(Reuters) - De La Rue (DLAR.L) said on Tuesday it plans to invest more in polymer notes and rein in costs at its currency division, as the struggling banknote printer tries to improve margins as part of a three-year turnaround plan.
Last November, De La Rue warned on its future and scrapped its dividend to tackle mounting debt after a series of setbacks which included profit warnings, a corruption probe in South Sudan and the loss of a 400 million pound contract for Britain’s new passports.
The company, which holds the contract to design and make the Bank of England’s new polymer notes, said it was targeting annual cost savings of 35 million pounds ($45.37 million) from the second half of 2020-21, up from its prior target of 20 million pounds.
The turnaround plan includes consolidating the company into two divisions, focussing on growing demand for polymer currency and its authentication business, which seeks to capitalise on more countries adopting tobacco tax stamps to comply with World Health Organisation rules.
The plan targets a mid-teen adjusted operating profit margin for the currency division from the year 2020-2021.
“I am confident that this is the right plan for De La Rue. There is a considerable amount of work to be done, and the company has a single, focused plan, a fully aligned leadership team, and a greatly enhanced structure,” said Chief Executive Clive Vacher, a turnaround specialist who was appointed in October.
The company stuck to its previous forecast for adjusted operating profit of 20-25 million pounds for full-year 2019-20.
The UK-based company also said it expects to operate within its banking covenant for the year and would maintain a “good level of liquidity headroom” under its 275 million pounds revolving credit facility, which expires at the end of 2021.
Reporting by Yadarisa Shabong in Bengaluru; Editing by Bernard Orr