Company Announcements


Source: RNS
RNS Number : 8450F
De La Rue PLC
17 July 2019




De La Rue plc ("De La Rue" or the "Company") notes the announcement made today by Crystal Amber Fund Limited ("Crystal Amber"), proposing, among other things, that De La Rue's Chairman, Philip Rogerson, does not seek re-election at the Annual General Meeting of the Company to be held on 25 July 2019 at De La Rue House, Jays Close, Viables, Basingstoke, Hampshire RG22 4BS (the "AGM") (the "Crystal Amber Proposal").

The De La Rue Board (the "Board") firmly believes that this precipitous and destabilising Crystal Amber Proposal is very clearly not in the best interests of the Company, its shareholders as a whole or its wider stakeholders.

Accordingly, the Board unanimously recommends that shareholders VOTE FOR ALL RESOLUTIONS AT THE AGM, including the re-election of the Chairman.

In response to the Crystal Amber Proposal and other assertions made by Crystal Amber, the Board strongly believes:

·      De La Rue already has in place, and is progressing at pace, an orderly succession plan for the Chairman, Senior Independent Director and CEO;


·      In stark contrast to the Crystal Amber Proposal, this orderly succession plan helps ensure vital senior leadership continuity, at a time of significant and necessary change in the business, to help ensure the best candidates are attracted and appointed expeditiously to all three roles;


·      Senior De La Rue management has had very significant levels of interaction with Crystal Amber since Crystal Amber became a shareholder, demonstrating De La Rue's policy of proactive and open communication with shareholders as a whole;


·      The Remuneration Committee takes a robust approach to target setting for executive management incentives, and incentive awards are always made in the context of performance against those targets, consistent with the Remuneration Policy as voted for by shareholders in 2017;


·      De La Rue has considered very carefully Crystal Amber's various strategic proposals. The Board notes that following the introduction to a potential acquirer facilitated by Crystal Amber the other party did not respond. In addition two suggested acquisition targets were carefully and objectively assessed by the Company but in each case De La Rue concluded that they were of no strategic merit. The Board is well aware of its fiduciary duties and will always work to maximise value for shareholders as a whole; and


·      De La Rue has made significant and demonstrable progress in delivering the necessary strategic transformation of De La Rue into a less capital intensive, more technology-led security products and services provider.



As announced by De La Rue on 24 June 2019, Andy Stevens, Senior Independent Director, who was appointed a Non-executive Director of the Company on 2 January 2013, has informed the Board of his intention to step down as a Director of the Company due to his other commitments.

Mr. Stevens will remain on the Board until such time as a successor as Senior Independent Director has been appointed, but in any event until no later than 31 December 2019. Until then he will continue as the Senior Independent Director and accordingly will be standing for re-election at the Company's forthcoming AGM.

As previously announced, the search for a new CEO is underway, led by the Chairman, Philip Rogerson. Mr. Rogerson has indicated his intention to retire from the Board as part of the orderly succession process following the appointment and integration of the new CEO.

If a successor to Mr. Rogerson is appointed before the search for a new CEO has concluded, Mr. Rogerson's preference is to stand down at that point, provided him doing so does not negatively impact the search for and integration of a new CEO.

In this context a search has commenced, and is progressing well, for two Non-executive Directors with the intention to replace the Chairman and Senior Independent Director in line with the succession process outlined above.

The Board is committed to the highest standards of governance, and the searches above will be conducted accordingly.  If any De La Rue shareholders wish to nominate potential candidates for any of the positions for which a successor is being sought, the Board would be delighted to include those potential candidates in the formal process.

The Board strongly believes that this orderly succession plan is essential to help ensure:

·      there is stability and continuity in the leadership of the business so that the search for the best candidates for all three roles can be concluded expeditiously;

·      potential disruption in the business is minimised; and

·      De La Rue's best people are motivated to remain with the business during this period and beyond.



De La Rue is fully committed to a policy of proactive and open communications with shareholders as a whole.

To this end, De La Rue notes that over the past 16 months the Chairman and other senior representatives of De La Rue have held 10 meetings with Crystal Amber and had over 30 email exchanges with Crystal Amber.



