De La Rue cheers half-year earnings after currency demand rebound
The banknote printer said its currency order book has more than doubled to £219.8m from £105.4m since September.
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Your support makes all the difference.Banknote printer De La Rue has hailed a better-than-expected first half and revealed a more than doubling of its currency order book since September on a recovery in global demand.
The Basingstoke-based group, which prints banknotes for the Bank of England and other central banks across the world, posted an underlying operating profit of £7.9 million for the six months to September 30.
This was down from £9.3 million a year ago but better than its expectations of breakeven.
On a statutory basis, it remained in the red, with pre-tax losses widening to £16.8 million from £15.9 million a year earlier as it was hit by one-off costs linked to a restructuring of its manufacturing operations, as well as higher interest payments on its debt following rate rises.
Shares in the firm fell 6% on Tuesday morning.
It said the recovery in demand for currency has seen orders jump to £219.8 million from £105.4 million since the half-year alone.
The currency bounce-back is being driven by inflation, meaning goods and services cost more, and as governments have largely run down stocks built up during the pandemic.
But the group kept its full-year outlook unchanged, for underlying earnings “in the early £20 million range” as it warned over “a number of significant operational uncertainties” in its two main divisions.
De La Rue’s robust performance in the first half reflects the important actions that we have taken since 2020 to make the company resilient to changing market conditions
Chief executive Clive Vacher told the PA news agency this was partly down to pressures the company is facing to meet the sudden ramping up in demand for currency with “unusually short lead times”.
The firm has been cutting back its manufacturing operations in recent years to slash costs, which saw it trim its banknote print locations from five down to four.
Mr Vacher added that while inflation is easing back across a number of countries, the recovery in currency demand has not yet reached its peak.
“Globally, inflation remains a significant problem that’s going to run for some time and that will continue to fuel demand for banknotes,” he said.
“I don’t see an easing-off of demand for some time yet.”
De La Rue, which has a separate authentication division providing software for governments and businesses, posted a pre-tax loss during the year to March, having repeatedly issued profit warnings to shareholders.
Earlier this year, it revealed that demand for banknotes had slumped to the weakest level for 20 years.
But in recent months, it has seen demand for currency pick up and is expecting cash in circulation to grow around 5% a year globally.
Figures from UK Finance in September showed that cash usage increased last year, for the first time in a decade, as households looked to balance their budgets amid the cost-of-living squeeze.
Mr Vacher said the rise of crypto and digital currencies is seeing countries “reduce banknote demand”, but he said this is being offset by factors such as rising populations.
“Central bank digital currency is an area we keep looking at with great interest, but it’s a really slow burner,” he added.
De La Rue’s latest figures show the group has also been trimming its debt pile, with net debt standing at £82 million at the end of the half-year, down from £82.4 million a year earlier and better than the £100 million initially guided for.
The business has cut costs over the past few years in efforts to strengthen its finances against weaker market conditions.