REG - De La Rue PLC - 2024/2025 HALF YEAR RESULTS
12/12/2024 07:00
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RNS Number : 7675P De La Rue PLC 12 December 2024
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated by the Market Abuse Regulation
(EU) No.596/2014, as it forms part of UK law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement, the
inside information is now considered to be in the public domain.
12 December 2024
De La Rue plc
2024/25 half year results
De La Rue plc (LSE: DLAR) ("De La Rue", the "Group" or the "Company")
announces its half year results for the six months ended 28 September 2024
(the "period", "H1 25" or "half-year"). The comparative period was the six
months ended 30 September 2023 ("H1 24").
Highlights
· Adjusted operating profit of £7.3m (H1 24: £7.9m) ahead of guidance
of low single digit. On IFRS basis achieved operating profit of £1.3m (H1 24:
loss of £3.4m).
· Currency:
· H1 25 revenue of £94.9m (H1 24: £113.4m), with a number of deliveries
moving into H2 25 as previously guided
· Order book continued to build in H1 to £251.7m at 28 September 2024
(30 March 2024: £239.2m).
· Significant orders secured in Q3 to date, bringing November 2024 order
book to £338m, the highest level in at least five years.
· Order book includes significant increase in polymer orders, securing
good manufacturing loads into FY26 and beyond.
· Authentication:
· H1 25 revenue of £50.2m (H1 24: £48.1m).
· Proposed sale of Authentication to Crane NXT for cash, representing an
enterprise value of £300m, announced in October 2024.
· Additional multi-year contract won to produce passport data pages
· Net debt of £109.4m (FY24: £89.4m)
· Inventory build up to satisfy second half deliveries, together with
timing of customer collections, impacted net working capital movement.
· Completion of Authentication sale will allow repayment of existing
revolving credit facility in full, resulting in a Group net cash position.
· £30m of sale proceeds will be applied to reduce deficit on legacy
defined benefit pension scheme.
· Provides a springboard to find a long-term funding solution for this
scheme.
· Outlook
· Continued activity building in Currency and solid performance from
Authentication underpin reiteration of full year guidance for FY25 Group
adjusted operating profit of mid to high £20 millions.
· In FY26 conversion of Currency order book into sales will accelerate to
produce strong double-digit growth in Currency EBITDA before central costs.
Financial highlights
H1 25 H1 24 Change
£m £m %
Revenue 145.1 161.5 (10.2)
Currency 94.9 113.4 (16.3)
Authentication 50.2 48.1 4.4
Gross profit 38.9 40.2 (3.2)
Adjusted operating profit*(1) 7.3 7.9 (7.6)
IFRS operating profit/(loss) 1.3 (3.4) 138.2
Loss before taxation (6.5) (16.8) 61.3
Adjusted basic EPS*(2) (p) (1.5)p (2.6)p 42.3
IFRS basic EPS (p) (4.1)p (6.2)p 33.9
H1 25 £m FY24 £m Change %
Net debt(3) 109.4 89.4 22.4
Footnotes:
* These are non-IFRS measures. The definition and reconciliation of adjusted
operating profit and adjusted basic EPS can be found in non-IFRS financial
measures section of this Interim Statement.
(1. )Adjusted operating expenses and adjusted operating profit excludes
pre-tax exceptional items of £5.5m (H1 24: £10.8m) and pre-tax amortisation
of acquired intangible assets £0.5m (H1 24: £0.5m).
(2. )Adjusted basic EPS excludes post-tax exceptional items of £4.6m
(H1 24: £6.7m) and post-tax amortisation of acquired intangible assets £0.4m
(H1 24: £0.4m).
(3. )The definition of net debt can be found in note 8 to the financial
statements.
(4. )All of the above are reported for continuing operations.
Clive Vacher, CEO of De La Rue, commented:
"We have made substantial progress in 2024 both operationally and
strategically. We have reached agreement for a sale of Authentication to Crane
NXT for £300m and completion of the Authentication sale will allow us to
repay both our existing banking facilities in full and materially reduce the
remaining deficit on our legacy defined benefit pension scheme.
"We have also built up the Currency order book to the highest levels seen for
at least the last five years. The material new orders that we have won in
recent months will begin to convert into increased revenue as we move into the
next financial year and solidly underpin our growth expectations.
"With these firm foundations, our ongoing Currency business is now well
positioned to take full advantage of an improving market, with a substantial
upward step change in activity in 2025 and beyond."
The person responsible for the release of this announcement on behalf of De
La Rue for the purposes of MAR is Jon Messent (Company Secretary).
Enquiries:
De La Rue plc + 44 (0) 7990 337707
Clive Vacher Chief Executive Officer
Dean Moore Interim Chief Financial Officer
Louise Rich Head of Investor Relations
Brunswick + 44 (0) 207 404 5959
Stuart Donnelly
Ed Brown
A presentation to investors and analysts, including a live webcast will be
held today at 09:00 am and will be available via our website at
https://www.delarue.com (https://www.delarue.com/) or on
https://brrmedia.news/DLAR_HY_25 (https://brrmedia.news/DLAR_HY_25) . This
will be available for playback after the event.
About De La Rue
Established 211 years ago, De La Rue is trusted by governments, central banks,
and international brands, providing digital and physical solutions that
protect their supply chains and cash cycles from counterfeiting and illicit
trade.
With operations in five continents, customers in 140 countries and solutions
that include advanced track and trace software, security document design,
banknotes, brand protection labels, tax stamps, security features and passport
bio-data pages, De La Rue brings unparalleled knowledge and expertise to its
partnerships and projects.
Our focus areas are:
- Currency: designing and manufacturing highly secure banknotes and banknote
components that are optimised for security, manufacturability, cash cycle
efficacy and public engagement.
- Authentication: leveraging advanced digital software solutions and security
labels to protect revenues and reputations from the impacts of illicit trade,
counterfeiting, and identity theft. On 15 October 2024. De La Rue announced
the proposed sale of Authentication to Crane NXT for £300m.
The security and trust derived from our solutions pave the way for robust
economies and flourishing societies. This is underpinned by a significant
Environmental, Social, and Governance commitment that is evidenced by
accolades such as the ISO 14001 certification and a consistent ranking in the
top tier of the Financial Times European Climate Leaders list.
De La Rue's shares are traded on the London Stock Exchange (LSE: DLAR). De La
Rue plc's LEI code is 213800DH741LZWIJXP78. For further information please
visit www.delarue.com.
Cautionary note regarding forward-looking statements
Certain statements contained in this document relate to the future and
constitute 'forward-looking statements'. These forward-looking statements
include all matters that are not historical facts. In some cases, 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. They
appear in a number of places throughout this document 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, strategies and
dividend policy of De La Rue and the industry in which it operates.
By their nature, forward-looking statements are not guarantees or predictions
of future performance and involve known and unknown risks, uncertainties,
assumptions and other factors, many of which are beyond the Group's control,
and which may cause the Group's actual results of operations, financial
condition, liquidity, dividend policy and the development of the industry and
business sectors in which the Group operates to differ materially from those
suggested by the forward-looking statements contained in this document. In
addition, even if the Group's actual results of operations, financial
condition and the development of the business sectors in which it operates are
consistent with the forward-looking statements contained in this document,
those results or developments may not be indicative of results or developments
in subsequent periods.
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, readers
of this document are cautioned not to place undue reliance on these
forward-looking statements.
Other than as required by English law, none of the Company, its Directors,
officers, advisers or any other person gives any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any
forward-looking statements in this document will actually occur, in part or in
whole. Additionally, statements of the intentions of the Board and/or
Directors reflect the present intentions of the Board and/or Directors,
respectively, as at the date of this document, and may be subject to change as
the composition of the Company's Board of Directors alters, or as
circumstances require.
The forward-looking statements contained in this document speak only as at the
date of this document. Except as required by the UK's Financial Conduct
Authority, the London Stock Exchange or applicable law (including as may be
required by the UK Listing Rules and/or the Disclosure Guidance and
Transparency Rules), De La Rue expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this document to reflect any change in
the Group's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
BUSINESS UPDATE
We have achieved substantial progress both strategically and operationally so
far in FY25, building on the foundations we had previously laid.
In May 2024 we succeeded in securing renewals on two multi-year Government
Revenue Solutions contracts within Authentication, thereby concluding the
renewal of all four substantial contracts that were due over the previous 12
months. These contracts, with an expected value of over £150m, provided
tangible evidence of the attractive attributes of the Authentication business,
aiding us in agreeing the proposed sale of this business for £300m in October
2024, as well as helping to secure its trading performance while it remains
part of the De La Rue Group.
Reaching agreement to sell Authentication represents the next stage in
realising the intrinsic value of the business for the benefit of all
stakeholders. The completion of the sale in the first half of 2025 will allow
us to repay in full the existing revolving credit facility ahead of its
expiry, delivering a balance sheet with a net cash position and without the
cost burdens of substantial interest payments or banking fees for facility
amendments.
In addition, we will use £30m of the sale proceeds to reduce materially the
remaining deficit outstanding on the legacy defined benefit pension plan. This
will build on the progress that we have already made in reducing ongoing cash
outflows to fund the scheme deficit and will assist us with finding a
long-term solution for this pension plan. Once the sale of Authentication is
completed, we will also be able to focus fully on building and growing our
Currency business, as we set out further below.
In H1 25, De La Rue achieved an adjusted operating profit of £7.3m (H1 24:
£7.9m) in the first half, ahead of guidance. Though adjusted operating profit
was lower than the comparative period last year, at an IFRS level we saw a
profit of £1.3m (H1 24: loss of £3.4m), a much-improved performance thanks
to a reduced level of exceptional charges.
Currency
Our Currency division delivered an adjusted operating profit of £1.1m (H1 24:
£1.4m) in its traditionally weaker first half from lower revenue of £94.9m
(H1 24: £113.4m). Revenue in the comparative period benefited from banknotes
that were manufactured in FY23 but not sold until H1 24. In contrast H1 25
has seen some deliveries shifted into the second half, as we explained in our
trading statement issued at the time of our AGM. H1 25 saw a price per unit
and margin both substantially improved compared with H1 24, despite a 16.3%
fall in revenue.
Just under a year ago we first remarked that we were seeing an increase in our
order book, moving away from the lows that we had experienced in FY23 and
early FY24. Lead times between order and production, particularly in banknote
printing, are frequently in excess of six months. Hence the benefit of this
deeper order book is only beginning to be translated into higher activity and
production levels to a material extent now, in the second half of FY25.
Over 2024, we have seen a continuation of the order book momentum we first
spoke about at the close of 2023. Our Currency order backlog has built
steadily during 2024 and at 28 September 2024 stood at £251.7m (30 March
2024: £239.2m). This growth has continued into the second half, as we have
secured a number of orders including multi-year, polymer-based banknote
contracts bringing the total of the order book to £338m at the end of
November 2024, the highest level we have seen in at least the last five years.
The bulk of these contracts are scheduled for delivery in FY26 and beyond,
which gives us confidence in our performance for FY26 and beyond.
In FY25 to date we have won six new banknote customers, nearly all of whom
have De La Rue polymer or security features specified within the design. In
addition, the proportion of banknote tenders that we have won in this period
remains at the consistently high level that we have seen recently.
Within the ramp up of activity that we are currently experiencing, polymer is
a particular highlight. Production volumes of polymer substrate in H1 25
were substantially higher than in the same period last year. This volume is
expected to double in the second half , and see a further substantial upward
step change in FY26.
In addition, the work that we have done in making the Currency business more
competitive and agile over the last five years means that this division is
well placed to benefit from the stronger trading environment that we are now
experiencing.
De La Rue Currency is the leading commercial banknote printer and designer and
a trusted supplier to over half of all issuing authorities. We are at the
leading edge of developments in banknote technology with a deep expertise in
optical science and innovation and the capability to benefit from growth in
use of polymer substrate and new security features.
We have invested significantly in our manufacturing capacity in recent years,
to achieve a right-sized footprint with three flexible and upgraded banknote
print sites in the UK, Malta and Sri Lanka. Alongside our investment in
flexible banknote print, we have created a substantial facility for production
of our SAFEGUARD® polymer substrate together with bespoke machinery to scale
up novel security features. All major investment associated with this
transformation in manufacturing capability is now complete or is scheduled to
complete shortly.
One recent significant event in our manufacturing transformation was the
removal of the last remaining banknotes stored at Gateshead to complete our
closure there. This will save around £2m per annum.
Authentication
Our Authentication division delivered a solid first half performance,
generating an adjusted operating profit of £6.2m (H1 24: £6.5m) from revenue
up 4.4% to £50.2m (H1 24: £48.1m). GRS benefited from strong sales in
certain territories, including those where we had succeeded in securing
contract renewals earlier in the year, though activity in Sudan was adversely
affected by the ongoing unrest in the country. The ID business also saw a
strong first half performance, though Australian passport data pages are
expected to return to normal annual volumes for the full year. This impact
will be softened as ID also won another multi-year passport data page
programme for a different country to run alongside the Australian passport.
Brand continued to see subdued Microsoft related sales.
Proposed sale of Authentication
As noted above, on 15 October 2024 we announced the proposed sale of our
Authentication division to Crane NXT for cash consideration representing an
enterprise value of £300m. The agreement of a sale to Crane NXT was the
culmination of an extensive and wide-reaching process conducted by the
Board.
The proceeds of sale will create a more resilient and flexible Group by
enabling us to repay the Group's existing revolving credit facility in full,
reducing leverage to a net cash position. At the same time, we will
significantly reduce the deficit on the Group's legacy defined benefit pension
scheme by paying £30m as an accelerated contribution on completion of the
sale.
Completion of the sale is expected to occur in the first half of 2025 and is
conditional on implementation of a reorganisation to affect the divisional
separation required to deliver the Authentication Division to Crane NXT as
well as obtaining the customary antitrust approvals.
Progress on separation of Authentication
Detailed work on separation of the Authentication division is now well
underway. A separation steering board, reporting to the Executive Leadership
Team, has overall responsibility for the project.
All employees are now settled as to whether they are staying with the
remaining business or moving to Crane NXT under the appropriate transfer
process applicable in their country of employment. We have contacted all
customers impacted by novation and detailed discussions are ongoing to move
that process forward. In Malta we are working through a clear plan to
implement physical separation of the business by completion. These changes
remain on track and will ensure appropriate security segregation to allow for
secure manufacturing by both parties.
We remain on track to complete the sale according to the timetable envisaged
at the time of announcement. We continue to expect to complete the sale in
the first half of calendar 2025.
Outlook
The deeper order book in Currency is beginning to translate into higher
production volumes and revenue, sufficient to bring Currency revenue for the
full year back in line with FY24 levels. With steady trading in Authentication
and several strong margin projects in the pipeline, we remain confident that
for the current financial year the existing Group will meet full year current
guidance for adjusted operating profit, namely mid- to high-£20 millions.
In FY26 we expect the conversion of order book into sales to accelerate within
Currency, to produce strong double-digit growth in Currency EBITDA before
central costs.
The level of net debt at this financial year end will depend on the exact
timing of the completion of the Authentication sale, which remains on track
for the first half of 2025. Between now and year end we expect to see a net
investment in working capital and a consequent increase in indebtedness as we
prepare for the higher Currency production volumes scheduled for FY26. The
impact of this move will be more marked than in prior periods as we do not
expect this working capital investment to be funded to the same extent by
advance payments backed by performance guarantees as in the past, given the
short-term nature of our current guarantee facility. In addition, over H2 we
expect to incur around £12m of cash costs of separation of the Authentication
business, as disclosed at the time of announcement of the sale.
Conclusion
In summary, the work to execute the proposed sale of Authentication is
proceeding well. When completed, the proceeds will materially improve both the
balance sheet of the remaining Group and the outstanding actuarial deficit on
the legacy defined pension plan. This will place our Currency business on a
firm financial footing and allow it to focus on maximising value from the
current order book and future growth opportunities for the benefit of all
stakeholders.
Achieving all that we have over 2024 has required much hard work from
employees across De La Rue. I would like to thank the team for all their
efforts during the financial year so far, and in the months to come as we work
to complete the Authentication sale, as well as to achieve our operational
goals for the remainder of FY25 and beyond.
