The company that prints banknotes for the Bank of England has announced a one-third slump in profits.
De La Rue, which prints more than 150 national currencies, as well as passports and identity cards for around 65 countries, said it was continuing to struggle from fierce competition in the banknote printing market. The 201-year old firm warned that “difficult trading conditions” would affect its profitability for two years.
De La Rue’s revenues for the six months to 27 September fell 8% to £215m, sending pretax profits tumbling by 36% to £18m. The downturn in revenues is a result of falling income from its banknote-printing business, even though the firm printed a slightly higher number of notes than last year. Many industry watchers think there are too many players in the market, which has put pressure on prices.
The firm was also hit by declining revenues in its passport business, because new business has been slower than expected, partly because governments have been slow to embrace machine-readable passports.
De La Rue, which has issued two profit warnings this year, said trading conditions were challenging, but it had mitigated the difficulties by cutting costs by £3m over the period.
“The board continues to believe that, while current conditions are tough De La Rue remains a strong profitable and cash generative business in a market with good medium- and long-term growth prospects,” said De La Rue’s chairman, Philip Rogerson.
The company received a fillip in September when the BoE awarded it a 10-year contract to print the UK’s first-ever plastic bank notes, which are due to make their debut in 2016, starting with the new £5 note featuring Winston Churchill. Many analysts think the contract was not worth as much as De La Rue had hoped for.
Nevertheless, the contract is a welcome boost for new chief executive Martin Sutherland, who joined from BAE Systems last month. Sutherland said he plans to report on company strategy in May 2015, when De La Rue posts its full-year results.
