De La Rue shares collapse on profit warning

Shares in the 201-year-old firm plunged 26% to a four-year low

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The Independent Online

Banknote printer De La Rue has blamed severe price-cutting in its markets, particularly by the Russian state rival, for a huge profit warning.

Shares in the 201-year-old firm plunged 26 per cent or 195p to a four-year low of 564p. De la Rue rejected a 935p takeover bid from Dutch rival in 2011 and its shares were above 1000p less than a year ago.

De La Rue said it expected headline profits for the year to next March to be £20 million lower than last year’s £77.3 million. Worryingly it also warned that it expects difficult market conditions to continue into the following year.

The share price crash was heightened by De La Rue’s immediate decision to slash its first-half dividend from 14.1p a share to 8.3p a share. Chairman Philip Rogerson, who has been running the company since chief executive Tim Cobbold was poached by UBM in April, said: “Although we print banknotes for 150 countries, more and more of them are putting contracts out to tender and, with major overcapacity in the market, prices have been hit. In particular, state-owned printers have been coming in with unrealistic prices because they have too much spare capacity. The most active of these is Russia.”

Rogerson said he could not blame the Bank of England which named De La Rue this month preferred bidder for the next 10-year contract. He said: “We are on the old contract and prices until March next year and still negotiating over the new one.”

De La Rue has also been disappointed by the slow take-up of machine readable e-passports by countries outside the EU. Rogerson said: “It has been slower than expected.” He added:  “It is worth noting these are not  De La Rue-specific issues but problems across the industry. We remain a strong and cash generative business.”

New chief executive Martin Sutherland, recruited from BAE Systems last month, will start as expected in two weeks’ time.

Shares in waste group Shanks dropped 15.5p or 15 per cent to 87.25p after it issued a profits warning. Chief executive Peter Dilnot said: “Market conditions in our Benelux Solid Waste business have deteriorated.”

The group said it now expects profits for the year to March to be some 15 per cent below expectations.

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