Clive Vacher
Chief Executive Officer
FINANCIAL REVIEW
To provide increased clarity on the underlying performance of our business, we
have reported gross profit and operating profit on an IFRS and adjusted basis,
together with adjusted controllable operating profit (adjusted operating
profit before enabling function cost allocation), for both operating
divisions. Further details on non-IFRS financial measures can be found later
in this document.
100% of Group revenue for H1 25 of £145.1m (H1 24: £161.5m) originated from
our operating divisions of Currency and Authentication.
Together Currency and Authentication delivered adjusted operating profit of
£7.3m (H1 24: £7.9m), a fall of £0.6m (7.6%) period-on-period. This largely
reflects lower revenue from the Currency division at higher margin and a
steady performance in Authentication, offset by a slight fall in operating
expenses.
On an IFRS basis, the Group moved into an operating profit of £1.3m, a
significant improvement compared to the equivalent period last year, which saw
a loss of £3.4m impacted by higher exceptional costs.
Currency
The Currency division designs and manufactures highly secure banknotes and
banknote components that are optimised for security, manufacturability, cash
cycle efficacy and public engagement.
H1 25 H1 24 Change
£m £m
Revenue 94.9 113.4 (16.3)%
Gross profit 19.7 22.3 (11.7)%
Adjusted controllable operating profit* 12.3 14.1 (12.8)%
Adjusted operating profit* 1.1 1.4 (21.4)%
Operating profit/(loss) 0.5 (5.5) 109.1%
% %
Gross profit margin 20.8 19.7 110 bps
Adjusted controllable operating profit margin* 13.0 12.4 60 bps
Adjusted operating profit margin* 1.2 1.2 0 bps
*Non-IFRS measure
Our Currency division again remained profitable at the adjusted operating
profit level during its traditionally weaker first half, delivering an
adjusted operating profit of £1.1m (H1 24: £1.4m) from lower revenue of
£94.9m (H1 24: £113.4m).
Revenue in the comparative period benefited from banknotes that were
manufactured in FY23 but not sold until H1 24. In contrast H1 25 has seen
some deliveries shifted into the second half, as we explained in our trading
statement issued at the time of our AGM. Consequently H1 25 saw a 16.3% fall
in Currency revenue when compared with H1 24, though the price per unit and
margin were both substantially improved. Given our order book and production
plan, we expect much higher banknote sales volumes in the second half, and
banknote selling activity is expected to remain at least at this higher level
during FY26.
Polymer production volumes, taking both external sales and that manufactured
for further processing within our banknote facilities, in H1 25 were
materially higher than in H1 24. As we work through our current order book,
we expect the equivalent H2 25 volumes to be around double of those produced
in the first half, and then to see a further upwards substantial step change
in volumes in FY26.
External security feature sales remained stable in both revenue and margin
terms compared to H1 24.
Gross profit fell 11.7% to £19.7m (H1 24: £22.3m) with the mix of sales
benefitting margin when compared with the prior period.
Adjusted controllable operating profit fell 12.8% to £12.3m (H1 24: £14.1m)
because of the higher margin mix of work seen in H1 25, despite the lower
selling volumes.
Though enabling costs overall were lower as discussed below, and a smaller
proportion of the total was applied to Currency given its lower revenue as a
proportion of the Group, this was not sufficient to fully offset the fall in
adjusted controllable operating profit. Hence adjusted operating profit fell
by £0.3m to £1.1m in H1 25 (H1 24: £1.4m).
In H1 25, the Currency division was not significantly impacted by exceptional
costs, with just £0.6m of site relocation exceptional costs accrued in the
period. In contrast, in the prior period the division incurred £6.9m of
exceptional costs of right-sizing the business for future operations.
Consequently, on an IFRS basis the division made an operating profit of £0.5m
in H1 25 (H1 24: loss of £5.5m).
Authentication
The Authentication division leverages advanced digital software solutions and
security labels to protect revenues and reputations from the impacts of
illicit trade, counterfeiting, and identity theft.
H1 25 H1 24 Change
£m £m
Revenue 50.2 48.1 4.4%
Gross profit 19.2 17.9 7.3%
Adjusted controllable operating profit* 11.5 11.6 (0.9)%
Adjusted operating profit* 6.2 6.5 (4.6)%
Operating profit 5.7 5.8 (1.7)%
% %
Gross profit margin 38.2 37.2 100 bps
Adjusted controllable operating profit margin* 22.9 24.1 (120) bps
Adjusted operating profit margin* 12.4 13.5 (110) bps
*Non-IFRS measure
Revenue was up 4.4% on prior period, rising to £50.2m (H1 24: £48.1m). GRS
saw strong sales into certain territories, offset by Sudanese sales impacted
by the continuing unrest in that country. The ID business also saw a strong
performance, adding an additional contract mitigating an expected drop in
volumes of Australian passport data pages now buffer stocks are fully built.
Gross profit margin rose 100 basis points, when compared with the prior
period, reflecting the mix of sales and the increase in overall volumes.
Adjusted controllable operating profit was broadly flat on prior period at
£11.5m (H1 24: £11.6m), though margin was trimmed as share based payment
accruals rose along with other staff costs.
Adjusted operating profit fell 4.6% to £6.2m (H1 24: £6.5m) with the
division being allocated a higher proportion of central overheads, given its
proportionally higher revenue for the period. IFRS operating profit level was
broadly flat on the prior period, falling just 1.7% to £5.7m (H1 24: £5.8m).
Given the proposed sale of Authentication to Crane NXT announced on 15 October
2024, Authentication will be disclosed as a discontinued activity in the
results for FY25 and any subsequent periods, and the prior period comparatives
will also be adjusted at that time.
Enabling function costs
In H1 25 enabling function costs of £16.5m (H1 24: £17.8m) fell by 7.3% and
represented 11.4% of Group revenue (H1 24: 11.0%).
Reduction of enabling function costs has been and continues to be an area of
focus for the Group. Targeted savings programmes within IT, recruitment and
intellectual property led to reductions in costs. These are expected to
continue into the second half and beyond.
Exceptional items
Exceptional items during the period constituted a net charge of £5.5m (H1 24:
£10.8m) before tax.
Exceptional charges before tax included:
H1 25 H1 24
£m £m
Site relocation and restructuring costs 0.9 7.9
Pension underpin costs 0.1 0.2
Costs in relation to pension payment deferment and banking refinancing - 3.0
Divestiture costs 4.5 -
Credit loss provision/write back on Portals loan notes - (0.3)
5.5 10.8
In H1 25 £4.5m (H1 24: £nil) of divestiture costs were incurred in relation
to the sale of the Authentication division to Crane NXT which were classed as
exceptional given their size, nature and they relate to operations that will
become discontinued by sale. These include separation costs, and advisory
costs for the definitive sale agreements as well as banking and pensions.
In H1 25 £0.9m (H1 24: £0.1m) of charges related to the closure activities
for the Gateshead facility were recognised. In H1 25 these costs primarily
relating to the costs, net of grant income received of £0.1m, of relocating
assets to different Group manufacturing locations and redundancy costs. In H1
24, £7.9m of site relocation and restructuring costs were recorded, relating
to redundancy, legal fees and fixed asset impairments to right-size both
Currency and Authentication for future operations, together with costs in
relation to the wind down of our operations in Kenya.
Pension underpin costs of £0.1m (H1 24: £0.2m) relate to legal fees, net of
amounts recovered, incurred in the rectification of certain discrepancies
identified in the Scheme's rules. The Directors do not consider this to have
an impact on the UK defined benefit pension liability at the current time, but
they continue to assess this.
During H1 24, £3.0m of legal and professional advisor costs were incurred in
relation to amendments to the schedule of deficit repair contributions for the
Pension Scheme and the amendment and restatement of terms of the Revolving
Credit Facility agreement. In addition, a net credit loss provision release of
£0.3m was reported on the loan notes held in Portals International Limited
where an unexpected cash repayment was received on the loan notes from Portals
International Limited during the period.
The tax credit within exceptional items amounted to £0.9m (H1 24: credit of
£4.1m). Of this, £0.6m is related to favourable movements in exchange rates
on certain tax provisions and £0.3m represents the tax impact of exceptional
costs.
The cash flow impact of exceptional items in H1 25 was a £0.8m outflow (H1
24: £14.6m outflow) which included the £0.8m of divestiture costs, £0.1m
for each of site relocation and pension underpin costs and a receipt of £0.2m
from Portals Paper Limited which was settled in cash in relation to prior year
exceptional items. H1 24 was impacted by the final payment relating to the
termination of the supply arrangement with Portals Paper Limited.
Finance charge
The Group's net interest charge was £7.8m (H1 24: £13.4m). This included
interest income of £0.2m (H1 24: £0.1m), interest expense of £6.9m (H1 24:
£12.2m) and retirement benefit finance expense of £1.1m (H1 24: expense of
£1.3m).
Interest expense comprised:
H1 25 H1 24
£m £m
Bank loan interest 6.3 6.1
Lease liability interest 0.2 0.2
(Credits)/Charges relating to previous periods debt modification (2.1) 3.8
Other, including amortisation of finance arrangement fees 2.5 2.1
6.9 12.2
The slight increase in bank loan interest paid in H1 25 was largely
attributable to the marginally higher average base rate experienced in the
period. In H1 25 these moved from 5.25% to 5.00% over the period. By
comparison in H1 24 these moved from 4.25% to 5.25%.
The net loss on debt modification, including amortisation credit of £2.1m in
H1 25 relates to the amortisation of previous losses on debt modification. The
loss on debt modification, including amortisation in H1 24 was £3.8m. This
included the losses on the debt modification in June 2023 of £4.8m, offset by
the subsequent amortisation of £1.0m (including £0.2m of amortisation of the
loss on debt modification recognised in FY23 of £0.9m).
The retirement benefit obligation finance expense is calculated under IAS 19
and represents the difference between the interest on pension liabilities and
assets. The loss in H1 25 of £1.1m (H1 24: loss of £1.3m) was due to the
opening pension valuation on an IAS 19 basis as at 30 March 2024 being a
deficit of £51.6m.
Taxation
The total tax charge in respect of continuing operations for the first half
was £0.5m (H1 24: tax credit £5.6m) and comprised:
- £1.5m charge (H1 24: £1.4m credit) on adjusted loss after interest
expense;
- £0.1m credit (H1 24: £0.1m credit) on the amortisation of acquired
intangibles; and
- £0.9m credit (H1 24: £4.1m credit) on exceptional items, which is
described in more detail in note 3 'Exceptional items'.
Earnings per share
The basic weighted average number of shares for earnings per share ('EPS')
purposes was 196.0m (H1 24: 195.6m).
Adjusted basic loss per share was 1.5p (H1 24: loss per share of 2.6p),
reflecting the improvement in adjusted basic earnings from a loss of £5.1m in
H1 24 to a loss of £3.0m in H1 25.
IFRS basic loss per share from continuing operations was 4.1p (H1 24: 6.2p)
reflecting a basic loss of £8.0m (H1 24: loss of £12.2m).
Cash flow
The conservation and generation of cash within the business continues to be an
area of stringent focus.
Cash flow from operating activities was a net cash outflow of £9.5m (H1 24:
£15.4m inflow), generated after adjusting the £6.5m loss before tax (H1 24:
£16.8m loss) for:
- £17.9m net working capital outflow (H1 24: £11.5m inflow)
including:
o £7.3m increase in inventory (H1 24: £9.6m decrease), as the Currency
division prepared for orders to be completed in H2 25;
o £8.1m increase in trade and other receivable and contract assets (H1 24:
£20.8m decrease); and
o £2.5m decrease in trade and other payables and contract liabilities (H1
24: £18.9m decrease), due to the timing of supplier payments.
- £3.0m (H1 24: £0.9m) of pension recovery plan payments and
administration expenses;
- £0.2m decrease in provisions (H1 24: £2.8m decrease)
- £1.3m tax payments (H1 24: £1.2m)
- £7.8m of net finance expense (H1 24: £13.4m)
- £9.8m of depreciation and amortisation (H1 24: £9.0m)
- £nil of asset impairment (H1 24: £4.4m)
- £0.9m inflow of other non-cash items (H1 24: £2.0m outflow).
The cash outflow from investing activities of £3.7m (H1 24: £2.2m outflow)
included:
- capital expenditure on property, plant and equipment, after cash
receipts from grants, of £1.3m (H1 24: £0.8m), largely relating to the
construction of our expanded facility in Malta. This is expected to increase
in the second half as work separating the Authentication business accelerates.
- capital expenditure on software intangibles and development assets
of £2.5m (H1 24: £2.1m).
- H1 24 also included £0.3m received from the partial settlement of
Portals Loan notes, £0.2m proceeds from the sale of property, plant and
machinery and £0.2m of interest received.
The cash inflow from financing activities was £2.0m (H1 24: outflow £19.6m),
included:
- £10.9m net drawdown of borrowings (H1 24: repayment of £7.0m),
- £6.9m (H1 24: £8.3m) of interest payments,
- £0.5m (H1 24: £3.0m) of debt issue cost payments, and
- £1.5m (H1 24: £1.3m) of lease liability payments.
The net decrease in cash and cash equivalents in the period was £11.2m (H1
24: £6.4m decrease).
As a result of the cash flow items referred to, Group net debt increased from
£89.4m at 30 March 2024 to £109.4m at 28 September 2024. £28m of cash to
settle trade receivables was received from Currency customers in the first
three weeks of October 2024.
Net debt
The analysis below provides a reconciliation between the opening and closing
positions for liabilities arising from financing activities together with
movements in cash and cash equivalents:
At 30 Cash Foreign exchange and other At 28 September 2024
March flow
2024
£m £m £m £m
Gross Borrowings (118.7) (10.9) - (129.6)
Cash and cash equivalents 29.3 (11.2) 2.1 20.2
Net debt (89.4) (22.1) 2.1 (109.4)
Net debt is presented excluding unamortised pre-paid borrowing fees of £3.5m
(FY24: £5.0m), loss on debt modification of £1.4m (FY24: £3.5m) and £13.9m
(FY24: £11.6m) of lease liabilities.
Banking facilities
Following amendments on 29 June 2023 and 18 December 2023, the revolving
facility agreement with the Group's lending banks and their agents extends to
1 July 2025. Under this amended agreement the Group has bank facilities of
£235m including an RCF cash drawn component of up to £160m and bond and
guarantee facilities of a maximum of £75m. The facilities are secured against
material assets and shares within the Group.
During H1 25, the Group was subject to the following financial covenants and
spread levels:
- EBIT/net interest payable more than or equal to 1.0 times
- Net debt/EBITDA less than or equal to 3.6 times
- Minimum Liquidity testing monthly, testing at each weekend point on
a 4-week historical basis and 13-week forward-looking basis. The minimum
liquidity was defined as "available cash and undrawn RCF greater than or equal
to £10m".
- Spread rates calculated on the leverage ratio as follows:
Leverage (consolidated net debt to EBITDA) Margin (% per annum)
Greater than 3.5:1 4.35
Greater than 3.0:1 and less than or equal to 3.5:1 4.15
Greater than 2.5:1 and less than or equal to 3.0:1 3.95
The covenant tests use earlier accounting standards, excluding adjustments for
IFRS 16. Net debt for covenants includes the borrowings, where the RCF amount
is considered, the principal amount withdrawn, (excluding unamortised pre-paid
borrowing fees and the net loss on debt modification) net of cash and cash
equivalents.
Covenant test results as at 28 September 2024:
Test Requirement Actual at 28 September 2024
EBIT to net interest payable More than or equal to 1.0 times 1.49
Net debt to EBITDA Less than or equal to 3.6 times 3.08
Minimum liquidity testing Testing at each weekend point on a 4-week historical basis and 13-week forward No breaches
looking basis. The minimum liquidity is defined as "available cash and undrawn
RCF greater than or equal to £10m."
On 28 September 2024 the Group had bank facilities of £235.0m (FY24:
£235.0m) including an RCF cash drawn component of up to £160.0m (FY24:
£160.0m) and bond and guarantee facilities of a maximum of £75.0m (FY24:
£75.0m), which are due to mature on 1 July 2025.
