Banknote printer De La Rue warns on profits after Covid costs

The banknote printer De La Rue has issued a profit warning after suffering from higher Covid-19 costs, including staff absences and computer chip shortages.

The company’s adjusted operating profit for the year to 26 March will be between £36m and £40m rather than the £45m to £47m expected by investment bank analysts, it said in trading update. It added that the pandemic would probably cause “incremental headwinds” for the next financial year.

Shares in the company, which is listed on the London Stock Exchange, plummeted by 28% in the first hour of trading to hit their lowest since May 2020, during the early months of pandemic-induced market turmoil.

De La Rue said profits were hit by “substantially increased employee absences in our manufacturing facilities globally” caused by the Delta and then Omicron coronavirus variants.

More recently it has suffered from the chip shortages that have hit industries ranging from mobile phone manufacturers to carmakers, as well as shortages of chemicals and solvents used to produce its plastic polymer banknotes. The company buys the chemicals at spot prices, which are four times higher than they were in early 2020.

De La Rue is a City stalwart, with roots in printing stretching back to 1813 in a newspaper in Guernsey and a London stock market listing since 1947.

However, it was struggling with a series of setbacks even before the pandemic, including warning in 2019 it could go out of business after losing out to a Franco-German rival on a contract to print the UK’s post-Brexit blue passports.

Clive Vacher, a former aerospace executive brought in as De La Rue’s boss in October 2019, insisted on Monday that the company’s turnaround plan – which has already included shutting a factory at Gateshead and selling its passports business – was still working but that it had been delayed by a year.

Vacher said: “Despite the macro challenges that are delaying aspects of the turnaround plan, De La Rue continues to increase adjusted operating profit in both divisions year on year, and the plan anticipates this to continue going forward.

“While this trading update is disappointing, it should be seen as a delay to reaching our turnaround plan objectives, rather than indicating that a change of direction is required.”

He pointed to cost cuts, understood to total £36m in the almost two years since February 2020, and argued that there is still underlying growth in demand.

“The markets in which we operate, and our position in them, remain strong, and we continue to execute substantial investment for the future,” Vacher said.

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