Uncertain future for De La Rue following 87 per cent drop in profits
Banknote printer launches new security feature as part of its turnaround plan
UK banknote printer De La Rue has “significant doubt” about its future, following reports of an 87 per cent drop in operating profits for the past six months.
The company has suspended dividend payments and is focused on delivering a turnaround plan in a bid to tackle the company’s growing debt.
As of September 28, the group’s net debt was £170.7m, up from £107.5m in March. Its share price plummeted by 20 per cent on November 26 to 131.7p, close to its lowest level since 1998.
De La Rue’s problems began last year when it lost the £490m contract to print Britain’s new Brexit passports. It then lost £18m when the Bank of Venezuela failed to pay its bills.
According to CEO Clive Vacher, the company has also gone through an “unprecedented period of change” with the chairman, CEO, senior independent director and most of the executive team leaving or resigning.
In addition, he blamed pricing pressure as a result of lower demand, which led to an oversupply of banknotes.
Vacher has pledged to make structural changes to “further strengthen our competitiveness in a challenging market” and accelerate its three-year £20m cost reduction programme.
On November 4 the group was realigned into two divisions: Authentication (encompassing security features) and Currency (encompassing its banknote print).
The company will also focus on building momentum in the banknote security market, which has higher profit margins. In 2020 there are plans to launch a new security feature called Ignite.
“Between now and the end of calendar Q1 2020, we will complete a full review of the business and design a comprehensive turnaround plan for the company,” he said.
“With strong emphasis on cost control and cash management, coupled with a focus on innovation and reversing the revenue decline, we will become a leaner, more efficient company and drive shareholder value.”