Banknote printer’s profits slump

De La Rue, which prints notes for the Bank of England, has warned that profits will slump by £20m due to deteriorating trading conditions.

The Basingstoke-based firm said its currency division has been impacted by lower prices and reduced margins, while demand from overseas customers for biometric passports has also been disappointing.

De La Rue’s shares lost more than a fifth of their value following the profit warning and after the company warned the tough trading conditions were likely to continue into the 2015/16 financial year. It also said it was putting the size of its full-year dividend payment to shareholders under review.

The update is the latest blow from the banknote printer, which warned last year that tough competition was driving down banknote prices.

It said today that this trend was continuing, with recent orders being good in respect of volumes but disappointing in terms of pricing.

The company has produced bank notes since 1860 and was recently selected by the Bank of England as its preferred bidder to print the country’s first plastic bank notes.

De La Rue has printed notes at the Bank’s plant in Debden, Essex, since 2003 under a contract due to end in April but which is now likely to be extended by another 10 years.

The FTSE 250 company recently ended its seven-month search for a chief executive by appointing Martin Sutherland, managing director of BAE Systems’ cyber business. He joins the company on October 13.

In today’s update, De La Rue said profits for the year to March 31 were likely to be about £20m lower than the £77.3m reported for last year.

Chairman Philip Rogerson said: “While disappointing to announce this trading update De La Rue, as the market-leading banknote printer, remains a strong, profitable and cash-generative business.

“We will continue to pursue efficiency gains, invest in the business and in research and development for the future.”

In recent years De La Rue has been involved in the production of more than 150 national currencies, and passports or identity systems for more than 65 countries.

It employs approximately 4,000 people worldwide.