BOSSES at De La Rue, which operates the world's largest banknote factory on Team Valley, Gateshead, will press ahead with turnaround plans as it tackles falling profits and fierce competition from Europe.

Pre-tax profits dropped by more than a third to £69.5m in the six months to March 28, down from £89.3m in 2013/14. Revenues were also down to £472.1m from £513.3m last year.

It slashed the dividend to shareholders by more than 40 per cent to 16.7p from down from 28.2p. De La Rue shares have almost halved in the past year and fell up to 10 per cent in early trading yesterday.

The company, which has issued three profit warnings in the past two years, has made £7m savings under the leadership of chief executive Mr Sutherland who joined the company in October last year.

As part of the cost cutting drive De La Rue has made 85 of its 592 Gateshead workers redundant. In addition, the firm's two factories on the Team Valley, which produce passports, postage and security stamps, as well as about ten million foreign notes a day, will be included in a company-wide review of its manufacturing division.

However, the firm has invested about £5.5m in its Gateshead sites over the last three years to meet increasing demand for notes to include high tech security features.

In the results announcement Mr Sutherland said a new strategic plan was in place to deliver growth and improved profitability. He cited "challenging market conditions" noting that the weak Euro had given EU rivals a competitive edge which had hurt profits “in the short term”.

While the firm's core activities of making banknotes and banknote paper are expected to remain very challenging De La Rue plans to generate additional revenue by growing its share of the global passport and identity card markets. The manufacturer also anticipates "attractive growth prospects" for its authentification products, which includes tax stamps that help governments around the world to combat illicit trade and collect duty.

Mr Sutherland, who joined from BAE Systems, said: “In my first seven months, I have strengthened the leadership team and restructured the organisation to better align the business with its strategic needs as well as initiating a number of actions to achieve substantial cost savings which will be largely reinvested in the business to drive growth.

"I have completed a review of the business and formulated a clear Strategic Plan to deliver growth and improved profitability in the long term through a greater focus on customers, innovation and delivery.”

The company recently won a 10-year contract with the Bank of England to print its sterling banknotes at its facility in Debden in Essex, which will see the introduction of plastic banknotes.

Mr Sutherland added: “I have seen the new designs of the new notes and they seem spectacular.”