De La Rue notes Crystal Amber's assertion that the Chairman has obstructed a potential discussion with a potential acquirer of De La Rue instigated by Crystal Amber. Richard Bernstein (Investment Adviser to Crystal Amber) did email Philip Rogerson and certain individuals at that potential acquirer to effect an introduction. The individuals at that potential acquirer did not respond to that email. The Board's focus is on taking actions within its control to improve the Company's share price to put the Company in a stronger position.  The Board is well aware of its fiduciary duties and will always work to maximise value for shareholders as a whole.

De La Rue also notes that Crystal Amber has in the past referenced certain acquisition proposals that it has made to the Board and that Crystal Amber claims have not been actioned.  De La Rue confirms that Crystal Amber identified two specific possible acquisition targets. The Board can confirm that the Company considered fully and carefully these proposed targets and concluded that the proposals were of no strategic merit and very clearly not in the best interests of the Company and provided responses on both proposed acquisitions to Crystal Amber.

In coming to this conclusion, the Board took into account (among other things) the following considerations:

In relation to potential target 1:

·      Richard Bernstein declared a personal interest in this potential target;

·      The transaction with this potential target proposed to De La Rue by Crystal Amber changed over time from a partnership, to an equity interest, an option to acquire or a joint venture with De La Rue having majority control, to ultimately outright acquisition by De La Rue;

·      During the period of De La Rue's assessment of this potential target, it was heavily loss-making with a low sales base and large cash outflows;

·      Despite the above, De La Rue trialled the potential target's technology with De La Rue's customers, whose feedback led De La Rue to conclude it would not enhance its current offering; and

·      Over the period that De La Rue was considering this opportunity, the potential target's shares lost more than 90% of their value.

In relation to potential target 2:

·      Closer ties with this potential target would run counter to De La Rue's current strategy of seeking to focus on the technology-led growth areas of its business;

·      A significant part of the business was entirely unrelated to De La Rue's current operations or any planned growth area, being a traditional (non-security related) retailing business;

·      Part of Crystal Amber's proposed rationale was based on undertaking a significant property deal;

·      The potential target's business had only two significant contracts falling within De La Rue's core business and of these one was judged to represent a major dis-synergy given the dynamics of De La Rue's current business; and

·      The requirements to optimise the potential target operationally could have proved challenging and distracting in the jurisdiction in question, at a time when management efforts are focused on driving growth and efficiency across different parts of De La Rue's existing portfolio.

Contrary to Richard Bernstein's public statement in relation to these acquisition proposals that he "served the management team an open goal and they have squandered the opportunity"[1], the Board believes the acquisition of either of these companies would in fact represent an own goal by De La Rue and would absolutely not have been in the interests of its shareholders as a whole.



De La Rue notes Crystal Amber's assertions regarding the appropriateness of certain elements of the directors' remuneration report on which shareholders are being asked to vote at the AGM.

The Board strongly disagrees with Crystal Amber's assertions. The Remuneration Committee takes a robust approach to target setting, and incentive awards are always made in the context of performance against those targets, consistent with the Remuneration Policy as voted for by shareholders in 2017.

The Board would like to provide the following clarifying points:

·      The overriding objective of our Remuneration Policy is that the existing structures incentivise and reward the delivery of sustainable long-term shareholder value for all stakeholders;

·      40% of executives' bonuses for 2018/19 were deferred into shares to align their interests with those of shareholders;

·      Financial incentive targets for 2018/19 were set at the start of the financial year in the knowledge that the Company was adopting IFRS15;

·      Incentive targets were set at levels which required growth in revenue, operating profits and cash conversion versus the actual 2017/18 revenue, operating profit and cash conversion results (excluding the Paper business);

·      De La Rue's like-for-like performance (stripping out the impact of the Paper business disposal) in 2018/19, demonstrated growth across revenue, operating profit and EPS:

Group revenue (excluding Paper) increased by 12% to £516.6m (FY18: £461.4m);

Adjusted Operating Profit (excluding Paper) increased by 6% to £60.1m (FY18: £56.9m); and

Adjusted EPS (excluding Paper) increased 12% to 42.9p (FY18: 38.2p).

Notwithstanding that like for like growth was achieved, the assessment against the financial targets resulted in a payout, well below target (23.8% of maximum), demonstrating the targets were set with appropriate stretch.



De La Rue is undergoing a period of significant, and necessary, strategic change.

