Banknote printer recovering – even without drachma
IT has become la question du jour: how are you preparing for a Greek exit, or “Grexit” as the latest parlance would have it? Most executives will tell you they are looking at cash, treasury and currency issues – but some are having to be more inventive than others. Dixons, for example, is stockpiling security shutters to protect its nearly 100 stores from Greek riots or looting. Diageo, which has seen its sales in Greece halve over the last five years or so, is pulling out more quickly than you can shout tequila. Small Greek bars are having to make do with nothing but ouzo. TUI, the German travel agent, has asked Greek hoteliers to sign contracts agreeing to be paid in drachmas if Greece leaves the euro. None of it is very reassuring.
While a Greek exit would be almost universally bad for UK Plc, some companies could counter the cycle of despair. Aggreko, the temporary power provider, might be called upon to keep some of the lights on. Richer Greeks considering how to flee their native land could call upon the services of a private jet operator, such as Air Partner. If these predictions sound a little far fetched, they are nothing compared to the latest rumour that has been doing the rounds. Some suggest that De La Rue, the banknote printer, could be called upon to print the new drachma, a pretty good gig when you consider the levels of inflation that will plague Greece following an ejection. Eurozone perma-bears would say that a Deutschmark contract will soon be up for grabs too. Nice work for some – if they can get it.
If De La Rue has been put on standby to print a new drachma, it wasn’t letting on at yesterday’s results presentation. Instead recently-installed chief executive Tim Cobbold wanted to talk about year one of his three-year turnaround plan. Not as exciting, perhaps, but pretty impressive nonetheless.
Excluding exceptional charges related to the turnaround, pre-tax profits came in at £57.7m, up 73.3 per cent on 2010-11. That of course was the annus horribilis that saw De La Rue lose one of its biggest clients, widely thought to be the Indian government, following a fraud at one of its factories. No surprise then that yesterday’s underlying pre-tax profit figure is still 44.6 per cent shy of 2009-10’s number, the year before disaster struck.
Banknote print volumes grew by eight per cent, taking revenue at its dominant Currency division up 15 per cent. Operating profit in this part of the business grew 59 per cent.
But the standout performances came from its smaller Solutions business, largely thanks to a contract to print UK passports. Operating profit in its ID systems business was up by 254.2 per cent to £8.5m.
So Cobbold’s turnaround plan is on track, while growing money supply is a dead cert thanks to emerging markets. That puts De La Rue in a pretty good place. Still, it would be nice to have that drachma printing contract.