In the six months to 24 September, sales were effectively flat at £189.5m (2015: £188.7m), even though the prior year had benefited from a circa £30m contract that concluded during that period.

Operating profit prior to exceptionals was up 2% to £24m, while the bottom line profit for the period was down to £8.3m from £20.2m.

The prior year figures included a £9.5m exceptional gain from the sale of surplus land at its Overton mill.

“Banknote print and paper performed particularly well. Strong volumes mean our factories are full,” said chief financial officer Jitesh Sodha. “This was driven by overspill orders and increased demand from our regular customers.”

Banknote print volumes jumped 22% to 3.3bn notes, and banknote paper volumes were up 8% to 5,300 tonnes.

Net debt increased by £9.4m to £115.5m, in part due a build-up of stock for second-half sales. The company described its 12-month order book as “strong” at £409m.

Chief executive Martin Sutherlands said talks with other papermakers over a potential joint venture for its banknote paper operation in Hampshire were ongoing, and were “constructive and complex”.

“We are exploring all possibilities about this part of the business,” he said.

The security printing giant has also secured the second major order for its own Safeguard polymer banknote substrate, and is now on tenterhooks as it awaits the outcome of the crucial Bank of England tender process for the substrate for the polymer £20.

The decision should be announced by the end of the year.

The polymer £5 that was issued in September and the upcoming £10 – which De La Rue has now begun printing – are printed on a polymer from rival Innovia Films.

De La Rue’s polymer sales jumped by 70%, and it is now in use by 15 issuing authorities. All three of the Scottish polymer £5 notes are made of Safeguard.

“Although our share is more modest by volume we are gaining the confidence of the bigger issuing authorities,” Sutherland said.

The Bank of England’s polymer £10 will be issued next summer, with the £20 following by 2020.

The £20 note deal is hugely significant because the denomination makes up by far the largest number of notes in circulation – more than 2bn according to the latest statistics. The Bank of England could choose to split the substrate deal across more than one supplier. 

Although the switch will have a knock-on impact on De La Rue’s banknote paper volumes, the group said it had been planning for the change for some time, and that growing paper volumes elsewhere would more than offset the loss.

More than 80% of De La Rue’s sales come from outside the UK, and 60% of its cost base is in sterling, so the fall in the value of the pound could also benefit the group.

“If sterling were to stay at the level it is at the moment it will give us a competitive advantage,” Sutherland said.

He also said De La Rue would look at potential “bolt-on” M&A deals that fitted in with the group’s existing strategy.

De La Rue’s ongoing plans to restructure its manufacturing footprint to provide more flexibility were “on track”, and the group has decided to keep open one of the three banknote printing lines originally slated for shutdown at its Malta facility. The Kenyan joint venture should be finalised in the second half. It spent £8.8m on capex during the period.

Overall revenues in Currency, De La Rue’s biggest division, were down 2% at £136.4m, and operating profits rose 3% to £14.3m.

At its Identity Solutions business sales were up 6% at £33.5m but operating profits fell by 26% to £3.4m due to the conclusion of the large contract.

In Product Authentication & Traceability, sales rose 10% to £21.5m and operating profits jumped 24% to £6.3m. The group launched its DLR Certify track and trace solution for tax stamps on cigarettes in Cameroon during the period.

Group headcount was reduced by 14% to 3,067 year-on-year.

The business has also reached agreement with its pension trustees on an extended future funding plan to eliminate its huge pension deficit, which has ballooned by £130m to almost £300m.  

De La Rue will make cash contributions to the scheme of £13m and £13.5m in 2017 and 2018, rising to £20m in 2019 and then increasing to £23m per annum from 2023 through to 2028.

The group’s share price rose by 4.5p after the results, to 580p. (52-week high:641.5p, low: 395.5p)