Embattled passport maker De La Rue issues dire profit warning

Edmund Heaphy
Finance and news reporter
De La Rue last year lost the contract to print UK passports. Photo: Getty

De La Rue (DLAR.L), the embattled banknote and passport maker that is under investigation for suspected corruption, on Wednesday said that full-year profits would come in “significantly lower” than expectations.

Shares in the company fell as much as 30% in early trading before recovering slightly.

Profits in the six months to the end of September would be in the “low-to-mid single digit millions”, pushing overall profits in the year down, De La Rue said in its fourth profit warning in less than two years.

Earlier this month, the company announced that it had appointed former Rolls-Royce executive Clive Vacher as CEO. Vacher replaced Martin Sutherland, who announced he was stepping down in May after the company reported a 77% drop in pre-tax profits.

De La Rue gave no explanation for why profits would come in so far below expectations.

The company lost the contract to print UK passports in 2018 and it disclosed in July that the Serious Fraud Office had opened a probe into “suspected corruption” relating to its work in South Sudan.

Led by Vacher, management at the company are “conducting a detailed review of the business”, De La Rue said on Wednesday.

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It will update the market further when it reports its full-year results on 26 November.

“Investors might be slightly concerned that no reason is given for today’s profit warning, the second in a little over six months,” said Russ Mould, the investment director at AJ Bell.

“De La Rue fails a major test for investors: if it didn’t exist as a business today, would you really set it up? Being a specialist banknote printer looks anachronistic in an increasingly cashless world.”

The company has been at the centre of several investigations by the Serious Fraud Office, including a 2010 examination of falsification of banknote quality certificates by employees.

In 2011, it spent six months designing and manufacturing the currency for South Sudan, which was then the newest country in the world.

It is the largest commercial printer of passports in the world, and has designed around a third of the banknotes in circulation around the world.

The UK government in March 2018 decided not to renew its contract with De La Rue to print British passports, prompting a fiery response from the company.

French-Dutch competitor Gemalto was picked for the 10-year, £490m contract. The government later said that Gemalto would also manufacture the much-anticipated post-Brexit blue passports.

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Sutherland demanded that then-prime minister Theresa May visit the company’s factory to outline why her government made the decision to “offshore” the manufacturing of the British passport.

After pledging to appeal the contract decision, Sutherland said a month later that De La Rue had taken legal advice and made the “pragmatic business decision” not to contest the UK government decision.