De La Rue sells cash processing arm after lossmaking year

De La Rue has sold its Cash Processing Solutions division to Privet Capital for £3.6m, which could rise by a further £6.5m depending on performance.

The deal is expected to be cash neutral overall to the group at completion, with 2015/16 annual results containing a £23.4m non-cash exceptional charge in relation to the sale.

After reviewing the business, the banknote printer had concluded that cash processing was now "non-core" and that CPS did not fit in its current product portfolio and growth strategy, however De La Rue has entered into a strategic partnership with CPS under its new owners.

CPS provides cash processing hardware, software and associated services used in banknote processing to manage banknote production, cash in circulation and the maintenance of banknote authenticity, condition and fitness.

The unit experienced difficult trading conditions last year and in the year to March 2016 is expected to slide into an operating loss of circa £8m on sales down by almost a third to roughly £34m.

On top of the initial £2.1m payment, there will be a deferred consideration totalling £1.5m payable in two equal instalments on the first and second anniversaries of the transaction.

Based on certain performance targets and other "event driven milestones", De La Rue will also be entitled to a further contingent consideration with a maximum payout of £6.5m.

A trading update last month stated that full year revenue for the year to 26 March was "broadly in line" with expectations and that underlying operating profit was anticipated to be above previous expectations at £62m thanks mainly to strong operational performance on certain contracts within the currency business, while the Identity Solutions and Product Authentication and Traceability (PA&T, formerly Security Products) had traded broadly in line with expectations.