The group has now completed the three-year performance improvement plan implemented in 2011 following its annus horribilis in 2010. Chairman Philip Rogerson said the company, which posted sales up 6% to £513.3m in the year to 29 March, was in “fundamentally better shape” and that a culture of continuous improvement would result in further efficiency gains in the future.
It is also making headway in tackling its pension deficit, and made an £11.5m payment into its defined benefit pension scheme as part of a special funding plan that is expected to eliminate the scheme’s £180m deficit by 2022.
At its £342.7m (2013: £298.1m) turnover Currency division, banknote print volumes slipped 2% to 6.2bn notes, while banknote paper output grew 10% to 9,600 tonnes.
Although average banknote prices rose year-on-year, prices still remain below the historic average. However, cost reduction measures and increased sales resulted in a huge jump in operating profits at the division, from £38m to £62m.
“If there were such a thing as an average banknote specification then pricing is a little bit weaker, but it is difficult to quantify. We have done quite well in improving the volume of paper made,” said chief operating officer and group finance director Colin Child, who put the scale of the security print giant’s output into a monumental context: “Every three days we produce enough banknotes to create a pile the height of Everest,”
De La Rue, as the incumbent, is awaiting the outcome of the Bank of England’s hotly-contested banknote print tender. “We expect a decision before the end of the calendar year,” Rogerson said.
The group missed out on the contract to supply the Bank with polymer for the upcoming £5 and £10 polymer notes, with the business instead going to Innovia Group.
De La Rue’s exceptional costs of £17.5m included a £1m fee for legal and professional fees related to an “aborted acquisition”, understood to be for Innovia, which was instead sold to Arle Capital in a €498m deal last month.
Rogerson said De La Rue’s own polymer banknote substrate, Safeguard, was now being used in nine countries.
Clydesdale Bank is set to introduce the first polymer note in Great Britain next year, with two million £5 notes being released to mark the 125th anniversary of the Forth Bridge.
“It will be Britain's first banknote on polymer and will be ours from end-to-end. We’re quite proud about that,” Rogerson stated.
Overall, polymer’s share of the worldwide banknote substrate market is around 3% at present, or 4,500 tonnes. “It’s likely to grow faster than paper, but from a very low base,” he explained.
The exceptional costs included a £14.2m write-off related to its loss-making Cash Processing Solutions business, which it expects to breakeven next year.
Rogerson also said the group was targeting growth in its passports operation, where De La Rue lays claim to being the worldwide leader in commercially available passport production.
It currently handles the passport requirements of 65 countries through its Identity Systems wing, which accounts for 15% of group sales but 24% of operating profit.
“One of the key drivers for growth is the conversion of countries to adopt e-passports. The western world has moved to this solution but a lot of customers elsewhere are still in the process of moving. It involves a level of complexity and digitisation that is very attractive to us and we see real growth there.”
The group, which employs around 4,000 staff worldwide, is currently without a chief executive following the departure of Tim Cobbold, who left to join UBM at the end of March. De La Rue “has a shortlist and is working through it,” Rogerson said. “We are absolutely on the case.”
De La Rue’s share price jumped 64p, almost 8%, to 874p on the news, but is still down on the price of 892p at the beginning of the year. The 52-week high was £10.46 (low: 745p).
It had orders on its books for the coming year of £218m at the year-end.
