Company which makes British pound notes sees profits fall
De La Rue, which prints notes for the Bank of England, said its annual profits fell sharply as it faced challenging market conditions and price pressures.
The Basingstoke-based firm, which also makes passports and tax stamps, said underlying pre-tax profits slumped by a quarter to £57.7 million after it also experienced lower levels of new business at its security products unit.
Shares tumbled by 9% after the results and as De La Rue cautioned of an ongoing hit from the weak euro, which is providing a boost to its European competitors.
The business, which has produced bank notes since 1860, has one of its key contracts with the Bank of England and signed a new 10-year deal with the central bank in October that will see it print plastic banknotes from 2016.
The notes, which are coated with a thin film of polypropylene polymer, are harder to counterfeit and stay cleaner for longer.
De La Rue had already warned that full-year profits would be lower, with shares losing more than a fifth of their value following the alert last September and after the company said the tough trading conditions were likely to continue into the 2015/16 financial year.
It delivered a further blow to investors alongside the full-year results, as it also slashed its total dividend by 40% to 25p “in light of the difficult trading environment.”
The FTSE 250 company added its 12-month order book at the end of the period was almost 21% lower at £243 million, reflecting tough trading ahead.
De la Rue ended its seven-month search for a chief executive by appointing Martin Sutherland, former managing director of BAE Systems’ cyber business, last October to lead a turnaround.
On posting full-year figures today, he announced the results of a six-month strategic review and said the group would invest on plastic banknote development, security products and passports.
Mr Sutherland said this move would lead to a wider spread of customers and give it higher quality earnings.
He said: “I have completed a review of the business and formulated a clear strategic plan to deliver growth and improved profitability in the long term through a greater focus on customers, innovation and delivery.”
However, the group said difficult market conditions have continued into the new financial year. It added the weakness of the euro against the pound was helping its European rivals.
Brokers at Investec said: “The cautious outlook does not give us any comfort that the headwinds, especially in currency are easing, and note that the current euro weakness against the US dollar is aiding European competitors.”
