(Alliance News) - Shares in De La Rue PLC plunged on Monday, after the security printed products maker warned that annual profit will miss market expectations due to significant pressure from the extended Covid-19 pandemic.
However, De La Rue said it remains confident in its two-year-old turnaround plan.
Shares in the Basingstoke, England-based company were 27% lower at 109.20 pence on Monday morning in London.
For the financial year ending March 26, De La Rue expects adjusted operating profit to come between GBP36 million and GBP40 million, flat on GBP38.1 million in the prior year but below market expectations of GBP45 million to GBP47 million.
More positively, De Le Rue noted that the revised outlook includes year-on-year growth from its two core businesses, Currency and Authentication.
The group said that since publishing its interim results in November 2021, the significant headwinds relating to the pandemic have become more "pronounced", with the Omicron and Delta variant causing a rise in employee absences in manufacturing facilities, leading to lower output for the full year.
In addition, the company is also dealing with higher commodity and energy costs and with supply chain shortages in chips and other raw materials.
De La Rue said that these issues are expected to cause a 12-month delay to the group's turnaround plan, which was first announced in February 2020. The headwinds are expected to continue into the new financial year - financial 2023 - and slow the company's adjusted operating profit growth.
De La Rue's turnaround plan includes the return of its Currency unit to "progressive" margin growth from financial 2021, helped by cost reductions and investment in polymer and related features.
Elsewhere, the company has targeted continued strong year-on-year growth of its Authentication business, driven by further, largely project-related, investment.
Looking ahead, De La Rue said it remains confident in the turnaround plan and has made no changes to it.
"Despite the macro challenges that are delaying aspects of the turnaround plan, De La Rue continues to increase adjusted operating profit in both divisions year on year, and the plan anticipates this to continue going forward. While this trading update is disappointing, it should be seen as a delay to reaching our turnaround plan objectives, rather than indicating that a change of direction is required," said Chief Executive Officer Clive Vacher.
De La Rue will publish its annual results on May 25.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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De La Rue (DLAR)
