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Co expects to miss market expectations for year ended
March 25
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Co says outlook for current fiscal 2024 was uncertain
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Shares drop to record low
(Adds CEO comments from interview, background, analyst comment)
By Yadarisa Shabong and Radhika Anilkumar
April 12 (Reuters) - Struggling British banknote printer
De La Rue Plc warned its fiscal 2023 profit would miss
market expectations and this fiscal year's outlook was
uncertain, as demand for cash hit its lowest in over two
decades, sending shares to a record low.
The London-listed company said it was talking to lenders
about amending its banking terms due to the worsening outlook
and the higher interest rates, while it has requested its
pension trustee to defer its deficit contribution for the next
five quarters.
"The challenge at the moment is that there simply isn't quite the demand there to be where we want to be, which is disappointing," CEO Clive Vacher told Reuters.
Governments and central banks all over the world had stock-piled huge amounts of cash during the pandemic and are delaying new orders as they deplete their stock, De La Rue said. The drop in demand for notes may also serve as an early sign of a potential global economic downturn as banks need to hold less cash if they cut lending and customers spend less.
Modern notes last longer too. The Bank of England estimates polymer notes circulating in Britain - made by De La Rue - last two-and-a-half times longer their paper equivalents. "De La Rue has struggled with ...a structural decline in demand for physical cash amid the rise of contactless payments and digital banking," said Victoria Scholar, head of investment at online investment platform interactive investor.
Vacher, who launched a turnaround plan for De La Rue in 2020 including an increasing focus on polymer notes, said he expected "progressive recovery" in the next six to 12 months based on current "very high" volume of bids, which would take time to show up as revenue if bids are won. The over 200-year-old company, which works with governments, central banks and commercial organisations in more than 140 countries, signalled in November significant doubts about its ability to continue as a going concern. In recent weeks, it has been under pressure from third-largest shareholder Crystal Amber Fund to remove the chairman and shake-up its performance and share price. The activist investor was also concerned that going concern doubts could hurt the company's ability to win new contracts and retain existing ones. De La Rue shares, which have lost more than half of their value so far this year, fell more than 30% to 33 pence on Wednesday to a record low.
The company said it expected adjusted operating profit for the year ended on March 25 to undershoot market expectations by a mid-single digit percentage. In November, it had warned fiscal 2023 profit would be between 30 million pounds ($37.26 million) and 33 million pounds. It forecast on Wednesday adjusted operating profit to be in the low 20 million pound range for its fiscal 2024. On the positive side, revenue at its authentication business, which designs and makes secure documents as well as security features such as holograms to authenticate goods, is expected to exceed 100 million pounds for the first time in 2024, partly thanks to its Australian passport contract.
($1 = 0.8051 pounds) (Reporting by Radhika Anilkumar and Yadarisa Shabong in Bengaluru; Editing by Savio D'Souza, Varun H K and Tomasz Janowski)
