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Financial Summary |
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H1 2019/20 £m |
H1 2018/19 (3) £m |
Change % |
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Adjusted Revenue* |
205.9 |
242.0 |
-14.9% |
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Currency |
128.7 |
182.5 |
-29.5% |
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Product Authentication & Traceability |
33.0 |
19.4 |
+70.1% |
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Identity Solutions |
44.2 |
40.1 |
+10.2% |
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IFRS Revenue |
232.3 |
257.6 |
-9.8% |
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Adjusted operating profit *(1) |
2.2 |
17.0 |
-87.1% |
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IFRS operating (loss)/profit |
(9.2) |
10.1 |
n/a |
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Adjusted EPS basic (p) *(2) |
(1.5)p |
11.2 |
n/a |
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IFRS EPS basic (p) |
(10.7)p |
5.1 |
n/a |
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Dividend per share (p) |
0p |
8.3p |
n/a |
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(1) |
Excludes exceptional items net charges of £11.0m (H1 2018/19: net charges of £6.6m) and amortisation of acquired intangible assets of £0.4m (H1 2018/19: £0.3m) |
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(2) |
Excludes exceptional item net charges net of tax of £9.2m (H1 2018/19: net charges of £6.0m) and amortisation of acquired intangible assets net of tax of £0.3m (H1 2018/19: £0.3m) |
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(3) |
Comparative figures have not been restated for the impact of IFRS 16. |
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*
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This is a non-IFRS measure. Amortisation of acquired intangible assets is a non-cash item, while exceptional items are considered to be items of income and expenditure which are both material by size/or by nature and not representative of normal business activities. Adjusted revenue excludes “pass-through” revenue relating to non-novated paper business contracts where the Group earns nil margin. By excluding these items from the adjusted operating profit and EPS metrics, the Directors are of the opinion that these measures give a more meaningful understanding of the underlying performance of the business. See note 17 for further explanations and reconciliation to the comparable IFRS measures. |
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H1 2019/20 financial performance
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IFRS revenue (including “pass-through” revenue on paper contracts) of £232.3m (H1 2018/19: £257.6m) and adjusted revenue of £205.9m (H1 2018/19: £242.0m), reflect a decline in Currency volumes and average price, more than offsetting the significant increase in PA&T revenue. |
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Adjusted operating profit of £2.2m (H1 2018/19: £17.0m), resulting mainly from the decline in Currency volumes and margin. |
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IFRS operating loss of £9.2m (H1 2018/19: profit £10.1m), which is stated after significant restructuring charges related to the reorganisation announced in May 2019. |
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Adjusted basic EPS was a loss of 1.5p (H1 2018/19: 11.2p) and IFRS basic EPS was a loss of 10.7p (H1 2018/19: 5.1p).
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Net debt* of £170.7m (FY 2018/19: £107.5m), increased mainly due to adverse working capital movement on inventory, final dividend payment, pension funding contributions and capital expenditure. Proceeds of £42m from the sale of International Identity Solutions were received after the end of the reporting period. |
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Business update
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A period of significant management change and instability. |
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Reorganisation into two divisions – Authentication and Currency – launched on 4 November 2019. |
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On track and aiming to accelerate the three-year £20m cost reduction programme. |
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Sale of International Identity Solutions business for £42m completed on 14 October 2019. |
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The first state printworks customer for our security thread Ignite™ shipping in calendar 2020. |
Dividend
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The Board has decided to suspend future dividend payments in order to manage net debt levels as one of the measures undertaken to respond to the identified material uncertainty (see Director's report for further details). |
Clive Vacher, Chief Executive Officer of De La Rue, said:
“The business has experienced an unprecedented period of change with the Chairman, CEO, senior independent director and most of the executive team leaving or resigning in the period. This has led to inconsistency in both quality and speed of execution. The new Board is working to stabilise the management team, which we believe will take some time.
“At the same time, we have seen significant changes since the start of the year in the market for Currency, including pricing pressure as a result of reduced overspill demand. This has had a material impact on volumes and profitability in H1 2019/20 and it will also take time for the currency market to normalise. Our Authentication business continues to show good growth and provides some degree of balance to the Currency headwinds, while demand for polymer substrate is also exceeding our expectations.
“In response, we are reviewing our cost base and will make the structural changes that will further strengthen our competitiveness in a challenging market. We continue to focus on building momentum in the higher-margin security feature market and continue to innovate to improve our position in this fast-growing area.
“Between now and the end of calendar Q1 2020, we will complete a full review of the business and design a comprehensive turnaround plan for the Company. In the meantime, we have already identified and started to implement the urgent actions needed to stabilise the business and allow us to complete the review. With strong emphasis on cost control and cash management, coupled with a focus on innovation and reversing the revenue decline, we will become a leaner, more efficient Company and drive shareholder value.”