De La Rue, the world’s biggest commercial passport maker and the printer of notes for the Bank of England, is now almost a year into a five year plan it set out last May that will eventually see its identity division grow to rival its core cash business.
This morning De La Rue announced the sale of its Cash Processing Solutions (CPS) business to private equity group Privet Capital as it looks to slim down the cash side of its business in a deal that could eventually be worth £10.1m.
This change is meant to revitalise the company that has seen its share price fall by 250 per cent since highs in 2008 due to rising costs and a string of profit warnings. Its latest set of results, due out tomorrow, will provide some evidence of progress.
Either way, it won’t be easy; the identity side of the business currently makes up only 15 per cent of revenue.
Read more: Cash isn’t dead and it isn’t even dying
Martin Sutherland, De La Rue’s chief executive since October 2014, has been tasked with turning around the business and hopes his digital experience from his last job as managing director of BAE’s cyber security division will give De La Rue the edge.
“One of the secrets of De La Rue’s future success is innovation and we’re putting a lot into thinking about product management and product development across different markets,” he says.
Last year De La Rue printed around seven billion bank notes and Sutherland boasts there are enough of his notes in circulation around the world that the average person would be carrying three at any one time.
The company has supplied notes to over 140 countries in the last three years alone with over 85 per cent of its revenue coming from exports. Despite how it may seem on the UK’s high street, the volume of notes globally continues to increase, up by around four per cent year on year.
The business is still heavily dependent on cash creation, with 70 per cent of profit coming from note printing and De La Due’s core profit driver is not going to change quickly.
In 2014 De La Rue landed another contract with the Bank of England to produce its notes for the next 10 years, and is currently printing the new polymer notes set to hit the high street later this year at a secret location in Essex.
But the future, Sutherland promises, is in identity.
“Demand for government backed identity schemes is increasing. It’s a much bigger market than the bank note market, and through investment in new capabilities we can take a larger market share,” says Sutherland.
The bank note business has gone stale. The only way to improve performance, according to Sutherland, is to cut costs to better cope with increasingly volatile demand.
“Identification is where there’s growth and we can win market share with new security features,” he says.
De La Rue plans to use the biometric facial recognition technology from its passports to make ID cards.
“Similar customers, similar technologies,” says Sutherland.
The current migrant crisis facing Europe is an example of why Sutherland expects ID cards to grow in demand.
“I think that governments will want more certainty about who is crossing their borders and when,” he says.
Unlike printing cash, for which demand can be hard to predict, the identity market is thought to be far more stable. Sutherland is hoping the shift will secure the future for the near 200 year-old-company.