Turnaround Plan on track.
De La Rue plc (LSE: DLAR) (“De La Rue”, the “Group” or the “Company”) announces its half year results for the six months ended 26 September 2020 (the “period”, “H1” or “half year”). The comparative period was the six months ended 28 September 2019.
H1 20/21 highlights:
- Adjusted operating profit significantly improved at £15.3m (H1 2019/20: £2.2m)
- Positive operating cash flow
- Cost reduction programme on track to contribute £23m of savings in FY 2020/21
- Authentication orders secured with total lifetime contract value exceeding £120m
- Currency 100% full for banknote printing in H2 2020/21
- £100m equity capital raise completed July 2020
- Exclusive Bank of England banknote printing contract extended to 2028
- Net debt reduced to £21.6m (H1 2020/21: £170.7m; FY2019/20: £102.8m)
|Financial Summary||H1 2020/21
|Adjusted operating profit(2)(5)||15.3||2.2||595.5%|
|IFRS operating profit/(loss)||4.6||(9.2)||n/a|
|Adjusted EPS basic (p)(3)(5)||6.5p||(1.4)p(4)||n/a|
|IFRS EPS basic (p)||1.0p||(9.8)p(4)||-80%|
(1) This is a non-IFRS measure. Adjusted revenue excludes “pass-through” revenue relating to non-novated paper and International IDS business contracts where the Group earns nil margin. Presentation of adjusted revenue more meaningful understanding of the underlying performance of the business. See note 17 for further explanations and reconciliation to the comparable IFRS measures.
(2) Excludes exceptional items net charges of £10.2m (H1 2019/20: net charge of £11.0m)and amortisation of acquired intangible assets of £0.5m (H1 2019/20: £0.4m.
(3) Excludes exceptional item net charges net of tax of £7.8m (H1 2019/20: net charges of £9.2m) and amortisation of acquired intangible assets net of tax of £0.4m (H1 2019/20: £0.3m.
(4) Restatement of earnings per share reflects adjustments associated with the Rights Issue with regards to weighted average number of shares.
(5) 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. See note 9 to the financial statements for details of the net debt calculation).
H1 2020/21 financial performance
- IFRS revenue (including “pass-through” revenue on paper contracts) of £179.7m (H1 2019/20: £232.3m) and adjusted revenue of £174.7m (H1 2019/20: £205.9m) reduced mainly due to the decline in Identity Solutions revenue as a result of the sale of the International Identity Solutions business in October 2019 and the run-off of the UK Passport contract. Authentication revenue was lower mainly due to £1.6m of contracts reported in the prior year related to the International Identity Solutions business sold in H2 2019/20 (see page 11 for further details), and COVID-19 related impact on two contracts.
- Gross profit of £49.4m (H1 2019/20: £51.3m) reflecting lower Identity Solutions gross profit following the UK Passport contract cessation and the sale of the International Identity Solution business, together with increased efficiencies in Currency and lower Authentication gross profit on reduced volumes. Total gross profit for our two ongoing divisions, Authentication and Currency, grew to £38.1m (H1 2019/20: £34.1m).
- Adjusted operating profit of £15.3m (H1 2019/20: £2.2m), represents significant improvement resulting from the ongoing implementation of the Turnaround Plan, including benefits from the reorganisation and cost reduction programmes.
- IFRS operating profit of £4.6m (H1 2019/20: loss £9.2m) is stated after net exceptional items charges of £10.2m.
- Net debt of £21.6m (H1 2019/20 £170.7m, FY 2019/20: £102.8m), reduction principally due to equity capital raise (see note 9 to the financial statements for details of net debt calculation), offset in part by cash spend on the Turnaround Plan.
- Authentication awarded contracts of total multi-year lifetime value exceeding £120m in year to date, with new contracts delivering revenue in H2 2020/21. Authentication re-iterates guidance for £100m in revenue in FY 2021/22.
- Currency expects to utilise 100% of its available polymer and banknote printing capacity for FY 2020/21 with expected improved higher revenue and margin mix in second half.
- Actions taken to deliver cost savings of approximately £23m during FY 2020/21 and approximately £36m of annualised total savings.
- Completed the £100m equity capital raise on 7 July 2020, strengthening the Group’s balance sheet.
- Debt facilities were extended to December 2023, and the Company renegotiated Pension scheme deficit contributions.
- Company continues to manage business effectively during the COVID-19 pandemic.
Clive Vacher, Chief Executive Officer of De La Rue, said:
“Our first half results have shown a substantial improvement in the Group’s performance, with very strong growth in adjusted operating profit as we increase efficiencies, resulting in positive cash generation from operating activities. I am satisfied with the progress of the Turnaround Plan so far, which is yielding positive improvements across the company.
“Our two ongoing divisions, Authentication and Currency, are performing well. We are building strong order books and have secured a number of important strategic wins in the first half of the year.
“I am impressed by the dedication and resilience of De La Rue’s employees, particularly in their execution of the transformation during the COVID-19 pandemic.
“Trading for the financial year 2020/21 has been positive, with the outlook for revenue, adjusted operating profit and net debt for the full year in line with the Board’s expectations.”
De La Rue plc
+44 (0)7387 122645
Clive Vacher, Chief Executive Officer
Rob Harding, Chief Financial Officer
Matthew Rose, Director of Tax, Treasury and Investor Relations
+44 (0)207 404 5959
A conference call will take place at 9:00 am BST on 25 November 2020, which is also accessible via webcast on www.delarue.com.
For the live webcast, please register at www.delarue.com/investors/results-and-reports where a replay will also be available subsequently.
De La Rue plc's LEI code is 213800DH741LZWIJXP78.