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Last updated: February 25, 2014 8:23 pm
At a recent investor day at its Hampshire headquarters, De La Rue showed off its gleaming new research centre, historic paper mill and advanced design centre. Those taking the tour of the traditionally secretive banknote printer were told of its “extensive skills and talented personnel”, according to one visitor.
But less than two weeks later, the leader of this talented group of technocrats jumped ship.
Tim Cobbold, the group’s affable chief executive, announced on Tuesday that he was resigning to take the top job at events and communications group UBM, which has more than twice the market capitalisation – but little in common – with the 200-year-old printing company.
He will replace David Levin, who transformed UBM from a UK-focused media conglomerate centred on magazine and television assets into the world’s second-largest exhibitions business. However, his departure from De La Rue, three years after he was brought in on a turnround mission, leaves the group searching for its fourth chief executive in 10 years. It also comes as the company is bidding to keep its most important contract: the mandate to print sterling banknotes for the Bank of England.
“Obviously, from our standpoint, it’s a disappointment,” said Philip Rogerson, the chairman who will now take on executive responsibilities at De La Rue, until a replacement is found. “We would have preferred that he had stayed but we’re a well-run business with high-quality people – and life goes on.”
In recent times, though, life has not gone entirely to plan for the group, which began life in 1813 as a newspaper publisher, before moving into stamps, and playing cards.
1813 Thomas de la Rue publishes the first edition of Le Miroir Politique newspaper in Guernsey
1830 He begins printing playing cards
1846 Mr de la Rue’s son, Warren, invents an envelope-folding machine, that can produce 2,700 envelopes an hour
1853 De La Rue wins the contract to print adhesive stamps for the Inland Revenue – the first perforated stamps. Two years later, it begins printing postage stamps
1860 The company wins its first banknote printing contract, for Mauritius
1921 The family partnership becomes
a public company
1940 The company’s London factories are destroyed in the Blitz
1947 De La Rue lists
on the London Stock Exchange
1967 De La Rue jointly develops and installs the world’s first cashpoint machine at a Barclays branch in Enfield
1969 A takeover by
the Rank Organisation
is rejected by the Monopolies commission
1993 De La Rue joins the Camelot consortium and wins licence to operate the National Lottery
2003 De La Rue takes over BoE’s manufacturing operation and signs contract to supply sterling
2009 De La Rue wins
10-year contract to produce the UK passport
In 2010, Mr Cobbold, 51, was appointed chief executive while the company was still reeling from production problems at its UK paper mill, which were affecting a contract for the Reserve Bank of India – a customer that accounted for 30 per cent of currency printing revenues. At the same time, De La Rue was in the process of fighting off – successfully in the end – a 905p a share approach from French rival Oberthur. Since then, De La Rue shares have fallen below that level, closing 1 per cent down on Tuesday, at 814p.
Mr Cobbold will leave the company in March at the end of his three-year plan to boost operating profit from £40m to £100m, and deliver £30m of cost savings. But while he exceeding his cost saving target by £10m in September, he missed his profit target by the same amount – prompting the second profit warning of his tenure.
Analysts described his move to UBM as a “genuine surprise”, given his lack of any background in media or events. “He’s perhaps come to the end of his three-year plan and thought:‘What do I do now?’,” said Paul Jones, an analyst at Panmure Gordon.
In his time at De La Rue – which is still the world’s largest commercial banknote printer by market share – he brought some of the manufacturing expertise he had gained from 18 years with engineer Smiths Group, before he ran power supply systems company Chloride.
His £40m of cost savings were achieved mainly by reducing waste and amalgamating two factories into one plant. He also revolutionised the group’s passport printing business, overseeing the introduction of advanced watermarking techniques and chip-and-pin features. De La Rue currently holds a £400m contract with the UK government to provide biometric passports.
On Tuesday, Mr Cobbold hinted at shaking up UBM in a similar way. “It’s a bigger business, it’s very international, which I love ... and I think some of the things that probably need to be happening at UBM play to my strengths,” he said.
But important questions remain for the business he leaves behind. Although De La Rue has turned itself into a world leader in passport design, it has yet to land any further “glory contracts”, said Mr Jones.
However, the real prize remains the BoE printing contract. De La Rue has held it for the past 10 years but its relationship with the UK central bank dates back to 1724 – thanks to its acquisition of the printing company Portals in the 1990s.
The BoE is expected to wait until the autumn before deciding on the contract, which is worth a total of about £1bn. If De La Rue is not selected, it would be more than the severing of historic ties. “It would be a major loss to them,” said Charles Pick, analyst at Numis Securities.
New chief’s lack of media experience surprises some UBM investors
UBM’s decision to appoint Tim Cobbold as its new chief executive took some investors by surprise, given that the head of De La Rue lacks any experience running a media business, writes Robert Cookson.
But Helen Alexander, UBM’s chairman, said Mr Cobbold’s record operating complex, international businesses more than made up for his lack of specialist knowledge of the events and marketing sectors.
“To find someone who has real depth across every continent was something we searched for and Tim was particularly strong in,” she said.
“It’s about understanding cultural diversity and the complexity of doing business across borders.”
UBM has embarked on a rapid global expansion in recent years and now operates trade shows in more than 30 countries around the world. The FTSE 250 company derives only about 12 per cent of its revenues from the UK.
One of the main questions facing Mr Cobbold once he starts at UBM in May will be whether to sell PR Newswire, a tool for issuing corporate announcements. The unit is one of the last remaining parts of the company that is not related to organising events.
UBM, whose share price was down 1 per cent by mid afternoon on Tuesday, is set to report its full-year results on Friday.
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