Signs of Recovery as De La Rue Resolves Financial Issues

De la Rue has announced its results for the financial year ending March 2023. These were eagerly awaited following a trading update issued by the company April (see CN April 2023).

The company reiterated its guidance for FY24 and highlighted that its independent auditors had removed any material uncertainty with respect to going concern in the accounts. Actions taken since 2019 means that its Currency division is more resilient, as evidenced by remaining profitable at an adjusted operating profits level despite FY23 coinciding with a significant downturn in the currency market that impacted all suppliers.

Revenue of £349.7 million was 6.8% below that of the previous year. Adjusted operating profit of £27.8 million was in line with the guidance provided in April and £8.6 million (23.6%) below the £36.4 million achieved in FY22. The operating result using IFRS accounting was a loss for continuing operations of £29.6 million, compared with an operating profit of £24.2 million in FY22, reflecting exceptional costs in FY23 of £47.1 million (of which £29.7 million were non-cash charges).

Revenue from the Currency division was 9.4% lower at £254.6 million, resulting from the afore-mentioned industry wide downturn in activity as central banks used stocks built up in the COVID pandemic, but also due to a delay in market recovery from the global economic downturn. Authentication increased its revenue by 1.6% to £91.7 million.

Net debt at end FY23 was £83.1 million and in line with expectations of £88-£92 million after the early-April final Portals exit payment. The net operating cash inflow for FY23 increased 44% to £23.8 million.

According to Clive Vacher, CEO, ‘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.’

Achievements in the year included the successful renegotiation of 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.

Also, agreement was reached with the Pension Trustee to defer £18.75 million of deficit repair contributions due over the 15 months from April 2023, with the bulk deferred to the FY26 -FY29 timeframe, significantly improving the cash position for the company over the next few years.

De La Rue says it has achieved this whilst continuing to invest in growth areas and sustainability.

In Currency, the second polymer line in Westhoughton opened earlier this year and the division has invested in equipment to support the scale-up of various surface-relief micro-structures such as NEXUS™ and IGNITE®.

In Authentication there has been investment in software to support the growing digital tax schemes and brand protection part of the business, as well as an extension of a contract to provide the data-page for the Australian Passport until 2032, which resulted in a second polycarbonate line.

The investment to turn Malta into a 29,000 sq ft super site also continues. Furthermore, De La Rue was ranked in the top quartile of the Financial Times European Climate Leaders list for the third year running.

The company has maintained its guidance for FY24 adjusted operating profit to be in the low £20 million range, but noted that trading in the first half is expected to be broadly break-even at adjusted operating profit level due to the timing of Currency recovery.

Notably, Clive Vacher stated: ‘importantly, there is now no ‘material uncertainty’ with respect to De La Rue’s continuation as a going concern. This gives us a stable platform for future trading. Together with the management team, I will continue the development of De La Rue and further strengthen the market position of the company’.

The market was impressed by the announcement, the share price increasing by 33% in the following two days.