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British currency maker De La Rue warned that its profits next year would be hit by rising supply costs, sending its shares tumbling on Wednesday.
The company, which makes British banknotes, said “further headwinds” would reduce adjusted operating profit for 2023. It added that there was now a “substantial degree of uncertainty in the outlook “, with supply chain inflation expected to increase operating costs by £5mn.
“It is possible that disruptions will affect revenue,” he added. “The board now expects full-year 2023 adjusted operating profit to be broadly flat versus full-year 2022, and weighted toward the second half. “
The group’s shares fell 8% in early trading in London to 102p, pushing their decline for the year to nearly 35%. De La Rue’s supply chain includes chips used in passports from countries like Australia, which have been hit by a global disruption. It also faces rising costs for raw materials such as polymer sheets and chemicals used to make banknotes.
De La Rue said he was making progress on his turnaround strategy, which includes cutting costs and streamlining operations. The company has improved its market position across all of its business divisions, he added.
“We have cautiously revised our outlook for FY 2022/23 adjusted operating profit, due to further headwinds experienced since the end of our fiscal year, and a realistic expectation of the extent to which we can mitigate,” chief executive Clive Vacher said.
He added that although progress has slowed, “we remain firmly on track strategically and operationally to build a strong, cash-generating business over the medium term.”
The company was forced in March to admit that a turnaround plan launched by new management would take longer than expected after it missed analysts’ operating profit forecast for this year.
The company reported adjusted operating profit of £36.4million in the 12 months to the end of March, compared to £38.1million last year, with revenue down to £375.1million of pounds sterling, against 397.4 million pounds sterling.