On 28 September 2024, the Group had a total of undrawn RCF committed borrowing
facilities, all maturing in less than one year, of £31.1m (30 March 2024:
£42.0m, all maturing in more than one year). The amount of loans drawn on the
£160.0m RCF cash component is £128.9m on 28 September 2024 (30 March 2024:
£118.0m).
Guarantees of £34.1m (30 March 2024: £41.8m) were drawn using the £75.0m
guarantee facility on 28 September 2024.
When we repay the revolving credit facility and outstanding guarantee
facilities following completion of the sale of Authentication, we will also
pay £4.9m in fees due under the terms of the June 2023 and December 2023
amendments to the facilities.
A separate borrowing facility for financing equipment under construction is in
place and on 28 September 2024 the amount outstanding on this facility is
£0.7m (30 March 2024: £0.7m).
Pension scheme
The Company recommenced payment of deficit repair contributions to the Pension
Scheme in July 2024, following the completion of a deferral period agreed with
the Pension Scheme Trustee in 2023. The Company paid £2.0m of deficit
repair contributions to the Scheme in H1 25, in accordance with the schedule
of repair contributions agreed with the Trustee following an actuarial
valuation undertaken at 30 September 2023.
The actuarial valuation of the Scheme on 30 September 2023 showed a Scheme
deficit of £78m. As a result of this new valuation, on 18 December 2023, the
Company and the Scheme Trustee agreed a new schedule to fund the deficit. The
funding moratorium until July 2024 as previously agreed was retained, followed
by deficit repair contributions from the Company of £8m per annum to the end
of FY27, followed by higher contributions that at no time exceed £16m per
annum and which run until December 2030 or until the Scheme becomes fully
funded.
On 13 October 2024, De La Rue Plc entered into an agreement with the Pension
Trustee. Under this agreement De La Rue agreed to pay £30m to the Scheme by
way of pension deficit repair contributions on completion of the sale of
Authentication. In addition, De La Rue agreed to pay an additional £12.5m in
deficit repair contributions to the Pension Scheme over the period to the end
of FY27 once the sale of Authentication was completed. The agreement also set
out that no dividend or distribution to shareholders or repurchase of De La
Rue plc shares would be made until the Pension Scheme was either fully
de-risked, or more than 105% funded on a buy-out funding basis.
In addition, when we repay the revolving credit facility following completion
of the sale of Authentication, we will also pay £2.5m in additional pension
deficit repair contributions, as agreed with the Pension Scheme Trustee as
part of the June 2023 amendment to the banking facilities.
The valuation of the Scheme on an IAS 19 basis on 28 September 2024 is a net
liability of £48.4m (30 March 2024: net liability of £51.6m).
The charge to the adjusted operating profit in respect of the Scheme in the
period was £0.6m (H1 24: £0.6m). Under IAS 19 there was a finance charge of
£1.1m (H1 24: finance charge of £1.3m) arising from the difference between
the interest cost on liabilities and the interest income on scheme assets.
Capital structure
At 28 September 2024 the Group had net liabilities of £4.7m (30 March 2024:
net assets of £2.6m).
The movement during the period included:
£m
Opening net assets - 30 March 2024 2.6
Loss for the period (7.0)
Remeasurement loss on retirement benefit obligations 2.0
Other movements in other comprehensive income 0.2
Foreign exchange movements (3.5)
Employee share scheme charges 0.9
Share capital issued 0.1
Closing net liabilities - 28 September 2024 (4.7)
DIRECTORS' REPORT
Principal risks and uncertainties
Throughout its global operations De La Rue faces various risks, both internal
and external, which could have a material impact on the Group's performance.
The Group manages the risks inherent in its operations in order to mitigate
exposure to all forms of risks, where practical, and to transfer risk to
insurers where applicable.
The Group analyses the risks that it faces under the following broad headings:
strategic risks (technological revolution, strategy implementation, changes to
the market environment and economic conditions), operational risks, legal and
regulatory, information risks and financial risks (currency risk, credit risk,
liquidity risk, interest rate risk and commodity price risk).
The principal risks and uncertainties are reviewed and updated at least
quarterly. Currently we expect the key risks for the remaining six months of
the financial year to include:
- bribery and corruption;
- quality management and delivery failure;
- macroeconomic and geo-political environment;
- loss of a key site or process;
- sustainability and climate change;
- loss of key talent;
- breach of information security;
- supply chain failure;
- breach of security - product security;
- sanctions; and
- banking facilities.
The principal risks remain in line with the Annual Report and Accounts for
FY24.
The Group has not experienced any specific impact from the war in Ukraine and
the Israel-Hamas war, other than the global economic conditions.
Going concern
Going concern assessments are included with the Basis of Preparation section
of these Interim Financial Statements. These Interim Financial Statements do
not contain the adjustments that would result if the company was unable to
continue as a going concern.
A copy of the 2024 Annual Report is available at www.delarue.com
(http://www.delarue.com) or on request from the Company's registered office at
De La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS.
Related party transactions
Details of the related party transactions that have taken place in the first
six months of the current financial year are provided in note 12 to the
Condensed Consolidated Interim Financial Statements. None of these have
materially affected the financial position or the performance of the Group
during that period, and there have been no changes during the first six months
of the financial year in the related party transactions described in the last
annual report that could materially affect the financial position or
performance of the Group.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge:
- the Condensed Consolidated Interim Financial Statements, which have
been prepared in accordance with UK adopted IAS 34 'Interim Financial
Reporting', give a true and fair view of the assets, liabilities, financial
position and profit of the Company and the undertakings included in the
consolidation as a whole;
- the interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the Condensed Consolidated Interim
Financial Statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes during the first
six months of the financial year in the related party transactions described
in the last annual report that could materially affect the financial position
or performance of the entity.
The Board of Directors of De La Rue plc at 30 March 2024 and their respective
responsibilities can be found on pages 72 and 73 of the De La Rue plc Annual
Report 2024. Since the year end there have been no changes to the Board:
For and on behalf of the Board
Clive Whiley
Chairman
11 December 2024
GROUP CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT - UNAUDITED
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2024
H1 25 H1 24
Note £m £m
Revenue from customer contracts 2 145.1 161.5
Cost of sales (106.2) (121.3)
Gross profit 38.9 40.2
Adjusted operating expenses (31.6) (32.3)
Adjusted operating profit 7.3 7.9
Adjusted items(1):
- Amortisation of acquired intangible assets (0.5) (0.5)
- Net exceptional items - expected credit loss 3 - 0.3
- Net exceptional items 3 (5.5) (11.1)
- Net exceptional items - Total 3 (5.5) (10.8)
Operating profit/(loss) 1.3 (3.4)
Interest income 0.2 0.1
Interest expense (6.9) (12.2)
Net retirement benefit obligation finance charge (1.1) (1.3)
Net finance expense 4 (7.8) (13.4)
Loss before taxation (6.5) (16.8)
Taxation 5 (0.5) 5.6
Loss for the period (7.0) (11.2)
Attributable to:
- Owners of the parent (8.0) (12.2)
- Non-controlling interests 11 1.0 1.0
Loss for the period (7.0) (11.2)
Earnings per ordinary share:
Basic EPS continuing operations 6 (4.1)p (6.2)p
Diluted EPS continuing operations 6 (4.1)p (6.2)p
(1) For adjusting items, the cash flow impact of exceptional items can be
found in note 3 and there was no cash flow impact for the amortisation of
acquired intangible assets.
GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME/(LOSS)
- UNAUDITED
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2024
H1 25 H1 24
£m £m
Loss for the financial period (7.0) (11.2)
Other comprehensive income/(expense):
Items that are not reclassified subsequently to income statement:
Re-measurement losses on retirement benefit obligations (note 9) 2.0 (4.5)
Tax related to remeasurement of net defined benefit liability - (1.7)
2.0 (6.2)
Items that may be reclassified subsequently to income statement:
Foreign currency translation difference for foreign operations (3.1) (1.8)
Foreign currency translation difference for foreign operations - (0.4) 0.7
non-controlling interests
Change in fair value of cash flow hedges (0.9) (1.2)
Change in fair value of cash flow hedges transferred to income statement 1.1 (0.1)
Tax related to cash flow hedge movements - 0.3
0.2 (1.0)
Other comprehensive loss for the period, net of tax (1.3) (8.3)
Total comprehensive loss for the period (8.3) (19.5)
Total comprehensive loss for the period attributable to:
Equity shareholders of the Company (8.9) (20.1)
Non-controlling interests 0.6 0.6
(8.3) (19.5)
GROUP CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
AT 28 SEPTEMBER 2024
H1 25 FY24
(unaudited) (audited)
Note £m £m
ASSETS
Non-current assets
Property, plant and equipment 80.8 85.4
Intangible assets 35.7 37.2
Right-of use assets 12.4 10.2
Deferred tax assets 0.1 0.1
129.0 132.9
Current assets
Inventories 47.3 41.7
Trade and other receivables 86.6 72.8
Contract assets 9.1 16.7
Current tax assets 0.1 0.2
Derivative financial instruments 7 1.9 0.7
Cash and cash equivalents 20.2 29.3
165.2 161.4
Total assets 294.2 294.3
LIABILITIES
Current liabilities
Trade and other payables (81.5) (82.8)
Borrowings 8 (127.2) -
Current tax liabilities (19.3) (20.4)
Derivative financial liabilities 7 (3.5) (3.3)
Lease liabilities (2.5) (2.5)
Provisions for liabilities and charges 10 (1.0) (1.8)
(235.0) (110.8)
Non-current liabilities
Borrowings 8 (0.3) (117.2)
Retirement benefit obligations 9 (48.4) (51.6)
Deferred tax liabilities (2.1) (1.9)
Lease liabilities (11.4) (9.1)
Provisions for liabilities and charges 10 (0.6) -
Other non-current liabilities (1.1) (1.1)
(63.9) (180.9)
Total liabilities (298.9) (291.7)
Net (liabilities)/assets (4.7) 2.6
EQUITY
Share capital 89.1 89.0
Share premium account 42.3 42.3
Capital redemption reserve 5.9 5.9
Hedge reserve (1.0) (1.2)
Cumulative translation adjustment 3.3 6.4
Other reserves (83.8) (83.8)
Retained earnings (75.3) (70.2)
Total equity attributable to shareholders of the Company (19.5) (11.6)
Non-controlling interests 11 14.8 14.2
Total (deficit)/equity (4.7) 2.6
GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY -
UNAUDITED
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2024
Attributable to equity shareholders Non- Total
controlling equity
interests
Share Share Capital Hedge Cumulative Other Retained
capital premium redemption reserve translation reserves reserves
account reserve adjustment
£m £m £m £m £m £m £m £m £m
Balance at 25 March 2023 88.8 42.2 5.9 0.1 9.2 (83.8) (55.7) 15.9 22.6
(Loss)/profit for the period - - - - - - (12.2) 1.0 (11.2)
Other comprehensive income for the period, net of tax
- - - (1.0) (1.8) - (6.2) 0.7 (8.3)
Total comprehensive income - - - (1.0) (1.8) - (18.4) 1.7 (19.5)
Transactions with owners of the Company recognised directly in equity:
Employee share scheme - value of services provided - - - - - - 0.8 - 0.8
Share capital issued 0.2 0.1 - - - - - - 0.3
Balance at 30 September 2023 89.0 42.3 5.9 (0.9) 7.4 (83.8) (73.3) 17.6 4.2
Balance at 25 March 2023 88.8 42.2 5.9 0.1 9.2 (83.8) (55.7) 15.9 22.6
(Loss)/profit for the period - - - - - - (20.0) 0.9 (19.1)
Other comprehensive income for the year, net of tax - - - (1.3) (2.8) - 4.1 0.6 0.6
Total comprehensive income - - - (1.3) (2.8) - (15.9) 1.5 (18.5)
Transactions with owners of the Company recognised directly in equity:
Share capital issued 0.2 0.1 - - - - - - 0.3
Employee share scheme - value of services provided - - - - - - 1.4 - 1.4
Dividends paid - - - - - - - (3.2) (3.2)
Balance at 30 March 2024 89.0 42.3 5.9 (1.2) 6.4 (83.8) (70.2) 14.2 2.6
(Loss)/profit for the period - - - - - - (8.0) 1.0 (7.0)
Other comprehensive income for the period, net of tax - - - 0.2 (3.1) - 2.0 (0.4) (1.3)
Total comprehensive income - - - 0.2 (3.1) - (6.0) 0.6 (8.3)
Transactions with owners of the Company recognised directly in equity:
Employee share scheme - value of services provided - - - - - - 0.9 - 0.9
Share capital issued 0.1 - - - - - - - 0.1
Balance at 28 September 2024 89.1 42.3 5.9 (1.0) 3.3 (83.8) (75.3) 14.8 (4.7)
GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
(Continued) - UNAUDITED
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2024
Notes:
Share premium account
This reserve arises from the issuance of shares for consideration in excess of
their nominal value.
Capital redemption reserve
This reserve represents the nominal value of shares redeemed by the Company.
Hedge reserve
This reserve records the portion of any gain or loss on hedging instruments
that are determined to be effective cash flow hedges. When the hedged
transaction occurs, the gain or loss on the hedging instrument is transferred
out of equity to the income statement. If a forecast transaction is no longer
expected to occur, the gain or loss on the related hedging instrument
previously recognised in equity is transferred to the income statement.
Cumulative translation adjustment ("CTA")
This reserve records cumulative exchange differences arising from the
translation of the financial statements of foreign entities since transition
to IFRS. Upon disposal of foreign operations, the related accumulated exchange
differences are recycled to the income statement. This reserve also records
the effect of hedging net investments in foreign operations.
Other reserves
On 1 February 2000, the Company issued and credited as fully paid 191,646,873
ordinary shares of 25p each and paid cash of £103.7m to acquire the issued
share capital of De La Rue plc (now De La Rue Holdings Limited), following the
approval of a High Court Scheme of Arrangement. In exchange for every 20
ordinary shares in De La Rue plc, shareholders received 17 ordinary shares
plus 920p in cash. The other reserve of £83.8m arose as a result of this
transaction and is a permanent adjustment to the consolidated financial
statements.
On 17 June 2020 the Group announced that it would issue new ordinary shares
via a "cash box" structure to raise gross proceeds of £100m, in order to
provide the Company and its management with operational and financial
flexibility to implement De La Rue's turnaround plan, which was first
announced by the Company earlier in the year. The cashbox completed on 7 July
2020 and consisted of a firm placing, placing and open offer. The Group issued
90.9m new ordinary shares each with a nominal value of 44 152/175p, at a price
of 110p per share (giving gross proceeds of £100m). A "cash box" structure
was used in such a way that merger relief was available under Companies Act
2006, section 612 and thus no share premium needed to be recorded and instead
an 'other reserve' of £51.9m was recorded, increasing other reserves from a
deficit of £83.8m to a deficit of £31.9m. This section applies to shares
which are issued to acquire non-equity shares (such as the Preference Shares)
issued as part of the same arrangement.
