De La Rue sees ‘signs of recovery’ in banknote demand after swinging to a loss

Banknote maker De La Rue said there have been “encouraging signs of recovery” in its currency business after plummeting demand for fresh cash saw it slump into the red.

The group – which prints banknotes for the Bank of England and other central banks across the globe – reported pre-tax losses of £29.6 million for the year to March 25 compared with profits of £24.2 million the previous year.

Underlying operating profits tumbled to £27.8 million from £36.4 million in 2021-22.

De La Rue has repeatedly issued profit warnings over the past year, revealing in April that demand for banknotes had fallen to its weakest level for 20 years.

This came as governments instead looked to use up the stocks of banknotes built up during the pandemic, while countries have also been facing pressure on public finances caused by the cost-of-living crisis and inflation woes.

It also said at the time that it was in talks with its lenders over banking agreements.

Chief executive Clive Vacher admitted it had been a “challenging year” for the company.

But the group said actions taken in recent months have played a part in “stabilising” the firm and said it is on track with expectations to make underlying earnings “in the low £20 million range” over 2023-24, although it is set to remain broadly break-even in the first half.

Shares lifted more than 10% in Thursday morning trading on the brighter outlook.

De La Rue added that doubts over its future have been removed, confirming that there is no “material uncertainty” over its ability to continue as a going concern in the latest set of accounts.

Mr Vacher said: “Following a significant downturn in currency demand over the past 18 months, we have witnessed encouraging signs of recovery.”

He told the PA news agency that demand for currency is picking up as governments have largely run down the stocks built up during the pandemic, adding that inflation is also providing a boost, with goods and services now costing more worldwide.

He said the group has not lost market share and has been winning currency work as more tenders have been put out to pitch.

“The recovery isn’t fully here yet, but the situation is improving,” he said.

He said the group has implemented a raft of measures to get back on track in the past three years, including cost-cutting, renegotiating lending terms, and agreeing a substantial deferral to its contributions to plugging the firm’s pension deficit.

“Importantly, there is now no ‘material uncertainty’ with respect to De La Rue’s continuation as a going concern in the 2022-23 full-year accounts. This gives us a stable platform for future trading,” he said.

Mr Vacher told PA the firm is also “keeping an eye” on global central bank plans for digital currencies.

The group has had a “minor involvement” with a provider to look at the concept, but has decided not to invest in the area yet.

“I don’t see it as a threat in the short run that will replace physical currency… but it is an interesting concept,” he said.