Can't make money in a mint?

The Royal Mint, which produces all the UK's coins, has seen a huge slump in profits for the 1999-2000 tax year, seeing it massively underperform the targets set by the Treasury.

The Royal Mint, which produces all the UK's coins, has seen a huge slump in profits for the 1999-2000 tax year, seeing it massively underperform the targets set by the Treasury.

Its troubles could continue following the publication of its annual report, which has been criticised by the Conservatives and which fails to provide goals for its financial performance for the current financial year. This omission is likely to lead to further speculation on the real state of one of the few public sector businesses.

Profits fell from nearly £6.3m in 1998-99 to a mere £668,000 last year. As a result the company only managed an average rate of return of 0.5 per cent on net assets. The Treasury targeted 14.6 per cent.

This year's target has yet to be announced, and the Treasury says it is currently under discussion. It denies that the absence of a target at the moment has anything to do with last year's fall in profits.

"The annual report needed to be got out, and it couldn't hold on for a decision about the net asset target," said a spokesman for the Treasury. "Obviously, though, we are reviewing procedures, particularly in the areas where slippage occurred last year, as it is important that the target is realistic."

The Royal Mint defends its performance, saying it has just gone through "one of the most difficult periods in recent history". This "difficult period" was the result of massive investment in new plant and machinery and changes in working patterns. Adaptation to these changes took longer than expected, which the Royal Mint claims had a knock-on effect on productivity.

"We anticipated difficulties but we did not anticipate the full impact the changes would have," said Roger Holmes, deputy master and controller of the Royal Mint. "Over the long term, the Mint is a very solid business, and it will recover, but we don't know how long a full recovery will take."

David Heathcoat-Amory, the shadow Treasury Secretary, is sceptical about the Royal Mint's defence and critical of the annual report as a whole.

"This is a pretty unhelpful report that fails to fully explain the difficulties the Royal Mint has encountered," said Mr Heathcoat-Amory.

"I wonder if the decline is partly due to money being wasted on preparing for the euro. Nothing is mentioned about this or whether any of the lost business is a permanent loss.

"I am also concerned that the changes introduced have been blamed for the fall in profits in order to disguise a management failing, and therefore think it recommendable that the Treasury Select Committee investigate the matter."

Mr Holmes firmly denies there has been any hidden expenditure on the euro. He states that the Royal Mint has invested in a supply of euro blank coins for the first wave of monetary union, but this move was for business reasons and was not an indication that the Government is planning for Britain to enter the single currency in the near future.

The Royal Mint is not prepared to make any predictions on how it will perform this year, but history shows that the circulation market is quite volatile and that profits can vary considerably from year to year.