UK based banknote printer De La Rue has seen its shares drop 30% after it issued a profits warning, with this year’s profits expected to be £20m lower than the previous financial period.

The company, which produces the UK’s biometric passports and prints banknotes for countries worldwide, warned that industry trading conditions had “deteriorated” causing prices and margins for its security printing services and secure paper production to be compromised.

De La Rue also stated that its new business growth rate had been slower than anticipated, and that global take-up of biometric passports had been “disappointing”.

Though De La Rue was recently named by the Bank of England as its preferred bidder for a new 10 year deal to print its banknotes, it is thought that the contract value was lower than expected.

“The profits warning is the result of pricing pressure being seen in the banknote printing business, including in the renewed deal with the Bank of England,…But the £20m isn’t a one-off – when [the company’s] existing customers come back to renew existing contracts they will push for the same price reductions that the Bank of England has demanded.” Kevin Doran, Chief Investment Officer, Brown Shipley

De La Rue’s operating profits last year were £89.3m. Analysts had forecast them to be £90m this year, and £94m in 2015/16 but have since downgraded them to £68m and £58m respectively.

“While disappointing to announce this trading update De La Rue, as the market leading banknote printer, remains a strong, profitable and cash generative business. We will continue to pursue efficiency gains, invest in the business and in R&D for the future,” Philip Rogerson, Chairman, De La Rue

Source: BBC News