MONEY’S RUNNING SHORT
Hundreds of North East jobs at risk as passport and money maker struggles
DE La Rue has warned that it could fall foul of its banks, putting hundreds of jobs at risk.
The passport and money printer has warned that it may not be able to continue to operate in tough trading conditions and that it could breach its banking conditions.
As a result, the company said “there is a material uncertainty that casts significant doubt on the group’s ability to continue as a going concern”.
De La Rue operates a major factory in Team Valley, Gateshead, where it produces bank notes and, until recently, UK passports. It employs around 430 people.
But in a controversial decision by the Government, De La Rue lost the contract to print the UK’s new blue passports. It was instead given to a European firm. The situation has continued to get worse for the business and its senior management team has been working on a turnaround plan for the company.
Yesterday, the firm named a number of issues that could impact its business and cause it to breach its agreement with its bank.
Among its concerns is that the business might not be able to generate the necessary cost savings that would allow a major contract to become profitable enough.
It also said a major problem could stem from the timing of revenue recognition on jobs for delivery for the current financial year.
Chief executive Clive Vacher said the group had been hit by a raft of management changes and an increasingly competitive banknote printing market, but is expecting a better second-half performance.
Mr Vacher said: “The business has experienced an unprecedented period of change with the chairman, CEO, senior independent director and most of the executive team leaving or resigning in the period.
“This has led to inconsistency in both quality and speed of execution.
“The new board is working to stabilise the management team, which we believe will take some time.”
He added: “Between now and the end of calendar first quarter 2020, we will complete a full review of the business and design a comprehensive turnaround plan.”
Turnaround specialist Mr Vacher replaced Martin Sutherland, who quit in May following a previous profit warning. Mr Vacher’s turnaround will also have to contend with a Serious Fraud Office investigation into alleged corruption at its South Sudan business.
There is also an £18m black hole in the accounts after the company revealed in May that the Venezuelan central bank has been struggling to pay its bills.
De La Rue manufactures about a third of the world’s banknotes and employs more than 2,500 people.
The company has also suspended the payment of dividends and yesterday its share price fell by around 20%.
The company’s half-year results showed revenue from customer contracts fell from £257.6m in the first half of last year to just £232.3m for the six months ending September 28.
Meanwhile the firm made an operating loss of £9.2m, down from a profit of 10.1m. After tax, the business made a loss of £10.1m.