The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

17 June 2020

DE LA RUE

2019/20 FULL YEAR RESULTS AND PUBLICATION OF ANNUAL REPORT 2020

De La Rue plc (LSE: DLAR) ("De La Rue", the "Group" or the "Company") announces its full year results for the year ended 28 March 2020 (the "period", "FY" or "full year"). The comparative period was the twelve months ended 30 March 2019.

Financial Summary

FY 2019/20

FY 2018/19 (4)

Change

£m

£m

Adjusted revenue(3)*

426.7

516.6

-17.4%

Currency

281.6

398.9

-29.4%

Authentication

68.5

42.7

+60.4%

Identity Solutions

76.6

75.0

+2.1%

IFRS revenue

466.8

564.8

-17.4%

Gross profit

105.9

162.4

-34.8%

Adjusted operating expenses *(1)

(82.2)

(102.3)

-19.6%

Adjusted operating profit *(1)

23.7

60.1

-60.6%

IFRS operating profit

42.8

31.5

+35.9%

Adjusted EPS basic (p) *(2)

12.1p

42.9p

-71.8%

IFRS EPS basic from continuing operations (p)

33.1p

18.8p

+76.1%

Dividend per share (p)

-

25.0p

n/a

(1)

Excludes exceptional items net credits of £20.0m (FY 2018/19: net charges of £27.9m) and amortisation of acquired intangible

assets of £0.9m (FY 2018/19: £0.7m)

(2)

Excludes exceptional items net credits net of tax of £22.5m (FY 2018/19: net charges net of tax £23.7m) and amortisation of

acquired intangible assets net of tax of £0.7m (FY 2018/19: £1.0m)

(3)

Adjusted revenue figures were labelled as "excluding paper" in the FY 2018/19 release

(4)

Comparative Authentication and Identity Solutions results for FY 2018/19 have been restated in line with the adjustment noted

in note 2 to present the results of one of the Group's subsidiaries solely in the Authentication division consistent with where

management of the subsidiary's business now falls. The impact of this has been the transfer of the following amounts from the

Identity Solutions results to Authentication: Revenue of £3.4m, gross profit of £2.1m and operating profit and profit before tax of

£1.6m that would have been presented in the Identity Solutions division previously.

*

This is a non-IFRS measure. Adjusted revenue excludes "pass through revenue" relating to non-novated paper business contracts

where the group earns nil margin. See note 13 for reconciliation of non-IFRS measures to comparable IFRS measures.

FY 2019/20 financial performance

  • Adjusted revenue of £426.7m (FY 2018/19: £516.6m) and IFRS revenue (which includes "pass-through" revenue on paper and International Identity Solutions non-novated contracts) of £466.8m (FY 2018/19: £564.8m). Both were lower reflecting a decline in Currency volumes and average price which more than offset the significant increase in Authentication revenue. We saw broadly flat adjusted revenues in Identity Solutions as the impact of the sale of International Identity Solutions in October 2019 was mitigated by higher revenue on the UK Passport production contract during the period.

  • Gross profit of £105.9m (FY 2018/19: £162.4m), due to lower currency volumes and price, the sale of International Identity Solutions and negative manufacturing variances, more than offsetting the growth in Authentication and increased profits on the UK Passport production contract.

  • Adjusted operating expenses declined by £20.1m reflecting cost saving initiatives and the sale of International Identity Solutions.

  • Adjusted operating profit of £23.7m (FY 2018/19: £60.1m), resulting from a loss in Currency, driven by the decline in Currency volumes and margin, offset by increased profits in Authentication due to increased volumes and the benefit of increased profits from the UK Passport production contract.

  • IFRS operating profit of £42.8m (FY 2018/19: profit £31.5m) was higher than adjusted operating profit due mainly to a gain on the sale of International Identity Solutions of £25.3m (excluding associated disposal costs), and a credit of £8.7m relating to the change in revaluation rates for certain UK defined benefit pension deferred scheme members, offset by £9.3m of restructuring charges.

  • Adjusted basic EPS was 12.1p (FY 2018/19: 42.9p) and IFRS basic EPS from continuing operations was 33.1p (FY 2018/19: 18.8p).

