De La Rue Casts Doubt on Continuing as Going Concern

Leading commercial banknote printer De La Rue has said that it hopes talks over the sales of its authentication and currency divisions would reach a “successful conclusion” in the coming months. Despite the optimism, the British firm is skeptical about its ability to continue as a going concern.

Established over 200 years ago, the group said that it has received further interest from suitors and that negotiations are “progressing”. The group’s shares in the stock market dipped 9% in response to “material uncertainty” over its financial future over the payment of a loan due in July next year.

Even while De La Rue is banking on the sale of its authentication division to repay the loan amount, there’s uncertainty over the timing of any potential deal. This in turn throws doubts over its ability to continue as a going concern through to 28 September next year.

“Following 30 May strategy update, further interest in both of the group’s divisions has been received and negotiations and due diligence in respect of both divisions are progressing,” says De La Rue CEO Clive Vacher. The company has also revealed that their range of strategic options and considering the progress being made will ultimately allow the company to repay the revolving credit facility in full before its expiration on 1 July, 2025.

The Basingstoke-headquartered group is going through a difficult phase with demand for banknotes crashing after banks stockpiled cash during the pandemic and online banking and contactless payments gaining huge global popularity.

The printer posted sliding earnings in the current fiscal forecast due to what it described as “substantial trading difficulties.” Group revenue slumped 11.3% from £349.7 million in FY23 to £310.3 million impacted by currency industry downturn. Its currency division was badly impacted with earnings falling 18.7%, from £254.6 million in FY23 to £207.1 million. In contrast, the authentication division’s FY24 revenue grew by 12.5% to £103.2 million, surpassing the company’s £100 million target.

Vacher comments, “De La Rue’s businesses successfully navigated substantial trading challenges faced in the last financial year and met all expectations that were set.

“Both divisions enter the current financial year well positioned to take advantage of the increasing opportunities available to them. The recovery in the currency market that we noted at the end of 2023 has continued into 2024, and the division now has a strong order book that has been secured by an excellent win rate. Authentication has converted all four substantial contracts that it was targeting for renewal in the last year, safeguarding £150 million of future revenue. It is now pursuing a number of new potential opportunities to grow revenue further.”

Vacher also emphasized that this stronger trading environment has provided an encouraging background to make progress on strategic priorities. “These are progressing well and we are confident that discussions will reach a successful conclusion in the coming months.”

De La Rue Chairman Clive Whiley adds, “Despite the challenging trading environment over the last two years, De La Rue remains a trusted leader in providing authentication and currency solutions and the business is well placed to benefit from the normalization of our markets.

“Since we published our strategic update on 30 May, we have seen an increase in strategic interest with more entities involved and due diligence undertaken on both divisions. These workstreams continue and we will provide a further update ahead of our annual general meeting on 25 September.”

He further said that the board has made progress in establishing a route to realize the underlying intrinsic value of the business for the benefit of all stakeholders and are looking forward to complete this process during the current financial year.

De La Rue works with governments, central banks, and commercial organisations around the world, delivering security and integrity to the cash supply chain and providing product authentication solutions.