Bank note printing company De La Rue (DLAR) is up 2.8% to 669p as it secures a potentially lucrative contract with the Bank of England.
The company will be providing the Bank with polymer substrate material for 25% of the first issuance of new £20 notes for 10 years. No financial details of the contract have been disclosed at this stage.
Canadian company CCL will provide the remaining 75% after it acquired Innovia last year which makes the most polymer notes in the world.
De La Rue won a contract to design and print £5 and £10 notes in 2014 using the materials supplied by Innovia.
Since De La Rue began producing its patented ‘Safeguard’ polymer substrate in 2012, it is the only vertically integrated supplier of polymer banknotes.
The company’s Safeguard product is used by 15 issuing authorities across 21 denominations of bank notes. Production of the material almost quadrupled last year and is expected to double this year.
However, this recent win is not expected to have any financial impact on the company until financial year 2019 as this is when the contact commences.
Broker Investec says ‘This is a great reference contract win for De La Rue and will help it win more polymer contracts’.
The analyst also expects the contract to increase polymer substrate utilisation from around 800 tonnes expected for the end of 2018 ‘towards the current max of about 2,500 tonnes’.
Investec has made no changes to its 2017 forecasts at this time. It identifies the next potential catalyst for upgrades as the UK passport tender, expected in the second half of the company’s financial year.
De La Rue’s year end is 25 March and its first half results to 24 September are expected on 21 November.
