Banknote maker De La Rue rocked by supply chain shortages

Banknote printer De La Rue has warned that supply chain issues triggered by the pandemic and rising energy costs will hit its profits.

The company, which prints banknotes for the Bank of England, said it faced higher costs of raw materials and microchips, "primarily" due to Covid.

De La Rue said Covid variants had also resulted in higher staff absences.

It added annual profits were now set to be between £36m and £40m, rather than about £45m as first estimated.

The warning sent the London-listed company's down by 30% on Monday.

UK-based De La Rue prints cash for about 140 central banks and employs more than 2,500 people globally.

Chief executive Clive Vacher said factories in the UK, Malta and Sri Lanka had been the worst hit by Covid infections.

"The spikes in absences have looked very similar to the spikes we've seen in the general population across the pandemic," he told the PA news agency.

"The Omicron and Delta variants have caused substantially increased employee absences in our manufacturing facilities globally, which will result in lower total operational output for the full year."

The boss said ink and paper was not a "big problem" as it could be purchased at fixed prices.

However, he added raw materials used in production which were bought at so-called spot prices were proving costly due to prices being "quite volatile".

Mr Vacher said in a trading statement the profit adjustments would delay the company reaching its "turnaround plan objectives" by a year.

"Even though it's a disappointing set of results it's still indicative of a fundamentally different business from the one I inherited when I arrived," he added.

The turnaround plan includes the company cutting costs and investing in polymer notes and in its authentication business.

The plan, introduced in February 2020, came after De La Rue warned there was a risk the firm could collapse.

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In 2019, the company suspended its dividend and reported a loss in the first half of its financial year.

De La Rue previously held the contract to manufacture British passports, but lost it to Franco-Dutch firm Gemalto in April 2018.

After losing out on the deal, the firm cut 170 roles at its Team Valley plant in Gateshead.