De La Rue House
To innovate and provide secure, cost effective, accessible money and identity products, systems and services that keep our customers, worldwide, two steps ahead of the fraudster.
The world's largest commercial banknote printer and banknote paper manufacturer, De La Rue plc has a presence in literally the four corners of the earth. With 90 percent of its sales outside the United Kingdom, the company's security paper and print division is active in about 150 countries worldwide. Its customers include commercial banks, central banks, and other financial institutions. In security printing, De La Rue provides total solutions--including products and services&mdashø governments and retailers needing secure printed products, such as checks, traveler's checks, passports, vouchers, tickets, and revenue, postage, and other types of stamps. At the forefront of the move to automate retail banking processes, De La Rue's cash systems division is a leader in payment systems, producing cash handling equipment, cash dispensing machines (including ATMs), banknote sorting machines, counting products, and cash processing software systems. De La Rue also holds a 26.7 percent stake in the Camelot Group, operator of the national lottery in the United Kingdom, and a half interest in De La Rue Giori, a maker of banknote printing machinery. A company founded on and fueled by innovation, De La Rue has had a colorful and eventful history.
Thomas de la Rue was born in a small village in Guernsey, the Channel Islands, in 1793. A boy of little formal education but much ingenuity, he was apprenticed at the age of nine to a newspaper printer in Guernsey's capital, St. Peter Port. Immediately after his term of service ended in 1811, de la Rue entered into a partnership with Englishman Tom Greenslade to produce their own weekly 'journal politique et littéraire,' the Publiciste. After only 13 editions, however, de la Rue, whose burning ambition was matched by an equally fiery temper, fell out with his partner and independently set up Le Miroir Politique, a forum from which he energetically attacked Greenslade and the other publishers in town.
From the beginning, however, de la Rue was more interested in publishing processes than in editorial content, and by the time he was 25 he had determined that provincial Guernsey offered too restricted a scope and moved to London. In order to support his family, de la Rue began his London career as a manufacturer of straw hats, but all the while he was experimenting with paper surfaces and printing processes. In 1829 he produced a deluxe edition of the New Testament, 25 copies of which were printed with pure gold powder. The result was universally admired, and book lovers judged it a marvel, but unfortunately, with a price tag of £15, only one copy was sold.
The foundation of the De La Rue company, which was initially named Thomas De La Rue, came in 1830, when de la Rue first went into the playing card business. Two years later de la Rue patented his 'Improvements to Playing Cards' and produced the first modern cards. His printing technique, electrotyping on enameled paper, represented a notable achievement not only in playing cards but in the history of color printing. Within a few years De La Rue was acknowledged as the premier maker of playing cards in Britain. Although cards remained the backbone of the business until the 1850s, during the 1830s and 1840s De La Rue branched out into all aspects of the stationery business, establishing a brisk trade in elaborately designed Victorian stationery, visiting cards, wedding cards, fancy menus, and railway tickets (a handy way of using up odd pieces of pasteboard). In 1843 De La Rue established its first overseas trade, as de la Rue's brother Paul traveled to Russia to advise on the making of playing cards.
Meanwhile the burgeoning postal system was to supply De La Rue with its next major business avenue. In 1840 the system of prepaid postage was first introduced, and with it the idea of the envelope. The earliest envelopes were sold flat and unfolded; later they were cut and folded, but the whole laborious process was done by hand. In 1846 de la Rue's son Warren, an inventor like his father and in his later years a well-respected amateur scientist and astronomer, designed the first envelope-making machine, able to produce 2,700 envelopes in an hour. This proved to be a tremendous boost to De La Rue, particularly after 1851 when it caught international attention and acclaim at the Great Exhibition at the Crystal Palace in Hyde Park.
Two years later De La Rue scored another coup when it won a four-year contract from the Inland Revenue to produce adhesive fiscal stamps on drafts and receipts. The company's main competitor in this area, Perkins Bacon & Co., might have seemed the logical choice for this contract as it was already making Britain's first postage stamps, but De La Rue was pioneering a new method; instead of the old line engraved system, whereby each sheet was printed from a transferred plate, De La Rue's new process was typographical, or surface printed. The system was more economical and practical, and De La Rue promised, in addition, that they could provide a special 'fugitive' ink which would disappear if anyone attempted to clean the stamps to reuse them.
De La Rue's first foray into security printing was thus a tremendous success. By 1855 the company was producing its first British postage stamp, the Fourpenny Carmine, and had begun supplying stamps to the East India Company. This was the start of a hugely lucrative contract; within a few years the company was supplying the entire colony with all its postal requirements.
