UPDATE 4-De La Rue warns on its future, scraps dividend to tackle debt

* Firm raises doubt over ability to continue as going concern

* Shares fall by as much as 26% to a 20-yr low

* Cuts dividend to tackle debt, speeds up restructuring (Updates shares, adds comments, timeline)

By Yadarisa Shabong

Nov 26 (Reuters) - Banknote printer De La Rue warned on Tuesday of "significant doubt" that it can continue as a going concern and said it would scrap its dividend to tackle mounting debt, sending its shares to their lowest in two decades.

The news follows a series of setbacks, including two profit warnings, an investigation into suspected corruption in South Sudan and the loss of a 400 million pound ($513.20 million) contract for Britain's new passports.

"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 in a statement, adding that it was focused on delivering a turnaround plan.

De La Rue, which appointed Clive Vacher as its chief executive last month, said it would conduct a review of its business that will speed up its restructuring plan to cut overhead costs and focus on inventory management.

The over 200-year old firm, which holds the contract to design and manufacture the Bank of England's new polymer notes, said its net debt had risen 58% to 170.7 million pounds.

That is above the company's market capitalisation of roughly 133 million pounds at its lowest price on Tuesday.

De La Rue said dividend and pension payments and inventory buildup due to changes in production schedules were among the reasons for its ballooning debt. It has a 275 million pound loan due in 2021.

Before Tuesday's announcement, De La Rue's combined credit score - which measures how likely a company is to default in the next year on a scale of 100 (very unlikely) to 1 (highly likely) - was 4, Refinitiv Eikon data showed.

De La Rue also faces competition from state-run and private firms, which has pressured its banknote printing margins, and the increasing popularity of digital payments..

"We might have simply reached the point where De La Rue is best positioned as part of a bigger company rather than as a standalone entity," said Russ Mould, investment director at AJ Bell.

UK trade union Unite called the situation "very worrying" and said it was seeking clarification from De La Rue regarding its future, with its chief concern being the employment of more than 400 people at its Gateshead and Debden sites.

The company posted a half-yearly operating loss of 9.2 million pounds, compared with a profit of 10.1 million pounds a year earlier, chiefly due to restructuring charges.

Activist fund and second biggest shareholder Crystal Amber said it was "not alarmed" by De La Rue's weak first-half report, and had been encouraged by Vacher's turnaround plan. It had chosen to buy more shares, it said..

Although its adjusted operating profit plunged 87% for the first half, De La Rue forecast it would do better in the second half as it expects more favourable currency volumes and benefits from cost cuts.

($1 = 0.7794 pounds)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Shounak Dasgupta, Alexander Smith and Jan Harvey)