De La Rue prints the UK’s polymer bank notes
(Picture: PA Archive)Banknote maker De La Rue has lost over a quarter of its value after a Covid-related profit warning.
De La Rue today said operating profits for the current year would be up to £11 million below City forecasts. Shares in the company, which prints Britain’s polymer banknotes, sunk 40.9p, or 27.3%, to 109.1p.
CEO Clive Vacher blamed a host of issues caused by the pandemic. Omicron has “hit us hard,” Vacher said, with staff absences at its Debden and Westhoughton factories spiking. Absences due to sickness have also been an issue at its Malta and Sri Lanka sites.
Inflation has sent the cost of key chemicals and solvents soaring as much as four fold. And supply chain issues have led to microchip shortages, impacting its Australian passport contract.
Problems have gotten worse since the company’s last update in November, when it reaffirmed targets. Setbacks means profits for the full year are now set to be between £36 million and £40 million, compared to market expectations of £45 million to £47 million.
Vacher defended his ongoing turnaround plan, saying profits were still growing despite recent disruption slowing the pace.
“It’s the right strategy and it’s absolutely delivering the right results,” he said.
He said De La Rue’s core businesses were still on track to deliver “very strong double digit percentage” profit growth.
Vacher was bought in as CEO in late 2019 and was quickly forced to warn the market that De La Rue was at risk of going bust. He raised £100 million to help bolster the company’s position and launched a round of cost cutting, shifting the business towards growing areas like polymer bank notes.
Analysts at Investec cut their target price for the stock but said: “While it is disappointing that these external factors have delayed the profit recovery by approximately one year, we remain confident that the Turnaround Plan benefits and external end market growth potential both remain unaltered.”
