De La Rue looks at joint ventures
Wednesday, June 1, 2016
De La Rue is talking to other papermakers about a potential joint venture for its banknote paper business.
The security printing giant has already turned to partnerships with other specialists to flex its print capacity, and outsourced the production of more than 500m banknotes in its last year.
Chief executive Martin Sutherland said: “We think there’s more we can do with our paper business to fundamentally improve the prospects of this business going forward.
“We are in talks with a number of other papermakers about what a potential joint venture might look like to drive improved ` efficiency in our paper business.”
Sutherland described the talks as “complex but also constructive.”
De La Rue made 10,000 tonnes of paper at its Overton mill in Hampshire last year, up 6% on the prior year although the group said the market continued to be oversupplied and described demand as “lumpy”.
The firm has been making cotton banknote paper for more than 300 years.
Sutherland was speaking as the firm unveiled its year-end results last week. Sales in the year to 26 March rose 3% to £488.2m and underlying operating profits (prior to an exceptional charge of £3.6m) fell 10% to £62.5m.
De La Rue announced the sale of its loss-making Cash Processing Solutions business the day before the results, and also provided figures for its continuing operations excluding that business.
Sales in the ongoing group were up 7% to £454.5m, with underlying operating profits rising by 2% to £70.4m.
Reported pre-tax profits (pre-disposal) slumped by 47% to £20.8m because of a £26m exceptional charge related to the discontinued cash handling business.
It also booked £9.2m of restructuring and relocation costs relating to its review of banknote manufacturing, which will result in De La Rue’s production capacity being reduced from 8bn to 6bn notes a year.
It also made a £9.5m gain on the sale of surplus land at Overton.
De La Rue outsourced the production of 500m notes during the period in order to better cope with the peaks and troughs of demand.
“We looked at spare capacity and what that costs us in fixed overhead, versus reducing our capacity and potentially paying slightly more to outsource,” Sutherland explained.
De La Rue has worked with three separate partners on the outsourcing deal: two state printing works and one commercial security printer. Sutherland said none were direct competitors of the PLC.
It also designed and launched the new UK passport together with Her Majesty’s Passport Office during the period, and entered a partnership with Dainippon for the security laminates used on the data page of the passport.
The group also produced its first lenticular-based security feature, which has already been sold to two customers, Sutherland said.
Although a large three-year contact for security features has just come to an end, it is targeting further growth in this market in items such as ID cards and driving licences.
“Once security features are embedded they endure for years, it’s a very attractive market,” he added.
De La Rue is also pushing its offering as an integrated polymer producer and security printer.
Tomorrow the Bank of England will reveal the design for the new polymer £5 note, which is being printed by De La Rue on a substrate made by Innovia Films.