De La Rue Plc shares fell to a record low as the company that’s printing new UK money featuring King Charles III warned that demand for banknotes is the weakest in 20 years.
(Bloomberg) — De La Rue Plc shares fell to a record low as the company that’s printing new UK money featuring King Charles III warned that demand for banknotes is the weakest in 20 years.
The stock fell as much as 34% in London trading after the firm said adjusted operating profit for the fiscal year just ended would miss analyst estimates by “a mid-single digit percentage.” It also said it’s talking with lenders about amending its banking covenants, in part due to the recent jump in Bank of England interest rates.
Share trading volume swelled to about 5 million shares, 28 times the three-month daily average.
The plunge is the second in four months for De La Rue, which cited a surge in input costs such as energy for a November profit warning.
Demand for banknotes has dropped after central banks built up inventory during the pandemic, according to Chief Executive Officer Clive Vacher. Additionally, the devaluation of many countries’ currencies over the past few years has made placing orders for fresh bills more costly, he said in a phone interview.
Wednesday’s drop saw the company’s market capitalization cut to just 67 million pounds ($83.2 million). De La Rue was worth close to a billion pounds about a decade ago, but has been hit by a string of warnings as consumers shift to card and digital payments. The company also suffered from the loss of a contract to produce Britain’s blue passports after Brexit.
Vacher said the firm is starting to see a recovery in cash demand, partly due to the cost-of-living crisis.
“Inflation does drive demand for banknotes as the money in your pocket is worth less, so you need more of them,” he said. “And in a crisis, people seek a security blanket of having cash hanging around. If you want to make sure your grandmother’s okay then you’ll make sure you have access to cash.”
(Adds comments from CEO interview.)
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