  • Net debt of £102.8m (FY 2018/19: £107.5m), down £4.7m year on year, reflecting the proceeds from sale of International Identity Solutions, offset by negative working capital movements, final dividend payment, pension funding contributions and capital expenditure.

  • Net debt reduced by £67.9m since H1 2019/20, reflecting the sale of International Identity Solutions and an improved operating cash flow in H2.

  • The Group's UK defined benefit pension scheme moved to an IAS 19 accounting net surplus of £64.8m as at 28

    March 2020 (30 March 2019: £76.8m deficit).

Business update

  • Three-year Turnaround Plan announced in February 2020, which is focused on growth in both Authentication and Currency, and a cost reduction programme.

  • Already implemented actions expected to deliver £24.8m of annualised savings (out of the total £35.9m of annualised savings targeted under the Turnaround Plan).

  • Today announcing a consultation process in relation to a proposal to cease banknote printing at our Gateshead plant, while retaining current printing capacity.

  • Won two new customers in Currency for our security thread Ignite®, with strong demand for Currency.

  • The Qatar Central Bank will be the first central bank to issue our next generation security feature NEXUS™.

  • Strong growth in Authentication with good pipeline of upcoming tenders.

  • Mitigating actions taken to protect employees and insulate the business from the impact of the COVID-19 pandemic, with limited disruption experienced to date.

Proposed fully underwritten capital raising

  • Today we are separately announcing a proposed fully underwritten equity capital raising of approximately £100m gross proceeds through a firm placing and placing and open offer of, in aggregate, 90,909,091 new ordinary shares at an issue price of 110 pence per new ordinary share, subject to shareholder approval.

  • The Group intends to use the net proceeds raised from the proposed equity capital raising to fund the necessary investment to implement the Turnaround Plan.

Clive Vacher, Chief Executive Officer of De La Rue, said:

"I am pleased that we have seen increased utilisation of our factory capacity for Currency in the second half, alongside strong growth in Authentication and polymer throughout the year.

"We are now well underway with our plans to turnaround the Company, with opportunities to grow our revenue and reduce our cost base. Our cost cutting initiatives will enable us to compete harder in the currency market, while the development of security features and polymer will drive growth for this division. Authentication and polymer continue to show strong growth and we see an increasing pipeline of new opportunities.

"I would like to thank my colleagues who have worked hard to get the Company where it is today and we all recognise there is much more work to do. The £100m equity capital raising we are announcing today will strengthen the Group's balance sheet and help us deliver the Turnaround Plan, enabling De La Rue to create value for our employees, customers, suppliers and shareholders."

Today we are also announcing that Sabri Challah has informed the Board of his intention to step down as a Director due to his other commitments. Sabri will remain on the Board until such time as a successor Independent Non-Executive Director has been appointed, but in any event until no later than the date of the Company's forthcoming Annual General Meeting.

Until then, he will continue as the Senior Independent Director, but accordingly will not be standing for re-election at the Company's forthcoming Annual General Meeting.

De La Rue has today also made available its Annual Report and Accounts for the year ended 28 March 2020 (the "Annual Report 2020") on the Company's website,www.delarue.com.In accordance with Listing Rule 9.6.1, the Company has today submitted a copy of the Annual Report 2020 to the Financial Conduct Authority via the National Storage Mechanism and the Annual Report 2020 will shortly be available for inspection at:https://data.fca.org.uk/#/nsm/nationalstoragemechanism.In due course, a hard copy version of the Annual Report 2020 will be sent to those shareholders who have elected to receive paper communications, together with the Notice of Annual General Meeting 2020.

Certain of the information contained in this announcement is extracted from the Annual Report 2020 in accordance with the requirements of the DTR 4.1.3 and DTR 6.3.5.

Enquiries:

De La Rue plc

+44 (0)1256 605322

Clive Vacher

CEO

Rob Harding

Interim CFO

Paul Sharma

Head of Investor Relations

Brunswick

+44 (0)207 404 5959

Stuart Donnelly

Imran Jina

A conference call will take place at 9:00 am on 17 June 2020, which is also accessible via webcast onwww.delarue.com.

For the live webcast, please register atwww.delarue.com/investors/ where a replay will also be available subsequently.

The person responsible for the release of this announcement on behalf of De La Rue is Jane Hyde (General Counsel and Company Secretary).

