LONDON (Alliance News) - De La Rue PLC on Thursday proposed a restructuring, after annual profit fell sharply and in preparation for the expiration of the company's UK passport contract.
In addition, De La Rue said Martin Sutherland has agreed to step down as chief executive as soon as his successor is in place. The company has already commenced the recruitment process, it said.
"For the past five years, Martin has brought tremendous energy and strategic insight to moving the company from a traditional manufacturing business to a service-oriented business building on leading edge technological solutions, as well as refocusing the business on its core strengths and bringing greater balance to the portfolio. The company is now well positioned to move to the next phase of this journey," said Chair Philip Rogerson.
De La Rue is know for making banknotes but has been changing itself into a security and anti-counterfeiting firm.
Pretax profit for the financial year ended March 30 dropped to GBP25.5 million from GBP113.6 million a year earlier, as operating expenses jumped to GBP533.3 million from GBP370.9 million.
De La Rue said revenue rose 12% to GBP564.8 million during the year from GBP493.9 million, benefiting from the adoption of the IFRS 15 accounting standard. Excluding the impact of IFRS 15, revenue would have increased by 9%.
The company said it saw "strong" momentum in its Product Authentication & Traceability division, which has driven order intake up. As a result, De La Rue's total order book increased by 20% to GBP554 million, of which GBP288 million will be delivered within the next 12 months.
Meanwhile, the Banknote Print unit, which has benefited from strong overspill demand, has proven to be "resilient" in the past few years. However, De La Rue said it anticipates margin pressures going forward as competition in the banknote print market intensifies.
De La Rue declared a final dividend of 16.7 pence a share, unchanged from the prior year. This would make a full year payout of 25.0p per share, also unchanged.
"As we look ahead, the conclusion of the UK passport contract in 2020 and the growing competitive pressure in the banknote print market present some significant challenges for our business," said Sutherland.
As a result, De La Rue proposed a reorganisation that is aimed at creating better strategic focus and greater efficiency, with a cost-cutting programme that will deliver in excess of GBP20 million annual savings by 2022.
De La Rue intends to restructure its operations into two divisions: Authentication and Currency.
"By aligning the group structure into two divisions focused on our chosen markets, we will not only optimise the operations of each division to the market dynamics they face, but we will also give ourselves future strategic options," the company explained in its statement Thursday.
De La Rue shares were trading 25% lower on Thursday at 343.98p each.
De La Rue (DLAR)