De La Rue sells cash handling business

Jo Francis
Monday, May 23, 2016

De La Rue has sold its loss-making Cash Processing Solutions business to private equity house Privet Capital.

De La Rue said that after an extensive review, it had deemed the CPS business to be non-core. CPS provides a range of services to central banks and commercial customers, including high-speed cash sorting and authentication systems.

In De La Rue’s 2015 results the CPS business made a £400,000 operating profit on sales of £49.3m. But in the financial year just concluded it is expected to post an operating loss of around £8m on sales down to £34m.

CPS had gross assets of £32.8m.

Privet Capital has paid £2.1m for the CPS operation via acquisition vehicle CPS Topco, with a further £1.5m deferred consideration to be paid over two years.

De La Rue has entered into a strategic partnership with CPS Topco and will also receive a further contingent consideration of £6.5m “in the event that certain performance related and event driven milestones are achieved by CPS”.

The CPS leadership team, including managing director Keith Eckford, remains with the business.

De La Rue chief executive Martin Sutherland said: “The sale will enable De La Rue to focus on its core business and future growth areas, as well as allow CPS to achieve its full potential under the new ownership.”

Commenting on the deal, M&A specialist Nicholas Mockett, partner at Moorgate Capital, said: “It was a small business within the mighty De La Rue empire and there are no doubt bigger fish, within the core security products area, for management to focus their attention on.

"The performance of Cash Processing Solutions has been poor and with enhanced management attention it may be possible to drive revenues and profits, perhaps by rejigging the business model.

“The use of cash in the economy is still important and therefore labour-saving handling machines seem attractive, particularly in the face of counterfeiting. There will be parts of the world where this is particularly true and where card or electronic based payments will be some way off,” Mockett added.

The security printing giant will make a non-cash charge of £23.4m as a result of the deal.

De La Rue sold off its Cash Systems division eight years ago in a £360m deal. 

The group will announce its full-year results tomorrow. Its share price moved up slightly, by 3p (0.6%) to 489p on this morning’s announcement. 

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