A rival's bad luck and the uncertain temperament of a government official provided De La Rue's next big break. In 1858 Perkins Bacon inadvertently offended the Agent General in charge of the British colonies' stamps to such a degree that the Agent General relieved that company of the contracts for the Cape of Good Hope, Mauritius, Trinidad, Western Australia, Ceylon, Saint Helena, the Bahamas, Natal, and St. Lucia and awarded them all to De La Rue. This in turn led to another profitable avenue for De La Rue, as the same official contracted the firm to print the paper currency for Mauritius, giving De La Rue its first banknote printing contract, in 1860. Success in the British colonies bred success at home, and by 1880 De La Rue had completely cornered the domestic postal market.
During the middle decades of the 19th century, De La Rue became an international force in security printing. As new countries emerged or different governments came to power, De La Rue was there to offer its expertise in postal and currency printing. During the U.S. Civil War, De La Rue was hired by the Confederacy to produce the only American stamp ever printed abroad: the Five Cents Blue, adorned with the head of Jefferson Davis. The business expanded into Italy, Portugal, Uruguay, and Ecuador, and as it expanded Thomas de la Rue and his sons Warren and William continued to make improvements in paper and processes.
Early 20th-Century Difficulties
In 1896 Thomas De La Rue converted from a family partnership to a private company. Now under third-generation leadership, the firm seemed to lose those qualities of ambition and innovation that had caused it to flourish under Thomas and his sons, and entered a long period of stagnation and decline. The company did enjoy a brief success with its Onoto pen, the first practical fountain pen. As its eccentric inventor George Sweetser enthused of his creation: 'It can not only be filled in a flash and written with, but could be used to syringe your ears, spray the geraniums with insecticide, and it is ideal for 'ink-splashers' as it will carry across the road.' Fueled by a £50,000 advertising campaign (an enormous sum at the time), the Onoto was a big success in the early years of the 20th century, though not big enough to save the faltering fortunes of De La Rue.
As early as 1888 there had been some concerns expressed in Parliament about De La Rue's monopoly of the British postage stamp market. That incipient storm had blown over largely because De La Rue was able to convince the government that it was, simply, the best company for the job. By 1910, however, suspicions were rekindled, not least because, although production costs had gone down, De La Rue's prices remained as high as ever. The company was, in fact, making colossal profits and had grown complacent. The Inland Revenue proposed to split the contract between De La Rue and another firm, Harrisons. Reportedly, Thomas de la Rue's grandson, Thomas Andros de la Rue, was so incensed by this proposal that he stormed out of a meeting with the secretary of the Post Office after shouting that De La Rue would have the entire contract or it would have none of it. Thus De La Rue lost a contract it had held for 30 years. The consequences for the company were grave, with idle factories and redundant workers the result. Loss of face was added to loss of profits only months later when Thomas Andros de la Rue died and the rumor went around that De La Rue's workers were each to benefit by his will. The widely publicized rumor proved to be untrue, and De La Rue sank even further in the public's estimation.
With the outbreak of World War I, the company's fortunes were briefly revived with an important government commission to print one and ten shilling notes, but on the whole fourth-generation management fared no better than had third-generation. Indeed, the company started the war with £90,000 to its credit, and ended it £90,000 in debt. Part of the problem stemmed from Stuart de la Rue's too-eager embrace of the wartime government's suggestions that manufacturing firms should diversify. De La Rue diversified into everything from cricket bats to motor cars with mostly disastrous results. On one occasion, in a bid to prove De La Rue's security printing superiority, Stuart de la Rue forged one of the company's competitor's banknotes, successfully presented it to his bank, and triumphantly informed the government, only to be nearly imprisoned for counterfeiting.
By 1921, when the company went public, it was nearly ruined. Once at the forefront of new technologies and developing research, De La Rue's factories were degenerating into a jumble of antiquated machinery and outdated processes. Stuart de la Rue, as chairman, was the only family member left in the firm. When the government proposed that the company fulfill India's printing requirements on location rather than in London, Stuart refused to do so, with the result that within a few years the entire Indian contract--a mainstay of the business--was lost.
