De La Rue optimistic about demand as central banks restock cash

By Yadarisa Shabong

(Reuters) -British banknote maker De La Rue is cautiously optimistic about the demand for cash, fuelled by high inflation and central banks restocking notes, it said on Tuesday, after reporting a 15% drop in half-yearly profit.

Demand for banknotes had slumped to a two-decade low earlier in the year, De La Rue said in April, as central banks stockpiled cash during the pandemic and digital banking and contactless payment become more popular.

"We are seeing good signs of recovery, but not quite yet to sort of pre-pandemic levels, or levels that we saw at the early stages of the pandemic," CEO Clive Vacher said in an interview.

The Basingstoke-based company designs around a third of the world's banknotes and its headquarters houses what it calls the largest currency design studio, offering governments and central banks varied levels of security features to prevent counterfeiting.

"What we have seen over the last sort of 18 to 24 months is that despite significant inflation worldwide, there's been a sort of counterbalancing factor, which is that countries, particularly in the areas of the world where we are strongest, have got a lot of pressure on their budgets, so they have delayed purchasing decisions on banknotes," Vacher said.

The company, more than 200 years old, reported an adjusted operating profit of 7.9 million pounds ($10.00 million) for the six months to Sept. 24, compared with 9.3 million pounds a year earlier.

It had forecast being slightly ahead of break-even.

Shares in the company, which have lost nearly half of their value in the last two years, were down 6% at 75.8 pence by 0909 GMT as it kept its annual outlook unchanged despite results coming in better than its previous expectations.

($1 = 0.7896 pounds)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Sherry Jacob-Phillips and Louise Heavens)