PROPOSED FULLY UNDERWRITTEN EQUITY CAPITAL RAISING

Today we are announcing the terms of a proposed fully underwritten equity capital raising, which is intended to raise gross proceeds of approximately £100m. The capital raising will be structured by way a firm placing of 45,410,026 new ordinary shares and a placing and open offer of 45,499,065 new ordinary shares, at an issue price of 110 pence per new ordinary share.

The proposed equity capital raising is required to provide the Company and its management with operational and financial flexibility to implement the Turnaround Plan, in particular given the investment needed to achieve the full benefits of the Turnaround Plan, the upcoming refinancing requirement of its existing debt facilities, the loss of the UK Passport production contract during H1 2020/21 and the current unprecedented uncertainty in the financial and commercial markets. The equity capital raising is fully underwritten by Investec Bank plc, Numis Securities Limited and Barclays Bank PLC. Rothschild & Co is acting as sponsor and financial adviser.

The Group intends to use the net proceeds from the equity capital raising of approximately £92m to invest in the Turnaround Plan. The principal use of the proceeds will be to:

  • provide the investment required to grow the Authentication division, especially in respect of the provision of tobacco tax stamps compliant with the World Health Organisation's Framework Convention on Tobacco Control (FCTC);

  • cover the restructuring cash costs of the Group's accelerated cost reduction programme;

  • invest in new equipment to double the Currency division's capacity for polymer production;

  • finance footprint related capital expenditure in respect of the Group's overseas manufacturing sites; and

  • invest in the expansion of the Group's security features businesses (in respect of both the Currency and

    Authentication divisions).

The balance is expected to be used for general working capital purposes and/or to strengthen the Company's balance sheet.

For further details on the proposed capital raising, please see the Prospectus which is expected to be published later today and will be available atwww.delarue.com.

COVID-19

The Company has assessed, and continues to assess, the potential for disruption caused by the COVID-19 pandemic and has put in place plans and measures in order to enable the business to maintain normal operations, to the extent possible, against the backdrop of an evolving situation.

Within the UK and across many of the other countries in which the Group operates, many of the Group's products and services are considered by customers, governments and other relevant stakeholders to be essential to the underpinning of trade integrity, personal identity and/or the movement of goods. Despite the wider global impact of the COVID-19 pandemic:

  • The Group's manufacturing sites have continued to operate with only moderate disruption;

  • The Group's supply chain and distribution network have remained robust;

  • The Group's order book remains strong; and

  • The Group remains committed to implementing its Turnaround Plan.

The Group has nevertheless implemented actions to mitigate the impact of COVID-19, including steps to protect its employees in line with guidance from governments, and whilst there remains considerable uncertainty in relation to the COVID-19 pandemic (including in relation to its duration, extent and ultimate impact), the Board believes that the Group's operations will continue to experience only limited disruption due to the impact of the COVID-19 pandemic and that such disruption will continue to diminish in the coming months.

Limited business disruption

All four of our UK sites have continued to operate with minimal disruption, remaining fully operational, while implementing necessary safe working practices. Our Malta site has continued to operate without disruption, with record production output achieved in the final month of FY 2019/20. Our Kenya site has remained operational on a reduced shift pattern and the site's production has experienced only minimal disruption. Operations at our site in Sri Lanka, which were suspended for eight weeks, are now operational at slightly lower capacity.

Within the Group's Authentication division, volumes under existing brand and government revenue solutions are stable despite the COVID-19 pandemic. Manufacturing facilities have been able to fulfil increased demand from some of the Group's material customers, where short-term peaks have required a response to COVID-19 impacts in their supply chains. De La Rue's brand protection expertise has been selected by an international customer to authenticate and protect its COVID-19 testing kits that are being shipped around the world, and it has developed existing physical and digital solutions to provide a COVID-19 immunity certification scheme.

The Group's Currency division is witnessing strong global demand for currency, as central banks seek to increase stock levels during and after the COVID-19 pandemic. This has resulted in a number of significant opportunities for the Group's Currency division which are being actively pursued and the Board believes that this strong demand for currency will continue for the remainder of FY 2020/21.

Across the Group's Currency and Authentication divisions, there has been some evidence of the COVID-19 pandemic delaying customers' processes for approving new contracts and orders with the Group. However, set against the new opportunities that COVID-19 presents for the Group, the impact of these delays on the Group's order book has been minimal and the Group's order book continues to be strong.

