De La Rue plc 2021/22 Half-Year Results

DE LA RUE

2021/22 HALF YEAR RESULTS

De La Rue plc (LSE: DLAR) (“De La Rue”, the “Group” or the “Company”) announces its half year results for the six months ended 25 September 2021 (the “period”, “H1 2021/22” or “half-year”). The comparative period was the six months ended 26 September 2020 (“H1 2020/21”).

H1 2021/22 highlights:

• Adjusted operating profit from our ongoing divisions up by 165.6% to £17.0m (H1 2020/21: £6.4m)
• Adjusted revenue for Authentication and Currency increased by 10.3% to £177.1m (H1 2020/21: £160.6m). IFRS revenue was £179.2m for the period (H1 2020/21: £182.6m)
• Group adjusted operating profit increased by 13.7% to £17.4m (H1 2020/21: £15.3m), demonstrating strong growth from Authentication and Currency that more than offset the cessation of the UK passport contract. IFRS operating profit to £13.8m (H1 2020/21: £4.6m)
• Turnaround Plan and cost reduction activities continue to strengthen performance versus H1 2019/20 and H1 2020/21, with minimal impact of COVID-19 due to the Group's response
• Malta expansion announced, that will double Authentication production capacity and further enhance Currency manufacturing flexibility
• Currency 100% banknote capacity utilisation in H2 2021/22 across all print sites
• Polymer production volumes up by more than 90% versus H1 2020/21
• Positive operating cash flow of £25.8m (H1 2020/21: £3.3m), with net debt reduced by 16.1% to £43.9m (FY 2020/21: £52.3m). Full year net debt outlook in line with the Board's expectations
• FY 2021/22 trading to date has been positive and the outlook continues to be in line with the Board's expectations

Footnotes:

* These are non-IFRS measures. The definition and reconciliation of adjusted revenue, adjusted operating profit and adjusted basic EPS can be found in Non-IFRS financial measures section of this Interim Statement.

^1.  Identity solutions in H1 2021/22 includes sales made under the Design and Supply Agreement (“DSA”) arrangement with HID Corporation Limited (“HID”) entered into following the sales of the International Identity Solutions business in October 2019. H1 2020/21 includes sales relating to the UK passport contract in addition to DSA sales.

^2.  Adjusted operating expenses and adjusted operating profit excludes pre-tax exceptional items of £3.1m (H1 2020/21: £10.2m) and pre-tax amortisation of acquired intangible assets £0.5m (H1 2020/21: £0.5m).

^3.  Adjusted basic EPS excludes post-tax exceptional items of £2.5m (H1 2020/21: £7.8m) and post-tax amortisation of acquired intangible assets £0.4m (H1 2020/21: £0.4m).

^4.  The definition of net debt can be found in note 8 to the financial statements.

^5.  The H1 2020/21 figures have been restated to correctly reflect the nature of certain contract related payments to include these as cost of goods 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 £2.9m with no overall impact on profits compared to the figures originally reported. This restatement was also made in the FY 2020/21 results.

H1 2021/22 financial performance

• Adjusted revenue of £179.2m (H1 2020/21: £177.6m) reflects growth in Authentication and Currency which more than offset the expected loss of revenue from the UK Passport contract in the prior period. IFRS revenue (including “pass-through” revenue) of £179.2m (H1 2020/21: £182.6m) was impacted by the contracts covered by these arrangements having now completed.
• Authentication adjusted revenue growth of 28.3% reflecting the benefit of a full period of Ghana Revenue Authority contract and growth in Brand revenue.
• Currency adjusted revenue increase of 5.3% reflecting growth of Banknote and Polymer sales.
• Adjusted operating profit of £17.4m (H1 2020/21: £15.3m), includes a 165.6% growth in our two ongoing divisions to £17.0m (H1 2020/21: £6.4m) reflecting strong revenue growth and increased profitability more than offsetting the impact of the UK Passport contract cessation in FY 2020/21 which contributed the majority of Identity Solutions profit in H1 2020/21.
• IFRS operating profit of £13.8m (H1 2020/21: £4.6m) reflected the impact of lower net exceptional item charges of £3.1m compared to £10.2m in H1 2020/21 as the prior period included significant charges relating to the cessation of Banknote manufacturing at the Group's Gateshead facility.
• Net debt at H1 2021/22 of £43.9m (FY 2020/21: £52.3m). Net debt at H1 2021/22 was lower than expected and less than at the end of FY 2020/21, as a result of the phasing of capital expenditure and strong operating cash flows of £25.8m. Full year net debt outlook is in line with the Board's expectations.

Business update

• Authentication continues to deliver good volume growth and is on track to exit the year at an annualised revenue run rate of approximately £100m.
• Currency achieved 100% of available capacity in Banknotes in H1 2021/22 and expects full utilisation of Banknotes and Polymer capacity during H2 2021/22.
• Continued investment in manufacturing capabilities with an additional Polymer line in Westhoughton and the expansion of Malta facility to grow available production capacity for Currency and Authentication.
• We continue to monitor and work to mitigate headwinds in commodity and energy costs, and challenges in the supply chain.  

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

“Our first half results have shown substantial improvement in the Group's financial and operational performance. We continue to make progress in executing our Turnaround Plan, which is delivering both operating improvements and cost reductions. These, coupled with our increasing market competitiveness, have resulted in stronger adjusted operating profit and excellent cashflows generated from operating activities. The results from our two ongoing divisions, Authentication and Currency, have more than offset the cessation of the UK Passport contract last financial year.

“We are continuing to invest in Authentication and Currency in line with our Turnaround Plan. In H1 2021/22, we announced a substantial expansion of our facility in Malta that will increase manufacturing capacity and flexibility for both divisions. We will achieve this additionally without exceeding the original total turnaround investment of £79.8m. Our Polymer expansion plans in the UK, which will see a doubling of production capacity, are on track, with the new production line being operational early in Q4 this financial year.

“We continue to monitor and work to mitigate headwinds in commodity and energy costs, and challenges in the supply chain. The De La Rue team has additionally overcome some COVID-19 disruption in H1 2021/22, and I am pleased that we have performed strongly despite these challenges. As a result, and based on Group trading for FY 2021/22 to date continuing to be positive, the outlook for revenue, adjusted operating profit and net debt for the full year remain in line with the Board's expectations.”