De La Rue: British banknote and passport maker warns it could collapse

Firm has struggled with declining use of cash payments and loss of £400m UK passport contract

Ben Chapman
Tuesday 26 November 2019 15:54
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 Up to 2,500 jobs could be put at risk if banknote manufacturer De La Rue were to cease trading
Up to 2,500 jobs could be put at risk if banknote manufacturer De La Rue were to cease trading

British banknote and passport maker De La Rue has warned that it could collapse if a turnaround plan does not succeed.

The 198-year-old company, which lost out to a French rival on a contract to make Britain’s new blue passports, saw its shares crash as much as 24 per cent on Tuesday after warning of uncertainty that “casts significant doubt on the group's ability to continue as a going concern“.

Basingstoke-based De La Rue prints about a third of the world’s banknotes through contracts with 140 central banks, but has struggled over the last two years since losing the £400m UK passport contract.

The firm has also been hit by an accelerating move away from cash towards contactless card payments and online transfers. Up to 2,500 jobs could be put at risk if De La Rue were to cease trading, although the company said it was too early to assess the likely impact.

“Just when you thought it couldn’t get any worse for De La Rue, along comes another wave of bad news,” said Russ Mould, investment director at AJ Bell.

“It is drowning in debt and has this year seen most of the executive team leave or resign, causing further instability in the business.

“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.

De La Rue has already restructured its operations into two divisions – authenticating goods as genuine, and currency services – and pledged that a “full review” will be carried out by the end of next March.

The company's chief executive, Clive Vacher​, said of its first-half performance that it had been hit by a raft of management changes and an increasingly competitive banknote-printing market.

He said it is also cutting costs further and faster, going beyond the £20m a year in savings expected under its previous targets.

As well as dire trading, Mr Vacher is also having to contend with a Serious Fraud Office investigation into alleged corruption at De La Rue's South Sudan business.

In addition, there is an £18m hole in the accounts after the company revealed in May that the Venezuelan central bank has been struggling to pay its bills.

Mr Vacher said: “The business has experienced an unprecedented period of change with the chairman, chief executive, senior independent director and most of the executive team leaving or resigning in the period.”

He said it will “take some time” to get the management team on a steady footing.

But, he added: “We have already identified and started to implement the urgent actions needed to stabilise the business and allow us to complete the review.”

Additional reporting by PA news agency

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