De La Rue's turnaround plan suffers a setback

Halfway through its turnaround plan, De La Rue has been hit by pandemic-related disruption that have caused it to slash its full-year profit forecast.

In a trading update, the banknote printer and authentication technology specialist said that the Omicron and Delta variants had led to significant employee absences in its manufacturing facilities, leading to lower operational output.

The company said it has also been affected by supply chain issues that have resulted in shortages of chips and raw materials, along with rising costs.

As a result De La Rue is forecasting full-year profits in the £36m-£40m range ($48m-$54m), against earlier expectations of around £45m-£47m, although it is still expecting healthy growth in both its currency and authentication businesses.

Sales of authentication products - physical and digital technologies used to authenticate products through the supply chain and protect them from counterfeiting – grew 28 per cent in the first half to just over £44m and are set to reach £100m for the full-year.

It will also set back the timeline for the turnaround plan implemented under chief executive Clive Vacher in February 2020 – aimed at trimming business units like identity solutions and cutting costs – by around 12 months.

"De La Rue continues to increase adjusted operating profit in both divisions year on year, and the plan anticipates this to continue going forward," said Vacher.

"While this trading update is disappointing, it should be seen as a delay to reaching our turnaround plan objectives, rather than indicating that a change of direction is required," he added.

Investors in De La Rue were nevertheless spooked by the news, with shares in the company falling by more than quarter after the announcement.

The company expects to announce its results for the full year ending March 26 on May 25.