De La Rue overcomes UK passport loss to deliver profit hike

Banknote printer De La Rue has notched up a jump in half-year profits as cost savings and turnaround plans helped it overcome the loss of its UK passport contract.

he group saw pre-tax profits leap to £10.9 million in the six months to September 26, up from £2.5 million a year ago, as underlying revenues edged 0.9% higher.

Its results were boosted by cost cutting after stripping out £36 million from annual costs in 2020-21, with another £7 million due in the current financial year.

Boss Clive Vacher said “no company is immune” to the widespread supply chain problems, with De La Rue suffering rising costs and sourcing challenges for some raw materials, such as solvents and chemicals used in its production facilities.

He said the firm was looking at making cost savings across the board – on top of the turnaround cuts – to offset rising inflation.

We see hiring being the main challenge rather than letting people goClive Vacher

On the possibility of further job cuts on top of the recent closure of its Gateshead site, Mr Vacher said there “may be more” but stressed its focus is on hiring in growth areas and not making job cuts.

The group is recruiting another 70 people to expand its plastic banknote printing site in Westhoughton, as well as another 100 staff across operations in Malta.

“We see hiring being the main challenge rather than letting people go,” he said.

The company, which sold its identity solutions arm in 2019, is halfway through a three-year turnaround plan, which includes reducing debts and moving away from making passports.

The group has also been putting resources into plastic banknote manufacturing, having lost the contract to print Britain’s blue Brexit passports to Franco-Dutch company Gemalto three years ago.

Despite the shift away from passports, it saw underlying earnings from its two ongoing divisions – currency and authentication – soar 165.6% to £17 million on adjusted revenues up 10.3%.

Overall underlying group operating profits lifted 13.7% to £17.4 million as it said strong growth in its two focus businesses “more than offset” the passport contract loss.

Mr Vacher added: “We continue to monitor and work to mitigate headwinds in commodity and energy costs, and challenges in the supply chain.

“The De La Rue team has additionally overcome some Covid-19 disruption in the first half, and I am pleased that we have performed strongly despite these challenges.”

The group’s new polymer production line is set to start up around January time and will be the largest in the industry.

Polymer production volumes were up 90% in the group’s first half and De La Rue sees demand ramping up further, with some 90% of the world’s banknotes still in paper format.

Analysts at Numis Securities said: “If management continues to successfully execute on the turnaround plan, then we see the potential for a business with significantly higher exposure to growth markets – polymer currency and authentication – and a transformed balance sheet.”

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