De La Rue warns of ‘significant uncertainty’ as demand for cash dries up
Storied banknote-maker De La Rue said profits would slump below expectations and warned of a “significant degree of uncertainty” today as it struggles to cope with a downturn in cash usage.
In a trading update, the firm said full year adjusted operating profits would come in at a “mid-single digit percentage below” an initial £30m forecast after a sharp fall in demand for its banknotes over the past year.
“The downturn in currency, impacting both De La Rue and the wider industry, is causing a significant degree of uncertainty in terms of outlook for the [full year 2024],” the firm said.
“The demand for banknotes has been at the lowest levels for over 20 years, resulting in a low order book going into [the full year for 2024].”
Bosses said they had requested a deferral of an £18.75m payout into its pension scheme and had been forced into negotiations with its bankers to try and rejig the terms of its covenants.
The firm slashed its profit guidance for next year to “the low £20m range”, down from a previous forecast of £40m.
Shares in the firm collapsed more than 21 per cent after the update, with brokers at Numis placing their recommendation for the stock under review as they await the outcome of the negotiations with lenders.
“Whilst there are a number of new tenders underway, the timing of recovery remains uncertain,” said Numis analyst James Beard in a note.
“We view the outcome of [the banking] negotiations as key to the equity story in the short term,” he added.
The profit warning underscores the struggles of the 202-year-old note-printer to diversify beyond its historic staple as cash usage plummets around the country.
Efforts to push into authentication and central bank products have failed to impress investors, with its share price cratering over 91 per cent in the past five years.
The chief of pricing firm Updata, David Linton, told Morning Wire that bosses had failed to heed the warnings of its collapsing share price and push into new terrain.
“What the stock market was telling the management at De La Rue for more than a decade, was that they were in long term decline,” he said. “Did the market know something that De La Rue’s management didn’t?”
Today’s warning marks the latest troubles for the firm after an aggressive campaign by investor Amber Crystal – one of its biggest shareholders – which has called for its chairman Kevin Loosemore to be ousted.
Crystal Amber said last week that De La Rue’s turnaround efforts had “failed by every measure” in a scathing attack on the firm.
Sharpest share collapses
De La Rue’s share price plunge is enough to make any investor wince – but it’s by no means the most brutal fall felt on London’s markets in the past five years.
Research by Hargreaves Lansdown for Morning Wire shows that 115 firms have suffered a more painful time since 2018, with AIM-listed Vela Technologies topping the list with a fall of nearly 100 per cent over the period.
A host of big name firms have suffered similar freefall. Cineworld and retailer McColls have both seen their share price collapse over 99.5 per cent, once feted challenger bank Metro Bank has fallen 97 per cent and construction firm Kier has plummeted 91 per cent.