De La Rue warns on banknote demand

23rd Nov 2010 07:07

De La Rue's underlying interim profits tumbled after well-flagged problems at one of its paper production sites, with the banknote printer warning it won't make up the shortfall this year.The paper problems cost it £35m and the resignation of chief executive James Hussey. The firm says demand for banknotes was also weak generally in the past six months with revenues falling from £252m to £209m. It does not expect to recover that shortfall this year."The timing and volume of order receipts mean that the shortfall in banknote print volumes in the first half will not be recovered in the remainder of the year. As a result it is estimated that full year volumes will be approximately 20% lower than the previous year, with a consequent reduction in internal component sales by Security Products, " it added.Underlying profits fell in the first half from £48m to £23.8m including the £35m charge for the problems in paper production, which was in line with previous estimates. That charge consists £12m trading and £23m exceptional items. "The board reiterates its confidence that neither the physical security nor the security features in the paper were compromised," the statement said. Pre-tax profits rose to £69.4m from £44.2m, which includes the gain on the sale of De La Rue's stake in lottery operator Camelot.Executive chairman Nicholas Brookes added the firm is in the closing stages of negotiations with a potential new chief executive."Banknote print volumes in the first half were significantly below the high levels of the prior two years but the board is confident that this is unrelated to the paper production issues," he added. "Banknote paper volumes for the full year remain uncertain as customer discussions are yet to be concluded. Pending this, the financial impact on the group for the full year and subsequent years remains unclear," he said.The interim dividend is unchanged at 14.1p.