In May 2015, De La Rue announced a five-year plan to transform the Company into a less capital intensive, more technology led security product and service provider, with a more balanced business portfolio and a focus on growth businesses.

The main priorities of this five-year plan were:

·      Diversifying revenue by growing Polymer, Security Features and PA&T;


·      Improving competitiveness in Banknote Print;


·      Reducing exposure to the volatility of the oversupplied paper market;


·      Divesting non-core businesses; and


·      Reducing the pension deficit.

Whilst such a fundamental strategic change is never without its challenges as reflected in the Company's performance and share price, much progress has still been made, with clear plans to take the business forward as set out in De La Rue's full year results on 30 May 2019.

Areas of progress since the strategy was initiated in May 2015 include:

·      Diversifying revenue by growing Polymer, Security Features and PA&T:

Polymer total volumes increased from 26 tonnes in FY15 to 998 tonnes in FY19

Security Features sales volumes have grown by 13% p.a. (excluding the large contract which ended in FY16)

Underlying PA&T revenues (excluding Paper) have grown by 16% p.a. and are expected to further double by FY22


·      Significant investment in technology:

R&D spend has increased by almost 125%, with 133 patents granted in the past 4 years

Acquired the Du Pont authentication business to add valuable technology


·      Improving competitiveness:

Banknote Print sales volumes have increased from 6.5bn to 7.5bn notes

Revenue per employee has risen from £125,000 to £180,000

Return on Capital Employed has increased from 39% to 43%

A cost reduction programme has been launched to deliver in excess of £20m annualised savings from FY22


·      Reducing exposure to the volatility of the oversupplied paper market:

Divested the capital intensive Paper business and negotiated an ongoing supply contract to ensure security of supply is retained


·      Divesting non-core businesses:

Divested the loss-making CPS business

Agreed to sell the International ID business, retaining the identity related security features and components business


·      Reducing the pension deficit;

Reduced the UK pension fund deficit by approximately two-thirds to £76.8m


The Group is now focused on two distinctive markets, Authentication and Currency, to provide better alignment to the different market dynamics and opportunities, as well as strategic flexibility going forward.



The Board unanimously recommends that shareholders VOTE FOR ALL RESOLUTIONS AT THE AGM, including the re-election of the Chairman.

Proxy forms for the AGM have already been sent to shareholders, with the notice of AGM, and should be completed and returned to the Company's registrar, at Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY by 10:30am on Tuesday 23 July 2019.


Shareholders may, if they wish, submit proxy votes electronically via the registrar's website CREST members who wish to appoint a proxy or give an instruction through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST manual on the Euroclear website CREST members wishing to appoint multiple proxies for a holding should contact the Company's registrar.

If you vote electronically your vote must also be registered by 10:30am on Tuesday 23 July 2019.

Further details are set out in the explanatory notes on the proxy form and notice of AGM.

You may still attend and vote at the AGM whether you vote by post or electronically.



De La Rue plc's LEI code is 213800DH741LZWIJXP78.





Brunswick Group LLP +44 (0)207 404 5959

Azadeh Varzi

Stuart Donnelly



About De La Rue


De La Rue's purpose is to enable every citizen to participate securely in the global economy. As a trusted partner of governments, central banks and commercial organisations, De La Rue provides products and services that underpin the integrity of trade, personal identity and the movement of goods.


As the world's largest designer and commercial printer of banknotes, De La Rue designs, manufactures and delivers banknotes, banknote substrates and security features to customers in a world where currency will continue to be a key part of the developing payments eco-system.  De La Rue is the only integrated supplier of both paper and polymer banknotes, and creates security features that ensure banknotes are protected against counterfeiting.


De La Rue is the world's largest commercial designer and printer of passports, delivering national and international identity tokens and software solutions for governments in a world that is increasingly focused on the importance of a legal and secure identity for every individual.


De La Rue also creates and delivers secure product identifiers and 'track and trace' software for governments and commercial customers alike to help to tackle the challenge of illicit or counterfeit goods and the collection of revenue and excise duties.


De La Rue is listed on the London Stock Exchange (LSE:DLAR). For further information visit

[1] Richard Bernstein quoted in an article by (financial website and money channel of the Daily Mail Online) published on 30 May 2019.


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