In 1923, Stuart de la Rue unwisely revealed that De La Rue had a secret private agreement with its competitor Waterlows over stamp interests. De La Rue held a monopoly on domestic and colonial stamps, Waterlows on foreign stamps. If the 'wrong' tender were accepted, one company paid compensation to the other. There was a great public outcry at this revelation, and although Stuart received only a public admonishment in the inquiry that followed, the company's reputation was further discredited. Stuart de la Rue's own reputation was in tatters. It is said that, in desperation, he asked his employees what had gone wrong with the company, and one of them, Bernard Westall, a junior clerk who later became managing director, responded, 'You.' Stuart de la Rue left the company soon thereafter.
It took some time for De La Rue to recover from its troubles, but recover it did. Instrumental in the company's revival was its 1930 entry into the vast and lucrative Chinese market, which was to be for nearly 20 years a mainstay for De La Rue. Operations were frequently fraught with cloak-and-dagger style intrigue as international hostilities heightened and World War II drew near. A factory was secretly built in the French settlement of Shanghai with a backup plant constructed in Rangoon, Burma, as a precaution against Japanese aggression. When France fell, De La Rue succeeded in moving its operations to Rangoon, and when Rangoon fell, to Bombay, India.
De La Rue's London factories at Bunhill Row were destroyed in the Blitz in December 1940, and the old ways of commercial printing were finished forever. De La Rue, however, quickly made arrangements to resume printing elsewhere by offset lithography and was able to honor all commitments.
Postwar Acquisitions, Expansions, and Divestments
Following the war, De La Rue embarked on a half century of acquisitions, developments, and expansions. In a strong postwar position, the company grew, establishing interests in Pakistan, Ireland, and Brazil. In 1958 the company set up Formica Ltd. (with 40 percent participation by American Cyanamid) and within a few years its factories were established in France, Germany, Australia, New Zealand, and India. Security Express, a carrier of valuables, was created the following year. In 1958 the parent company changed its named to De La Rue Company Limited, reflecting its status as a classic conglomerate.
In 1960 De La Rue's growing involvement in bank automation was signaled by its creation of a subsidiary, De La Rue Instruments. The following year the company acquired the de la Rue family's old printing rivals, Waterlow and Sons. The 150th anniversary of Thomas de la Rue's first edition of his own newspaper Le Miroir Politique coincided with the company's registration in New York as a security and financial printer to the New York Stock Exchange. The company entered into a Switzerland-based joint venture in 1965 called De La Rue Giori, which specialized in the manufacture of banknote printing machinery. In 1968 the Rank Organisation Plc made a bid for De La Rue but this was rejected the following year by the Monopolies Commission as being against the public interest. In 1969 the early foundation of De La Rue, the playing card business, was finally sold, to John Waddington.
The 1970s and 1980s were busy years of acquisitions and sales, with De La Rue divesting itself of interests that were not part of its core businesses (such as the sale of Formica to American Cyanamid in 1977, which brought the company's conglomerate phase to a close) and consolidating its position in its chosen ventures. Among the acquisitions of the period was the 1974 purchase of Crosfield Electronics, maker of banknote handling systems. In 1975 De La Rue Instruments and Crosfield were merged to form De La Rue Crosfield, the forerunner to the cash systems division of De La Rue. Another key acquisition came in 1982, that of the U.S. payment card firm Faraday National Corporation. Also during the 1980s some of De La Rue's banknote export factories were opened, including those in Singapore and Hong Kong. Most significantly, however, the company moved increasingly into the area of payment systems, among other ventures, forming De La Rue Garny in Germany in 1983 and acquiring the Scottish-based Fortronic in 1987. The German joint venture was transformed in 1989, when De La Rue acquired a 95 percent stake in Garny AG.
The late 1980s brought additional challenges for De La Rue. In late 1987 publishing magnate Robert Maxwell purchased a 15 percent holding in the company, later increased to almost 22 percent. Although Maxwell never gained a seat on the company board, he cast a long shadow over the company's operations. This was most noticeable in 1989 when De La Rue decided to sell the troubled Crosfield manufacturing operation, which by this time specialized in prepress equipment for the printing and publishing industries. Maxwell opposed a proposed sale of Crosfield to a joint venture of Du Pont and Fuji, backing a rival bid by Israel-based Scitex, which was 27 percent owned by a Maxwell-controlled firm. Shareholders sided with management, voting in favor of the sale to Du Pont/Fuji, and Maxwell sold his De La Rue shares in late 1990. Just two weeks after the approval of the sale of Crosfield, De La Rue faced another takeover bid, this time by security printing and publishing rival Norton Opax PLC. De La Rue's independence was saved only after Norton itself was swallowed by Bowater PLC.
