UPDATE 1-De La Rue shifts focus to polymer notes in hopes of faster turnaround

(Adds detail on turnaround plan, debt, background)

Feb 25 (Reuters) - De La Rue said on Tuesday it
plans to invest more in polymer notes and rein in costs at its
currency division, as the struggling banknote printer tries to
improve margins as part of a three-year turnaround plan.

Last November, De La Rue warned on its future and scrapped
its dividend to tackle mounting debt after a series of setbacks
which included profit warnings, a corruption probe in South
Sudan and the loss of a 400 million pound contract for Britain's
new passports.

The company, which holds the contract to design and make the
Bank of England's new polymer notes, said it was targeting
annual cost savings of 35 million pounds ($45.37 million) from
the second half of 2020-21, up from its prior target of 20
million pounds.

The turnaround plan includes consolidating the company into
two divisions, focussing on growing demand for polymer currency
and its authentication business, which seeks to capitalise on
more countries adopting tobacco tax stamps to comply with World
Health Organisation rules.

The plan targets a mid-teen adjusted operating profit margin
for the currency division from the year 2020-2021.

"I am confident that this is the right plan for De La Rue.
There is a considerable amount of work to be done, and the
company has a single, focused plan, a fully aligned leadership
team, and a greatly enhanced structure," said Chief Executive
Clive Vacher, a turnaround specialist who was appointed in
October.

The company stuck to its previous forecast for adjusted
operating profit of 20-25 million pounds for full-year 2019-20.

The UK-based company also said it expects to operate within
its banking covenant for the year and would maintain a "good
level of liquidity headroom" under its 275 million pounds
revolving credit facility, which expires at the end of 2021.

($1 = 0.7714 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Bernard
Orr)