Broker snap: Investec downgrades De La Rue after profit warning

23rd Oct 2013 10:51

Investec has downgraded its rating for banknote printer and ID services group De La Rue from 'add' to 'hold' after the company's profit warning on Wednesday.The broker explained that first-half results should be in line with expectations with operating profits up 18% at £39m after the company made good progress in cost reduction in the six months to September 28th.However, "this is now unlikely to be enough to offset the impact of poorer pricing in banknote printing in H2 and ongoing weakness in Cash Processing Solutions," Investec said.De La Rue said that full-year operating profits would be around £90m, up 40% on the year but £10m under its £100m target set three years ago.The broker expects to reduce its full-year earnings per share (EPS) forecast for the year ending March 2014 by 13% to 59.1p, equal to an adjusted operating profit of £88.4m. Profit forecasts for the following year look set to fall by a similar amount, it said.Investec has cut its target price for the stock from 1,070p to 885p."We expect the shares to fall in line with our downgrade and move to 'hold' until greater clarity is seen."The stock was down 9.48% at 888p on Wednesday morning.BC