The company responsible for distributing cash to Australia’s bank branches, ATMs, and supermarkets says it’s still running at a loss, and warns against any move to allow the Reserve Bank of Australia (RBA) to step in and take over parts of the business.
Linfox Armaguard—which is 65 percent owned by transport giant Linfox and 35 percent by Spanish firm Prosegur—has received a cash injection totalling $1.725 million from Linfox and the Fox family, executive chairman Peter Fox told the Senate Economics Legislation Committee on July 21.
The committee is examining the Cash Distribution Framework Bill, which aims to stop the company from cutting unprofitable routes amid concerns about dwindling cash use or availability—mainly in the regions.
Because regional operations face lower transaction volumes and higher driving distances, they represent Armaguard’s greatest financial drain.
The bill forbids Armaguard from unilaterally cutting routes to remote or regional towns to save money, in a move designed to ensure regional bank branches, local post offices, and independent grocers retain scheduled cash drops. Currently Australia Post is also one other larger provider of physical cash services in the regions.
An Armaguard truck travels through Sydney, June 26, 2008. AAP Image/Melanie Foster
Fox said the government’s impending bill amounted to “nationalisation by stealth.”
He also said any move to give the RBA power to appoint a statutory manager or direct the transfer of business assets or shares without consent from Armaguard owners was “an absolute outrageous affront.”
“That they are to be empowered to order recapitalisation and could cherry-pick particular assets out of our enterprise and leave us with liabilities is not reasonable for a business of this character, and the compensation provisions are completely unclear.”
State Intervention to Ensure Cash Continues Flowing
The provision could be triggered if Armaguard suffered vehicle breakdowns or local staff shortages that threaten regional routes.
The RBA can instantly step in to finance alternative distribution options, ensuring isolated regional hubs do not lose access to physical cash.
The legislation also establishes a mechanism where high-volume, highly profitable metropolitan routes help pay for low-volume regional routes.
Major banks must co-fund these regional routes through supervised pricing arrangements administered by the Australian Competition and Consumer Commission (ACCC), shielding Armaguard from taking heavy losses outside major cities.
However, Armaguard loses the freedom to dictate price increases to banks and retailers.
But the bill effectively shifts the company from an independent, unregulated private monopoly into a highly restricted, state-supervised utility—instead of breaking up the monopoly, the federal government has chosen to permanently regulate parts of Armaguard’s commercial conduct and operational footprint.
As the lone major cash-in-transit provider, with around 90 percent of the market, Armaguard can no longer leverage abrupt service withdrawals to force better terms from clients.
Armaguard Still Struggling
Armaguard’s merger three years ago between Linfox Armaguard and Prosegur Australia created savings of $38 million across the two businesses, including the closure of more than 30 branches.
At the time, short-term funding arrangements were negotiated with its eight largest customers: Coles, Woolworths, Wesfarmers, Australia Post, NAB, ANZ, Westpac, and Commonwealth Bank.
Since then, it has been negotiating to try create a more sustainable business model away from “just-in-time”—meaning, on-demand deliveries—to try achieve profitability.
“Run density for cash services has also significantly declined as banks have closed branches and ATM networks, with the biggest impact seen in regional and remote areas of Australia, leading to much higher costs per individual job that Armaguard has to service.”
Fox said he tried engaging with the Australian Treasury and Reserve Bank about Armaguard’s trading losses since 2020, but “the majority of correspondence [has] gone unanswered. In the last six years, the government has spent no money on cash distribution.”
“Why would we spend tens of millions of dollars on capital, forgoing debt repayments and dividends, when the business could be transferred by the Reserve Bank of Australia without notice and without any right of reply at any time? Why would this even be considered? It’s absolutely ludicrous,” Fox said.
“Let me go on the record to say, there will be no [failure to] service any postcode throughout Australia.
“All we want is to announce some service delivery efficiencies, such as certain run days per week, rather than just-in-time servicing, and more importantly, fair pricing for customers that are currently loss-making.”
Bank branch closures are a major factor in reduced cash use, Fox said.
In its submission (pdf), the RBA said the fall-off in cash use by Australians appears to have stabilised in recent years, now accounting for around 15 percent of all transactions.
Half of all Australians use cash in a typical week and a third would face hardship or major inconvenience if cash were to become difficult to access, the Bank said.