The Group recorded share capital equal to the aggregate nominal value of the
ordinary shares issued (£40.8m) and merger reserve equal to the difference
between the total proceeds net of costs and share capital. As the cash
proceeds received by De La Rue plc were loaned via intercompany account to a
subsidiary company to enable a substantial repayment of the RCF, the increase
to other reserves of £51.9m was treated as an unrealised profit. In the year
ended 25 March 2023, the Company recorded an impairment of the intercompany
loan. As a matter of generally accepted accounting practice, a profit
previously regarded as unrealised becomes realised when there is a loss
recognised on the write-down for depreciation, amortisation, diminution in
value or impairment of the related asset. In the year ended 25 March 2023, the
£51.9m previously treated as unrealised within Other Reserves is now treated
as a realised amount, which could be considered as distributable and
reclassified from "Other Reserves" to "Retained earnings". Given the reversal
of the impairment recorded in relation to intercompany during the year ended
30 March 2024, the £51.9m is now considered to be unrealised.
GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2024
H1 25 H1 24
£m £m
Cash flows from operating activities
Loss before tax (6.5) (16.8)
Adjustments for:
Finance income and expenses 7.8 13.4
Depreciation of property, plant and equipment 5.2 5.1
Depreciation of right-of-use assets 1.3 1.1
Amortisation of intangible assets 3.3 2.8
Impairment of property, plant and equipment and intangible assets and - 4.4
accelerated depreciation charges
Share-based payment expense 0.9 0.8
Pension Recovery Plan and administration cost payments(1) (3.0) (0.9)
Decrease in provisions (note 10) (0.2) (2.8)
Non-cash credit loss provision - other 0.1 -
Other non-cash movements 0.8 (2.0)
Cash generated from operations before working capital 9.7 5.1
Changes in working capital:
(Increase)/decrease in inventory (7.3) 9.6
(Increase)/decrease in trade and other receivables and contract assets (8.1) 20.8
Decrease in trade and other payables (2.5) (18.9)
(17.9) 11.5
Cash generated (used in)/from operating activities (8.2) 16.6
Net tax paid (1.3) (1.2)
Net cash flows from operating activities (9.5) 15.4
Cash flows from investing activities:
Purchases of property, plant and equipment - gross (2.8) (6.0)
Purchases of property, plant and equipment - grants received 1.5 5.2
Purchase of software intangibles and development assets capitalised (2.5) (2.1)
Proceeds from the sale of property, plant and equipment - 0.2
Proceeds from other financial assets - 0.3
Interest received 0.1 0.2
Net cash flows from investing activities (3.7) (2.2)
Net cash flows before financing activities (13.2) 13.2
Cash flows from financing activities:
Net draw down/(repayment) of borrowings 10.9 (7.0)
Payment of debt issue costs (0.5) (3.0)
Lease liability payments (1.5) (1.3)
Interest paid (6.9) (8.3)
Net cash flows from financing activities 2.0 (19.6)
Net decrease in cash and cash equivalent in the period (11.2) (6.4)
Cash and cash equivalents at the beginning of the period 29.3 40.3
Exchange rate effects 2.1 (0.2)
Cash and cash equivalents at the end of the period 20.2 33.7
Cash and cash equivalents consist of:
Cash at bank and in hand 20.2 33.7
( )
(1) H1 25 - the £3.0m (H1 24: £0.9m) of pension payments includes £2.0m (H1
24: £nil) payable under the Recovery Plan (note 9) and a further £1.0m (H1
24: £0.9m) relating to payments made by the Group towards the administration
costs of running the scheme.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED
1 Corporate information, basis of preparation and change to the Group's
accounting policies
Corporate Information
De La Rue plc is a public limited company, incorporated and domiciled in the
UK, whose shares are publicly traded. The registered office is located at De
La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS. The Group
has two principal segments Currency and Authentication;
- In Currency we design, manufacture and deliver bank notes,
polymer substrate and security features around the world.
- In Authentication, we supply products and services to
governments and Brands to assure tax revenues and authenticate goods as
genuine.
These unaudited Condensed Consolidated Interim Financial Statements of De La
Rue plc and its subsidiaries ("Group") for the half year ended 28 September
2024 were authorised for issue in accordance with a resolution of the
Directors on 11 December 2024.
These Condensed Consolidated Interim Financial Statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 March 2024 were approved by the
Board of Directors on 24 July 2024 and delivered to the Registrar of
Companies.
Basis of preparation
These Condensed Consolidated Interim Financial Statements for the half year
ended 28 September 2024 have been prepared in accordance with IAS 34, "Interim
Financial Reporting" as adopted for use in the UK and should be read in
conjunction with the Annual Report and Accounts for the year ended 30 March
2024. They do not include all the information required for a complete set of
financial statements prepared in accordance with UK-International Financial
Reporting Standards. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance since the last
annual financial statements.
The annual financial statements of the Group for the year ending 29 March 2025
will be prepared in accordance with UK-adopted International Accounting
Standards ('IFRS') in accordance with the requirements of the Companies Act
2006.
Going concern
Background and relevant facts
In line with IAS 1 "Presentation of financial statements", and the FRC
guidance on "risk management, internal control and related financial and
business reporting", when assessing the Group's ability and the Company's
ability to continue as a going concern, the Directors have taken into account
all available information for a period up to 27 December 2025, being the going
concern period.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out on pages 1 to 10
of the Strategic Report in De La Rue Plc's FY24 Annual Report. In addition,
pages 56 to 63 include the Group's objectives, policies and processes for
financial risk management, details of its financial instruments and hedging
activities and its exposure to credit risk, liquidity risk and commodity
pricing risk. There have been no material changes in overall strategy to that
disclosed in the FY24 Annual Report, other than the proposed sale of
Authentication to Crane NXT as disclosed in Note 16 of these Condensed
Consolidated Interim Financial Statements.
As explained further below, the Board of De La Rue Plc has determined that the
going concern basis of accounting in the preparation of the Condensed
Consolidated Interim Financial Statements is appropriate.
The Group's Revolving Credit Facility (RCF) expires on 1 July 2025. The cash
flow forecasts for the Group indicate that it would not have sufficient
liquidity to meet the obligation to repay the RCF in full on or before 1 July
2025. Over the last twelve months, management has been pursuing various
strategic options which would allow the Group to repay the RCF on or before 1
July 2025. As summarised below, the Company has recently announced the
proposed sale of its Authentication division to Crane NXT for cash
consideration representing an Enterprise Value (EV) of £300m. While the
proceeds will be used to repay the RCF, the Board notes that the probability
and timing of completion are subject to factors outside of the Board's
control, and this risk may ultimately impact the Group's ability to repay the
RCF on or before 1 July 2025.
The Group's base case modelling (excluding the repayment of the RCF on or
before 1 July 2025) shows headroom on all covenant thresholds across the going
concern period. At the same time, the severe but plausible downside modelling,
as described below, shows relatively low headroom on the net debt/EBITDA and
minimum liquidity covenants at specific times over the going concern period.
The increased risk of a breach under the severe but plausible modelling (which
only exists prior to the completion of the sale of Authentication) can be
primarily attributed to bonding constraints linked to the expiration of the
RCF on or before 1 July 2025. These bonding constraints are currently
impacting the Group's net debt position, as explained within 'Severe but
plausible modelling'. In addition, over the going concern period, the Group is
expected to incur material cash costs relating to the carve-out of the
Authentication division in order to allow completion to occur in the first
half of 2025.
These matters represent a material uncertainty which may cast significant
doubt upon the Group's ability and the Company's ability to continue as a
going concern for a period up to 27 December 2025.
Sale of Authentication
On 15 October 2024, the Company announced the proposed sale of its
Authentication division to Crane NXT for cash consideration representing an EV
of £300m. The agreement of a sale to Crane NXT was the culmination of an
extensive and wide-reaching process conducted by the Board.
The proceeds of sale will create a more resilient and flexible Group by
enabling management to repay the Group's existing RCF in full, reducing
leverage to a net cash position. At the same time, the Group will
significantly reduce the deficit on its legacy defined benefit pension scheme
by paying £30m as an accelerated contribution on completion of the sale.
Completion of the sale is expected to occur in the first half of 2025 and is
conditional on implementation of a reorganisation to affect the divisional
separation required to deliver the Authentication Division to Crane NXT as
well as obtaining the customary antitrust approvals.
Expiration of the RCF
Under the amended facility agreement, signed on 18 December 2023, the Group
has access to a RCF of £235m that expires on 1 July 2025, which is within the
going concern period. Over the last year, the Board has been in ongoing
dialogue with the banking syndicate providing the RCF. This dialogue has been
constructive and the lenders are supportive of the proposed sale of the
Authentication division. The Directors are confident that the completion of
this sale will allow for the full repayment of the RCF prior to its expiration
in July 2025. As a result, both the Group and its banking syndicate have
agreed not to further extend the RCF beyond its current expiry date.
Covenants testing
The RCF allows the drawing down of cash up to the level of £160m and the use
of bonds and guarantees up to the level of £75m. The continued access to
these borrowing facilities is subject to quarterly covenant tests which look
back over a rolling 12-month period. In addition, there is minimum liquidity
testing at each week-end point on a four-week historical basis and 13-week
forward looking basis. The Group was in full compliance with its covenants
throughout the first half of FY25. During this period, the covenant terms
were:
· EBIT/net interest payable more than or equal to 1.0 times
· Net debt/EBITDA less than or equal to 3.6 times.
· Minimum liquidity testing at each week-end point on a four-week
historical basis and 13-week forward looking basis. Minimum liquidity is
defined as 'available cash and undrawn RCF greater than or equal to £10m'.
The spread rates on the leverage ratio remain at the following levels:
Leverage (consolidated net debt to EBITDA) Margin (% per annum)
Greater than 3.5:1 4.35
Greater than 3.0:1 and less than or equal to 3.5:1 4.15
Greater than 2.5:1 and less than or equal to 3.0:1 3.95
In order to determine the appropriate basis of preparation for the Condensed
Consolidated Interim Financial statements for the period ended 28 September
2024, the Directors must consider whether the Group can continue in
operational existence for the going concern review period to 27 December 2025,
taking into account the above liquidity headroom and covenant tests. The terms
of the facility agreement also include consideration of future options for the
Group and provision of non-financial deliverables.
Testing assumptions
The Group has prepared profit and cash flow forecasts which cover a period up
to 27 December 2025 (Q3 FY26), being the going concern period. This includes
the following quarters: Q3 and Q4 FY25 and Q1, Q2, and Q3 FY26 as well as
monthly liquidity testing points over the period.
The Directors consider that a period of at least 13 months to 27 December 2025
is an appropriate going concern period given this is the first quarterly
covenant test which is greater than 12 months from the opinion date. While the
current RCF is due to expire before this date, the Directors are confident
that the completion of the sale of Authentication will provide sufficient
liquidity within the going concern period, notwithstanding the material
uncertainty as described above.
Base case assumptions
The base case forecasts over the going concern period have been developed
taking into consideration the timing of the Currency recovery that has been
materialising in the marketplace with order book growth and bid activity
showing clear and tangible signs of a market rebound. In addition, renewals of
key Authentication contracts, combined with the annualisation of contracts
already won and starting to produce in the current financial year, aid
confidence in the strategic growth forecasted for that division through the
going concern period.
The already enacted and largely completed footprint and restructuring projects
have right sized the business for current demand levels. Any ramp up required
over the going concern period will be carefully managed in line with pipeline
capacity requirements and orders to avoid significant negative fluctuations
against base plans.
FY25 results to date indicate the Group is substantially on-track to deliver
the FY25 budget from an EBIT and EBITDA perspective, with key order book wins
secured to deliver the in-year plan.
In Currency, the Group is seeing clear evidence of the expected market
recovery. While the overall market remains unpredictable, our conversion rate
of bids to orders since the beginning of this financial year supports the base
strategic plan numbers. At 30 September 2024, the total order book stood at
£251.7m (25 March 2024: £239.2m).
The timing of tenders has been such that several significant orders have been
closed recently, which further supports the base case modelling within the
going concern period.
Over the going concern period, the Group is expected to incur material cash
costs relating to the carve-out of the Authentication division in order to
allow completion to occur. These cash costs primarily relate to advisor fees
and costs associated with the physical separation of the operating site in
Malta.
The Group's base case modelling (excluding the repayment of the RCF on or
before 1 July 2025) shows headroom on all covenant thresholds across the going
concern period.
Non-financial milestones
Over the going concern period, there are a number of non-financial milestones
such as the provision of monthly short-term cash flow (STCF) submissions and
monthly progress updates.
As previously reported, management have proactively implemented a bi-monthly
13-week cash flow process with the outturn of this and monthly monitoring
reports shared with the relevant stakeholders in line with the amended terms
from June 2023. The Directors are confident that all of the non-financial
conditions and monthly monitoring will continue to be met over the going
concern period.
Severe yet plausible downside modelling
The downside modelling has incorporated the Directors' assessment of events
that could occur in a 'severe yet plausible downside' scenario. The risks
modelled are directly linked to the Risk Committee 'principal risks' described
on page 56 of the FY24 Annual Report and the Directors note there are no new
matters which present additional principal risks.
As with the base case, the downside modelling incorporates the movement in
Group net debt from £89.4m at 30 March 2024 to £109.4m at 28 September
2024. Whilst this movement is primarily due to delayed Currency receipts,
and a strengthening Currency orderbook (in the short-term increasing net
working capital at the expense of net debt) it also reflects bonding
constraints linked to the expiration of the RCF on or before 1 July 2025. As a
result of these bonding constraints, the Group is currently required in
certain cases to provide cash collateral in support of the issuance of
performance guarantees. For the same reason (i.e. inability to bond without
cash collateral), the Company is also unable to accept advance payments from
customers in every circumstance. Over the going concern period, this will
have the effect of progressively increasing net working capital and Group net
debt whilst reducing overall liquidity.
When preparing the downside model, management combined the expected impact of
bonding constraints (already included in the base case) with the potential
negative ramifications linked to the principal risks as described in the FY24
Annual Report. This included for example Currency pipeline risk (Risk 13) and
macro-economic and geo-political risk (Risk 3).
The severe but plausible downside modelling shows relatively low headroom on
the net debt/EBITDA and minimum liquidity covenants at specific times over the
going concern period. There are a number of mitigating actions that can be
taken by management to improve both covenants in the event that this is
required.
Additional modelling
In addition to the above, management has performed modelling that assumes the
successful completion of the sale of the Authentication division. This
modelling took into account the expected use of funds, which includes full
repayment of the RCF, mitigation of any risk to the De La Rue UK defined
benefit pension scheme and expected transaction costs. This modelling
indicated sufficient cash liquidity, including the expected use of funds,
between the expected completion date and the end of the going concern period,
taking into account the required liquidity of the remaining Group through to
27 December 2025, with the Group benefitting from reduced interest costs and a
strong Currency order book in particular.
The Board acknowledges that that the probability and timing of completion of
the sale are subject to factors outside of its control, which could lead to a
scenario whereby the Group and Company would have to seek alternative
financing to repay the RCF on or before 1 July 2025, or obtain an extension to
the RCF from the lenders. Both of these options are outside of the Board's
control.
Conclusion
Based on the above, the Board of De La Rue Plc has concluded the following:
1. The base case modelling indicates that the Group has sufficient
positive cashflows to continue operating as a going concern over the 13-month
period ending 27 December 2025, excluding the need to repay the RCF on or
before 1 July 2025. Similarly, no breaches of the existing financial and
non-financial covenants are expected.
2. The base case modelling indicates that the Group would not have
sufficient funds or the ability to repay the RCF on or before 1 July 2025 in
the event that the sale of Authentication has not completed by that date. The
circumstances which would follow non-repayment of the RCF on or before 1 July
2025, including the manner in which the Group's lenders would seek to recover
funds, would not be within the control of the Directors.
3. The severe but plausible downside modelling shows relatively
low headroom on the net debt/EBITDA and minimum liquidity covenants at
specific times over the going concern period. There are a number of mitigating
actions that can be taken by management to improve both covenants in the event
that this is required.
The matters described above represent a material uncertainty which may cast
significant doubt upon the Group's ability and the Company's ability to
continue as a going concern for a period up to 27 December 2025. At the same
time, the Board is confident that the completion of the sale of Authentication
in the first half of 2025 will ultimately allow the Group to repay in full the
RCF before its expiration on 1 July 2025, satisfy future bonding requirements,
mitigate any risks to the De La Rue UK defined benefits pension scheme, and
continue to operate the remaining business as a going concern.
The financial statements do not contain the adjustments that would result if
the Group and Company were unable to continue as a going concern.
A copy of the FY24 Annual Report is available at www.delarue.com or on request
from the Company's registered office at De La Rue House, Jays Close, Viables,
Basingstoke, Hampshire, RG22 4BS.
Critical estimates, assumptions and judgements
In preparing these Condensed Consolidated Interim Financial Statements, the
Group has made its best estimates and judgements of certain amounts included
in the financial statements, giving due consideration to materiality. The
Group regularly reviews these estimates and updates them as required. The
Group has reviewed its critical accounting estimates, assumptions and
judgements and identified no new critical accounting estimates, assumptions
and judgements in the period.
Critical accounting estimates, assumptions and judgements set out on pages 144
to 147 of the Group's Annual Report and Accounts for the year ended 30 March
2024. These remain relevant to these Condensed Consolidated Interim Financial
Statements, in addition to the updates disclosed below.
