De La Rue PLC (LSE:DLAR) shares tumbled by over 30% in early exchanges in London after it warned that falling demand for bank notes means adjusted operating profit for financial year 2023 is expected to be below market expectations.
The Basingstoke, England-based firm said profit is forecast to be a mid-single-digit percentage below market expectations following the downturn in its Currency business with demand for banknotes at the lowest levels for over 20 years.
This has resulted in a low order book going into financial year 2024 causing a significant degree of uncertainty in terms of outlook for the year.
But the firm did note there are encouraging signs that the market is recovering, with a significant number of new tenders actively underway but the timing of this recovery remains uncertain.
However, revenue in its Authentication division is forecast to exceed £100mln for the first time in financial year 2024, driven by the existing order book, including the full-year impact of the Qatar, Bahrain and Oman GRS programmes, and a substantial increase in demand from the Australian passport programme.
But this progress will be somewhat offset by the ongoing lower global PC sales which, according to IDC, is likely to start to recover only in calendar year 2024.
As a result, De La Rue currently expects full-year adjusted operating profit for financial year 2024 to be in the low £20mln range.
Talks with its lending banks are underway regarding an amendment to its banking covenants, reflecting the revised outlook while the firm is also in conversations with the trustee of the De La Rue Pension Scheme and has officially requested a deferral of the next £18.75mln of deficit repair contributions.