FY23 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 25 March 2023 (the “period”, “FY23” or “full year”). The comparative period was the 12 months ended 26 March 2022 (“FY22”). In addition, the Company provides an update on current trading and outlook for FY24.
Key Highlights
- Revenue for FY23 of £349.7m (FY22: £375.1m)
- Adjusted operating profit of £27.8m (FY22: £36.4m), in line with guidance provided in April
- IFRS operating loss-for continuing operations of £29.6m (FY22 profit of £24.2m), reflecting exceptional charges of £47.1m (FY22: £5.7m), of which £29.7m are non-cash charges.
- FY23 end-of-year net debt at £83.1m; in line with expectations (£88-92m) after early-April final Portals exit payment
- FY23 net operating cash inflow increased 44% to £23.8m (FY22: £16.5m).
- Market activity in Currency is showing encouraging signs of recovery, with strong bid activity, a positive win rate, and the significant majority of FY24 banknote print volume already under confirmed award
- Authentication on track to exceed £100m in revenue for FY24, demonstrating good growth versus FY23 (£91.7m)
- As a result, the Company reiterates its guidance for FY24 adjusted operating profit in the low £20m range, albeit with H1 trading expected to be broadly break-even at adjusted operating profit level, due to timing of Currency recovery
- Net debt expected to be around £100m by year end and half year
- Successfully renegotiated the Company’s facilities with its lenders, leading to a significant relaxation of both interest cover and gearing covenant ratios, and the addition of a liquidity measure
- Agreement reached with the Pension Trustee to defer £18.75m of deficit repair contributions originally due over the 15 months from April 2023, with the substantive majority (£16.25m-£17.5m) deferred to the FY26-FY29 timeframe. This significantly improves the cash position for the Company over the next few years
- No ‘material uncertainty’ with respect to going concern in the accounts
Clive Vacher, CEO of De La Rue commented:
“Following a significant downturn in Currency demand over the past 18 months, we have witnessed encouraging signs of recovery with strong bid activity, a positive win rate, and the significant majority of FY24 banknote print volume already contracted.
“In addition, Authentication is on track for significant revenue growth in the current financial year.
“The actions we have taken over the past few months have built on the essential operational improvements made in the last three years and played a vital role in stabilising the Company. These include renegotiating terms with our lenders, leading to covenant relaxation, and agreeing a substantial deferral to our pension deficit repair contributions.
“Importantly, there is now no ‘material uncertainty’ with respect to De La Rue’s continuation as a going concern in the FY23 full-year accounts. This gives us a stable platform for future trading.
“Together with my management team, I will continue the development of De La Rue and further strengthen the market position of the Company.”
Clive Whiley, Chairman of De La Rue added:
“Since I joined the Board and took office as Chairman on 18 May 2023, I have immersed myself in the business and have a clear understanding of the principal challenges facing the Company. My background gives me unique experience in managing companies through existential crises and it is my conviction that the fundamentals of De La Rue’s business remain sound.
“We are approaching the challenges facing the Company with vigour and I am confident that today’s announcement, which highlights support from our core lenders, pension trustees and other stakeholders will enable a focus upon the significant market opportunities from a stable platform.
“Whilst we are operating in volatile times, with rapid and significant changes in the business environment and the markets in which we compete, I have been impressed by the commitment of our people which will be critical as we reposition ourselves for future growth.”
| Financial Summary | FY23 £m | FY22 £m | Change % |
| Revenue | 349.7 | 375.1 | -6.8 |
| Authentication | 91.7 | 90.3 | +1.6 |
| Currency | 254.6 | 280.9 | -9.4 |
| Identity Solutions | 3.4 | 3.9 | -12.8 |
| Adjusted operating profit*(1) | 27.8 | 36.4 | -23.6 |
| IFRS operating (loss)/profit - continuing operations | (20.3) | 29.7 | n/a |
| IFRS (loss)/profit before tax - continuing operations | (29.6) | 24.2 | n/a |
| Adjusted basics EPS (p)*(1) | (1.5) | 13.0p | n/a |
| IFRS basic EPS (p) | (28.6)p | 10.6p | n/a |
| Net debt | 83.1 | 71.4 | +16.4 |
- Adjusted operating profit of £27.8m (FY22: £36.4m) reduced year on year due to weak market demand in Currency and lower global PC sales affecting Brand sales within Authentication.
- Authentication:
- Revenue rose modestly, benefitting from:
- Government Revenue Solutions (“GRS”) coming on stream in Bahrain, Qatar and Oman.
- A full year of contribution from polycarbonate data pages manufactured for the new Australian passport.
- Offsetting this were:
- Lower PC sales globally, impacting sales to Microsoft.
- The end of the HMRC contract and a falling away of Covid vaccine brand protection seals.
- Revenue rose modestly, benefitting from:
- Currency: saw a 9.4% decrease in revenue. This was the result of an industry-wide downturn in activity as Central Banks used stocks built up during the Covid pandemic. Market recovery was also delayed, due to the global economic downturn and lower access to foreign exchange reserves and devaluation of currencies in some core markets. As we ended the year, the market has shown some encouraging signs of recovery.
- Strong supply chain management mitigated much of the cost risks identified at the beginning of the year:
- Tenders undertaken since the termination of the agreement with Portals for paper supply have validated that the anticipated cost savings can be achieved
- Pre-tax exceptional charges of £47.1m (FY22: £5.7m) included:
- £17.0m (FY22: £nil) terminating the long-term supply agreement with Portals Paper
- £12.6m (FY22: £nil) redundancy charges and asset impairments associated with the wind down of activity in Kenya
- £8.5m (FY22: £1.8m) of other site relocation and restructuring costs
- £8.5m (FY22: £3.1m) non-cash charge, recognising credit loss provision on securities held in the Portals group
- Of £47.1m of FY23 pre-tax exceptional charges:
- £17.4m were paid in FY23
- £9.4m are due to be paid in FY24
- £20.3m relate to non-cash asset impairments
- Net debt of £83.1m (FY22: £71.4m) favourable to guidance, as final payment for Portals termination was paid in April.
- In line with guidance, once this payment is taken into account.
- Operating activities provided £24.8m of net cash inflow (FY22: £18.3m net inflow).
In these results, we report on the financial performance of the Authentication and Currency divisions, together with the legacy activity of the Identity Solutions division. To provide insight into the underlying performance of our business, we have reported revenue, gross margin and operating loss on an IFRS and an adjusted basis for the Group. We have also reported gross profit, adjusted operating profit and adjusted controllable operating profit for the divisions. The Non-IFRS financial measures section of this statement provides definitions of these Non-IFRS financial measures and their reconciliation to the equivalent IFRS measure.
Footnotes:
* These are non-IFRS measures. The definition and reconciliation of adjusted operating profit and adjusted basic EPS can be found in the Non-IFRS financial measures section of this Full Year Results announcement.
(1) Adjusted operating profit excludes pre-tax exceptional items of £47.1m (FY22: £5.7m) and pre-tax amortisation of acquired intangible assets £1.0m (FY22: £1.0m).
(2) Adjusted basic EPS excludes post-tax exceptional items of £52.2m (FY 22: £3.9m) and post-tax amortisation of acquired intangible assets £0.7m (FY22: £0.7m).
(3) The definition of net debt can be found in note 9 to the financial statements.