Strong Upturn in the Early 1990s
In November 1989, soon after the Norton Opax takeover was narrowly avoided, Jeremy Marshall was named chief executive, becoming the first outsider so appointed. Marshall managed the company through a very successful period in the early 1990s, shaking up what had been a rather insular organization. Finding the structure overly decentralized, Marshall reorganized the company into three main divisions: payment systems, currency, and security printing. Marshall also continued and strengthened the trend toward concentration on these strong core areas, selling off loss-making subsidiaries and concerns not directly related to the firm's principal ventures. He also initiated a program of strategic acquisitions to bolster these areas.
De La Rue profited as well from political events. The breakup of the Communist bloc resulted in some 26 countries requiring new currency. De La Rue got the lion's share of the business. Boosted by these new markets, the company's currency division remained strong in the early 1990s. Of the world's countries whose governments did not print their own currency, De La Rue had 60 percent of the market share. The company regained its traditional lead in technological innovation: specialized presses were continually being developed and marketed by its associated company, De La Rue Giori. Its patented computer-aided design system, Durer, was able to produce banknote designs in half the time formerly required.
Research and development were also keystones of De La Rue's security printing division in the early 1990s: it supplied the Bank of Scotland with debit cards incorporating laser-engraved photographs, and in partnership with a Dutch electronics company, Philips, developed microchip 'smart cards.' Plastic payment cards, checks, passports, traveler's checks, and bonds all played a part in De La Rue's security printing business, and the company was expanding into related ventures, moving increasingly into printed materials for elections and for national registration and identity card schemes.
De La Rue's payment services division was the company's fastest growing area of business in the early 1990s. As banking became increasingly automated, De La Rue was at the forefront of technological development and sought out acquisitions to gain a larger portion of this rapidly expanding market. In 1992 the company paid £94.7 million for Inter Innovation, a Swedish maker of automated currency handling machines, including automated cash dispensers, and physical security products, such as safes and vaults. Meanwhile, the company changed its name to De La Rue plc in 1991.
By 1993 Marshall had succeeded in increasing revenues 60 percent, to £559.6 million, and in turning a 1990 pretax loss of £50.6 million into profits of £104.7 million. During 1993 De La Rue joined a consortium called Camelot Group plc, which was formed to make a bid for the license to run the new U.K. national lottery. De La Rue took an initial 22.5 percent stake in Camelot (later raised to 26.7 percent), contributing its security printing expertise to the venture. In 1994 Camelot was awarded the license.
During much of 1994, De La Rue was occupied pursuing a bid for Portals Group PLC, a producer of paper used in making currencies and one of De La Rue's main suppliers. Portals had a history even longer than that of De La Rue. The company traced its origins to 1712 when Henry Portal, a French Huguenot who had fled to England to escape religious persecution, began making stationery paper at a mill in Whitchurch, Hampshire. The quality of his paper became so renowned that he was asked to make paper for the Bank of England. Deals with other banks followed, including the Bank of Ireland and the General Bank of India. After banknote forgery emerged as a major problem in the early 19th century, the company began making paper with elaborate watermarks. In 1855 Portals made the paper for the first Bank of England note containing a shaded watermark. In 1880 Portals supplied paper for the first U.K. Postal Orders, and five years later began making paper for the Bank of Scotland. The early 20th century saw the company rapidly expand its base of international customers. During World War I, Portals began making paper for the Indian rupee, then in 1921 began making banknote paper for Chile. Quickly following the latter were orders from Australia, South Africa, Persia, Danzig, Portugal, Greece, and Argentina. By 1929 Portals was making paper for 41 banknote issues around the world. Building security features into its paper became a specialty of Portals. In 1940 the company pioneered in weaving a fine security thread of special composition into its paper, a procedure that became standard industry practice. Throughout this entire history a member of the Portal family had headed the company, but that tradition ceased shortly after the company went public in 1947.
De La Rue's acquisition of Portals was completed in early 1995 for £682 million (US$1.1 billion). De La Rue was not just interested in gaining control of one of its suppliers. Portals also brought to De La Rue a host of new customers or potential customers--state-owned printers that produced their own banknotes. About 88 percent of the world's banknotes were produced by state-owned printers, and Portals held about half of that market. De La Rue was also interested in gaining Portals' expertise in anticounterfeiting. Concern about forgeries was on the rise in the 1990s as cheaper and higher-quality copiers, scanners, and printers provided counterfeiters with increasingly sophisticated tools of the trade. By controlling both the paper-making and printing stages, De La Rue hoped to offer integrated security features in its banknotes and other products, including watermarks, special inks, and holograms.
