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By James Davey and Sarah Young
LONDON (Reuters) - British banknote printer De La Rue Plc (L:DLAR) has warned on profit for this year and next amid intense competition in the sector, forcing it to cut its dividend and pummelling its shares to a four-year low.
Its shares were trading down 29 percent at 537.8 pence at 0930 GMT on Friday, their biggest one-day percentage fall since February 2003 and wiping 223 million pounds off the company's stock market value.
De La Rue, which makes over 150 national currencies and UK passports, said trading conditions had deteriorated across the group and it expected pricing pressures to continue into its 2015-16 financial year, when contractual price reductions are also due to bite, hitting profitability further.
Given the more difficult trading environment, De La Rue, which first started printing paper money in 1860, said it intends to review the level of its dividend for the full year. It said it expects to make a half-year payout of 8.3 pence, down from 14.1p in 2013-14.
"This is a major warning," said analyst Charles Pick at brokerage Numis, who cut his rating to "hold" from "add". "They weren't upbeat at the time of the last results in late May time, they were quite cautious about prospects. A bad situation has got even worse."
Pick said De La Rue was suffering as the bank note printing industry had become more competitive, with it and rivals such as Germany's Giescke & Devrient and France's Oberthur [OTHS.UL], a suitor for De La Rue in 2011, involved in a price war.
Its shares were briefly buoyed earlier this month when the company was named preferred bidder on a 10 year contract to print Britain's paper and new plastic banknotes. It has been printing money for Britain since 2003.
NEW BOSS
Without a chief executive since March after Tim Cobbold left, De La Rue's new CEO Martin Sutherland, who joins from BAE Systems (L:BAES), will take up his post on Oct. 13.
The group, which last October also warned on profit, said on Friday that for the current 2014-15 year, both underlying operating profit and underlying pretax profit will be approximately 20 million pounds lower than that reported for 2013-14.
In that year it made an underlying operating profit of 89.3 million pounds and underlying pretax profit of 77.3 million.
Before Friday's warning, analysts had been expecting De La Rue to post pretax profit of 81.6 million pounds, according to a Thomson Reuters consensus forecast.
In its bank note business, De La Rue said pricing had been disappointing, leading to reduced margins, adding that in the division which provides product authentication and cash management processing services, the rate of growth had been significantly slower than expected.
In passports, some contracts were not put out to tender as expected and instead countries kept incumbent suppliers, while the take-up of electronic passport had also disappointed.
"While disappointing to announce this trading update, De La Rue ... remains a strong, profitable and cash-generative business," said Chairman Philip Rogerson. "We will continue to pursue efficiency gains, invest in the business and in R&D for the future."
(Editing by Pravin Char and David Holmes)