March 20, 2018
Banknote printer De La Rue startled investors after announcing the departure of a top executive and cautioning that profits will be at the low end of expectations.
De La Rue rocked as key executive quits and trading disappoints
Shares in the main market-listed business crashed more than 20pc on news that chief financial officer Jitesh Sodha had resigned as a director with immediate effect.
Fears were compounded by a brief trading update, which revealed that De La Rue - one of whose biggest contracts is producing banknotes for the Bank of England - is downbeat about its financial performance.
De La Rue rocked as key executive quits and trading disappoints
Consensus forecast is for adjusted operating profit of between £71m and £73m for the full year.
De La Rue, which also designs and prints passports and security products such as seals, said Mr Sodha was stepping down to pursue a career outside the company. Although he has given up his director role, he will remain with the business until September to ease his successor into place.
The company played down the link between the management change and the trading update, with a spokesman for De La Rue saying both had been put out together to “stop the market over speculating”.
Martin Sutherland, chief executive, praised Mr Sodha for his work. He added: “Jitesh has been a valued member of De La Rue's management team. He has been instrumental in the execution of our strategic plan to diversify our business.”
De La Rue rocked as key executive quits and trading disappoints
Shares were off 14pc at 520p in morning trading, having pared back some of the losses.
De La Rue is trying to lessen its dependence on printing banknotes - which represent about 75pc of the company’s £460m annual revenues - and move into other areas such as software to help central banks manage their cash systems.
The company is also waiting to hear if it is going to win a key £490m, decade-long contract to print British passports. An announcement was expected at the start of the year but has been pushed back. Under EU rules the deal, which comes into force in 2019, was put out to tender and De La Rue is understood to be against rivals from across the Channel, despite the fact Britain will leave the EU next year.
Over the past couple of years the business has suffered from the global oversupply of banknote printing facilities - many of which are state-owned - and has streamlined its global production footprint to a handful of key plants.
Investec analysts described the share price fall as an “over reaction”, while JP Morgan said it believed “there is nothing to be read into Mr Sodha’s departure about the state of the business or its prospects; it is the result of personal motives”.
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