The world’s largest security printer said it was on track to make an operating profit of around £90m in 2013/14, up 40% year-on-year, but warned it would fall short of its £100m target.
De La Rue set the £100m target as the key aim of its three-year Improvement Plan, which was announced in 2011 and set the goal of raising operating profit from £40m in 2010/11 to £100m in 2013/14.
The shortfall was blamed on “more challending trading conditions” for the Currency division and the Cash Processing Solutions (CPS) business, the latter of which will report an operating loss for the first half of 2013/14 and is expected to report a loss for the full year, although De La Rue said it had commenced cost-cutting action and was targeting break even for CPS in 2014/15.
Of greater concern was the performance of the Currency division, where De La Rue said overcapacity in the banknote paper market had led to a “worsening pricing environment in the printed banknote market”. Based on recently confirmed orders for the second half of 2013/14 and 2014/15, this pricing pressure is expected to continue.
Operating profit for the six months to 28 September 2013 was said to be around £39m, up 18% year-on-year on marginally lower revenues. Banknote print volumes in the first half fell 10% to 2.6bn notes, while banknote paper volumes rose 4% to 4,700 tonnes.
The group’s 12 month order book at 28 September 2013 was £232m, up £25m on the start of the year. De La Rue will announce its interim results on 26 November 2013.
De La Rue’s share price was down 9.4% at the time of writing at 889p.