A Critical accounting judgements
1. Classification of exceptional items
The Directors consider items of income and expenditure which are material by
size and/or by nature and not representative of normal business activities
should be disclosed separately in the financial statements so as to help
provide an indication of the Group's underlying business performance. The
Directors label these items collectively as 'exceptional items'. Determining
which transactions are to be considered exceptional in nature is often a
subjective matter.
However, circumstances that the Directors believe would give rise to
exceptional items for separate disclosure would include: gains or losses on
the disposal of businesses; non-recurring fees relating to the management of
historical scheme issues; restructuring of businesses and asset impairments
All exceptional items are included in the appropriate income statement
category to which they relate. Refer to note 3 for further details.
2. Accounting for the extension of the factory site in Malta
On 9 September 2021, the Group signed an Agreement with Malta Enterprise
("ME") where ME finances the construction, civil works and M&E
installations to be carried out at the premises located in Malta. The premises
included land, the demolition of an existing building and a rebuild to the
Group's specifications. On 14 September 2021 the Company signed a lease for
the premises for an initial term of 20 years. The Group is managing the
construction of the new buildings for the lessor to the pre-agreed
specifications.
Management have made a judgement as to whether the Company has control of the
site during the construction period. If the Group has the right to control the
use of the identified asset for only a portion of the term of the contract,
the contract contains a lease for that portion of the term. It was determined
that control exists only after the build is completed and site becomes
available for use.
As per the agreement, there are three separate units with the different
start-up dates. The lease costs will be allocated to the division to which
they relate to based on area. However, if the cost relates to the total site,
then it is divided based on the percentage split of the area, with 27% of the
total sqm occupied by Authentication and 73% by Currency.
The first block is currently scheduled to be completed in H2 25. Therefore,
management has concluded that no lease should be recognised in H1 25. The
lease will be recognised when the building becomes available for use.
B Critical accounting estimates
1. Recoverability of other financial assets
In FY23, management assessed the recoverability of the carrying value of
securities interests held in the Portals International Limited group on the
balance sheet and recorded an expected credit loss provision in relation to
the original principal value and interest receivable which was recorded in
exceptional items in FY23 consistent with the original recognition as part of
the loss on disposal.
Management carefully assessed the recoverability of the other financial assets
on the balance sheet as at 25 March 2023 based on information available to
them determining that an expected credit loss provision of £8.5m was required
which will fully impair these other financial assets. Management considered
the following factors in making this determination:
1) The public announcements from the Portals group relating to the wind
down of the Overton paper mill and its sale of assets.
2) The latest available financial position of Portals International Limited
group as presented in its 2022 consolidated financial statements including
significant losses for the period and a net liabilities position.
3) The announcement of the sale of the Fedrigoni business to IN Groupe in
May 2023.
The provision accounted for the risk that the full amounts due are now
considered to be credit impaired. Management noted that if factors change
again in the future, this may alter the judgements made resulting in a
revision to the value of expected credit loss provision to be recognised.
During FY24, £0.3m was received to settle some of these other financial
assets. This was unexpected and no further amounts were expected as at 30
March 2024. However, a further £0.2m was received, again unexpectedly, in
June 2024 in settlement of some of these other financial assets. The £0.5m
credit was reflected in exceptional items in FY24.
The amount presented on the balance sheet within other financial assets as at
28 September 2024 of £nil (30 March 2024: £nil) included the original
principal received and accrued interest amounts, fully offset by the expected
credit loss provision.
After a further review, management has concluded that there has been no change
in the assessment of the remaining other financial assets in H1 25.
2. Post-retirement benefit obligations
Pension costs within the income statement and the pension obligations/assets
as stated in the balance sheet are both dependent upon a number of assumptions
chosen by management with advice from professional actuaries. These include
the rate used to discount future liabilities, the expected longevity for
current and future pensioners and estimates of future rates of inflation. The
discount rate is the interest rate that should be used to determine the
present value of estimated future cash outflows expected to be required to
settle the pension obligations.
The Group engages the services of professional actuaries to assist with
calculating the pension liability (note 9).
3. Tax
The Group is subject to income taxes in numerous jurisdictions and significant
judgement is required in determining the worldwide provision for those taxes.
The level of current and deferred tax recognised is dependent on subjective
judgements as to the outcome of decisions to be made by the tax authorities in
the various tax jurisdictions around the world in which the Group operates.
It is necessary to consider which deferred tax assets should be recognised
based on an assessment of the extent to which they are regarded as
recoverable, which involves assessment of the future trading prospects of
individual statutory entities, the nature and level of any deferred tax
liabilities from other items in the accounts such as pension positions, and
overseas tax credits that are carried forward for utilisation in future
periods, including some that have been allocated to Governmental authorities
as part of investment projects. Note 5 Taxation contains further details
regarding changes to recognised deferred tax assets balances as at H1 25.
The actual outcome may vary from that anticipated. Where the final tax
outcomes differ from the amounts initially recorded, there will be impacts
upon income tax and deferred tax provisions and on the income statement in the
period in which such determination is made.
The Group has current tax provisions recorded within current tax liabilities,
in respect of uncertain tax positions. In accordance with IFRIC 23, tax
provisions are recognised for uncertain tax positions where it is considered
probable that the position in the filed tax return will not be sustained and
there will be a future outflow of funds to a taxing authority. Tax provisions
are measured either based on the most likely amount (the single most likely
amount in a range of possible outcomes) or the expected value (the sum of the
probability-weighted amounts in a range of possible outcomes) depending on
management's judgement on how the uncertainty may be resolved.
The Group is disputing tax assessments received in certain countries in which
the Group operates. These tax assessments have been subject to court rulings
both in favour of the Group and also against the Group. The rulings are
subject to ongoing appeal processes. The Group has fully provided for these as
required by the relevant accounting standards. The disputed tax assessments
are subject to ongoing dialogue with the relevant tax authorities to reach a
settlement without the requirement to continue in a protracted legal process.
During H1 25, uncertain tax positions were reduced from £18.2m at FY24 to
£17.6m. The £0.6m reduction relates to favourable movements in exchange
rates for other provisions rather than a change to the underlying provided
amounts.
C Other long-term estimation uncertainties
1. Impairment test of Goodwill and acquired intangibles
Goodwill relates to the acquisition in FY17 of De La Rue Authentication Inc.
(previously DuPont Authentication Inc). The goodwill has been tested for
impairment during the period to 28 September 2024. For the purposes of
impairment testing the Cash Generating Unit ("CGU") for the goodwill has been
determined as the De La Rue Authentication entity as a whole. This is
consistent with the fact that the entity is not fully integrated into the
Group and the integrated nature of the Intellectual Property and other assets
which collectively generate cash flows.
The H1 25 impairment test calculated the recoverable amount using the fair
value less costs to sell approach as it was considered to provide a higher
amount than the value in approach. Fair value less costs to sell is the arm's
length sale price between knowledgeable willing parties less costs of
disposal. Fair value represents Level 3 in the FV hierarchy.
The fair value less costs to sell of the CGU was derived from the recent
proposed sale value of the Group's Authentication division. This proposed sale
value was received from a third party and is considered to be at arm's length.
For further information on this proposed sale value, refer to the note 16 of
these Condensed Consolidated Interim Financial Statements.
The recoverable amount at the testing date was significantly in excess of the
carrying value at 28 September 2024.
2. Onerous contract provisions
The financial statements also included a small number of onerous contract
provisions for loss making contracts. Management has assessed these and
applied judgement in determining the required level of provisioning including
how, in accordance with IAS 37, the lowest unavoidable costs of exiting or
fulfilling the contract have been calculated.
3. Estimation of provisions
The Group holds a number of provisions relating to warranties for defective
products and contract penalties. Management has assessed these and applied
judgement in determining the value of provisions required.
New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of these Condensed
Consolidated Interim Financial Statements to 28 September 2024 are consistent
with those applied by the Group in its consolidated financial statements as
at, and for the period ended, 30 March 2024, as required by the Disclosure
Guidance and Transparency Rules of the UK's Financial Conduct Authority.
During the period, the following new and amended IFRS became effective for the
Group. The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
New standards and amendments not yet effective:
- Amendments to IAS 1 "Presentation of financial statements" -
Classification of Liabilities as Current or Non-current - The amendments
clarify: what is meant by a right to defer settlement; that a right to defer
must exist at the end of the reporting period; that classification is
unaffected by the likelihood that an entity will exercise its deferral right
and that only if an embedded derivative in a convertible liability is itself
an equity instrument, would the terms of a liability not impact its
classification.
- Amendments to IFRS 16 "Leases" - Lease liabilities in a sale and
leaseback - This amendment to IFRS 16 specifies the requirements that a
seller-lessee uses in measuring the lease liability arising in a sale and
leaseback transaction, to ensure the seller-lessee does not recognise any
amount of the gain or loss that relates to the right of use it retains.
- Amendments to IAS 7 "Statement of Cash Flows" and IFRS 7 "Financial
Instruments: Disclosures" - Supplier Finance Arrangements, subject to UK
endorsement - The amendments specify disclosure requirements to enhance the
current requirements, which are intended to assist users of financial
statements in understanding the effects of supplier finance arrangements on an
entity's liabilities, cash flows and exposure to liquidity risk.
Effective for periods commencing after 1 January 2025, all subject to UK
endorsement:
- Amendments to IAS 21 "The effect of changes in foreign exchange rates"
- Lack of exchangeability - The amendment specifies how an entity should
assess whether a currency is exchangeable and how it should determine a spot
exchange rate when exchangeability is lacking.
Effective for periods commencing after 1 January 2026, all subject to UK
endorsement:
- Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial
Instruments: Disclosures"- Classification and measurement of financial
instruments:
o clarifies that a financial liability is derecognised on the 'settlement
date'. It also introduces an accounting policy option to derecognise financial
liabilities that are settled through an electronic payment system before
settlement date if certain conditions are met.
o clarifies how to assess the contractual cash flow characteristics of
financial assets that include environmental, social and governance
(ESG)-linked features and other similar contingent features.
o Clarifies the treatment of non-recourse assets and contractually linked
instruments.
o Requires additional disclosures in IFRS 7 for financial assets and
liabilities with contractual terms that reference a contingent event
(including those that are ESG-linked) and equity instruments classified at
fair value through other comprehensive income.
- Annual improvements to IFRS Accounting Standards - Volume 11 - These
deal with non-urgent but necessary, clarifications and amendments to IFRS.
Effective for periods commencing after 1 January 2027, all subject to UK
endorsement:
- Amendments to IFRS18 "Presentation and disclosure in financial
statements" - Presentation and disclosure in financial statements - This
introduces new categories and subtotals in the statement of profit and loss.
It also requires disclosure of management-defined performance measures (as
defined) and includes new requirements for the location, aggregation and
disaggregation of financial information.
- Amendments to IFRS 19 "Subsidiaries without Public Accountability:
Disclosures" - This allows eligible entities to elect to apply reduced
disclosure requirements while still applying the recognition, measurement and
presentation requirements in other IFRS accounting standards. Unless otherwise
specified, eligible entities that elect to apply IFRS 19 will not need to
apply the disclosure requirements in other IFRS accounting standards.
2 Segmental analysis
The continuing operations of the Group have two main operating units: Currency
and Authentication.
The Board, which is the Group's Chief Operating Decision Maker, monitors the
performance of the Group at this level and there are therefore two reportable
segments. The principal financial information reviewed by the Board is
revenue, adjusted operating profit and assets and liabilities.
The Group's segments are:
- Currency - provides Banknote print, Polymer and Security features.
- Authentication - provides the physical and digital solutions to
authenticate products through the supply chain and to provide tracking of
excisable goods to support compliance with government regulators. Working
across the commercial and government sectors, the division addresses consumer
and Brand owner demand for protection against counterfeit goods.
Inter-segmental transactions are eliminated upon consolidation. There is no
history of seasonality or cyclability of interim operations.
Total of Continuing operations
Unallocated
H1 25 Currency Authentication Central
£m £m £m £m
Total revenue from contracts with customers 94.9 50.2 - 145.1
Less: Inter-segment revenue - - - -
Revenue from contracts with customers 94.9 50.2 - 145.1
Cost of sales (75.2) (31.0) - (106.2)
Gross profit 19.7 19.2 - 38.9
Adjusted operating expenses (18.6) (13.0) - (31.6)
Adjusted operating profit 1.1 6.2 - 7.3
Adjusted items:
- Amortisation of acquired intangible assets - (0.5) - (0.5)
- Net exceptional items (0.6) - (4.9) (5.5)
Operating profit/(loss) 0.5 5.7 (4.9) 1.3
Interest income - - 0.2 0.2
Interest expense (0.6) - (6.3) (6.9)
Net retirement obligation finance charge - - (1.1) (1.1)
Net finance expense (0.6) - (7.2) (7.8)
(Loss)/profit before taxation (0.1) 5.7 (12.1) (6.5)
Capital expenditure on property, plant and equipment (1.5) (1.3) - (2.8)
Capital expenditure on intangible assets (0.7) (1.7) (0.1) (2.5)
Depreciation of property, plant and equipment and right-of-use assets (4.9) (1.1) (0.5) (6.5)
Amortisation of intangible assets (0.6) (2.7) - (3.3)
Total of Continuing operations
Unallocated
H1 24 Currency Authentication Central
£m £m £m £m
Total revenue from contracts with customers 113.4 48.1 - 161.5
Less: Inter-segment revenue - - - -
Revenue from contracts with customers 113.4 48.1 - 161.5
Cost of sales (91.1) (30.2) - (121.3)
Gross profit 22.3 17.9 - 40.2
Adjusted operating expenses (20.9) (11.4) - (32.3)
Adjusted operating profit 1.4 6.5 - 7.9
Adjusted items:
- Amortisation of acquired intangible assets - (0.5) - (0.5)
- Net exceptional items (6.9) (0.2) (3.7) (10.8)
Operating (loss)/profit (5.5) 5.8 (3.7) (3.4)
Interest income 0.1 - - 0.1
Interest expense (0.4) (0.1) (11.7) (12.2)
Net retirement obligation finance credit - - (1.3) (1.3)
Net finance expense (0.3) (0.1) (13.0) (13.4)
(Loss)/profit before taxation (5.8) 5.7 (16.7) (16.8)
Capital expenditure on property, plant and equipment (3.4) (2.6) - (6.0)
Capital expenditure on intangible assets (0.5) (1.6) - (2.1)
Impairment of property, plant and equipment (note 3) (4.4) - - (4.4)
Depreciation of property, plant and equipment and right-of-use assets (4.5) (1.3) (0.4) (6.2)
Amortisation of intangible assets (0.6) (1.7) (0.5) (2.8)
Total of Continuing operations
Unallocated
Currency Authentication Central
£m £m £m £m
H1 25
Segment assets 172.6 81.7 39.9 294.2
Segment liabilities (71.0) (14.9) (213.0) (298.9)
FY24
Segment assets 155.3 83.3 55.7 294.3
Segment liabilities (70.0) (15.0) (206.7) (291.7)
Revenue from contracts with customers:
Timing of revenue recognition across the Group's revenue from contracts with
customers is as follows:
Total of Continuing operations
H1 25 Currency Authentication
£m £m £m
Timing of revenue recognition:
Point of time 90.8 44.3 135.1
Over time 4.1 5.9 10.0
94.9 50.2 145.1
Total of Continuing operations
H1 24 Currency Authentication
£m £m £m
Timing of revenue recognition:
Point of time 106.1 43.9 150.0
Over time 7.3 4.2 11.5
113.4 48.1 161.5
Geographic analysis of revenue
H1 25 H1 24
£m £m
Middle East and Africa 69.7 68.7
Asia 18.5 16.6
UK 13.1 12.9
The Americas 7.3 23.9
Rest of Europe 23.0 23.0
Rest of World 13.5 16.4
145.1 161.5
( )
3 Exceptional Items
H1 25 Cash Non-cash H1 24 Cash Non-cash
£m £m £m £m £m £m
Site relocation and restructuring 0.9 0.1 0.8 7.9 3.0 4.9
Pension underpin costs 0.1 0.1 - 0.2 0.2 -
Costs associated with pension deferment and banking refinancing - - - 3.0 2.5 0.5
Divesture costs 4.5 0.8 3.7 - - -
5.5 1.0 4.5 11.1 5.7 5.4
Reversal of expected credit loss provision on other financial assets - - - (0.3) (0.3) -
Exceptional items in operating profit 5.5 1.0 4.5 10.8 5.4 5.4
Tax credit on exceptional items (0.9) (4.1)
Net exceptional items after tax 4.6 6.7
The cash flow impact of exceptional items was £0.8m in H1 25 (H1 24:
£14.6m). H1 25 included the £1.0m above and a receipt of £0.2m from Portals
Paper Limited which was settled in cash in relation to prior year exceptional
items.
