De La Rue’s share price crumbled today after it warned investors that full-year profits would fall “significantly lower” than current market expectations.
Britain’s former passport maker also warned that adjusted operating profit for its half-year to the end of September would only be in the low-to-mid single digits.
Shares sank 20 per cent to 149.2p in early trading as more investors abandoned the struggling company.
CEO Clive Vacher, a turnaround veteran airlifted in at the start of the month, is now undertaking a “detailed review” of the business, the firm said.
Today the company said:
De La Rue expects H1 2019/20 adjusted operating profits for the half year ended 28th September 2019 to be low-to-mid single digit millions. Full year 2019/20 adjusted operating profit will be significantly lower than market expectations.
Management, led by the new CEO, is conducting a detailed review of the business and will update the market further when it reports its H1 2019/20 results on 26 November 2019.
The banknote printer had already warned in May that operating profit for the 2020 financial year would be “somewhat lower” than 2019.
It revealed a 78 per cent plunge in profit before tax to £25.5m in its full-year results in May, down from £113.6m a year earlier.
That prompted the resignation of chief executive Martin Sutherland, who Vacher did not replace until early October.
It also replaced its chairman after months of pressure on its top level leadership after it failed to win a government contract to print Britain’s post-Brexit blue passports last year.
De La Rue drafted in Micro Focus’ chairman Kevin Loosemore in September to replace former chairman Philip Rogerson, who stepped down.
De La Rue has suffered a spate of profit warnings despite making almost one-third of the world’s banknotes, including those for the Bank of England.
Less money, more problems
The Serious Fraud Office opened an investigation into the company over summer to probe suspected corruption in South Sudan.
AJ Bell investment director Russ Mould warned that De La Rue has failed “a major test” for its shareholders.
As a banknote printer in a world going cashless, “if it didn’t exist as a business today, would you really set it up?” he asked.
He also cited De La Rue’s loss of a contract to print British passports to a French rival, the SFO’s ongoing fraud investigation and an unpaid £18m debt the firm is owed in Venezuela.
Activist shareholder Crystal Amber is putting the company under pressure to speed up its turnaround too. It voted against Sutherland’s £197,000 bonus over summer after the now-ex CEO oversaw a 22 per cent drop in the value of the company’s stock.
Can Vacher turn De La Rue around?
“It is little surprise the company has resorted to a change of management in a desperate attempt to revive its fortunes,” Mould said.
“[Vacher] is an old hand at turnarounds and appears to be following the playbook – wasting very little time from his arrival at the start of the month to reset expectations.
“Investors might be slightly concerned that no reason is given for today’s profit warning, the second in a little over six months.
“A ‘detailed review’ of the business implies some significant restructuring and even that some bits of the group might be sold off.”
De La Rue’s share price has plunged over 2019, losing 64 per cent of its value from 419p per share in January to just 149p today.