Money printer De La Rue warns it could collapse under debt mountain

Banknote printer De La Rue spooked investors on Tuesday after warning mounting debts could topple the 198-year old company.

The historic business, which prints £5 and £10 notes used by millions of Brits, issued a doomsday scenario warning it may struggle to stay in business if a downturn in trading, failure to get paid on time and missing cost saving targets all occurred at the same time.

Lower sales over the past six months combined with a 60% spike in net debts to £171 million — due to a misjudged inventory build-up — has put the beleaguered business precariously close to that scenario.

De La Rue said if it occurred it would breach banking covenants and cast “significant doubt” on the group’s ability to continue.

Shares fell 22%, leaving the firm valued at £145 million, meaning the debt now exceeds the value of the business.

In response, new chief executive Clive Vacher and chairman Kevin Loosemore have scrapped a £26 million dividend to gain breathing space.

Vacher is also working on a strategic review by March 2020 to turn around the business.

“I’ve done a number of these turnarounds and the characteristics (at De La Rue) I have seen before,” Vacher said.

“We are laser-focused on immediate actions to improve the position in the short term and create a full turnaround plan to build a strong business.”

He said the firm had included the doomsday warning to be “responsible” but downplayed the threat of going under. “It would basically require at least two or three of the downside risks to occur without mitigation. It is not particularly likely.”

The firm will use £42 million of proceeds from the sale of its international passports and identity card business sold in October to pay down debt.