Gemalto sets out ambitious growth plans

Gemalto, the world’s leading provider of security chips and software, has unveiled ambitious plans to double operating profits by 2017 on the back of rising demand for mobile payments and digital identity systems.

The fast-growing company, formed in 2006 from the merger of two French makers of bank and pre-paid phone cards, told investors it aimed to hit operating profits of €600m over five years after achieving its previous target of €300m a year early in 2012.

Olivier Piou, chief executive, said many of Gemalto’s markets remained “essentially untapped” and he was confident the bold targets would be realised.

Gemalto’s share price has soared as it has returned powerful sales and profit performance in recent years, rising more than 200 per cent over the past five years and driving it into France’s CAC 40 index of top companies.

But some analysts remain sceptical of its ability to sustain its promised pace of growth. The shares declined after the announcement on Thursday evening and were down as much as 1.5 per cent in Friday trading.

Nonetheless, Mr Piou insisted an anticipated surge in payments via smartphones and other mobile devices would fuel double-digit revenue growth, along with increasing demand from countries for e-passport and other digital identity systems and a move by the US and China to adopt chip-and-pin payment card systems.

Gemalto is banking on most growth coming from software and services as it supplies and runs the secure systems that underpin mobile, bank and other payment operations, not just the making of increasingly commoditised chips.

It also sees a big expansion in the ID business as countries move from e-passports to other individual digital documentation in areas including driving licences, welfare payments and health services.

The plan said half of the company’s growth up to 2017 would come from a leap in revenues from its platforms and services activities to €1bn a year: last year they accounted for €390m out of group sales of €2.2bn.

Gemalto said its assumptions were based on there being no big economic slowdown or structural changes in currency values.

It said potential accelerators beyond its forecast could come from a “drastic increase in usage of strong authentication for cloud and internet access security”.

It did not specify further, but Mr Piou told the Financial Times in an interview this month that any demand for enhanced security following recent revelations of US surveillance of internet connections could benefit Gemalto.

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