De La Rue plc (LSE: DLAR) (“De La Rue”, the “Group” or the “Company”) announces its full year results for the year ended 26 March 2022 (the “period”, “FY22” or “full-year”). The comparative period was the twelve months ended 27 March 2021 (“FY21”).
- Adjusted operating profit of £36.4m (FY21: £38.1m) is consistent with guidance in January 2022.
- IFRS operating profit increased to £29.7m (FY21: £14.5m)
- Adjusted operating profit growth of over 30% year-on-year in ongoing divisions to £35.8m, consisting of 20.4% growth in Currency and 44.2% growth in Authentication
- Authentication revenue growth of 16.4% to £90.3m
- Currency adjusted revenue decline of 2.1% to £280.9m
- IFRS revenue was £375.1m for the year (FY21: £397.4m)
- Polymer volumes increased 40% versus prior year, with continuing strong customer conversion to polymer banknotes
- Agreement secured with the Pension Trustees to reduce cash payments to the De La Rue Pension Scheme by £57m between 2023-29
- Net debt comfortably within market expectations and banking covenants, through strong cash management; balance sheet remains strong
- Strong operating cash flow generation of £18.3m (FY21: £5.6m net outflow)
Since the end of our financial year, De La Rue has experienced further headwinds that are anticipated to have an impact on adjusted operating profit in FY23. While the Company is making significant progress in its transformation programme, the external environment is providing a substantial degree of uncertainty in the outlook. In particular, supply chain inflation is anticipated to increase Group operating costs by an additional net of £5m this financial year, and there is a possibility that disruption may affect revenue. For this reason, the Board now expects that adjusted operating profit for FY23 will be broadly flat versus FY22, and weighted towards the second half.
Despite the unprecedented macro environment, De La Rue continues to make progress with addressing legacy issues and streamlining its operations. The markets in which the company operates remain strong, and De La Rue continues to improve its market position across both business divisions. The Board remains confident of De La Rue future prospects as a strong, cash-generative company.
Clive Vacher, Chief Executive Officer of De La Rue, said:
“Despite unprecedented global events, we grew adjusted operating profit in our two ongoing divisions by 30.2% year-on-year, with Currency up 20.4% and Authentication up 44.2%. This performance was against the background of supply chain inflation, and the various impacts of Covid-19, none of which were anticipated in the original Turnaround Plan of February 2020. We have made significant further progress in the execution of our operational transformation, enhanced our market positions in both divisions, and driven further efficiency improvements across the Group.
“Across the board, De La Rue has taken a number of actions since 2020 to de-risk the Company significantly, and we continue to address legacy issues. Successfully agreeing a £57m reduction in cash payments to the pension scheme, while enhancing protections for scheme members, is the latest example of delivering for all stakeholders. We are advancing our investment programme, with the significant majority of Currency’s planned capital expenditure already paid and contributing to overall performance. Our Authentication division continues to grow, and good progress has been made in implementing the contracts already won.
“We have prudently revised our outlook for the financial year 2022/23 adjusted operating profit, due to further headwinds experienced since the end of our financial year, and a realistic expectation of how far we can mitigate them. While this means that our progress is slowed, we remain strongly on the right path strategically and operationally to create a strong, cash-generative company in the medium term.”
|Non-IFRS Financial Measures|
|Adjusted operating expenses*(2)||(61.2)||(69.7)||12.2%|
|Adjusted operating profit*(2)||36.4||38.1||(4.5)%|
|Adjusted basic EPS (p)(*3) - continuing operations||13.0p||14.7p||(11.6)%|
|Revenue - continuing operations||375.1||397.4||(5.6)%|
|Gross profit - continuing operations||97.6||107.8||(9.5)%|
|Operating profit - continuing operations||29.7||14.5||104.8%|
|Basic EPS (p)- continuing operations||10.6p||3.7p||186.5%|
* 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 Full Year Results announcement.
(1) Identity solutions in FY22 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. FY21 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 £5.7m (FY21: £22.6m) and pre-tax amortisation of acquired intangible assets £1.0m (FY21: £1.0m).
(3) Adjusted basic EPS excludes post-tax exceptional items of £3.9m (FY21: £18.4m) and post-tax amortisation of acquired intangible assets £0.7m (FY21: £0.6m).
(4) 4. The definition of net debt can be found in note 9 to the financial statements.
FY22 financial performance
- Substantial growth in profitability in ongoing Authentication and Currency divisions, achieving an adjusted operating profit of £35.8m (FY21: £27.5m)
- Authentication saw growth across the division: revenues rose 16.4% to £90.3m (FY21: £77.6m)
- Government Revenue Solutions (“GRS”) benefitted from a full year of Ghanaian tax stamp and HMRC tobacco track and trace revenue
- Certain GRS contract implementations delayed by Covid-19 restrictions
- GRS received five additional contracts for the supply of tax stamps and solutions, most recently from Oman Tax Authority
- Brand Protection saw strong growth with pharmaceutical, information technology and vaping sectors
- Identity pages for Australian passport contract have started to be delivered
- Currency saw a slight fall in adjusted revenue of 2.1% to £280.9m (FY21: £286.8m)
- Demand for polymer continues: polymer volumes increased by 40% over the prior year
- Market for banknotes fell to lower-than-normal demand levels following the high demand experienced during the pandemic. As a result, volumes in banknote printing and security features were lower.
- Staff absence due to Covid-19 in UK and Malta in December and January impacted production
- Revenue from legacy Identity Solutions business dropped 83.5% to £3.9m (FY21: £23.7m) and adjusted operating profit dropped 94.3% to £0.6m (FY21: £10.6m) as minimal activity remains now
- Costs impacted by supply chain shortages and cost inflation in the second half
- Full year impact of £7m of savings, achieving £36m cost reduction in the Turnaround Plan
- Exceptional charges of £5.7m (FY21: £22.6m) comprised:
- £1.8m (FY21: £21.4m) of site relocation and restructuring
- £3.1m (FY21: £nil) expected credit loss provision on other financial assets held in Portals
- £0.4m (FY21: £0.6m) legal fees in relation to the pension scheme rules
- £0.4m (FY21: £nil) loss on devaluation of the Sri Lankan rupee in March 2022
- IFRS operating profit rose 104.8% to £29.7m (FY21: £14.5m) as exceptional charges of £5.7m (FY21: £22.6m) were much lower than last year
- Adjusted basic EPS were 13.0p (FY21: 14.7p), reflecting an increase in profits offset by the full year impact of a higher number of shares post equity raise in 2020
- IFRS basic EPS from continuing operations of 10.6p (FY21: 3.7p) reflected the higher IFRS profits earned this year, mitigated by the full year impact of a higher number of shares post equity raise in 2020
- Net debt of £71.4m (FY21: £52.3m) comfortably within banking covenants
- Operating activities provided £18.3m of net cash inflow (FY21: £5.6m net outflow)
De La Rue plc
+44 (0)7990 337707
Clive Vacher, Chief Executive Officer
Rob Harding, Chief Financial Officer
Louise Rich, Head of Investor Relations
+44 (0)207 404 5959
A briefing to analysts will take place at 9:00 am on 25 May 2022, which is 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.