Banknote printer De La Rue in profit warning over Covid impact

Banknote printer De La Rue issued a profit warning on Monday morning, warning that profits will be below expectations due to ongoing supply chain shortages.

The company, which prints banknotes for the Bank of England and other central banks across the globe, said the increased costs of raw materials, energy costs and disruption caused by Covid-19 have “become more pronounced”.

There have also been staff issues due to the latest variants, meaning underlying operating profits are now expected to be between £36 million and £40 million, compared with expectations of £45 million to £37 million from the City.

De La Rue explained that it flagged rising costs in November at the firm’s half-year results, but they had subsequently become worse.

It said: “Since then, the significant headwinds, primarily relating to the Covid-19 pandemic, have become more pronounced.

“The Omicron and Delta variants have caused substantially increased employee absences in our manufacturing facilities globally, which will result in lower total operational output for the full year.

“More recently, the group has also been affected by supply chain shortages in chips and other process raw materials and has experienced a degree of supply chain cost inflation.”

In November the company hinted that the costs from Covid were taking their toll, but had been reduced through cost-cutting measures.

The computer chip shortage has had an impact on numerous sectors, but De La Rue has also been hit by a rise in the cost of some solvents and chemicals used in its production facilities.

Chief executive Clive Vacher said the issues would not affect its turnaround efforts, but will instead delay them.

He added: “The company’s leadership has worked hard to mitigate many of these external effects, with the cost reduction activities we have implemented since early 2020 having a significant impact in supporting our underlying performance while we navigate these external factors.

“The markets in which we operate, and our position in them, remain strong, and we continue to execute substantial investment for the future.”

Turnaround plans include putting more focus on printing money, capitalising on a trend of governments to shift towards polymer banknotes and stronger security features.