LOSS MITIGATION

De La Rue in financial trouble as it runs out of cash

HID Corporation Ltd is set to take up 100 per cent of De La Rue Kenya Ltd’s issued share capital

In Summary

•Last month, the government approved the proposed acquisition of the firm’s local unit by American firm HID Corporation Ltd

•De La Rue PLC reported a £12.1 million (Sh1.59 billion) pre-tax loss for the six months to 28 September, compared with a £7.1 million (Sh934.64 million) profit reported over the same period last year

The De La Rue Currency and Security print Ltd factory along Thika road
The De La Rue Currency and Security print Ltd factory along Thika road
Image: FILE

De La Rue’s sale of its Kenyan unit could be part of the British firm’s restructuring plan to stay afloat.

The announcement came on Tuesday as the UK-based security printer suspended its dividend and reported a loss in the first half of its financial year.

The parent firm said there is a risk that the firm will collapse if its turnaround plan fails to work.

 

The Kenyan unit had not responded to our queries by the time of going to press. 

De La Rue prints cash for about 140 central banks and employs more than 2,500 people globally, among them Kenya .

 
 

Last month, the government approved the proposed acquisition of the firm’s local unit by American firm HID Corporation Ltd.

In a gazette notice, Competition Authority of Kenya Director-General Wang’ombe Kariuki said the government “has authorised the proposed transaction as set out herein on condition that existing contracts the target (De La Rue Kenya Ltd) has with the government are honoured.”

This includes the contract with the Central Bank of Kenya to print new currency notes over a three-year period valued at £85 million (Sh11.19 billion).

This came after the Court of Appeal on October reversed a High Court decision to quash De La Rue’s winning of the tender.

HID Corporation Ltd is set to take up 100 per cent of De La Rue Kenya Ltd’s issued share capital.

 

In June, De La Rue announced on its website that it had agreed to the sale of its International Identity Solutions business (‘International ID’) to HID Corporation Ltd (‘HID Global’) at a transaction cost £42 million (Sh5.53 billion) on a cash-free, debt-free basis, payable upon completion.

 

“Focusing on the identity-related security features and components is in line with our strategy to transform De La Rue to an asset-light and more technology-led business. This transaction strengthens our balance sheet and allows us to focus on the other strategic growth areas of security features, polymer and PA & T,” De La Rue’s former chief executive Martin Sutherland said back in June.

 

Last month Sutherland was replaced by Clive Vacher.  

The state acquired a 40 per cent stake in De La Rue Kenya EPZ Limited for Sh660 million in a deal which became effective on April 18.

Other than banknotes, the company prints cheque books, passports as well as debit and credit cards for a number of banks and security documents for financial institutions.

The currency printing firm’s global operations have faced a number of stumbling blocks including the loss of the post-Brexit UK passport printing contract to a Franco-Dutch firm last year.

In May last year De La Rue also had to write off £18 million (Sh2.37 billion) after Venezuela's Central Bank failed to pay its bills.

The company is also under investigation by the Serious Fraud Office in connection with "suspected corruption" in South Sudan.

De La Rue PLC reported a £12.1 million (Sh1.59 billion) pre-tax loss for the six months to 28 September, compared with a £7.1 million (Sh934.64 million) profit reported over the same period last year.

In a statement, the firm said it was fast tracking its restructuring plan, which includes a reduction in overhead costs.