De La Rue: turnaround plan is further hit for Gateshead
Wednesday, June 17, 2020
Hundreds more skilled print jobs are set to go at De La Rue’s Gateshead site after the security printer announced plans to cease banknote printing there as part of its Turnaround Plan.
The operation had already been hit by the controversial loss of the huge UK Passport contract.
Alongside its delayed year-end results announced today (17 June), the PLC also said that it was raising £100m through a capital raise and placing of 90.9m new shares to strengthen its balance sheet and help fund its transformation plans.
In a statement, chief executive Clive Vacher said: "We are now well underway with our plans to turnaround the company, with opportunities to grow our revenue and reduce our cost base.
"Our cost cutting initiatives will enable us to compete harder in the currency market, while the development of security features and polymer will drive growth for this division. Authentication and polymer continue to show strong growth and we see an increasing pipeline of new opportunities.”
"I am pleased that we have seen increased utilisation of our factory capacity for Currency in the second half, alongside strong growth in Authentication and polymer throughout the year.”
De La Rue has not specified the number of jobs under consultation, but union Unite said it could be more than 250.
The union reacted with dismay to the likely loss of yet more skilled print roles at the Gateshead site, and said it was “directly linked” to the passport contract loss.
The union stated: “When De la Rue was producing UK passports, there were over 500 workers employed at the Gateshead site. Last year, one line was closed making 170 workers redundant and a further 80 workers will be made redundant this month as passport production finally ends.”
Steve Turner, Unite assistant general secretary for manufacturing, said: “Since the government decision to off-shore UK passport production, the long-term viability of the Gateshead site and the remaining skilled jobs it provides for the north east have been at risk."
Currency printing at Gateshead had been part of the required disaster recovery setup for the Bank of England, in case anything happened at the main Debden banknote printing site.
Printweek understands that the BoE is in talks with De La Rue about what the plans to downscale Gateshead mean for its printing needs, including any arrangements around contingency sites.
De La Rue also has currency printing operations in Malta, Kenya and Sri Lanka.
The news of further UK job losses at the group overshadowed recent positive developments.
In its results for the year ending 30 March the group, which has had a torrid time since losing the passport contract, posted total sales down 17.4% at £426.7m.
Adjusted operating profit more than halved, slumping by 60.6% to £23.7m.
The figures were complicated by the passport contract loss and the sale of its International Identity Solutions (IIS) business.
The passport contract was originally expected to fully transition to new supplier Gemalto by the end of March 2020, but this is still ongoing.
“We continue to work with Her Majesty's Passport Office on the phased transition to the new supplier for the UK Passport production contract during H1 2020/21. As a result of the above, we expect lower revenue for Identity Solutions during FY 2020/21 and none for FY 2021/22.”
The group now has three divisions: Currency (sales down 29.4% at £281.6m), Identity Solutions (sales up 2.1% at £76.6m) and its fast-growing Authentication wing (sales up 60.4% at £68.5m).
The passport business was boosted by people rushing to renew passports ahead of the original Brexit deadline.
“We saw broadly flat adjusted revenues in Identity Solutions as the impact of the sale of International Identity Solutions in October 2019 was mitigated by higher revenue on the UK Passport production contract during the period,” De La Rue stated.
Net debt has been reduced by £67.9m since the first-half of 2019/20 following the IIS sale.
The PLC has also reached new agreements with its lenders and pension fund. It has agreed reduced pension contributions of £15m per annum, from £23m, over three years. The scheme had a £142.6m deficit at the end of last year.
De La Rue reported a “strong start” to its new financial year.
It said it needed £79.8m to fund its Turnaround Plan, including £16.3 in restructuring and £8.8m for capex related to “footprint rationalisation”.
It will invest £14.8m in its polymer business, £35.2m in authentication, and £4.7m in R&D for security features.
It expects to reduce annual operating costs by £36m.