Site relocation and restructuring costs
Site relocation and restructuring costs in H1 25 of £0.9m (H1 24: £7.9m)
included the following:
· the recognition of £0.9m (H1 24: £0.1m) of charges
related to the closure activities for the Gateshead facility. These costs
primarily relating to the costs, net of grant income received of £0.1m, of
relocating assets to different Group manufacturing locations and redundancy
costs. Since this program commenced, £10.0m of costs have been incurred in
relation to this. This relocation of assets will continue into H2 25 as the
Group continues its expansion of the manufacturing facilities in Malta, net of
any grants received;
· In H1 24 a £6.5m charge for redundancy and legal fees
(£3.2m) and property, plant and equipment impairments of £3.3m were made in
relation to restructuring initiatives in both the Currency and Authentication
divisions in order to right-size the divisions for future operations. Since
this program commenced, £9.0m of costs have been incurred in relation to
this; and
· In FY23, the Group announced that owing to current
market demand, and no expectation of new bank note orders from the Central
Bank of Kenya for at least the next 12 months, De La Rue Kenya (a subsidiary
with a material non-controlling interest held by the Government of Kenya) has
suspended banknote printing operations in the country. In addition, operations
in our Authentication division were wound down in the period. As a result of
the mothballing of operations in Kenya an exceptional charge of £1.3m was
made in H1 24 including redundancy charges of £0.2m, property, plant and
equipment asset impairments of £1.1m and other costs of £0.1m, offset by
£0.1m of proceeds from the sale of previously impaired inventories. No costs
were incurred in relation to H1 25. Since this program commenced, £13.8m of
costs have been incurred in relation to this. No further costs are expected in
relation to this project in FY25.
Pension underpin costs
Pension underpin costs of £0.1m (H1 24: £0.2m) relate to legal fees, net of
amounts recovered, incurred in the rectification of certain discrepancies
identified in the Scheme's rules. The Directors do not consider this to have
an impact on the UK defined benefit pension liability at the current time, but
they continue to assess this.
Costs associated with pension payment deferment and banking refinancing
Costs associated with pension payment deferment and the banking refinancing
amounted to £nil in H1 25 (H1 24: £3.0m). This included legal and
professional advisor fees.
On 3 April 2023, the Company and the Trustee agreed to defer the deficit
reduction contribution due under the previous Recovery Plan, payable on 5
April 2023, to 26 May 2023. Subsequently, on 25 May 2023 the Company and the
Trustee agreed to defer the deficit contribution due on 26 May 2023 to 5 July
2023. In June 2023, the Company and the Trustee agreed to defer all the
deficit reduction contributions due to recommence from 5 April 2024 and a new
Recovery Plan has been agreed between the Company and the Trustee. The legal
and professional advisor costs associated with this in the period was
£1.3m.
On the 29 June 2023 the Company entered into a number of documents which had
the effect of amending and restating the terms of the revolving facility
agreement with its lending banks and their agents. These documents are an
amendment and restatement agreement with the various lenders and the banks'
agents and security agent, a debenture between the Company, certain other
Group companies and the banks' security agent and inter-creditor agreement
between the creditors. As a result of these changes, the facilities are
secured against material assets and shares within the Group. The legal and
professional costs associated with this in the period was £1.7m.
Divestiture costs
As set out in the Company's half year results on 19 December 2023 and in the
Annual Report for FY24, the Board has been undertaking a review of the core
strategic strengths of the Group and how best to optimise the underlying
intrinsic value of the business for the benefit of all stakeholders. This
review and analysis has included:
- recognising the improved order intake over the last
year, and the future prospects for the Group's operating divisions and the
Group as a whole;
- the accretive value creation that may be achieved with
increased scale and capabilities in both of our operating divisions; and
- our commitment to reduce leverage and create greater
financial flexibility in the funding structure of the Group as a whole.
This review, and associated learnings, has guided the Board in its process to
evaluate strategic options for the Group and each division.
Proposed sale of the Authentication Division for £300m
On 15 October 2024, the Group announced that it had entered into a definitive
agreement for the sale of the Group's Authentication Division to Crane NXT, Co
("Crane NXT") and its related entities for a cash consideration representing
an enterprise value of £300m, of which 5% is to be held in escrow for up to
18 months following Completion.
This will realise significant capital and provides cash to the Group for the
benefit of all stakeholders by unlocking the intrinsic value of the
Authentication division. The proceeds will create a more resilient and
flexible Group by:
· Repaying the Group's existing revolving credit facility
in full and reducing leverage to a net cash position; and
· Significantly reducing the deficit on the Group's
legacy defined benefit pension scheme ("Pension Scheme") by paying £30m as an
associated contribution on Completion.
The Group has also agreed to pay an additional £12.5m in deficit repair
contributions to the Pension Scheme over the period to April 2027, which will
reduce the Pension Scheme deficit.
The completion of the Transaction is subject to a number of conditions,
including implementation of a reorganisation to affect a divisional separation
required to deliver the Authentication Division to Crane NXT on Completion and
obtaining customary antitrust approvals. It is expected that Completion will
occur during the first half of 2025.
In H1 25 £4.5m (H1 24: £nil) of divestiture costs have been incurred
including separation costs, advisory costs relating to the banking and
pensions implications and costs for the definitive agreement for the sale of
the Authentication division to Crane NXT.
The project costs associated with the divestiture projects have been classed
as exceptional items due to their size and nature as they relate to the
operations that will become discontinued by sale.
Recognition of expected credit loss provision on other financial assets
Other financial assets comprise securities interests held in the Portals
International Limited group which were received as part of the consideration
for the paper disposal in 2018. In accordance with IFRS 9, management assessed
the recoverability of the carrying value on the balance sheet and recorded an
expected credit loss provision in relation to the original principal value and
interest receivable, which was been recorded in exceptional items in FY23,
consistent with the original recognition as part of the loss on disposal. The
amount presented on the balance sheet within other financial assets as at 28
September 2024 of £nil (30 March 2024: £nil) included the original principal
received and accrued interest amounts, fully offset by the expected credit
loss provision.
During H1 24, the Company received notice that Portals International Limited
were to repay an amount of £290,266 (which comprised the principal amount of
£227,280 and accrued interest of £62,986) on 1 August 2023. This was part of
the £899,138 loan notes issued by Portals in November 2021. A credit of
£0.3m was recognised in exceptionals relating to this unexpected repayment. A
further £0.2m was received, again unexpectedly, in June 2024 in settlement of
some of these other financial assets. In FY24 a £0.5m credit was reflected in
exceptional items in FY24.
Management have assessed that no further amounts are expected to be received
and hence no change has been made to the expected credit loss in H1 25.
Taxation relating to exceptional items
The tax credit within exceptional items in the period was £0.9m (H1 24: tax
credit £4.1m).
Included within exceptional tax items is a tax credit of £0.6m relating to
the release of uncertain tax positions. The balance of £0.3m credit within
exceptional tax items relates to the tax impact on the exceptional costs
before tax.
4 Interest income and expense
H1 25 H1 24
£m £m
Recognised in the income statement
Interest income:
- Other Interest 0.2 0.1
Total interest income 0.2 0.1
Interest expense:
- - Interest on bank loans (6.3) (6.1)
- - Other, including amortisation of finance arrangement fees (2.5) (2.1)
- - Net loss on debt modification, including amortisation 2.1 (3.8)
- - Interest on lease liabilities (0.2) (0.2)
Total interest expense (6.9) (12.2)
Retirement benefit obligation finance expense (note 9) (1.1) (1.3)
Net finance expense (7.8) (13.4)
All finance income and expense arise in respect of assets and liabilities not
restated to fair value though the income statement.
The net loss on debt modification, including amortisation credit of £2.1m in
H1 25 relates to the amortisation of previous losses on debt modification. The
loss on debt modification, including amortisation in H1 24 of £3.8m included
the losses on the debt modification in June 2023 of £4.8m, offset by the
subsequent amortisation of £1.0m (including £0.2m of amortisation of the
loss on debt modification recognised in FY23 of £0.9m).
The retirement benefit obligation finance expense is calculated under IAS 19
and represents the difference between the interest on pension liabilities and
assets. The loss in H1 25 of £1.1m (H1 24: loss of £1.3m) was due to the
opening pension valuation on an IAS 19 basis as at 30 March 2024 being a
deficit of £51.6m.
5 Taxation
The total tax charge in respect of continuing operations for the H1 25 was
£0.5m (H1 24: tax credit £5.6m) and comprised:
- £1.5m charge (H1 24: £1.4m credit) on adjusted loss after interest
expense;
- £0.1m credit (H1 24: £0.1m credit) on the amortisation of acquired
intangibles; and
- £0.9m credit (H1 24: £4.1m credit) on exceptional items, which is
described in more detail in note 3 above.
The overall tax rate is determined using the statutory tax rates and
forecasted profits in the UK and all other territories. A weighted average
rate is generated for each of the UK and the other territories, with these
rates then applied to the actual profits for the half year along with
adjustments specific to the relevant period (such as known tax rate changes
substantively enacted during the period).
The Group is disputing a number of tax assessments received from the tax
authority of countries in which the Group operates. The disputed tax
assessments are at various stages in the local appeal process, but the Group
believes it has a supportable and defendable position (based upon local
accounting and legal advice) and is appealing previous judgments and
communicating with the tax authority in relation to the disputed tax
assessments. The Group's expected outcome of the disputed tax assessments is
held within the relevant provisions in this H1 25 Interim Statement. During H1
25, a credit of £0.6m was reported for disputed tax assessments, relating to
favourable movements in exchange rates rather than a change to the underlying
provided amounts.
Deferred tax assets are recognised for tax losses available and temporary
deductible differences to the extent that the realisation of the related tax
benefit through future taxable profits is probable.
The deferred tax asset balance for the period is unchanged at £0.1m (FY24:
£0.1m)
At H1 25 there were unrecognised deferred tax assets of £51.1m (FY24:
£51.5m) comprising:
- £8.2m (FY24: £9.2m) relating to gross UK tax losses of £33.0m (FY24:
£36.8m);
- £7.3m (FY24: £7.5m) relating to gross non-UK tax losses of £26.7m (FY24:
£27.5m);
- £11.6m (FY24: £12.4m) relating to the UK pension deficit of £46.5m (FY24:
£49.7m);
- £16.5m (FY24: £14.5m) relating to UK tax interest restrictions carried
forward of £66.1m (FY24: £58.0m);
- £5.4m (FY24: £5.8m) relating to the UK fixed assets temporary differences
of £21.7m (FY24: £23.2m);
- £2.1m (FY24: £2.1m) relating to other UK temporary differences of £8.3m
(FY24: £8.3m).
Tax losses carried forward do not have an expiry date.
6 Earnings per share
H1 25 H1 24
pence pence
per share per share
Earnings per share
Basic earnings per share (4.1) (6.2)
Diluted earnings per share(1) (4.1) (6.2)
Adjusted earnings per share
Basic earnings per share (1.5) (2.6)
Diluted earnings per share(1) (1.5) (2.6)
Number of shares (m)
Weighted average number of shares 196.0 195.6
Dilutive effect of shares 0.6 0.3
196.6 195.9
(1) The Group reported a loss from continuing operations attributable to the
ordinary equity shareholders of the Company for H1 25. The Diluted EPS is
reported as equal to Basic EPS, no account can be taken of the effect of
dilutive securities under IAS 33.
( )
Earnings per share are calculated by dividing the profit attributable to
equity shareholders by the weighted average number of shares. The Directors
are of the opinion that the publication of the adjusted earnings per share is
useful as it gives a better indication of underlying business performance.
Adjusted earnings per share excludes discontinued operations.
Reconciliation of the earnings used in the calculations are set out below:
H1 25 H1 24
£m £m
Earnings for basic earnings per share - Total (8.0) (12.2)
Add: amortisation of acquired intangibles 0.5 0.5
Add: exceptional items 5.5 10.8
Less: tax on amortisation of acquired intangibles (0.1) (0.1)
Less: tax credit on exceptional items (0.9) (4.1)
Earnings for adjusted earnings per share (3.0) (5.1)
7 Financial risk
7(a) Financial Instruments
Carrying amounts versus the fair value
Total fair Carrying Total fair Carrying amount
value amount value
H1 25 H1 25 FY24 FY24
£m £m £m £m
Financial assets
Trade and other receivables(1) Level 3 77.0 77.0 60.7 60.7
Contract assets Level 3 9.1 9.1 16.7 16.7
Cash and cash equivalents Level 1 20.2 20.2 29.3 29.3
Derivative financial instruments:
- Forward exchange contracts designated as cash flow hedges Level 2 0.9 0.9 0.4 0.4
- Short duration swap contracts designated as fair value hedges Level 2 0.1 0.1 - -
- Foreign exchange fair value hedges - other economic hedges Level 2 0.9 0.9 0.2 0.2
- Embedded derivatives Level 2 - - 0.1 0.1
Total financial assets 108.2 108.2 107.4 107.4
Financial liabilities
Unsecured bank loans and overdrafts(2) Level 2 (129.6) (129.6) (118.7) (118.7)
Trade and other payables(3) Level 3 (54.1) (54.1) (57.6) (57.6)
Derivative financial instruments:
- Forward exchange contracts designated as cash flow hedges Level 2 (1.9) (1.9) (1.5) (1.5)
- Short duration swap contracts designated as fair value hedges Level 2 (0.1) (0.1) (0.1) (0.1)
- Foreign exchange fair value hedges - other economic hedges Level 2 (0.9) (0.9) (1.4) (1.4)
- Embedded derivatives Level 2 (0.6) (0.6) (0.3) (0.3)
Total financial liabilities (187.2) (187.2) (179.6) (179.6)
1 Excludes prepayments of £6.8m (FY24: £6.4m), RDEC of
£1.1m (FY24: £2.0m) and VAT recoverable of £1.7m (FY24: £3.7m).
2 Excludes unamortised pre-paid loan arrangement fees of
£3.5m (FY24: £5.0m) and loss on debt modification of £1.4m (FY24: £3.5m).
3 Excludes social security and other taxation amounts of
£1.5m (FY24: £1.9m), contract liabilities of £0.2m (FY24: £0.2m) and
payments on account of £25.7m (FY24: £23.1m).
Trade receivables increased to £60.9m compared to £39.6m at FY24, driven
mainly by the timing of customer payments.
Contract assets have decreased from £16.7m at FY24 to £9.1m at H1 25. This
related to Currency contracts of £6.1m (FY24: £13.5m) and Authentication
contracts of £3.0m (FY24: £3.2m).
Trade and other payables(3) have decreased from £57.6m at FY24 to £54.1m at
H1 25, driven by the timing of supply payment and our reporting dates.
Fair Value Hierarchy
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole.
- Level 1 valuations are derived from unadjusted quoted prices for
identical assets or liabilities in active markets.
- Level 2 valuations use observable inputs for the assets or
liabilities other than quoted prices.
- Level 3 valuations are not based on observable market data and are
subject to management estimates.
There has been no movement between levels during the current or prior periods.
Fair Value measurement basis for derivative financial instruments
Fair value is calculated based on the present value of future principal and
interest cash flows, discontinued at the market rate of interest at the
reporting date. The valuation bases are classified according to the degree of
estimation required in arriving at the fair values. See fair value hierarchy
above.
Forward exchange contracts used for hedging
The fair value of forward exchange contracts has been determined using quoted
forward exchange rates at the balance sheet date.
7(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities where due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
The Group manages this risk by ensuring that it maintains sufficient levels of
committed borrowing facilities and cash and cash equivalents. The level of
headroom needed is reviewed annually as part of the Group's planning process.
The following are the contractual undiscounted cash flow maturities of
financial liabilities, including contractual interest payments and excluding
the impact of netting agreements.
