26th Sep 2014 06:23
LONDON (Alliance News) - De La Rue PLC Friday warned that its underlying operating and pretax profit for the current year will be GBP20 million lower than the previous year, and lowered its expectations for next year as a result of deteriorating trading conditions.
In 2013/14 the banknote printer posted an underlying pretax profit of GBP77.3 million.
De La Rue also said that, in light of the difficult trading environment, it intends to "reappraise" the level of its dividend for the full year. It expects to propose an interim dividend of 8.3 pence, down from 14.1 pence a year before.
Based on recent orders and current trends, De La Rue expects these difficult conditions to continue into the 2015/16 financial year, as the effect of recent pricing pressure and some contractual price reductions come into effect on a number of long-term contracts, which will hit margins and profitability further.
The company had previously expected a heavier second half weighting, and whilst De La Rue's first-half performance will be broadly in line with its expectations, trading conditions have deteriorated to the point that its expectations for the current and next financial year have been lowered.
In its currency division, recent orders have been good in terms of volumes, but pricing has been disappointing as it has continued to see lower prices and margins in both banknote print and paper, it said.
The rate of growth in new businesses in its solutions unit has been significantly slower than De La Rue expects, and at lower margins. In the international business, the shift towards "e" passports from machine readable passports has been disappointing, and a number of orders in its pipeline have not been put out to tender as it had expected.
In Security products, the rate of growth its its government revenue solutions has been slow, and this has not offset declines in some of its other product lines.
Cash processing solutions is on track for achieving break even in the current year.
"While disappointing to announce this trading update De La Rue, as the market leading banknote printer, remains a strong, profitable and cash generative business. We will continue to pursue efficiency gains, invest in the business and in R&D for the future," Chairman Philip Rogerson said in a statement.
New Chief Executive Martin Sutherland will joint the company October 13.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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