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De La Rue Plc - 2020/21 Full Year Results

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DE LA RUE

2020/21 FULL YEAR RESULTS

De La Rue plc (LSE: DLAR) ("De La Rue", the "Group" or the "Company") announces its full year results for the year ended 27 March 2021 (the "period", "FY" or "full year"). The comparative period was the twelve months ended 28 March 2020.

Highlights:

· Adjusted operating profit increased by 60.8% to £38.1m (FY 2019/20: £23.7m)

· IFRS operating profit of £14.5m reflecting significant exceptional item charges

· Turnaround Plan savings completed, delivering a cumulative £36m of annualised cost out due to the programme from the end of FY 2020/21

· Substantial growth in revenue and profitability in ongoing Authentication and Currency divisions, achieving an adjusted operating profit of £27.5m (FY 2019/20: £1.4m)

· Authentication saw good growth in H2 2020/21 and secured orders with expected total multi-year lifetime contract value of £195m from start of FY 2020/21 to date

· Currency 100% banknote capacity utilisation in H2 2020/21 with strong margin progression during year

· Bank of England majority polymer contract won starting July 2021; SAFEGUARD® now selected for all Sterling denominations

· Net debt substantially reduced to £52.3m (FY 2019/20: £102.8m)

· £100m equity capital raise completed July 2020

Financial Summary

 

 

FY 2020/21

£m

 

FY 2019/20 (3)

£m

Change

%

 

 

 

 

 

Adjusted Revenue (FY 2019/20 restated(3))*

388.1

432.0

-10.2%

 

Currency

286.8

281.6

1.8%

 

Authentication

77.6

73.8

5.1%

 

Identity Solutions

23.7

76.6

-69.1%

IFRS Revenue (FY 2019/20 restated(3))*

397.4

472.1

-15.8%

Gross Profit

107.8

105.9

1.8%

Adjusted operating expenses *(1)

-69.7

-82.2

-15.2%

Adjusted operating profit *(1)

38.1

23.7

60.8%

IFRS operating profit/(loss)

14.5

42.8

-66.1%

Net debt(5)

52.3

102.8

-49.1%

 

 

 

 

Adjusted EPS basic (p) *(2)

14.7p

11.1p(4)

32.4%

IFRS EPS basic (continuing operations) (p)

3.7p

30.3p(4)

-87.8%

 

 

 

               

FY 2020/21 financial performance

· Authentication revenue full year growth of 5.1%; the increase tempered by £1.6m of revenue contracts that were sold with the International Identity Solutions business in H2 2019/20. H2 2020/21 saw growth of 27.8% compared to same period in prior year reflecting growth from a new contract win and strong volume growth in Government Revenue Solutions (GRS), despite COVID-19 related impact on two contracts offsetting negative growth seen in H1 2020/21.

· Currency revenue grew due mainly to increased banknote volumes, and higher security features sales.

· Gross profit of £107.8m (FY 2019/20: £105.9m), reflecting improved mix through H2 2020/21 and increased efficiencies and volumes in Currency and increased Authentication volumes, offset by lower gross profit in Identity Solutions.

· Total gross profit for our two ongoing divisions, Authentication and Currency, grew by 30.5% to £95.3m (FY 2019/20: £73.0m).

· Adjusted operating profit of £38.1m (FY 2019/20: £23.7m), represents a significant improvement resulting from the ongoing implementation of the Turnaround Plan, including benefits from the reorganisation and cost reduction programmes. Adjusted operating profit for our two ongoing divisions, Authentication and Currency, performed strongly delivering £27.5m (FY 2019/20: £1.4m) being mainly driven by the improvement in the Currency division which grew adjusted operating profits to £16.2m from a loss of £9.4m in FY 2019/20. This performance more than offset the lower adjusted operating profits from the Identity Solutions division.

· IFRS operating profit of £14.5m (FY 2019/20: £42.8m) was substantially lower than adjusted operating profit due mainly to the recognition of substantial asset impairment and reorganisation charges relating to the cessation of banknote manufacturing at the Gateshead facility. IFRS operating profit in FY 2019/20 also included the gain on the sale of International Identity Solutions of £25.3m (excluding associated disposal costs).

· Adjusted basic EPS was 14.7p (FY 2019/20: (restated) 11.1p) reflected the improvement in adjusted profits which was mitigated by the higher number of shares post equity raise.

· IFRS basic EPS from continuing operations of 3.7p (FY 2019/20: (restated) 30.3p) reflected the recognition in FY 2020/21 of significant net exceptional charges (before tax) of £22.6m, compared to a net exceptional item credit (before tax) of £20.0m in the prior year in addition to the impact of a higher number of shares post equity raise.

· Net debt of £52.3m (FY 2019/20: £102.8m), reduction principally due to completion of equity capital raise in July 2020 offset in part by capital expenditure under the Turnaround Plan (which is below expectations primarily due to timings of expenditure) and the impact of a negative movement in working capital of £39.8m. The working capital movement reflects the timing of cash collections on certain material customer contracts, the impact of which will unwind in H1 FY 2021/22 and the impact of the payments relating to the close out of the UK Passport contract. Cash generated from operating activities included approximately £11m of cash payments related to exceptional items and discontinued.

Business update

· Authentication secured £195m of expected total multi-year lifetime contracts from start of FY 2020/21 to date, and re-iterates guidance of £100m in revenue in FY 2021/22.

· Currency 100% utilisation of banknote printing capacity during H2 2020/21 with good margin progression during year.

· Turnaround Plan savings completed, delivering a cumulative £36m of annualised cost out from the end of FY 2020/21. Actions from Turnaround Plan have delivered £6m of in year savings in FY 2019/20 and £23m of in year savings in FY 2020/21, with a further £7m of in year savings to come in FY 2021/22.

· Company continues to manage business effectively during the COVID-19 pandemic.

Clive Vacher, Chief Executive Officer of De La Rue, said:

"Both our ongoing divisions are performing well and the Group has delivered good growth in adjusted operating profits as we complete the first full year of our Turnaround Plan. We saw good growth in adjusted operating margins for Currency in the year and Authentication has secured £195m of expected multi-year lifetime contracts from April 2020 to date. We have made encouraging progress in our polymer growth plans, securing a new site to double capacity during FY 2021/22.

"We see a strong pipeline of business for FY 2021/22 and continue to expect to deliver the full financial and operational benefits of the Turnaround Plan during the year."

(1)

Excludes exceptional items net charges pre-tax of £22.6m (FY 2019/20: net credits pre-tax of £20.0m) and amortisation of acquired intangible assets pre-tax of £1.0m (FY 2019/20: £0.9m)

(2)

Excludes exceptional items net charges post-tax of £18.4m (FY 2019/20: net credits post-tax £22.5m) and amortisation of acquired intangible assets post-tax of £0.6m (FY 2019/20: £0.7m)

(3)

 

 

 

(4)

FY 2019/20 figures have been restated to correctly reflect the nature of certain contract related payments to include these as cost of goods sold rather than a reduction to revenue. The impact of this restatement is an increase to revenue with an offsetting increase to cost of goods sold of £5.3m with no overall impact on profits compared to the figures originally reported. For further information see page 24.

Restatement of earnings per share reflects adjustments associated with the Equity Capital raise with regards to weighted average number of shares

 

*

 

This is a non-IFRS measure. Adjusted revenue excludes "pass through revenue" relating to non-novated paper business contracts where the group earns nil margin. See note 14 for reconciliation of non-IFRS measures to comparable IFRS measures.

We announce today that the Board has decided to appoint Margaret Rice-Jones as Senior Independent Director with immediate effect.