The com­pa­ny that prints mon­ey for T&T mon­ey is hav­ing prob­lems mak­ing mon­ey.

And one of the is­sues that they have iden­ti­fied as im­pact­ing on their prof­it mar­gins is the “cus­tomers’ ir­reg­u­lar buy­ing pat­terns and rapid de­mand changes”.

British com­pa­ny De La Rue is al­so be­ing in­ves­ti­gat­ed by the Se­ri­ous Fraud Of­fice over “sus­pect­ed cor­rup­tion” in Africa.

Ac­cord­ing to the lat­est fi­nan­cial state­ments, the British com­pa­ny made an op­er­at­ing loss of £9.2 mil­lion for the six-month pe­ri­od end­ed Sep­tem­ber 30.

For the com­par­a­tive pe­ri­od last year De la Rue made £10.1 mil­lion.

“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,” De La Rue’s chief ex­ec­u­tive of­fi­cer Clive Vach­er stat­ed.

“This has led to in­con­sis­ten­cy in both qual­i­ty and speed of ex­e­cu­tion. The new board is work­ing to sta­bilise the man­age­ment team, which we be­lieve will take some time,” he stat­ed.

“At the same time, we have seen sig­nif­i­cant changes since the start of the year in the mar­ket for Cur­ren­cy, in­clud­ing pric­ing pres­sure as a re­sult of re­duced over­spill de­mand. This has had a ma­te­r­i­al im­pact on vol­umes and prof­itabil­i­ty in H1 2019/20 and it will al­so take time for the cur­ren­cy mar­ket to nor­malise,” Vach­er stat­ed.

“Our au­then­ti­ca­tion busi­ness con­tin­ues to show good growth and pro­vides some de­gree of bal­ance to the cur­ren­cy head­winds, while de­mand for poly­mer sub­strate is al­so ex­ceed­ing our ex­pec­ta­tions,” he stat­ed.

Vach­er said the com­pa­ny will be re­view­ing its cost base.

“In re­sponse, we are re­view­ing our cost base and will make the struc­tur­al changes that will fur­ther strength­en our com­pet­i­tive­ness in a chal­leng­ing mar­ket. We con­tin­ue to fo­cus on build­ing mo­men­tum in the high­er-mar­gin se­cu­ri­ty fea­ture mar­ket and con­tin­ue to in­no­vate to im­prove our po­si­tion in this fast-grow­ing area,” he stat­ed.

He said a com­pre­hen­sive turn­around plan will be es­tab­lished by the first quar­ter of next year.

“Be­tween now and the end of cal­en­dar Q1 2020, we will com­plete a full re­view of the busi­ness and de­sign a com­pre­hen­sive turn­around plan for the Com­pa­ny. In the mean­time, we have al­ready iden­ti­fied and start­ed to im­ple­ment the ur­gent ac­tions need­ed to sta­bilise the busi­ness and al­low us to com­plete the re­view,” Vach­er said.

“With strong em­pha­sis on cost con­trol and cash man­age­ment, cou­pled with a fo­cus on in­no­va­tion and re­vers­ing the rev­enue de­cline, we will be­come a lean­er, more ef­fi­cient com­pa­ny and dri­ve share­hold­er val­ue,” he stat­ed.

De La Rue stat­ed it has tak­en sev­er­al ac­tions in re­cent years to re­shape the com­pa­ny, in­clud­ing di­vest­ing our cash pro­cess­ing so­lu­tions (CPS), pa­per and in­ter­na­tion­al iden­ti­ty so­lu­tions busi­ness­es and, in May 2019, we an­nounced our in­ten­tion to re­align the group in­to two di­vi­sions fo­cused on au­then­ti­ca­tion and cur­ren­cy.

Au­then­ti­ca­tion will fo­cus on “en­com­pass­ing se­cu­ri­ty fea­tures for prod­uct au­then­ti­ca­tion and brand pro­tec­tion; soft­ware so­lu­tions and ser­vices for cus­tomer rev­enue pro­tec­tion and iden­ti­ty se­cu­ri­ty com­po­nents. The di­vi­sion is fo­cused on the sup­ply of so­lu­tions to au­then­ti­cate goods as gen­uine and to as­sure tax rev­enues.”

