Embattled De La Rue is a takeover target according to one of its biggest shareholders after the banknote printer warned of “material uncertainty” over its future, triggering its shares to plunge almost a quarter.
In its interim results the company which prints UK banknotes reported a 15pc drop in revenue and swung to a £12m loss.
Recently installed management led by chief executive Clive Vacher warned the £171m debt pile – up £63m on last time – meant De La Rue could breach its banking covenants if trade continues to worsen, costs are not slashed and the business fails to get paid on time.
He also announced plans for a radical review and scrapped the £26m dividend to give the business breathing space.
Mr Vacher said De La Rue has gone through an “unprecedented period of change” with the chairman, chief executive, senior independent director and most of the executive team leaving or resigning.
The results sent De La Rue shares down 23.5pc to 134p, valuing it at just £140m – less than its debt.
Richard Bernstein, fund manager at Crystal Amber which has a 7pc stake in De La Rue, said: “At this price De La Rue is very cheap. I’m certain bidders are looking at it.”
The activist investor added that De La Rue’s profitable product authentication arm which does security printing to identify genuine products is likely to be the main target for a bidder.
“Product authentication is worth several times more than De La Rue’s market value on its own,” Mr Bernstein said, but added he would be unlikely to sell unless it was a “knock-out” price.
“I’m bizarrely encouraged by today’s announcement,” the investor said. “New management have come in, identified the problem and are taking steps to deal with it – I just wish it had happened sooner.”
Mr Vacher – who has run turnarounds at companies including Rolls-Royce and Pratt & Whitney in the past – said he had “no plans to sell any part of the business”.
However, he added: “As a public company we are up for sale all the time but I have had no more detailed approach than the odd email – there have been no serious offers.”
The chief executive denied the announcement was a “kitchen sinking” – throwing out all the bad news and blaming previous management.
He said: “These results are the first step in the healing process of showing where we stand. We have a laser-like focus on immediate actions to get the business back on track. This is not a last-minute scramble, we have a long-term plan.”
The findings of Mr Vacher’s review which aims to get the loss-making banknote printing unit back in the black are due by March. He refused to rule out the possibility of job cuts, saying all options are open. A fundraising is also not being ruled out.
De La Rue’s latest troubles come after a torrid year for the company during which the Serious Fraud Office opened an investigation into the business – which is still ongoing – following allegations of suspected corruption in related to currency printing contract in Africa.
The business also took a £18m hit due to uncollected sales from Venezuela after US sanctions came into force and it lost the contract to print British passports late last year, resulting in a very public row with the Government.
The passport printing business was sold last month to Swedish rival HID Global and the £42m proceeds will be used to reduce the debt pile.
The company is struggling to cope with the move away from banknotes towards cashless payments as well as increasing competition in the sector.