De La Rue, which is one of the world’s leading high security printing firms, produces currency for over 150 countries around the world – including our very own sterling notes. Unsurprisingly its shares, already pretty low, plunged a further 15% on the news – no chief exec and 18 months of lost sales is a hard pill for investors to swallow over breakfast.
So what’s gone wrong? Well, you may be surprised to learn that here at MT, we don’t have much experience of printing money (honest, your honour), but we do know that it’s an extremely technical business, with anti-forgery measures improving all the time and very precise requirements from each customer in terms of paper selection, printing and security marking.
Details of the exact issue are unclear (and are likely to remain that way given the sensitive nature of De La Rue’s business) but it appears to be centred on problems with testing paper specifications for some notes. As students of crime fiction will know, the type of paper used for banknotes is an important basic element in making them resistant to forgery. Exotic and very precise paper specs are both easily recognisable and hard to copy.
But, in a world where electronic money transfers are now the norm in the vast majority of business to business transactions, how important is paper money anyway? Well a lot of high street and day-to-day businesses still rely on cash, so the trustworthiness of a nation’s notes remains a crucial issue, not only in terms of economic security but also national pride and consumer confidence.
In fact it’s hard to think of many other businesses where quality control is more critical, so it’s particularly unfortunate that this seems to be where De La Rue has fallen down.
What’s the prognosis? Well, the firm is confident that no flawed notes have been issued, but this morning’s statement that it was continuing to look into the problems – which the board regarded as ‘being of a serious nature’ – rather suggest that it hasn’t go to the bottom of things just yet. It also said that a further announcement on the likely financial impact would be forthcoming, so there may well be more bad news on the way for shareholders.
As for Hussey himself, he had only been in the job a year or so and until this problem emerged he seemed to be making a reasonable fist of it. Back in May, he reported revenues up 12% to £561m, and oversaw the sale of De La Rue’s stake in national lottery operator Camelot for £78m.
It just goes to show that even a license to print money isn’t always all it’s cracked up to be.