Due between Due between
Due within 1 year 1 and 2 years 2 and 5 years Total undiscounted cash flows Impact of discounting and netting Carrying amount
£m £m £m After 5 years £m £m £m
£m
28 September 2024
Non-derivative financial liabilities
Unsecured bank loans(1) 137.6 - 0.7 - 138.3 (8.7) 129.6
Trade and other payables(2) 54.1 - - - 54.1 - 54.1
Obligations under leases 3.0 2.9 5.3 23.5 34.7 (20.8) 13.9
Derivative financial liabilities
Gross amount payable from currency derivatives:
- Forward exchange swap contracts designated as cash flow hedges* 69.6 - - - 69.6 (67.7) 1.9
- Short duration swap contracts designated as fair value 24.7 - - - 24.7 (24.6) 0.1
hedges*
- Fair value hedges - other economic hedges* 27.3 - - - 27.3 (26.4) 0.9
316.3 2.9 6.0 23.5 348.7 (148.2) 200.5
Due between Due between
Due within 1 year 1 and 2 years 2 and 5 years Total undiscounted cash flows Impact of discounting and netting Carrying amount
£m £m £m After 5 years £m £m £m
£m
30 March 2024
Non-derivative financial liabilities
Unsecured bank loans(1) 10.9 120.7 0.7 - 132.3 (13.6) 118.7
Trade and other payables(2) 57.6 - - - 57.6 - 57.6
Obligations under leases 2.9 2.2 4.2 23.1 32.4 (20.8) 11.6
Derivative financial liabilities
Gross amount payable from currency derivatives:
- Forward exchange swap contracts designated as cash flow hedges*
77.7 - - - 77.7 (76.2) 1.5
- Short duration swap contracts designated as fair value hedges*
28.7 - - - 28.7 (28.6) 0.1
- Fair value hedges - other economic hedges* 81.5 - - - 81.5 (80.1) 1.4
259.3 122.9 4.9 23.1 410.2 (219.3) 190.9
Notes:
* Excludes embedded derivatives.
(1) Excludes unamortised prepaid borrowing fees of £3.5m (FY24: £5.0m) and
loss on debt modification of £1.4m (FY24: £3.5m).
(2)Excludes social security and other taxation of £1.5m (FY24: £1.9m),
contract liabilities of £0.2m (FY24: £0.2m) and payments on account of
£25.7m (FY24: £23.1m).
The following are the contractual undiscounted cash flow maturities of
financial assets, including contractual interest receipts and excluding the
impact of netting arrangements.
Due between Due between
Due within 1 year 1 and 2 years 2 and 5 years Total undiscounted cash flows Impact of discounting and netting Carrying amount
£m £m £m After 5 years £m £m £m
£m
28 September 2024
Non-derivative financial assets
Trade and other receivables(1) 77.0 - - - 77.0 - 77.0
Contract assets 9.1 - - - 9.1 - 9.1
Cash and cash equivalents 20.2 - - - 20.2 - 20.2
Derivative financial assets
Gross amount receivable from currency derivatives:
- Forward exchange contracts designated as cash flow hedges* 30.9 - 30.9 (30.0) 0.9
- -
- Short duration swap contracts designated as fair value hedges* 13.4 - 13.4 (13.3) 0.1
- -
- Fair value hedges - other economic hedges* 36.8 - 36.8 (35.9) 0.9
- -
187.4 - - - 187.4 (79.2) 108.2
Due between Due between
Due within 1 year 1 and 2 years 2 and 5 years Total undiscounted cash flows Impact of discounting and netting Carrying amount
£m £m £m After 5 years £m £m £m
£m
30 March 2024
Non-derivative financial assets
Trade and other receivables(1)* 60.7 - - - 60.7 - 60.7
Contract assets 16.7 - - - 16.7 - 16.7
Cash and cash equivalents 29.3 - - - 29.3 - 29.3
Derivative financial assets
Gross amount receivable from currency derivatives:
- Forward exchange contracts designated as cash flow hedges*
18.4 - - - 18.4 (18.0) 0.4
- Short duration swap contracts designated as fair value hedges*
6.7 - - - 6.7 (6.7) -
- Fair value hedges - other economic hedges*
25.9 - - - 25.9 (25.7) 0.2
157.7 - - - 157.7 (50.4) 107.3
Notes:
* Excludes embedded derivatives.
(1) Excludes prepayments of £6.8m (FY24: £6.4m), RDEC of £1.1m (FY24:
£2.0m) and VAT recoverable of £1.7m (FY24: £3.7m).
The fair value of a hedging derivative is classified as a non-current asset or
liability if the remaining maturity of the hedged instrument is more than 12
months and as a current asset or liability if the maturity of the hedged
instrument is less than 12 months.
Cash and cash equivalents, trade and other receivables, contract assets, bank
loans, trade and other payables and other current liabilities have fair values
that approximate to their carrying amounts due to their short-term nature.
Banking Facilities
The banking facilities expiration on 1 July 2025 remains unchanged.
The covenant tests use earlier accounting standards, excluding adjustments for
IFRS 16. Net debt for covenants includes the borrowings, where the RCF amount
is considered, the principal amount withdrawn, (excluding unamortised pre-paid
borrowing fees and the net loss on debt modification) net of cash and cash
equivalents.
Covenant test results as at 28 September 2024:
Test Requirement Actual at 28 September 2024
EBIT to net interest payable More than or equal to 1.0 times 1.49
Net debt to EBITDA Less than or equal to 3.6 times 3.08
Minimum liquidity testing Testing at each weekend point on a 4-week historical basis and 13-week forward No breaches
looking basis. The minimum liquidity is defined as "available cash and undrawn
RCF greater than or equal to £10m."
As at 28 September 2024, the Group had a total of undrawn RCF committed
borrowing facilities, all maturing in more than one year, of £31.1m (30 March
2024: £42.0m, all maturing in more than one year). The amount of loans drawn
on the £160.0m RCF cash component is £128.9m as at 28 September 2024 (30
March 2024: £118.0m).
Guarantees of £34.1m (30 March 2024: £41.8m) have been drawn using the
£75.0m guarantee facility. The accrued interest in relation to cash drawdowns
outstanding as at 28 September 2024 is £0.3m (30 March 2024: £0.3m).
Actual as at Maximum
28 September 2024 Facility
£m £m
Facilities:
Cash 128.9 160.0
Bonds and guarantees 34.1 75.0
163.0 235.0
A separate borrowing facility for financing equipment under construction is in
place and at 30 September 2024 the amount outstanding on this facility is
£0.7m (30 March 24: £0.7m).
8 Analysis of net debt
The analysis below provides a reconciliation between the opening and closing
positions for liabilities arising from financing activities together with
movements in cash and cash equivalents.
At 30 Cash Foreign exchange and other At 28 September 2024
March flow
2024
£m £m £m £m
Gross Borrowings (118.7) (10.9) - (129.6)
Cash and cash equivalents 29.3 (11.2) 2.1 20.2
Net Debt (89.4) (22.1) 2.1 (109.4)
At 25 Cash Foreign exchange and other At 30
March flow March
2023 2024
£m £m £m £m
Gross Borrowings (122.7) 4.0 - (118.7)
Cash and cash equivalents 40.3 (10.6) (0.4) 29.3
Net Debt (82.4) (6.6) (0.4) (89.4)
Net debt is presented excluding unamortised pre-paid borrowing fees of £3.5m
(FY24: £5.0m), net loss on debt modification of £1.4m (FY24: £3.5m) and
£13.9m (FY24: £11.6m) of lease liabilities.
At 30 Cash Non-cash At 28 September
March flow movements 2024
2024
£m £m £m £m
Unamortised pre-paid borrowing fees 5.0 (0.5) (1.0) 3.5
Borrowings:
28 September 2024 30 March 2024
Unamortised pre-paid borrowing fees Unamortised pre-paid borrowing fees
Gross Borrowings Loss on debt modification Gross Borrowings Loss on debt modification
Reported within: Total Total
£m £m £m £m £m £m £m £m
Current liabilities (128.9) 3.1 (1.4) (127.2) - - - -
Non-current liabilities (0.7) 0.4 - (0.3) (118.7) 5.0 (3.5) (117.2)
Total Borrowings (129.6) 3.5 (1.4) (127.5) (118.7) 5.0 (3.5) (117.2)
9 Retirement benefit obligations
The Group has pension plans, devised in accordance with local conditions and
practices in the country concerned, covering the majority of employees. The
assets of the Group's plans are generally held in separately administered
trusts or are insured.
Pension deficit funding
An actuarial valuation of the Scheme was undertaken as at 30 September 2023.
This showed a Scheme deficit of £78m. As a result of this new valuation, on
18 September 2023, the Company and the Scheme Trustee agreed a new schedule to
fund the deficit. The funding moratorium until July 2024 as preciously agreed
was retained with the only payment being £1.25m due under the June 2023
Recover Plan. This will be followed by deficit repair contributions from the
Company of £8m per annum to the end of FY27, followed by higher contributions
that at no time exceed £16m per annum and which run until December 2030 or
until the Scheme becomes fully funded.
The next periodic actuarial valuation will be as at the end of September 2026,
with the Scheme Trustee undertaking to provide the results of this valuation
by January 2027, ahead of any increase in contribution from £8m per annum.
The Company has paid deficit reduction contributions to the Main Scheme of
£2.0m over the period to 28 September 2024.
H1 25 FY24
£m £m
UK retirement benefit liability (46.5) (49.7)
Overseas retirement liability (1.9) (1.9)
Retirement benefit liability (48.4) (51.6)
The majority of the Group's retirement benefit obligations are in the UK:
H1 25 H1 25 H1 25 FY24 FY24 FY24
UK Overseas Total UK Overseas Total
£m £m £m £m £m £m
Equities 4.1 - 4.1 3.9 - 3.9
Bonds 93.5 - 93.5 91.6 - 91.6
Secured/fixed income 147.8 - 147.8 91.7 - 91.7
Liability Driven Investment Fund 122.6 - 122.6 183.7 - 183.7
Multi Asset Credit 30.6 - 30.6 46.7 - 46.7
Qualifying insurance policy 209.2 - 209.2 214.1 - 214.1
Other 22.1 - 22.1 12.4 - 12.4
Fair value of scheme assets 629.9 - 629.9 644.1 - 644.1
Present value of funded obligations (672.2) - (672.2) (689.4) - (689.4)
Funded defined benefit pension schemes (42.3) - (42.3) (45.3) - (45.3)
Present value of unfunded obligations (4.2) (1.9) (6.1) (4.4) (1.9) (6.3)
Net deficit (46.5) (1.9) (48.4) (49.7) (1.9) (51.6)
Amounts recognised in the consolidated income statement:
H1 25 H1 25 H1 25 H1 24 H1 24 H1 24
UK Overseas Total UK Overseas Total
£m £m £m £m £m £m
Included in employee benefits expense:
Current service cost - - - - - -
Administrative expenses and taxes (0.6) - (0.6) (0.6) - (0.6)
Included in interest on retirement benefit obligation net finance expense:
Interest income on scheme assets 15.2 - 15.2 15.9 - 15.9
Interest cost on liabilities (16.3) - (16.3) (17.2) - (17.2)
Retirement benefit obligation net finance expense (1.1) - (1.1) (1.3) - (1.3)
Total recognised in the consolidated income statement (1.7) - (1.7) (1.9) - (1.9)
Return on scheme assets excluding assumed interest income (8.4) - (8.4) (65.2) - (65.2)
Remeasurement gains on defined benefit pension obligations 10.4 - 10.4 60.7 - 60.7
Amounts recognised in other comprehensive income 2.0 - 2.0 (4.5) - (4.5)
Principal actuarial assumptions:
H1 25 H1 25 FY24 FY24
UK Overseas UK Overseas
% % % %
Discount rate 5.00% - 4.90% -
CPI inflation rate 2.70% - 2.80% -
RPI inflation rate 3.10% - 3.20% -
The financial assumptions adopted as at 28 September 2024 reflect the duration
of the scheme liabilities which has been estimated to be broadly 12 years
(FY24: broadly 13 years).
At 28 September 2024 mortality assumptions were based on tables issued by Club
Vita, with future improvements in line with the CMI model, CMI_2023 (FY24:
CMI_2022) with a smoothing parameter of 7.0 and a long-term future improvement
trend of 1.25% per annum (FY24: long-term rate of 1.25% per annum) and w2023
parameter of 25% (FY24: w2022 parameter 20%). The resulting life expectancies
within retirement are as follows:
H1 25 FY24
Aged 65 retiring immediately (current pensioner) Male 21.4 21.3
Female 23.6 23.5
Aged 50 retiring in 15 years (future pensioner) Male 21.9 21.8
Female 25.1 25.0
The table below provides the sensitivity of the liability in the scheme to
changes in various assumptions:
Assumption change Change in assumptions Increase in assumption approximate impact on liability Decrease in assumption approximate impact on liability
Discount rate 0.5% p.a. Decrease by c£33.9m Increase of c.£37.2m
Inflation (RPI and CPI inflation) 0.25% p.a. Increase by c£6.9m Decrease by c£8.6m
RPI inflation only 0.25% p.a. Increase by c£0.7m Decrease by c£0.7m
CPI inflation only 0.25% p.a. Increase by c£6.2m Decrease by c£7.9m
Life expectancy 1 year Increase by c£28.4m Decrease by c£28.2m
The liability sensitivities have been derived using the duration of the scheme
based on the membership profile as at 30 September 2023 and assumptions chosen
for H1 25. The sensitivity analysis does not allow for changes in scheme
membership since the September 2023 actuarial valuation or the impact of the
Scheme or Group's risk management activities in respect of interest rate and
inflation risk on the valuation of the Scheme assets.
10 Provisions for liabilities and charges
Restructuring Warranty Other Total
£m £m £m £m
At 30 March 2024 0.1 0.6 1.1 1.8
Charge for the period 0.2 - 0.1 0.3
Released in the period - (0.1) (0.4) (0.5)
At 28 September 2024 0.3 0.5 0.8 1.6
Reported:
Current liabilities 0.3 0.5 0.2 1.0
Non-current liabilities - - 0.6 0.6
0.3 0.5 0.8 1.6
Expected to be utilised within 1 year 0.3 0.5 0.2 1.0
Restructuring provisions
Restructuring provisions as at 28 September 2024 primarily related to
redundancy and other employee termination costs as a result of restricting
programmes within the Currency and Authentication divisions. The remaining
provision is expected to be utilised in FY25.
Warranty provisions
Warranty provisions relate to present obligations for defective products. The
provisions are management judgements based on information currently available,
past history and experience of the products sold. However, it is inherent in
the nature of the business that the actual liabilities may differ from the
provisions. The precise timing of the utilisation of these provisions is
uncertain but is generally expected to fall within one year.
The Group measures warranty provisions at the Directors' best estimate of the
amount required to settle the obligation at the balance sheet date, discounted
where the time value of money is considered material. These estimates take
account of available information, historical experience and the likelihood of
different possible outcomes. Both the amount and the maturity of these
liabilities could be different from those estimated.
Other provisions
Other provisions comprise a number of liabilities with varying expected
utilisation rates. This included a small number of employee related
liabilities (£0.3m) and IBNR insurance claim provisions (£0.5m) arising
through the Group's normal operations.
Onerous contract provisions arise where the unavoidable costs under a contract
exceed the economic benefits expected to be received under it. Unavoidable
costs represent the least net cost of exiting the contract, which is the lower
of the cost of fulfilling it and any compensation or penalties arising from
failure to fulfil it. Costs to fulfil a contract include those that directly
relate to the contract, including incremental costs and allocation of
production overheads. The precise timing of the utilisation of these
provisions is uncertain but is generally expected to fall within one year.
11 Non-controlling interests
The Group has three subsidiaries with material non-controlling interests:
- De La Rue Buck Press Limited, whose country of incorporation is Ghana;
- De La Rue Lanka Currency and Security Print (Private) Limited, whose
country of incorporation is Sri Lanka; and
- De La Rue Kenya EPZ Limited, whose country of incorporation and
operation is Kenya.
The accumulated non-controlling interest of the subsidiary at the end of the
reporting period is shown in the Group balance sheet. The following table
summarises the key information relating to these subsidiaries, before
intra-group eliminations.
