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