De La Rue chief quits after fresh profit warning

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The Independent Online
De La Rue yesterday shocked the market when it unveiled its fourth profit warning in less than three years and revealed plans to halve its annual dividend. Jeremy Marshall, who has been chief executive of the banknote and cash handling group since 1989, has left the company after deciding to retire two years earlier than expected.

Shares in De La Rue crashed 92.5p to 270p - their lowest level for more than seven years - as the company warned that operating profits for the year to March 1998 would be about pounds 30m less than last year's pounds 60.5m.

The news prompted analysts to slash pounds 15m off their profit forecasts for the group. Pre-tax profits, which include contributions from associate companies like lottery operator Camelot, are now expected to come in about pounds 90m this year and pounds 72.5m in 1999.

Brandon Gough, the Yorkshire Water chairman who only took over as chairman of De La Rue six months ago, will run the company until a new chief executive is found. He said yesterday it was "time for a change at De La Rue."

Under the terms of his two-year rolling contract Mr Marshall, 60, is expected to receive compensation of about pounds 570,000. Last night one institutional shareholder described the payoff as "a bit rich" given that Mr Marshall was close to retirement and had presided over a disastrous slump in the share price.

In the early 1990s, a banknote printing boom in the newly liberalised economies of Eastern Europe helped De La Rue's share price, lifting it to an all-time high of 1050p in 1995. Since then, however, the company suffered one disappointment after another as cut-throat competitors muscled in on De La Rue's market.

Analysts said the company had also lost credibility by consistently missing its profit targets.

De La Rue blamed yesterday's warning on the effects of the strong pound and the Asian crisis, as well as the absence of one-off banknote printing contracts from other central banks. The company had also increased development spending in areas of new technology like plastic "smartcards", which are increasingly expected to replace traditional bank notes as the most popular form of payment.

Mr Gough said it was time for De La Rue to rebuild confidence in the City: "We need to rebase expectations and concentrate on delivering solid profits. We have to go forward not back."

As part of the shift, the company announced plans to pay a final dividend of 4.5p, making a total payout of 12p - half last year's level. Mr Gough said the decision to cut the dividend had not been an easy one to take, but that the move would send a signal to investors that De La Rue had changed.

The company hopes to bring in a new chief executive by the autumn. Mr Gough said the board would consider all candidates, though in the circumstances, it was sensible to look outside the company.

De La Rue also said it was preparing to sell its US physical security business, while the future of its loss-making German arm was under review.

But Mr Gough said making more of the potential synergies in the business was the key to future growth. The company has created a separate business specialising in brand protection, which it sees as a growth area.

Analysts, however, said the new business was "small beer" and that the prospects for De La Rue's recovery were dependent on how much business it could pick up preparing for the introduction of the European single currency towards the end of the century.