Last checked at 
(Alliance News) - UK passport maker De La Rue PLC's shares slumped Tuesday as the company axed its dividend to manage debt levels.
The stock was 20% lower on Tuesday morning in London at 139.20 pence per share, meaning shares have fallen 70% in the past 12 months.
De La Rue will not be returning any cash to shareholders for the six months to September 28, having paid out 8.3 pence per share the year before.
Net debt at the end of the period was GBP170.5 million, far higher than GBP107.5 million six months earlier. De La Rue blamed the rise on adverse working capital movements, prior dividend payments, pension contributions, and capital expenditure.
The company said its debt position, and the ratio of net debt to earnings before interest, tax, depreciation, and amortisation, were significantly higher than expected, though it will remain within banking covenants.
De La Rue warned further deterioration in trading, further costs, and lower-than-expected margins could put this at risk, however.
"Given the more binary nature of the most significant plausible downside scenarios, if more than one of these were to occur concurrently without mitigation the group would breach its net debt to Ebitda ratio," it said.
"Therefore, we have concluded there is a material uncertainty that casts significant doubt on the group's ability to continue as a going concern. In mitigation the directors have suspended future dividends and management is focused on delivering the company turnaround plan."
Looking at the interim results, De La Rue posted a 9.8% drop in revenue to GBP232.3 million, and a pretax loss of GBP12.1 million versus a GBP5.4 million profit a year before.
De La Rue said pricing pressure due to reduced overspill demand has hit volumes and profitability.
The Currency division's revenue fell 22% to GBP155.1 million as De La Rue experienced a fall in demand for banknote and security feature volumes.
Product Authentication & Traceability revenue rose 70%, however, to GBP33.0 million due to growing volumes, and Identity Solutions revenue climbed 10% to GBP44.2 million on the back of increased UK passport business.
In response to the slowdown in trading, De La Rue has begun a turnaround plan. Immediate action will include reducing spending and costs, focusing on cash items, risk mitigation, and "ensuring the right leadership" at all levels.
"Between now and the end of calendar first quarter 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," said Chief Executive Clive Vacher.
"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."
By George Collard; georgecollard@alliancenews.com
Copyright 2019 Alliance News Limited. All Rights Reserved.
