The company, chaired by Lord Limerick, said the continuing low level of bank note prices and difficult trading in its automated cash handling systems division would lead to first-half profits being lower than last year. In a highly cautious statement accompanying news that annual results crept ahead last year, De La Rue said: "The year as a whole will be influenced by the degree of our success in the highly competitive conditions in banknotes."
The warning sent the company's shares reeling. The price ended 65p lower at 656p, as analysts slashed profit forecasts for this year from as high as pounds 160m to around pounds 140m. Richard Finch at brokers Credit Lyonnais Laing said the company was caught in a classic squeeze, with the core bank note business being hit by price competition and no growth in new businesses.
Jeremy Marshall, chief executive, said they were facing competition from North America and Europe. He singled out the German group Gieseke & Devrient, which supplies half the Bundesbank's requirements at what he claimed were very high prices. "They have a cosy deal, because I don't think the Bundesbank will ever ask anyone else to print their bank notes," he said.
However, he was cautiously optimistic that things had bottomed out. The order book stands at seven months' sales and prices have gone no lower than they were in the second half of last year. "I hope they have bottomed out and certainly most orders have not been won at lower prices."
He is looking forward to the eventual introduction of the euro single currency, which he believes will have to be a high security note because of its attractions to forgers. That should benefit De La Rue, because it will be one of the few manufacturers able to meet the high specifications needed and could set a lead for other countries.
Group profits grew 0.9 per cent to pounds 148m, but a 16.5p final dividend raises the annual total by 3 per cent to 23.8p.
Investment Column, page 18