Ailing passport and banknote maker De La Rue (DLAR.L) said on Wednesday that it was hoping to raise £100m ($126m) from investors to bolster its balance sheet and help it implement its cost-cutting plan.
The company, which also announced that it would cease banknote and passport printing at its Gateshead facility near Newcastle, noted that it had seen only “moderate disruption” from the coronavirus pandemic.
De La Rue said it intended to use the proceeds from the share placing to grow its authentication division, which sees it provide security features and software solutions for revenue, brand protection, and identity verification.
It will also cover the costs related to the company’s turnaround plan and see it invest in new equipment to double its currency division’s capacity to print polymer banknotes.
The company, which prints Bank of England banknotes, designed the polymer material and technology used in the new £20 note featuring artist JMW Turner.
“Today we are launching a £100m gross equity raise which will provide the company with the financial and operational flexibility to ensure the turnaround plan’s success,” said chief executive Clive Vacher, who joined the company in October.
“With this capital we will be able to strengthen our balance sheet, reduce our costs and invest in the exciting growth opportunities we see in authentication, polymer banknote production, and security features,” he said.
In February, Vacher unveiled the three-year cost-cutting plan, noting that he hoped the company would save £35m ($44m) per year from the second half of its current financial year.
De La Rue said on Wednesday that it expected banknote printing at its Gateshead facility to conclude by the end of 2020.
Noting that it would retain some “core” roles at the site, it said it would soon engage in consultations with impacted employees.
After last year losing the £490m contract to print UK passports to French-Dutch competitor Gemalto, De La Rue said passport operations at the site would also cease.
Though it did not say how many employees will be affected, De La Rue said that up to 40 roles, mainly finance and support staff, would be axed at its Basingstoke headquarters.
In the twelve months to 30 March, De La Rue reported adjusted operating profits of £23.7m, representing a 61% drop on 2019. Revenue fell 17% to £426.7m.
The company issued a series of stark profit warnings in recent months and in October said that full-year profits would come in “significantly lower” than expectations, giving no explanation for the warning.
In addition to losing the passport contract, De La Rue has been beset by woes in recent years.
Following the appointment of Vacher, it warned in November of “significant doubt” that it could continue as a going concern, citing access to credit, depressed margins, and competition.
The company said on Tuesday that the UK’s Serious Fraud Office (SFO) had concluded a year-long probe into “suspected corruption” relating to its business in South Sudan, and would take no further action.
In July 2019, De La Rue disclosed that the SFO had opened the probe into its affairs in South Sudan, where it spent six months designing and manufacturing the country’s currency.
De La Rue has been at the centre of several probes by the SFO, including a 2010 investigation into the falsification of banknote quality certificates by employees.