Broker snap: Panmure rues plastic banknotes loss for De La Rue

19th Dec 2013 11:41

Panmure Gordon notes that it was 'slightly disappointing' De La Rue missed out on the Bank of England's contract to produce a new plastic banknote 'does not bode well', retaining its 'hold' stance on the shares.The Bank (BOE) announced Innovia Security, which supplies Canadian and Australian notes, will produce the polymer for a new £5 note issued in 2016, but no supplier has yet been chosen for the launch of a plastic £10 note that is expected at least six months later. Analyst Paul Jones said he believes De La Rue will have tendered for the supply and will lose a "fairly small" amount of paper volume in 2016. As the FTSE 250 company only has two polymer notes in circulation, in Fiji and Mauritius, it "clearly missed the safety check for the BoE decision" but has an opportunity through its three further notes in its pipeline to add credibility and a better chance of winning the BoE's £10 contract as a result. "Not winning the polymer contract does not rule out De La Rue from printing the new £5 of course - Innovia has no printing capability - and the big prize is the renewal of the BoE printing contract in 2014. "Nevertheless, missing out on the £5 contract does not bode well in our opinion, and having warned as recently as October we believe this news is not the best for the short term valuation for any nervous holders."Panmure expects some short-term weakness in the shares, with a target price remaining at 806p, and has left current estimates unchanged.DLAR's shares were up 0.62% to 893.5p at midday on Thursday. OH