De La Rue plunges on note printing problems
By Ed Hammond
Published: July 20 2010 16:23 | Last updated: July 20 2010 16:46
De La Rue saw its shares plummet to the lowest level in three years after the bank note printer warned that poor quality paper would hit its profits.
The company, which manuafactures and prints bank notes, said production at its main plant in Hampshire had failed to meet “certain quality specifications”
EDITOR’S CHOICE
High-spec banknotes boost De La Rue - May-25.Banknote sales rise at De La Rue - Jan-26..The company declined to provide details of what was wrong with the paper, but said that production and shipment had been suspended while it conducted an investigation into the circumstances surrounding the faults.
The group added that sales and production levels would be “materially” lower than previously expected. Analysts had forecast group revenues of just under £600m for the year ending March 2011.
The paper printing business is one of two elements of the group’s core currency division and supplies bank note paper to central banks around the world, including the Central Bank of Iraq and the Bank of England.
De La Rue, which also makes cash counting and identity machines, has cemented a reputation for supplying high quality paper and is involved in the production of over 150 national currencies.
However, analysts on Tuesday warned that the news could damage the group’s reputation with banks and called on the management to offer more clarity over what had happened.
Describing the news as “shocking”, one analyst said: “Integrity of currency is not something you take risks with and this is frightening for the market."
JPMorgan, De La Rue’s house broker, meanwhile said it expected the company’s management to provide further insight into the scale of the problem, what could be done to fix it, and the likely impact on sales. The group has an AGM on Thursday.
“This seems likely to weigh on the shares until further clarity can be provided,” analysts at the broker said.
De La Rue announced a share buy-back earlier this year following the sale of its £78m stake in Camelot, the UK lottery operator. The group has enjoyed strong demand for its high-specification and high denomination bank notes, and saw sales rise 12 per cent during the year ended March.
Shares in De La Rue fell 16.3 per cent or 150½p to 773p, the lowest level since 2007.
http://www.ft.com/cms/s/0/420b628c-9...49a,s01=1.html
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