British banknote printer De La Rue has warned that its profits will miss full-year forecasts as demand for fresh cash fell to its weakest level in 20-years, pushing shares to record lows on Wednesday.

In its third profit warning since January 2022, the currency and passport maker cautioned that it faced “significant uncertainty” and low order volumes for the coming year.

It also said it was in discussions with its lenders to seek “an amendment to its banking covenants”. Last year, De La Rue found itself in a fight with its auditor after a “going concern warning” because of what EY said was a “severe but plausible downside scenario” where if the group lost key currency contracts, it would breach a debt covenant on the group’s credit facility.

Clive Vacher, chief executive of De La Rue, said on Wednesday that he was pushing for new terms from his banks because of the sharp rise in borrowing costs after the Bank of England raised its base rate to 4.25 per cent.

“We do think interest rates will go down, we just need to ride out this time,” Vacher told the FT. “We just want to have sufficient headroom in the coming timeframe.”

On Wednesday, De La Rue’s board said it expected full-year adjusted operating profit for 2024 to be “in the low £20mn range” compared with earlier unadjusted estimates of £40.1mn.

The group also has also asked the trustees of its pension to defer the next £18.8mn of deficit repair contributions.

De La Rue was already under huge pressure before Wednesday’s statement. It warned on profits last November and before that in January as activist fund manager Crystal Amber, one of De La Rue’s, largest shareholders, called for the board to consider a break-up or sale of the company.

Its shares have fallen close to 65 per cent over the past year, and were trading down 18 per cent by mid-morning on Wednesday, having fallen by as much as 30 per cent.

Line chart of Share price (£) showing De La Rue investors cash out amid profit warning

Rising inflation and cost of living pressures had affected demand for currency, said Vacher. Revenues in that division fell 12 per cent year on year to £116.4mn in the six months to 24 September 2022.

“We saw a significant increase in demand when Covid hit, which we knew would drop,” he said. “We’re in a downcycle in currency, but it may last nine months to a year longer than in normal times.”

The UK group, which reports full-year earnings next month, had in March agreed to pay £15mn per year to its pension scheme until 2029 to make up a funding shortfall, which stood at £92mn in October.

“We felt if we continued to put money in on schedule, that’s not in balance with other factors such as net debt and the overall value of the company — it’s a logical move at this point to take a holiday from it,” said Vacher.

Rising rates have boosted pension schemes, with data from the UK’s Pension Protection Fund showing that the number of schemes with a deficit more than halved to 776 between March 2022 and March 2023. Vacher said that De La Rue’s pension scheme had benefited to some extent, although it had not reversed the deficit.


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