De La Rue Shares Tumble as Bank Note Demand Weakens

De La Rue (LON: DLAR) shares plunged more than 30% in early Wednesday trading after it warned that the demand for bank notes is significantly low, impacting the company's full-year adjusted operating profits.

The company, which designs and produces banknotes, revealed it now expects full-year adjusted operating profits to be a mid-single-digit percentage below market expectations, while the downturn in currency, affecting De La Rue and the wider industry, is causing a substantial degree of uncertainty in terms of its outlook for FY24.

“The demand for banknotes has been at the lowest levels for over 20 years, resulting in a low order book going into FY24,” the company revealed.

However, they noted “encouraging signs” of a recovery, with several new tenders actively underway. However, they added that the timing of the potential recovery remains uncertain.

Revenue in De La Rue's Authentication division is expected to exceed £100 million for the first time in FY24, helped by its current order book, which includes the full-year impact of the Qatar, Bahrain, and Oman GRS programmes, and a significant rise in demand from the Australian passport programme.

However, the progress will be somewhat offset by the ongoing lower global PC sales, which are expected to start to recover in the calendar year 2024, according to IDC.

As a result, the company expects its FY24 full-year adjusted operating profit to be in the low £20 million range.

De La Rue is holding discussions with lending banks in relation to seeking an amendment to its banking covenants, while it is also speaking with the Trustee of the De La Rue Pension Scheme and has requested a deferral of the next £18.75 million of deficit repair contributions.