DE LA Rue’s share price plunged almost ten per cent yesterday, after the British banknote printer issued its second profit warning in less than a year.
The FTSE 250 firm cut its full-year profit guidance to £90m, which falls below the target set out in its three-year plan to reach £100m this year.
De La Rue attributed the lower forecast to overcapacity in the banknote paper market leading to a worsening pricing environment. Banknote print volumes fell by 10 per cent in the first half of the year.
Making profits of £90m will still be a 40 per cent increase on the previous year, despite missing the target.
“Given where they’ve come from, profits of £90m is not bad but any miss is still a miss,” Paul Jones, analyst at Panmure Gordon, told City A.M.
“The problem is the implications this presents for next year’s figures.”
De La Rue has supplied banknotes to the Bank of England for around a decade and is in the process of rebidding for the contract.
“I think they’ll keep the contract but at a reduced rate, as it’s been put out for tender for the first time so there is more competition,” said Jones.
The company’s cash processing solutions business has been in decline since the second half of last year, which resulted in an operating loss in the first half of 2013.
“Management action to reduce costs further has commenced, but it is expected that [the unit] will report a loss for the full year, with a target of achieving break even in 2014/15,” the firm said. Shares closed 9.7 per cent lower at 885.50p