De La Rue has taken an £18m hit after the Venezuelan central bank failed to pay its bills, helping to send shares in the banknote printer tumbling as the company also announced the departure of its chief executive and warned on the outlook for profits.
Venezuela, which is facing economic meltdown and saw inflation hit 130,000 per cent last year, had previously been a “very good” customer, said Martin Sutherland, chief executive, until US sanctions against the South American country made it harder for the central bank to transfer money.
“We are in constant contact with the customer, they really do want to pay that debt,” said Helen Willis, chief financial officer.
The Venezuelan charge was another blow to shareholders who were alarmed on Thursday after the company warned that profits for 2020 would be “somewhat lower” than this year. Analysts at Edison said the darkening picture for earnings was down to “increasing competition in the banknote market impacting margins”.
De La Rue manufactures about a third of the world’s banknotes and employs more than 2,500 people worldwide. Shares in the UK company dropped 29 per cent to the lowest level in 15 years in early afternoon trading on Thursday.
Mr Sutherland, who has run the company since 2014, agreed with the board that he will step down but remain in place as a successor is sought.
De La Rue, which first printed bank notes in Mauritius in 1860, is also grappling with the fallout from losing a £260m contract last year to print the UK’s new blue passports after Brexit to French company Gemalto. The company had tried to appeal against the Home Office’s decision, and was backed by pro-Brexit MPs, the opposition Labour party and a petition organised by the Daily Mail newspaper that gathered 330,000 signatures. But within a fortnight the company gave up, writing off £4m in bid costs.
The group laid out a fresh three-year £20m cost-reduction programme on Thursday, as it adapts its business following the British passport contract.
Mr Sutherland insisted that the furore around the loss of the contract was “water under the bridge”, and that having reshaped the business over the past five years, “I think I have achieved a lot of what it was I was brought into do”.
The group, which has sold off its struggling paper business and is already conducting a strategic review of its passport business, reported a 12 per cent year-on-year rise in revenue to £516.6m in the 12 months to the end of March, while adjusted operating profit rose 6 per cent to £60.1m.
Its operating model will be reorganised into two divisions: authentication, which includes security features and identification, and currency, its banknote printing business.
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