De La Rue issues job cuts warning after 70% profits slump

Banknote printer De La Rue yesterday warned of job cuts across the company after underlying profits dropped by nearly 70 per cent to £33.3 million.

The firm, which prints notes for the Bank of England and 150 other countries, added that a problem banknote contract that caused much of the profits shortfall remains on hold.

It suspended production on the contract, rumoured to be with the Reserve Bank of India, last July after it claimed some employees falsified paper specification test certificates for the contract.

The firm took a 29m charge in the last financial year for the contract, but said yesterday that as talks are still ongoing with the customer and other relevant authorities it cannot yet assess the full financial impact.

The problems in the paper production division were a major cause of the profits shortfall, but there was also a weakness in demand for banknotes generally.

Revenues for the year to March fell 17 per cent to 464m, while bottom-line pre-tax profits dropped 25 per cent to 72.8m, helped by the sale of its stake in the National Lottery operator Camelot last year.

The company has 4,000 staff worldwide, including at sites in Hampshire, where the problems with the bank note contact surfaced, and in Essex, Gateshead, Bathford, Dunstable and Lancashire.

De La Rue aims to cut 30m of costs over each of the next three years, but said it was too early to comment on where jobs might be lost.

Chief executive Tim Cobbold said: "Inevitably, there will be some job losses."

De La Rue, which also supplies security documents such as passports and authentication labels and provides cash and sorting equipment to central banks, said the job losses were part of a plan to lift operating profits back to 100m.

The dividend has been maintained at 42.3p, which Cobbold said reflected his confidence in the fundamentals of the business.