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De la Rue is spending Sh2.7 billion layoffs and out of Kenya
Friday, June 30, 2023
De La Rue offices in Ruaraka. file image | NMG
Banknote printer De La Rue has spent Sh2.7 billion (£15.1 million) laying off staff, paying lawyers and writing off assets as it shuts down operations at its Nairobi unit due to a currency drop and its check-printing business.
The multinational, which has been printing notes for Kenya through a local joint venture that is 40 percent owned by the Kenyan government, says in its latest trade update that it has now completely shut down its banknote printing line and is at the end of the lockdown. Down check business.
The company, operating in Kenya as De La Rue Kenya EPZ Limited, had about 300 employees.
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The trading update said it had used £5.5 million (Sh 977.1 million) in redundancy charges, £4.9 million (Sh 870.5 million) in writing off property, plant and equipment and £2 million (Sh 355.3 million) for inventory impairment.
“As a result of the review of business in Kenya, an extraordinary fee of £12.6m was collected in the 2023 financial year,” says de la Rue.
The company also incurred £2.5m (Sh 444.15m) in redundancy and legal fees in connection with restructuring initiatives in both its currency and endorsement divisions to appropriate size for future operations.
The expense, which covers the fiscal year ending March 25, 2023, came on the back of De La Rue’s announcement in January that it would close operations in Kenya due to an assurance from the Central Bank of Kenya (CBK) that there would be no offers to print banknotes for at least 12 months.
De La Rue says its operations in the authentication division that handles products like bank cards, ID cards, certificates and checks are also in the process of being liquidated.
Costs associated with closing its operations in the country saw De La Rue Kenya net loss £7.3m (Sh1.29 billion) compared to a net profit of £2.2m (Sh389.9 million) a year earlier.
The Treasury, with a 40 per cent stake it acquired for £5m (Sh886.2m) in 2019, will incur a loss of £2.9m (Sh513.97m) compared to a profit of £0.9m (Sh159.5m). a year ago.
Revenue from operations in Kenya fell 45 percent from 30.5 million pounds (5.41 billion shillings) to 16.8 million pounds (2.98 billion shillings), indicating the impact of lower banknote printing and the endorsement business.
De La Rue in late 2018 won a £85m (Ksh15.1bn) tender to design and manufacture new currency-generating banknotes for Kenya as the country moved to remove individuals’ faces from its currency.
Central Bank of Kuwait disclosures show that currency production costs, which include orders, printing, minting, shipping, insurance and handling expenses, amounted to 2.39 billion shillings in the fiscal year ending in June 2022 compared to 2.09 billion shillings in the previous year.
The end of operations in Kenya means De La Rue will now be left with three banknote locations — the UK, Malta and Sri Lanka — down from four at the start of the year and five in 2020, highlighting declining demand for banknotes globally as digital transactions gain traction.
The company has been undertaking major expansions at its facility in Malta, including investing in a new basement by 2025.
Clive Vacher, chief executive of the De La Rue Group, says the Malta unit has “the potential to replace Kenya’s capacity if market conditions are favorable.”
De La Rue has been operating in Kenya for over 25 years serving other markets such as Tanzania, Uganda, Zambia and Rwanda.
The 200-year-old company makes about a third of all banknotes in the world, but it faces increased exposure to the growing popularity of digital payments.
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The termination of operations in Kenya comes amid Sh1.1 billion in tax it must pay the Kenya Revenue Authority (KRA) after it lost in January a court case over taxes it paid on revenues generated in Kenya between 2013 and 2017.
The company said in January that it was “disappointed with the (high court’s) ruling” and that its Kenyan branch was preparing an appeal.
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