Banknote printer De La Rue in profit warning over Covid impact

Banknote printer De La Rue has warned that profits will be below expectations due to ongoing supply chain shortages, sending shares down nearly 30% in early trading.

The company, which prints banknotes for the Bank of England and other central banks across the globe, said the increased costs of raw materials, energy costs and disruption caused by Covid-19 have “become more pronounced”.

There have also been staff issues due to the latest variants, meaning underlying operating profits are now expected to be between £36 million and £40 million, compared with expectations of £45 million to £37 million from the City.

Chief executive Clive Vacher told the PA news agency that factories in the UK and Malta had been particularly badly hit by the rise in infections.

He said: “The spikes in absences have looked very similar to the spikes we’ve seen in the general population across the pandemic.

“We saw a big hit from Delta at our Sri Lanka factory and Omicron in Malta and the UK.”

The boss added that commodity prices for raw materials used in production have also increased, particularly on goods that can only be bought at so-called spot prices.

He said: “Ink and paper isn’t a big problem because we can buy it at fixed prices, but anything that is a spot price is harder because the prices can be quite volatile.”

Mr Vacher was keen to stress that despite the profit warning, the company was on the right path with its turnaround plans, pointing out that the business was close to going bust before he arrived nearly two and a half years ago.

“Even though it’s a disappointing set of results it’s still indicative of a fundamentally different business from the one I inherited when I arrived.”

Turnaround plans include putting more focus on printing money, capitalising on a trend of governments to shift towards polymer banknotes and offering stronger security features.

De La Rue explained that it flagged rising costs in November at the firm’s half-year results, but they had subsequently become worse.

It said: “Since then, the significant headwinds, primarily relating to the Covid-19 pandemic, have become more pronounced.

“The Omicron and Delta variants have caused substantially increased employee absences in our manufacturing facilities globally, which will result in lower total operational output for the full year.

“More recently, the group has also been affected by supply chain shortages in chips and other process raw materials and has experienced a degree of supply chain cost inflation.”