World's biggest banknote printer warns of collapse as profits slump

The world's biggest printer of banknotes has warned that it is at risk of collapse after half-year results revealed spiraling debts.

Shares in United Kingdom-based De La Rue, one of the country's oldest companies, plunged by 20 percent on Tuesday morning after it reported an 87 percent slump in operating profits for the last six months.

The company suspended its dividend payments, and warned there is "significant doubt" over its ability to continue operations.

De La Rue prints cash for about 140 central banks and employs more than 2,500 people globally. It employs hundreds of people at its UK operations in Gateshead and Essex, and has its headquarters in Basingstoke.

Around 11 percent of the 171 billion banknotes issued globally in 2017 were printed by a handful of commercial printers, of which De La Rue is now the largest. It also produces a wide range of security printed products such as passports and tax stamps.

The company said that its outlook had worsened after a global slump in currency printing volumes and profitability, which had already prompted three profit warnings in the past six months.

New Chief Executive Clive Vacher, who replaced former boss Martin Sutherland－who quit in May after a previous profit warning, said he is taking "urgent actions" under a turnaround plan to revive its fortunes.

"The business has experienced an unprecedented period of change with the chairman, CEO, senior independent director and most of the executive team leaving or resigning in the period. This has led to inconsistency in both quality and speed of execution," said Vacher. "The new board is working to stabilize the management team, which we believe will take some time."

De La Rue has suffered a series of blows in recent years, including losing out on the contract to print Britain's new Brexit passports to a French-Dutch company. It lost 18 million pounds($23 million) when the Bank of Venezuela failed to pay its bills. It added that the Serious Fraud Office was continuing to investigate alleged corruption with regards to contracts in South Sudan.

De La Rue said its warning was based on a worst-case scenario. However, Kevin Loosemore, the chairman, told the stock market there was "a material uncertainty that casts significant doubt on the group's ability to operate as a going concern." He said: "A rapid change in market conditions is impacting on our debt covenants."

Neil Wilson, chief market analyst at Markets.com, said there may be more pain to come for investors. He said: "De La Rue is teetering on the brink. Bad management and decisions seems to be the main reason for the malaise."

It is unclear what would happen if the company got into difficulties, but it is likely that a rival would take over its Bank of England contract, the BBC reported. Its main competitors are all based outside the UK. It is understood preparations have already been made for the launch of the new 20 pound note featuring artist JMW Turner, printed by De La Rue, which enters circulation on Feb 20.