De Le Rue boss Martin Sutherland said he was “slightly surprised” at the decline in the company’s share price yesterday, after it announced a £40m drop in revenue during the year to 28 March.
The banknote printer saw sales drop from £513.3m in the 2014 financial year to £472.1m, while pre-tax profit fell to £38.9m from £59.8m, pushing shares down by as much as 10 per cent. The stock closed at 504p, down by 8.94 per cent.
“The results are completely in line with expectations,” chief executive Sutherland told City A.M. yesterday.
He was brought in to lead the company in October last year, at a time when the company was already dealing with serious challenges, with several of its key divisions, such as identity systems and security products, seeing a lower level of new business than was expected and the currency division struggling in the face of pricing pressures.
Yesterday Sutherland ruled out pulling out of any of the markets that De La Rue currently operates in. “We don’t think divestments or exits are the right thing to do,” he said.
He admitted the firm would not have an easy time turning itself around: “In the short term we find ourselves in challenging markets and we are not going to reposition the business overnight.”
Instead, the group has established a five-year outlook and strategic plan to “optimise and flex” in low growth markets, and “invest and build” in stronger markets. “The business has some great ideas, but moving forward it needs to think of the markets it serves in distinct ways,” added Sutherland.
Meanwhile, Charles Pick, analyst at Numis Securities, put the blame for the drop in price on De La Rue’s gloomy outlook on exchange rate issues.
“Market sentiment was impacted by the outlook remark that euro weakness has given Eurozone suppliers a commercial advantage,” said Pick, adding that a 20.8 per cent decline in the order book last year also took a toll.
However, Sutherland’s optimism was not hit too badly by the share performance.“The markets will find the right level over time,” he said.
Sutherland has been chief executive at De La Rue for just on seven months, having come on board in October 2014. He was brought in to replace Tim Cobbold, who left to become chief executive of UBM. Sutherland joined from defence firm BAE Systems in its Applied Intelligence division, which he joined in 1996 when it was still known as Detica. He finished his stint there as managing director. Before joining Detica, Sutherland worked at Anderson Consulting, now Accenture, and at BT. When his appointment was announced, analysts at Numis praised it as a good choice, citing Sutherland’s experience in big companies, strong commercial skills and his “experience of technologically demanding businesses supplying governments and financial institutions”.