Crystal Amber (CRS) says that it has sent the board of De La Rue Plc a requisition notice requiring De La Rue to convene a general meeting at which a resolution will be proposed to remove the current non-executive director and chairman, Kevin Loosemore. The requisition also proposes to appoint Pepyn Dinandt as a non-executive director and chairman, in Loosemore’s stead. CRS has laid out the following series of points as background for the requistion (as it sees it):
- Since 2018, Crystal Amber has been a shareholder in De La Rue. Crystal Amber currently holds approximately 9.8% of the total issued share capital of De La Rue.
- Crystal Amber notes that De La Rue’s current market capitalisation is £103m. This is after the July 2020 equity fundraise of £100m, meaning that since July 2020, the like-for-like valuation of the business has fallen to £3m. Prior to the fundraise, the market capitalisation was £125m.
- Crystal Amber notes that on page 14 of De La Rue’s interim results released in November 2022, a reference was made to a material uncertainty going concern audit qualification. This relates to potential banking covenant breaches.
- Crystal Amber notes that in December 2022, it wrote to the directors of De Le Rue in a personal capacity. In that letter, Crystal Amber highlighted several specific concerns, including the effect on revenues and profits of making 300 staff redundant at the Kenyan print facility and ceasing print operations. The directors of De La Rue wrote to Crystal Amber to deny this. However, on 20 January 2023, De La Rue announced the closure of its Kenyan print facilities. Whilst the announcement said that this closure was not expected to affect revenues to 31 March 2023, it made no reference to the effect on revenues for the year commencing 1 April 2023. Prior to the closure of the Kenyan print facilities, the revenue from Kenya comprised around 12% of total revenues from the currency division of De La Rue.
- Crystal Amber notes that in the period to 26 March 2022, after the £36m cost cutting, De La Rue’s pre-tax profits from continuing operations were £24.2m. The current market consensus estimate for the year to 31 March 2023 for De La Rue is for pre-tax profits of £22m.
- Crystal Amber believes that unless it takes immediate action, De La Rue’s audit report for the year to March 2023 is likely to include a material uncertainty going concern qualification. This could have an adverse impact on De La Rue, not only as regards tendering for new contracts but importantly for retaining existing customers and contracts.
- Crystal Amber believes that an immediate change of leadership is required. Therefore, it has concluded that it is necessary to replace non-executive director and chairman Kevin Loosemore. Crystal Amber believes that Pepyn Dinandt should replace Kevin Loosemore as non-executive director and chairman. Further details relating to Pepyn Dinandt are set out below.
- Crystal Amber notes that De La Rue has a rich history and long-established reputation within banknote printing. With a broad range of central bank customers, it is naturally placed to lead industry growth, given the right strategy and operational execution. This Requisition seeks to honour these characteristics and the strategic value they give to De La Rue and to protect them for De la Rue’s shareholders and stakeholders.
Who is Pepyn Dinandt?
CRS says that Pepyn Dinandt has spent almost 20 years working on behalf of and with private equity firms including KKR, Apollo and Towerbrook, and that he has a long and successful track record in building businesses by delivering on value creation programmes and securing exits. Pepyn is currently chief executive of the climate control systems and automotive controls division at the Eberspaecher Group, a very large-owned Tier 1 automotive supplier. By the end of 2023, this global division is forecast to have approximately €900m revenues and 3,500 employees. [QD comment: While he looks like a very qualified individual for the role, Pepyn looks like he already has a busy day job. This raises the question as to whether he will have the necessary time to devote to De la Rue to effect the requisite change, if he is elected chairman.]