De La Rue faces shareholder revolt as fund calls for chair to go over ‘failed’ turnaround plan
London-listed banknote maker De La Rue is facing a shareholder revolt after a major investor demanded that chair Kevin Loosemore be removed for failing to improve the company’s performance.
In a letter to shareholders today, AIM-listed activist fund Crystal Amber argued that De La Rue is failing to meet its financial targets, which it set out as part of a turnaround plan back in February 2020.
Crystal Amber, which has a near-10 per cent stake in the firm, said that based on current market expectations, revenue for the year will be £340.5m, 25 per cent below the forecasts. Other measures, such as operating margin and free cash flow, will also likely come in below expectations, it said.
The fund added that net debt at the banknote maker is forecast to reach £103.3m – half a million higher than three years ago when De La Rue’s turnaround plan was first announced.
“The turnaround plan has failed by every measure,” the fund wrote in the letter.
De La Rue is set to announce its full year results on May 25th.
Back in 2020, Crystal Amber stumped up £18m in “rescue capital” as part of De La Rue’s £100m capital raise, making it the lead investor.
Crystal Amber noted that De La Rue’s market value is now £100m, despite the past £100m equity investment. “On a like for like basis, the entire £125m pre-money stock market valuation has been destroyed,” the fund said.
Crystal Amber also highlighted specific management mishaps such as De La Rue’s failure to re-negotiate its banking covenants when renewing its contracts. This represented “a gross failing of stewardship… [which] is still incurring substantial additional and avoidable costs”.
As a result of the company’s performance, Crystal Amber said that non-exec director and chair Kevin Loosemore should step down.
Loosemore “continues to fail to take responsibility” the fund said, and instead “blames external factors, including ‘the cycle.'”
The activist fund proposed Loosemore be replaced by Pepyn Dinandt, the current chief executive of the climate control systems and automotive controls division at the Eberspaecher Group.
“The last two years have been a disappointing and costly one for a once proud, great British company. The buck stops with the leadership. I believe that if we act quickly, with focus and operational execution, DLR can recover and thrive,” Dinandt said in Crystal Amber’s statement.
“It is now for DLR’s long-suffering shareholders to decide if they wish to condone this woeful record or seek to end this spiral of destruction of shareholder value,” he continued.
De La Rue declined to comment on the letter.
Its shares were trading 1.6 per cent lower on Wednesday afternoon.