Declining Fortunes in the Later 1990s
De La Rue made a number of other acquisitions in 1995 and 1997. During the latter year, the company acquired the French-based smart card business of Philips for £54.2 million. By that time, however, the glory days of the early 1990s had given way to a serious downturn. Profit growth flattened out in the 1996 fiscal year, then profits began to decline. As the company kept issuing profit warnings, its stock tumbled, from a high of more than £10.50 in early 1995 to less than 200p in late 1998. Its market value declined by 80 percent during the same period, from about £2 billion to little more than £400 million. De La Rue was afflicted by a host of difficulties. Its security printing division was hurt by a slowdown in demand and by decreased margins due to the maturing of the market. The cash systems division suffered first from a spate of bank mergers in the United States, then from decreased sales of its newest cash-handling machinery stemming from the Asian financial crisis that erupted in 1997; Asia had been seen as one of the main markets for these new machines. De La Rue's fastest growing unit, the card systems division, was busy developing new smart cards and other technologies, but the payback for these large investments was still in the future. A strong British pound did not help matters. Moreover, analysts also blamed management for responding slowly and inadequately to the growing crisis.
In February 1998, with a turnaround nowhere in sight, Marshall was forced to take an early retirement. While a search for a replacement was conducted, De La Rue began restructuring its operations with a reorganization of its banknote business, including a 25 percent reduction in printing capacity. Noncore activities began to be jettisoned, starting with the exit from the physical security business (vaults and safes) through the sale of Garny and other units, the last of which was sold in October 1998. During the prior month, Ian Much, a former chief executive of T & N plc, was appointed the new chief executive. Much immediately began shaking things up by forcing out the head of the cash systems division, which he then assumed direct control of. In February 1999 De La Rue sold its card-reading terminals business to Ingenico SA. Next came a major overhaul of the cash systems division, which was restructured in March 1999 into three business streams: desktop products, branch cash solutions, and cash processing. De La Rue also announced that an expensive and complex information technology system then under development was being scrapped and that 500 jobs would be cut from the division (representing one-sixth of the division's workforce).
For the fiscal year ending in March 1999, De La Rue reported a net loss of £7.4 million, stemming from its cash systems division, which was in red for the year, and from £64.5 million in exceptional charges, including £48.5 million in restructuring costs. The company's revamp then continued, with the sale in October 1999 of the bulk of its card systems division, including its smart cards operations, to François-Charles Oberthur Fiduciaire of France for £200 million (US$317.9 million). De La Rue sold the business, its fastest growing sector, after having concluded that it lacked sufficient scale and would require too much additional investment. The company's plan for the early 21st century, then, was to focus on its two core divisions--cash systems and security paper and print--and to develop a third division called services and solutions. Created in April 2000, this division focused on brand protection, electronic security, and other services related to its core customers; several existing businesses in holographics, identity systems, transaction services, and other areas formed the initial core of the new division. De La Rue thus appeared to have returned to its history of innovation; it seemed that Thomas de la Rue, that shrewd businessman and inventor, would surely applaud the latest strategies of the company he founded so long ago.
Principal Subsidiaries: De La Rue Holdings; De La Rue International; Portals Group; Portals Property; The Burnhill Insurance Company; Camelot Group plc (26.7%); De La Rue Giori (Switzerland; 50%); De La Rue Smurfit Limited (Ireland; 50%); De La Rue Cash Systems GmbH (Germany); IMW Immobilien AG (Germany; 95.7%); De La Rue Security Print Inc. (U.S.A.).
Principal Divisions: Cash Systems; Security Paper and Print; Services and Solutions.
Principal Competitors: Ambient Corporation; American Banknote Corporation; Bowne & Co., Inc.; Crane & Co., Inc.; Cummins-American Corporation; Dai Nippon Printing Co., Ltd.; Deluxe Corporation; Diebold, Incorporated; Drexler Technology Corporation; Frisco Bay Industries Ltd.; John H. Harland Company; MDC Corporation Inc.; Merrill Corporation; NCR Corporation; Oki Electric Industry Company, Limited; Quebecor Inc.; Toppan Printing Co., Ltd.; Transaction Systems Architects, Inc.; Triton Systems, Inc.; VeriFone, Inc.; Visage Technology, Inc.