Cur­ren­cy will fo­cus on “en­com­pass­ing our ban­knote print, se­cu­ri­ty fea­tures for cur­ren­cy and poly­mer prod­uct lines, fo­cused on the pro­vi­sion of fin­ished ban­knotes, as well as se­cu­ri­ty fea­tures/ban­knote sub­strate in­to cen­tral banks and state print works”

“While the un­der­ly­ing cur­ren­cy mar­ket con­tin­ues to grow, the mar­ket is im­pact­ed by the more un­pre­dictable over­spill ac­tiv­i­ty (state print work de­mand that can­not be sat­is­fied by their own in­ter­nal ca­pac­i­ty), cus­tomers’ ir­reg­u­lar buy­ing pat­terns and rapid de­mand changes.

“Cur­rent cus­tomer de­mand is re­sult­ing in over-ca­pac­i­ty in the in­dus­try, which has led to low­er mar­gins and a weak­er pipeline of or­ders. We aim to main­tain a lead­ing mar­ket po­si­tion in ban­knote print and se­cu­ri­ty fea­tures, and to fo­cus our in­no­va­tion in de­vel­op­ing tech­nol­o­gy and prod­ucts cus­tomers want to buy. We will con­tin­ue to grow our poly­mer sub­strate busi­ness,” the com­pa­ny stat­ed.

“With over­spill vol­umes in ban­knote print ex­pect­ed to re­duce year-on-year, we are con­tin­u­ing with our pro­gramme to op­ti­mise our ban­knote print ca­pac­i­ty with ex­pect­ed long-term de­mand,” it stat­ed.

The cur­ren­cy di­vi­sion made a loss of £12.5 mil­lion in the first half of this fi­nan­cial year.

For the com­par­a­tive pe­ri­od last year a prof­it of £6.5 mil­lion was made.

This change re­sult­ed from “low­er vol­umes and mar­gin due to ad­verse prod­uct mix”, De La Rue stat­ed.

“Through­out its glob­al op­er­a­tions De La Rue faces var­i­ous risks, both in­ter­nal and ex­ter­nal, which could have a ma­te­r­i­al im­pact on the group’s per­for­mance. The group man­ages the risks in­her­ent in its op­er­a­tions in or­der to mit­i­gate ex­po­sure to all forms of risks, where prac­ti­cal, and to trans­fer risk to in­sur­ers, where cost ef­fec­tive,” the com­pa­ny’s di­rec­tors re­port stat­ed.

“The group analy­ses the risks that it faces un­der the fol­low­ing broad head­ings: strate­gic risks (tech­no­log­i­cal rev­o­lu­tion, strat­e­gy im­ple­men­ta­tion, changes to the mar­ket en­vi­ron­ment and eco­nom­ic con­di­tions), op­er­a­tional risks, le­gal/ reg­u­la­to­ry, in­for­ma­tion risks and fi­nan­cial risks (cur­ren­cy risk, cred­it risk, liq­uid­i­ty risk, in­ter­est rate risk and com­mod­i­ty price risk),” it stat­ed.

“As de­scribed in the 2019 an­nu­al re­port, the prin­ci­pal risks in­clude:

• bribery and cor­rup­tion,

• fail­ure to in­te­grate and ex­e­cute M&A ac­tiv­i­ty,

• fail­ure to in­no­vate and mod­ernise to be com­pet­i­tive,

• qual­i­ty man­age­ment fail­ure,

• fail­ure of a key sup­pli­er,

• in­abil­i­ty to ac­cu­rate­ly fore­cast fi­nan­cial in­for­ma­tion,

• fail­ure to win or re­new a ma­te­r­i­al con­tract,

• man­age­ment lack of band­width and clear pri­ori­ti­sa­tion to ex­e­cute the strat­e­gy and run the busi­ness,

• pen­sion fund li­a­bil­i­ty,

• loss of a key site or process,

• fail­ure in health, safe­ty and en­vi­ron­men­tal con­trol,

• breach of in­for­ma­tion se­cu­ri­ty,

• breach of prod­uct se­cu­ri­ty and breach of sanc­tions.

“All of these risks list­ed above, along with the risk man­age­ment sys­tems and process­es used to man­age them, re­main un­changed since the 2019 An­nu­al Re­port was pub­lished,” it stat­ed.

“Since the re­port was is­sued there are two ad­di­tion­al no­table risk fac­tors. First­ly, the SFO have opened up an in­ves­ti­ga­tion in­to De La Rue Group and, sec­ond­ly, there has been a rapid change in mar­ket con­di­tions which is im­pact­ing on our debt covenant ra­tios,” the di­rec­tors re­port stat­ed.