De La Rue to cut costs by £35m a year

De La Rue said it would cut annual costs by £35m as the struggling banknote printer seeks to recover from losing the contest to produce the UK's blue post-Brexit passports.

The company said the cost cuts would take effect from the second half of the next financial year and include £10m of reductions already made. The target is an increase on a £20m cost-reduction plan announced before and will incur £17m of restructuring charges.

The 199-year-old company warned its future was in doubt in October as it swung to a half-year loss and scrapped its dividend. De La Rue said it was in danger of breaching banking covenants as debt surged. The company was devastated in 2018 when it lost the £490m contract to print post-Brexit UK passports to Franco-Dutch competitor Gemalto.

Alongside its recovery plan, De La Rue said it expected to operate within its banking covenants for the year to the end of March. It also confirmed guidance for adjusted annual operating profit of £20-25m.

De La Rue shares rose 20% to 146.68p at 09:56 GMT. The shares had lost about two-thirds of their value in the past year before Tuesday's announcement.

Clive Vacher, the turnaround specialist appointed as chief executive in October, said reducing costs would let De La Rue compete for currency orders it would otherwise have declined and strengthen margins from existing work.

He said the company could be a leader as central banks switch from paper to polymer notes. De La Rue makes polymer notes for the Bank of England including the £20 note released in February.

Vacher said: "I am pleased that we have delivered our review of the business on schedule and are on track with the turnaround plan, which will deliver significant improvement in the operational and financial performance of the company. The plan drives extensive cost reduction and, in parallel, offers a substantial investment opportunity for growth."