De La Rue parent firm now casts doubts on its survival

The Kenyan government acquired the minority stake in De La Rue’s local subsidiary. FILE PHOTO | NMG 

By VICTOR JUMA
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Summary

• Alert comes after Kenyan government acquired a 40pc stake in its local unit in April.
• The multinational’s problems mean the Kenyan unit could face funding constraints besides the possibility of being transferred to a new owner if the parent company is acquired or liquidated.
• The company did not comment on what impact its challenges will have on operations such as the Kenyan unit which it manages on a day-to-day basis.

De La Rue Plc, the parent company of Kenya’s currency printer, is facing financial difficulties in what has seen it warn investors that it may not survive in the near future.

The UK firm operates locally though its subsidiary De La Rue Kenya EPZ Limited in which the Kenyan government acquired a 40 percent stake in April for £5 million (Sh658 million).

The multinational’s problems mean the Kenyan unit could face funding constraints besides the possibility of being transferred to a new owner if the parent company is acquired or liquidated.

The company did not comment on what impact its challenges will have on operations such as the Kenyan unit which it manages on a day-to-day basis.

De La Rue says its debt burden has risen at a time when its business has suffered from a mix of higher costs, customer defaults and lower margins.

The company’s net debt rose to £170.7 million (Sh22.4 billion) in September from £107.5 million (Sh14.1 billion) in March, with the security printer noting that there is a risk it could breach covenants set by its banks who could deny it access to additional credit facilities.

“Therefore, we have concluded there is a material uncertainty that casts significant doubt on the group’s ability to continue as a going concern,” De La Rue said on Tuesday when announcing its results for the half year ended September.

“In mitigation the directors have suspended future dividends and management is focused on delivering the company turnaround plan.”

The company has lost more than a fifth of its market value since the announcement, with its share price dropping below the equivalent of Sh184 compared to Sh231 on Monday before the disclosures were made.

The Kenyan government acquired the minority stake in De La Rue’s local subsidiary in a bid to share in the profits the company makes from the State’s currency printing contracts.