Banknote printer teeters on brink
New boss warns that De La Rue could go bust Shares dive another 23.5pc £171m debt pile exceeds market cap
De La Rue is teetering on the brink of collapse after posting a dismal set of half-year results.
The banknote maker, which lost the contract to print Britain’s post-Brexit blue passports last year, now has a £171m debt pile which is dwarfing its £139m market value.
In an update which union Unite called ‘very worrying’, De La Rue’s board said there is ‘material uncertainty that casts significant doubt on the group’s ability to continue’.
It has now suspended its dividend for the foreseeable future.
Shares plummeted 23.5pc, or 41.2p, to 134p, taking losses this year to 68pc and since the peak in 2012 to 87.5pc.
Analysts warned that De La Rue, which has nearly 3,000 staff, is ‘teetering on the brink’.
The firm, which is based in Basingstoke and dates back to 1821, blamed its poor performance on an ‘unprecedented period of change’ during which its chief executive, chairman and most of its top team left the company.
Former boss Martin Sutherland, who lost the prestigious contract to print UK passports, was ousted in May following its third profit warning in two years. The firm’s latest problem came after Venezuela’s central bank failed to pay its bills for printing banknotes.
Although Sutherland presided over a 34pc decline in De La Rue shares during his five-year tenure, he was paid a total of £4.7m – and even handed £50,000 on his departure to help him find a new job.
In July, the Serious Fraud Office (SFO) revealed it had launched a probe into De La Rue’s operations in South Sudan, investigating ‘suspected corruption’. And chairman Philip Rogerson resigned in October after facing the threat of an investor revolt.
Neil Wilson, an analyst at Markets, said: ‘De La Rue is teetering on the brink. Bad management and decisions seems to be the main reason for the malaise.’
Revenue across the company plunged 14.9pc to £205.9m in the six months to September. De La Rue made a first-half loss of £9.2m, compared with a profit of £10.1m in the same period last year, as its currency division performed poorly and it was hit with £12m of costs related to its restructuring.
The Mail reported earlier this month that private equity bidders are circling De La Rue’s product authentication arm, which makes tags and software to help prevent trade in fraudulent goods. It is understood that one party has expressed interest in buying the unit, but that De La Rue – which is now under the management of chief executive Clive Vacher and chairman Kevin Loosemore – is reluctant to sell.
There was good news for this division, as revenue climbed by 70pc to £33m.
But revenue from the currency business slumped 30pc to £128.7m. Russ Mould, investment director at AJ Bell, said: ‘In an increasingly cashless world, one has to wonder just how long De La Rue can survive without a radical change to its business model.’
The questions over De La Rue’s survival raise fears for its near-3,000 employees, more than half of whom are in the UK including at its Gateshead factory and essex banknote-printing plant. Already this summer, the firm has axed 170 jobs in Gateshead, blaming the loss of the passport contract. Unite national officer Louisa Bull said: ‘The potentially precarious future of De La Rue should be ringing alarm bells across Government.’
