De La Rue has reported “a good year”, and a big improvement in profitability at its Currency wing, in the first full year of the radical turnaround plan instigated by CEO Clive Vacher.
Announcing the group’s full year results today (26 May), Vacher said the turnaround initiative was “on track” and the group was “making good progress”.
After a tumultuous period involving disposals, closures and reorganisation, the security printing giant posted sales down 10.2% at £388.1m in the year to 27 March 2021.
Adjusted operating profit rocketed 60.8% to £38.1m, while the statutory figure was £14.5m due to exceptional charges of £22.6m, which reflected the “substantial asset impairment and reorganisation charges” related to the shuttering of banknote printing at its Gateshead facility.
Sales at its Currency wing were up 1.8% at £286.8m, while Authentication grew by 5.1% to £77.6m.
Identity Solutions sales slumped by nearly 70% at £23.7m, reflecting the controversial loss of the UK Passport contract and sale of its international Identity Solutions business.
The future focus for the group is on its Currency and Authentication businesses.
Currency was running at 100% capacity in the second half thanks to increased banknote volumes – despite the accelerated switch to card and contactless payments during the pandemic in some markets.
According to the Bank of England, the volume of banknotes in circulation has continued to increase despite the pandemic, rising from 3.96bn notes in 2020 to 4.54bn this year.
De La Rue is also expanding its UK banknote polymer manufacturing facility at its Westhoughton site.
Its Authentication wing has won £195m-worth of multi-year contracts since April 2022. Vacher reiterated the group’s ambitions for the operation to reach £100m of sales in the current financial year.
CFO Rob Harding explained that the drop in group profits following the disposal and completion of the passport contract was £12.2m, while Currency had shown a dramatic turnaround in fortunes.
“The Currency division’s profitability improvement jumps out,” he said.
“This division has shifted from a loss of £9.4m in the prior year to an operating profit of £16.2m this year, which is a huge improvement in underlying performance of £25.6m, and that’s really driving the overall group numbers.”
Regarding the potential for De La Rue to supply Covid status vaccination certificates or technology, which caused its share price to spike last year, Vacher moved to cool expectations.
He stated: “By design there hasn’t been much talk about it, because Covid-19 vaccine certificates do not form any part of our going forward business plan.
“That said, we continue to have a very strong offering in both the physical and digital space for such a certificate and we continue to offer them to governments.
“But, given the uncertainty of whether the government will choose to implement the scheme, and whether that scheme would then be compatible and they would choose us, we are fully focused on the turnaround scheme as we designed it.”
De La Rue took out £36m of annualised costs during the period, and Harding said the business continued to look at further efficiencies, and at ways to mitigate rising input costs.
“We are seeing headwinds in terms of some of our raw materials costs and prices, as a result of Brexit etc, but we are mitigating that impact proactively by looking at other cost saving opportunities – we’re not going to sit back with a £36m cost-out programme, we’re looking at further efficiencies to drive additional cost savings.”
De La Rue’s share price had risen sharply over the past week, and slipped slightly to 200.50p after the announcement.
The new polymer £50 note featuring Alan Turning, and printed by De La Rue at Debden, will enter circulation next month.
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