Ghana Sri Kenya Ghana Sri Kenya
Lanka Lanka
Non-controlling interest percentage 51% 40% 40% 51% 40% 40%
H1 25 H1 25 H1 25 FY24 FY24 FY24
£m £m £m £m £m £m
Non-current assets 0.2 5.2 0.1 0.1 6.0 0.2
Current assets 7.2 28.4 20.3 7.1 30.0 20.3
Non-current liabilities - (0.5) - - (0.5) -
Current liabilities (4.8) (9.1) (11.3) (4.6) (13.5) (11.2)
Net assets (100%) 2.6 24.0 9.1 2.6 22.0 9.3
H1 25 H1 25 H1 25 H1 24 H1 24 H1 24
£m £m £m £m £m £m
Revenue 5.9 18.2 - 4.2 17.7 0.2
Profit/(loss) for the period 0.5 2.1 (0.2) 0.4 2.3 (0.1)
Profit/(loss) allocated to non-controlling interest 0.3 0.8 (0.1) 0.2 0.8 -
Dividends declared by non-controlling interest - - - - - -
Cash flows from operating activities 0.3 (3.5) - (2.2) 0.2 0.3
Cash flows from investing activities (0.2) - - - (0.1) 0.1
Cash flows from financing activities - - - - - -
Net increase/(decrease) in cash and cash equivalents 0.1 (3.5) - (2.2) 0.1 0.4
12 Related party transactions
During the period the Group traded on an arm's length basis with the
associated company Fidink (33.3% owned). The Group's trading activities with
Fidink in the period comprise £8.9m (H1 24: £12.7m) for the purchase of ink
and other consumables on an arm's length basis. At the balance sheet date
there was £2.7m (FY24: £3.7m) owing to this company.
The value of the Group's investment in associate is not material and hence not
disclosed on the face of the balance sheet.
Intra-group transactions between the Parent and the fully consolidated
subsidiaries or between fully consolidated subsidiaries are eliminated on
consolidation.
There were no material changes to these related parties in the period, other
than changes in the composition of the Board. Other than total compensation in
respect of key management, no material related party transactions have taken
place during the current period.
13 Contingent assets and liabilities
In FY23, De la Rue was made aware that the Central Bureau of Investigation in
India (CBI-I) had launched an investigation into the conduct of Arvind
Mayaram, the former Indian Finance Secretary, in which the historical
activities of De La Rue in India prior to 2016 had been implicated. The
Company still has not received any official direct communication of this
investigation from the CBI-I but has learned about it from publicly available
sources. De La Rue has not served the Government of India or the Central Bank
of India in any capacity since 2016. The Company believes that there is no
merit to the allegations that relate to De La Rue.
The Group also provides guarantees and performance bonds which are issued in
the ordinary course of business. In the event that a guarantee or performance
bond is called, a provision may be required subject to the particular
circumstances including an assessment of its recoverability.
14 Capital and other commitments
H1 25 FY24
£m £m
Capital expenditure contracted but not provided:
Property, plant and equipment 6.7 5.9
Lease commitments 12.2 13.3
18.9 19.2
Lease commitments relate to the factory site extension in Malta where the
Company has signed a lease for the premises for an initial term of 20 years.
The lease will be recognised when the building becomes available for use.
15 De La Rue Financial Calendar: FY25
Financial year
end
29 March 2025
16 Subsequent events
A. United Kingdom Pension Benefits - High Court of Justice Ruling on
Actuarial Confirmations
On the 16 June 2023, the High Court made a significant ruling in the case
between Virgin Media and the NTL Pension Trustees II Limited (and others). The
aim of this High Court case was to ascertain whether an amendment to a
scheme's rules was invalid in the absence of a confirmation from the Scheme
Actuary under Section 37 ("S37") of the Pension Schemes Act 1993.
If upheld, the High Court's decision could have wider implications, affecting
other defined benefit pension schemes in the United Kingdom that were
contracted-out on a salary-related basis between April 1997 and April 2016.
On 25 July 2024, the Court of Appeal dismissed the Virgin Media appeal and
upheld the decision of the High Court. Therefore, in relation to amendments
between April 1997 and April 2016, the changes to benefits - whether affecting
past service benefits, future service benefits or both - required a S37
confirmation.
The Company has a contracted out defined benefit pension fund scheme. The
pension fund trustee has determined that there were eight amendments in the
scheme for the period from 1997 to 2013, noting that the scheme closed to
accrual on 31 March 2013. In the period since 30 March 2024, the pension
scheme administrators and trustee have carried out a full review of these
amendments and historical actuarial certification dating back to 1997. As a
result of this review, noted there are S37 amendments in place for six of the
amendments, for another there is documentation to evidence the condition has
been met and for the final one, lawyers have confirmed there is no impact on
the Section 9(2B) rights. Therefore, there is no impact for the De La Rue
Group as a result of this ruling.
B. Proposed sale of the Authentication Division for £300m
On 15 October 2024, the Group announced that it had entered into a definitive
agreement for the sale of the Group's Authentication Division to Crane NXT, Co
("Crane NXT") and its related entities for a cash consideration representing
an enterprise value of £300m, of which 5% is to be held in escrow for up to
18 months following completion.
This will realise significant capital and provides cash to the Group for the
benefit of all stakeholders. The sale unlocks the intrinsic value of the
Authentication division and the proceeds will create a more resilient and
flexible Group by:
· Repaying the Group's existing revolving credit facility in full
and reducing leverage to a net cash position; and
· Significantly reducing the deficit on the Group's legacy defined
benefit pension scheme ("Pension Scheme") by paying £30m as an associated
contribution on completion.
The Group has also agreed to pay an additional £12.5m in deficit repair
contributions to the Pension Scheme over the period to April 2027, which will
reduce the Pension Scheme deficit.
The completion of the Transaction is subject to a number of conditions,
including:
· Implementation of a reorganisation to affect a divisional
separation required to deliver the Authentication Division to Crane NXT on
completion; and
· Obtaining customary antitrust approvals.
It is expected that completion will occur during the first half of 2025.
NON-IFRS FINANCIAL MEASURES
De La Rue plc publishes certain additional information in a non-statutory
format in order to provide readers with an increased insight into the
underlying performance of the business. These non-statutory measures are
prepared on a basis excluding the impact of exceptional items and amortisation
of intangibles acquired through business combinations, as they are not
considered to be representative of underlying business performance. The
measures the Group uses along with appropriate reconciliations to the
equivalent IFRS measures where applicable are shown in the following tables.
The Group's policy on classification of exceptional items is also set out
below.
The Directors consider items of income and expenditure which are material by
size and/or by nature and not representative of normal business activities
should be disclosed separately in the financial statements so as to help
provide an indication of the Group's underlying business performance. The
Directors label these items collectively as 'exceptional items'. Determining
which transactions are to be considered exceptional in nature is often a
subjective matter. However, circumstances that the Directors believe would
give rise to exceptional items for separate disclosure would include: gains or
losses on the disposal of businesses, non-recurring fees relating to the
management of historical scheme issues, restructuring of businesses and asset.
All exceptional items are included in the appropriate income statement
category to which they relate.
A Adjusted operating profit from continuing operations
Adjusted operating profit represents earnings from continuing operations
adjusted to exclude exceptional items and amortisation of acquired intangible
assets.
H1 25 H1 24
£m £m
Operating profit/(loss) from continuing operations on an IFRS basis 1.3 (3.4)
Amortisation of acquired intangible assets 0.5 0.5
Exceptional items 5.5 10.8
Adjusted operating profit from continuing operations 7.3 7.9
B Adjusted basic earnings per share
Adjusted earnings per share are the earnings attributable to equity
shareholders, excluding exceptional items and amortisation of acquired
intangible assets and discontinued operations divided by the weighted average
basic number of ordinary shares in issue. It has been calculated by dividing
the De La Rue plc's adjusted operating profit from continuing operations for
the period by the weighted average basic number of ordinary shares in issue
excluding shares held in the employee share trust.
H1 25 H1 24
£m £m
Loss attributable to equity shareholders of the Company (8.0) (12.2)
Amortisation of acquired intangible assets 0.5 0.5
Exceptional items 5.5 10.8
Tax on amortisation of acquired intangible assets (0.1) (0.1)
Tax on exceptional items (0.9) (4.1)
Adjusted loss attributable to equity shareholders of the Company from (3.0) (5.1)
continuing
Operations
Weighted average number of ordinary shares for basic earnings 196.0 195.6
H1 25 H1 24
pence per share pence per share
Continuing operations
Basic earnings per ordinary share on an IFRS basis (4.1) (6.2)
Basic adjusted earnings per ordinary share (1.5) (2.6)
Diluted adjusted earnings per ordinary share(1) (1.5) (2.6)
(1) As there is a loss from continuing operations attributable to the ordinary
equity shareholders of the Company for the period (£8.0m), the Diluted EPS is
reported as equal to Basic EPS, as no account can be taken of the effect of
dilutive securities under IAS 33.
C Net debt
Net debt is a non-IFRS measure. See note 8 for details of how net debt is
calculated.
D Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA represents earnings from continuing operations before the
deduction of interest, tax, depreciation, amortisation and exceptional items.
The EBITDA margin percentage takes the applicable EBITDA figure and divides
this by the continuing revenue in the period of £145.1m (H1 24: £161.5m).
The covenant test uses earlier accounting standards and excludes adjustments
for IFRS 16 and takes into account lease payments made.
H1 25 H1 24
£m £m
Loss for the period (7.0) (11.2)
Add back:
Profit on discontinued operations - -
Taxation 0.5 (5.6)
Net finance expenses 7.8 13.4
Profit/(loss) before interest and taxation from continuing operations 1.3 (3.4)
(Operating profit/(loss))
Add back:
Depreciation of property, plant and equipment and right-of-use assets 6.5 6.2
Amortisation of intangible assets 3.3 2.8
EBITDA 11.1 5.6
Exceptional items 5.5 10.8
Adjusted EBITDA 16.6 16.4
Revenue £m 145.1 161.5
EBITDA margin 7.6% 3.5%
Adjusted EBITDA margin 11.4% 10.2%
The adjusted EBITDA split by division was as follows:
Total of continuing operations
H1 25 Currency Authentication Central
£m £m £m £m
Operating profit/(loss) on IFRS basis 0.5 5.7 (4.9) 1.3
Add back:
Net exceptional items 0.6 - 4.9 5.5
Depreciation of property, plant and equipment and right-of-use assets 4.9 1.1 0.5 6.5
Amortisation of intangible assets 0.6 2.7 - 3.3
Adjusted EBITDA 6.6 9.5 0.5 16.6
Total of continuing operations
H1 24 Currency Authentication Central
£m £m £m £m
Operating (loss)/profit on IFRS basis (5.5) 5.8 (3.7) (3.4)
Add back:
Net exceptional items 6.9 0.2 3.7 10.8
Depreciation of property, plant and equipment and right-of-use assets
4.5 1.3 0.4 6.2
Amortisation of intangible assets 0.6 1.7 0.5 2.8
Adjusted EBITDA 6.5 9.0 0.9 16.4
E Adjusted controllable operating profit by division
Adjusted controllable operating profit represents earnings from continuing
operations of the on-going divisions adjusted to exclude exceptional items and
amortisation of acquired intangible assets and costs relating to the enabling
functions such as Finance, IT and Legal that are deemed to be attributable
only to the on-going two divisional structure model. Key reporting metrics for
monitoring the divisional performance is linked to gross profit and
controllable profit (being adjusted operating profit before the allocation of
enabling function overheads), with the enabling functional cost base being
managed as part of the overall business key objectives.
Total of continuing operations
H1 25 Currency Authentication Central
£m £m £m £m
Operating profit/(loss) on IFRS basis 0.5 5.7 (4.9) 1.3
Amortisation of acquired intangibles - 0.5 - 0.5
Net exceptional items 0.6 - 4.9 5.5
Adjusted operating profit 1.1 6.2 - 7.3
Enabling function overheads 11.2 5.3 (16.5) -
Adjusted controllable operating profit/(loss) 12.3 11.5 (16.5) 7.3
Total of continuing operations
H1 24 Currency Authentication Central
£m £m £m £m
Operating (loss)/profit on IFRS basis (5.5) 5.8 (3.7) (3.4)
Amortisation of acquired intangibles - 0.5 - 0.5
Net exceptional items 6.9 0.2 3.7 10.8
Adjusted operating profit 1.4 6.5 - 7.9
Enabling function overheads 12.7 5.1 (17.8) -
Adjusted controllable operating profit/(loss) 14.1 11.6 (17.8) 7.9
F Covenant Ratios
The following covenant ratios are applicable to the Group's banking facilities
as at 28 September 2024.
1. Covenant net debt to EBITDA ratio
For covenant purposes the Net debt/EBITDA ratio was required to be less than
or equal to 4.0 times until the Q4 2024 testing point. This then reduced to
less than or equal to 3.6 times from Q1 FY25 through to the end of the current
agreement to 1 July 2025.
The definitions of "covenant net debt" and "covenant EBITDA" are different to
those provided in note C and D above. These are defined below:
H1 25
£m
Gross Borrowings (129.6)
Cash and cash equivalents 20.2
Net debt (note 8) (109.4)
Trapped and other cash adjustments per banking facilities agreement (7.1)
Covenant net debt (116.5)
H1 25
£m
Adjusted EBITDA - FY24 39.3
Less: Adjusted EBITDA - H1 24 (note D) (16.4)
Add: Adjusted EBITDA - H1 25 (note D) 16.6
Adjusted EBITDA for 12 months to 28 September 2024 39.5
Adjustments per banking facilities agreement:
IFRS 16 leases adjustment (2.9)
Bank guarantee fees 1.2
Covenant EBITDA 37.8
H1 25
£m
Covenant net debt to EBITDA ratio 3.08
2. Covenant EBIT / net interest payable ratio
For covenant purposes the EBIT/net interest payable ratio is required to be
more than or equal to 1.0 times.
The definition of "covenant EBIT" and "covenant net interest payable" are
provided below:
H1 25
£m
Adjusted operating profit - FY24 21.0
Less: Adjusted operating profit - H1 24 (7.9)
Add: Adjusted operating profit - H1 25 7.3
Adjusted operating profit for 12 months to 28 September 2024 20.4
Adjustments per banking facilities agreement:
IFRS 16 leases adjustment (0.3)
Bank guarantee fees 1.2
Covenant EBIT 21.3
Less Add 12 months to
FY24 H1 24 H1 25 H1 25
£m £m £m £m
Interest on bank loans 12.3 (6.1) 6.3 12.5
Other, including amortisation of finance arrangement fees 3.7 (2.1) 2.5 4.1
Interest income (0.5) 0.1 (0.2) (0.6)
Adjustments per banking facilities agreement:
Exclude: arrangement fees (2.5) 1.6 (1.9) (2.8)
Exclude: other including amortisation of finance arrangement fees (0.2) 0.1 - (0.1)
Include: bank guarantee fees 1.2 (0.6) 0.6 1.2
Covenant net interest payable 14.0 (7.0) 7.3 14.3
H1 25
£m
Covenant EBIT / net interest payable ratio 1.49
Covenant test results as at 28 September 2024:
Test Requirement Actual at
28 September 2024
EBIT to net interest payable More than or equal to 1.0 times 1.49
Net debt to EBITDA Less than or equal to 3.6 times 3.08
Minimum liquidity testing Testing at each weekend point on a 4-week historical basis and 13-week forward No breaches
looking basis. The minimum liquidity is defined as "available cash and undrawn
RCF greater than or equal to £10m".
G Free cash flow
Free cash flow is a Key Performance Indicator for the Group and shows how much
cash is being generated for shareholders and is a metric used in assessment of
the Group's Performance Share Plan. Free cash flow is defined below:
H1 25 H1 24
£m £m
Cash (used in)/generated from operating activities (8.2) 16.6
Add back: Pension recovery plan payments 2.0 -
Deduct: Purchases of property, plant and equipment (net of grants received) (1.3) (0.8)
Deduct: Purchases of software intangibles and development assets capitalised (2.5) (2.1)
Deduct: Lease liability payments (1.5) (1.3)
Deduct: Interest paid (6.9) (8.3)
Free cash flow (18.4) 4.1
-ENDS-
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