Our supply chain across both our Currency and Authentication divisions has remained materially unaffected since the outbreak of the COVID-19 pandemic. Throughout the duration of the COVID-19 pandemic, the Currency division's supply chain has remained fully functional and the Authentication division's supply chain has suffered no material disruption, with it also being able to pass on the majority of increased air freight costs to relevant customers.

BUSINESS UPDATE

Group reorganisation

In these results, we report on the financial performance of the Currency, Authentication and Identity Solutions divisions (see pages 12 and 13), reflecting our operating structure after our realignment of the Group in November 2019 and the sale of International Identity Solutions in October 2019. We have seen a significant level of senior management change in FY 2019/20, in addition to Board changes (please see page 13).

In November 2019, we realigned the Group into two ongoing divisions focused on:

  • Authentication: the supply of products and services to support businesses in protecting their revenue streams, product supply chain and brand; the supply of products and services to governments which authenticate goods as genuine and to assure tax revenues; and the provision of security components for the identity industry.

  • Currency: encompassing our banknote print, security features for currency and polymer product lines, focused on the provision of finished banknotes, as well as security features/banknote substrate into central banks and state print works.

In order to provide increased insight into the underlying performance of our business, we have reported revenue, gross margin and operating profit on an IFRS and adjusted basis for each of our two divisions.

On 14 October 2019, we completed the sale of our International Identity Solutions business to HID Corporation Limited, an ASSA ABLOY Group company, for a cash consideration of £42m on a cash-free, debt-free basis.

We continue to work with Her Majesty's Passport Office on the phased transition to the new supplier for the UK Passport production contract during H1 2020/21. As a result of the above, we expect lower revenue for Identity Solutions during FY 2020/21 and none for FY 2021/22.

Turnaround Plan

On 25 February 2020, we announced details of a turnaround plan for the Company (the "Turnaround Plan"), which is based on more than three months' data-driven intensive work by an extended leadership team and covers the three-year period from FY 2020/21 to FY2022/23 inclusive.

The Turnaround Plan is targeting improved and sustainable profitability in the Currency division, driven by cost reductions, and investment in polymer and related features where there are attractive market growth opportunities. We are also targeting continued strong year-on-year growth of the Authentication business during the three-year period of the Turnaround Plan, driven by further, largely project related, investment.

The Turnaround Plan has the following key elements, which will enable De La Rue to grow with an efficient and appropriate cost structure:

  • Cost reduction: The Company is enacting an accelerated cost reduction programme with a substantive proportion scheduled to complete by August 2020. Targeted savings on an annualised basis from H2 2020/21 will be approximately £35.9m, including actions already realised in FY 2019/2020 which are expected to secure £24.8m of annualised savings. This will significantly exceed and accelerate previous cost reduction commitments of £20m by FY 2021/22. The Company's cost structure will be re-based to enable it to compete more strongly across all its market segments, allowing it to tender for currency orders it would previously have declined, and to improve margins on existing work. In addition, in FY 2019/20 central costs represented approximately 8% of Group revenue (these costs being allocated to divisional adjusted operating profit by revenue in FY2019/20). As a result of the actions outlined above, we expect these central costs to reduce to approximately 6% of Group revenue in FY 2022/23. From FY 2020/21, we expect the allocation of central costs by division to reflect the ongoing changes in the organisation as we implement the Turnaround Plan. Divisional adjusted operating margins referred to below are stated before these central costs. The restructuring cash costs for the cost reduction actions within the Turnaround Plan will be approximately £16m in FY 2020/21.

  • Currency market leadership: The Turnaround Plan is targeting improved and sustainable profitability in the Currency division, focusing on: improving profitability of banknotes, protecting and growing the Group's paper security feature position, converting the world to polymer and being the market leader, and investing in R&D in polymer security features and leapfrogging the competition. De La Rue has established a leading position in polymer: since 2013, 83 per cent of issuing authorities who have issued banknotes on polymer globally have selected De La Rue Safeguard®. The Bank of England £20 note released in February 2020 represented the 42nd banknote worldwide that De La Rue has secured on

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De La Rue plc published this content on 17 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 June 2020 06:06:06 UTC