De La Rue - Venezuela costs dearly

Despite delivering close to our expectations for FY19, De La Rue has hit another problem which undermines prospects for FY20. The abrupt end of the overspill supply to Venezuela due to sanctions not only leaves the company £18m out of pocket, but also having to accelerate optimisation efforts to adjust to the new, lower but sustainable banknote print volumes by 2021. The result is a 22% reduction in our FY20 EPS estimates with declining revenues through FY21. Combined with the announced change of CEO, even the dividend yield support now falls into question, although we feel the prospects are bright enough for its maintenance.

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