Sutherland, who took over as chief executive last November, said polymer was “cleaner and more durable” than paper.
“It’s more profitable, it’s longer lasting. More and more customers are coming to us and asking about our polymer substrate,” he stated.
However, Sutherland also described paper as “a really important product line” because it allowed De La Rue to sell its security print know-how into state print works.
As part of the fresh strategy instigated under his leadership the firm is also looking to partner with another security printer or printers to cope with surges in demand. Further details of this plan were unavailable at the time of writing.
The group makes banknote paper at its Overton Mill in Hampshire. In the year to 28 March paper volumes fell 2% to 9,400 tonnes, while the number of banknotes printed by the group actually increased by 5% to 6.5bn.
Sutherland also highlighted the issue of customers “disaggregating” the purchase of banknotes, whereby the paper or polymer substrate is bought separately from the security components and the printing itself.
A case in point is the Bank of England’s upcoming polymer notes, where the polymer is being supplied by Innovia Security. De La Rue secured a 10-year print contract with the Bank in September.
“That disaggregation drives very competitive behaviour,” Sutherland stated.
Group sales fell 8% to £472.1m while underlying operating profit was down 22% at £69.5m. Underlying pre-tax profits fell by a quarter, from £77.3m to £57.7m.
It booked exceptional items of £18.8m including the £13.3m charge related to its banknote paper production issues, and £4.7m in restructuring and relocation costs.
Sutherland’s new strategy does not involve divesting any of its existing businesses. He plans to “optimise and flex” low growth operations including print, paper and cash processing systems.
Regarding its print business, he said: “We need to ensure we’ve got the appropriate capacity and flexibility to make sure we can maintain profitability in that business. But it’s a core part of De La Rue moving forward.”
Areas with higher growth potential are part of the “invest and build” portfolio and this includes polymers, security products, and identity systems.
It plans to boost R&D spend over the coming five years. Sutherland said it would increase the R&D budget and then double it.
Sutherland has also reorganised the group’s executive team, with chief operating officer Rupert Middleton joining the executive board, alongside chief technology officer Selva Selvaratna and chief commercial officer Marc Overton.
News about a replacement for outgoing chief financial officer Colin Child is expected soon.
De La Rue also cut its total dividend for the year by 40%. The group’s share price fell by 10% on the results, and was down 48.51p to 504.99p at the time of writing.
The group had a £180m deficit in its defined benefit pension scheme, and a fresh valuation of the scheme began in April. It has agreed funding payments of £18.2m for the current financial year as part of a plan to eliminate the deficit by 2022.
