De La Rue plc (LSE: DLAR) (“De La Rue”, the “Group” or the “Company”) today announces a trading update on the Financial Year ending March 26, 2022, and an update of progress on the Turnaround Plan.
At the time of the Half Year results, the Group referenced the increased commodity and energy costs, and challenges in the supply chain. Since then, the significant headwinds, primarily relating to the Covid-19 pandemic, have become more pronounced. The Omicron and Delta variants have caused substantially increased employee absences in our manufacturing facilities globally, which will result in lower total operational output for the full year. More recently, the Group has also been affected by supply chain shortages in chips and other process raw materials and has experienced a degree of supply chain cost inflation.
As a result of these external factors, the Company now expects adjusted operating profit for the full year to be broadly similar to last financial year, in the £36-40 million range, versus market expectations of approximately £45-47 million(1). However, net debt expectations remain unchanged.
This revised outlook still demonstrates substantial year-on-year growth in our two core businesses. The outlook for Currency and Authentication represents adjusted operating profit growth in the range of 35-45%, from the £27.5 million delivered by the two businesses in FY2020-21.
The global impacts that were not present at the time the Turnaround Plan was announced in February 2020, can be described as manifesting approximately a 12-month delay to the Turnaround Plan results, as the Company’s leadership work to mitigate them. In addition, we see these factors continuing as incremental headwinds into financial year 2022-23, with the effect of slowing the Company’s adjusted operating profit growth profile. However, we do expect to continue to deliver significant growth year on year, despite this external environment.
The Board retains full confidence both in the Turnaround Plan and in its execution. There is no change to the elements of the plan: the growth areas of Currency, driven by the continuing and accelerating trend of conversion to polymer, and Authentication, driven by increasing demand for digital and physical solutions for governments and corporations, remain strong and in line with the Plan’s expectations. The Company is also intensifying its efforts to deliver further efficiencies and cost reductions, to mitigate some of the factors described above.
Clive Vacher, CEO said “Despite the macro challenges that are delaying aspects of the Turnaround Plan, De La Rue continues to increase adjusted operating profit in both divisions year on year, and the Plan anticipates this to continue going forward. While this trading update is disappointing, it should be seen as a delay to reaching our Turnaround Plan objectives, rather than indicating that a change of direction is required. The Company’s leadership has worked hard to mitigate many of these external effects, with the cost reduction activities we have implemented since early 2020 having a significant impact in supporting our underlying performance while we navigate these external factors. The markets in which we operate, and our position in them, remain strong, and we continue to execute substantial investment for the future.”
De La Rue expects to announce its results for the full year ending 26 March 2022 on 25 May 2022.
De La Rue plc's LEI code is 213800DH741LZWIJXP78.
(1). Market expectations are based on the average of published notes from Investec and Numis Securities.
De La Rue plc
+44 (0) 7387 122645
Clive Vacher, Chief Executive Officer
Rob Harding, Chief Financial Officer
Matthew Rose, Director of Tax, Treasury, Investor Relations
+44 (0)207 404 5959
The person responsible for the release of this announcement on behalf of De La Rue for the purposes of MAR is Jane Hyde (General Counsel and Company Secretary).
Cautionary note regarding forward-looking statements
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “may”, “will”, “could”, “shall”, “risk”, “aims”, “predicts”, “continues”, “assumes”, “positioned” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the directors, De La Rue or the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth and strategies of De La Rue and the industry in which it operates.
By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation or assurance that trends or activities underlying past performance will continue in the future. Accordingly, investors or potential investors should not place undue reliance on these forward-looking statements. The Group's actual results of operations, financial condition, liquidity and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the results of operations, financial condition and liquidity of the Group and the development of the industry in which it operates, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods.
Other than in accordance with its legal or regulatory obligations, De La Rue does not undertake any obligation to update these forward-looking statements, which speak only as at the date of this announcement, and will not publicly release any revisions that may be made to these forward-looking statements, which may result from events or circumstances arising after the date of this announcement.