De La Rue drops passport contract appeal
De La Rue also said its full-year earnings would be hit by a write-off of about £4 million related to the bid costs.
British firm De La Rue has said it will not appeal against the Government’s controversial decision to choose a Franco-Dutch company to make the new blue UK passports after Brexit.
De La Rue, the current passport provider, said that it had “considered all the options”, but would not challenge the move, which will see the £490 million contract handed to Gemalto, which has its headquarters in Amsterdam and is listed on the French and Dutch stock exchanges.
De La Rue also confirmed that its full-year earnings would be hit by a write-off of about £4 million related to the bid costs for the passport tender.
It said underlying operating profits were now forecast in the “low to mid £60s million range”, against previous expectations for between £71 million to £73 million.
The firm added: “De La Rue will continue to fulfil its existing contract and assist with transition to the new supplier and is therefore expecting no impact on the group’s performance in the next 18 months.”
The Government has come under heavy fire for its decision to choose a European firm for the contract, but has claimed it will save £120 million during the lifetime of the 11-and-a-half-year contract.
Shares in Basingstoke-based De La Rue fell as much as 8% after the announcement and details of the profit blow.
De La Rue had initially vowed to appeal against the decision, with executives at the firm reportedly saying they believed Gemalto won the contract simply because it undercut its rivals.
The Home Office decision to choose Gemalto has drawn anger from a raft of politicians, including shadow home secretary Diane Abbott and Conservative Brexiteer Jacob Rees-Mogg, whose North East Somerset constituency is home to De La Rue’s Bathford plant.
Labour’s Liz Twist asked an urgent question on the issue in the Commons late last month, where Home Office minister Caroline Nokes told MPs the Gemalto bid “was the contract that provided the best value on all counts”.
De La Rue’s decision comes after it has already come under pressure on the stock market, seeing shares tank last month after it warned over profits and announced the departure of its finance chief.
As well as the passport bid hit, De La Rue said earnings have also been impacted by delays in the shipment of “certain contracts” in the last week of March.
“At this early stage of the new financial year, the group is cautious about the out-turn for the full year, however it starts off with a satisfactory order book,” it added.
Gemalto, which is headquartered in Paris, already produces the UK’s photo driving licence.
The firm – which is being acquired by French defence group Thales – has a number of sites in the UK, including factories in Heywood and Fareham.