De La Rue shares plunge as ticket maker warns of profits

More than a quarter was wiped off De La Rue’s value after the British banknote maker warned that supply chain disruption caused by the pandemic would hit full-year profits.

The company said a three-year turnaround plan launched by new management in 2020 will now take a year longer than expected due to lower production of its banknotes and passports.

Adjusted operating profit would likely be £36-40m for the year ending March 26, the group added. It was “broadly similar” to the previous financial year but below the market consensus of £45-47m, forcing De La Rue’s share price to fall more than 25% on Monday morning.

Since the group released its half-year results, challenges primarily related to the Covid-19 pandemic “have become more pronounced”, he said.

Clive Vacher, managing director of the Basingstoke-based company, said the Omicron variant had caused “double-digit” absentee percentages at higher-cost factories in the UK and Malta, which would mean the production of its tickets and passports would be “down quite considerably” this year.

Operations have also been hit by the global shortage of chips, he said, which are used in next-generation passports for countries like Australia. Vacher pointed to the rising cost of raw materials such as polymer sheets and chemicals used to make many of its banknotes.

“We just don’t know how long these headwinds will last,” Vacher said.

The challenges will mean a delay of around 12 months in De La Rue’s turnaround plan, which he announced in February 2020 after warning about his future and losing contracts, including the supply of British passports.

Vacher said management was confident in its plan, which it said was on track in terms of winning new customers and other strategic goals.

The company warned that the pressures would also affect next year’s earnings, although it expected “significant growth” year-on-year.

Revised guidance shows ‘substantial’ growth in its core currency and authentication business, expected to be between 35-45%, compared to the £27.5m generated by the units over the same period one year earlier.

Vacher said the expected profit increase for the year “was lost in computers selling our stock” on Monday morning.

“There’s nothing wrong with the turnaround plan,” he said.

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