New De La Rue chief executive introduces strategic plan as challenging market conditions continue

Profits and revenue at the banknote printer have been hit by pricing pressure and a lower level of new business than had been expected

De La Rue products
De La Rue products

The world’s largest commercial banknote printer, De La Rue plc, which has a factory in Gateshead, has introduced a new strategic plan as challenging market conditions continue to hit profitability.

Results for the year ended March 28, 2015, show profit before tax dropped from £59.8m the previous year to £38.9m. Revenue, meanwhile, decreased from £513.3m to £472.1m, while the year end 12-month order book stood at £243m, compared to £307m in 2013/14.

In a preliminary statement, the company - which also produces commercial passports, a range of security products and software solutions - said the figures reflected challenging market conditions across the board.

With the Currency division, pricing pressures had continued, resulting in lower margins, while in Identity Systems and Security Products, the level of new business had been lower than expected.

Some mitigation of these factors had been achieved through operational efficiencies which realised further benefits of £7m in period.

Proactive moves in the Cash Processing Systems division, meanwhile, had allowed this part of the business to return to underlying profitability.

However, after a six month strategic review addressing matters such as competition, markets and customers’ changing requirements, De La Rue is now pressing ahead with a new business strategy.

Chief executive Martin Sutherland, who joined de La Rue in October, 2014, said: “These results are in line with our revised expectations and include the benefit of further operational efficiencies. “However, these have been outweighed by the impact of the challenging market conditions on revenue and operating profit across the group.

“In my first seven months, I have strengthened the leadership team and restructured the organisation to be better align the business with its strategic needs as well as initiating a number of actions to achieve substantial cost savings, which will be largely reinvested in the business to drive growth.

“I have completed a review of the business and formulated a clear Strategic Plan to deliver growth and improved profitability in the long-term through a greater focus on customers, innovation and delivery.”

Under the plan, the company will:

  • maintain its current integrated portfolio
  • adopt a differential approach to products based on market growth opportunities
  • “optimise and flex” its capabilities through modernisation, cost reduction and accessing flexible capacity where products are exposed to low growth markets and
  • invest in and build on new capabilities, technologies and sales resources where products are exposed to higher growth and more profitable markets.

The result, De La Rue believes, will be a higher growth, technology-led business with “improved and less volatile profitability”.

The preliminary statement said: “With the completion of the recent strategic review, the group has a clear plan to deliver growth and improved profitability in the long term.

“The board is confident that the Strategic Plan can be delivered and yield benefits for shareholders, employees and customers.”

A final dividend of 16.7p per share is being recommended, compared to 28.2p in 2013/14.

Together with the interim divided paid in January, 2015, this will give a total dividend for the year of 25p per share, down from 42.3p last year.

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