TIDMDLAR

RNS Number : 3959G

De La Rue PLC

25 November 2020

25 November 2020

DE LA RUE

2020/21 HALF YEAR RESULTS

Turnaround Plan on track

De La Rue plc (LSE: DLAR) ("De La Rue", the "Group" or the "Company") announces its half year results for the six months ended 26 September 2020 (the "period", "H1" or "half year"). The comparative period was the six months ended 28 September 2019.

H1 2020/21 highlights:

   --      Adjusted operating profit significantly improved at GBP15.3m (H1 2019/20: GBP2.2m) 
   --      Positive operating cash flow 
   --      Cost reduction programme on track to contribute GBP23m of savings in FY 2020/21 
   --      Authentication orders secured with total lifetime contract value exceeding GBP120m 
   --      Currency 100% full for banknote printing in H2 2020/21 
   --      GBP100m equity capital raise completed July 2020 
   --      Exclusive Bank of England banknote printing contract extended to 2028 
   --      Net debt reduced to GBP21.6m (H1 2020/21: GBP170.7m; FY2020/21: GBP102.8m) 
 
 Financial Summary 
                                                               H1 2020/21     H1 2019/20   Change 
                                                                  GBPm           GBPm         % 
====================================  ====================  =============  =============  ======= 
 
 Adjusted Revenue(1)(5)                                         174.7          205.9       -15.1% 
                                     Currency                   126.0          128.7       -2.1% 
                                     Authentication              31.7           34.9       -9.2% 
                                     Identity Solutions          17.0           42.3       -59.8% 
 IFRS Revenue                                                   179.7          232.3       -22.6% 
 Gross Profit                                                    49.4           51.3       -3.7% 
 Adjusted operating profit(2)(5)                                 15.3           2.2        595.5% 
 IFRS operating profit/(loss)                                    4.6           (9.2)        n/a 
 Net debt(5)                                                     21.6          170.7        n/a 
 
 Adjusted EPS basic (p)(3)(5)                                    6.5p        (1.4)p(4)      n/a 
 IFRS EPS basic (p)                                              1.0p        (9.8)p(4)      n/a 
==========================================================  =============  =============  ======= 
 
 
 
 

H1 2020/21 financial performance

 
      --   IFRS revenue (including "pass-through" revenue on paper contracts) 
            of GBP179.7m (H1 2019/20: GBP232.3m) and adjusted revenue of GBP174.7m 
            (H1 2019/20: GBP205.9m) reduced mainly due to the decline in Identity 
            Solutions revenue as a result of the sale of the International Identity 
            Solutions business in October 2019 and the run-off of the UK Passport 
            contract. Authentication revenue was lower mainly due to GBP1.6m 
            of contracts reported in the prior year related to the International 
            Identity Solutions business sold in H2 2019/20 (see page 11 for further 
            details), and COVID-19 related impact on two contracts. 
      --   Gross profit of GBP49.4m (H1 2019/20: GBP51.3m) reflecting lower 
            Identity Solutions gross profit following the UK Passport contract 
            cessation and the sale of the International Identity Solution business, 
            together with increased efficiencies in Currency and lower Authentication 
            gross profit on reduced volumes. Total gross profit for our two ongoing 
            divisions, Authentication and Currency, grew to GBP38.1m (H1 2019/20: 
            GBP34.1m). 
      --   Adjusted operating profit of GBP15.3m (H1 2019/20: GBP2.2m), represents 
            significant improvement resulting from the ongoing implementation 
            of the Turnaround Plan, including benefits from the reorganisation 
            and cost reduction programmes. 
      --   IFRS operating profit of GBP4.6m (H1 2019/20: loss GBP9.2m) is stated 
            after net exceptional items charges of GBP10.2m. 
      --   Net debt of GBP21.6m (H1 2019/20 GBP170.7m, FY 2019/20: GBP102.8m), 
            reduction principally due to equity capital raise (see note 9 to 
            the financial statements for details of net debt calculation), offset 
            in part by cash spend on the Turnaround Plan. 
 

Business update

 
      --   Authentication awarded contracts of total multi-year lifetime value 
            exceeding GBP120m in year to date, with new contracts delivering 
            revenue in H2 2020/21. Authentication re-iterates guidance for 
            GBP100m in revenue in FY 2021/22. 
      --   Currency expects to utilise 100% of its available polymer and banknote 
            printing capacity for FY 2020/21 with expected improved higher 
            revenue and margin mix in second half. 
      --   Actions taken to deliver cost savings of approximately GBP23m during 
            FY 2020/21 and approximately GBP36m of annualised total savings. 
      --   Completed the GBP100m equity capital raise on 7 July 2020, strengthening 
            the Group's balance sheet. 
      --   Debt facilities were extended to December 2023, and the Company 
            renegotiated Pension scheme deficit contributions. 
      --   Company continues to manage business effectively during the COVID-19 
            pandemic. 
 

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

"Our first half results have shown a substantial improvement in the Group's performance, with very strong growth in adjusted operating profit as we increase efficiencies, resulting in positive cash generation from operating activities. I am satisfied with the progress of the Turnaround Plan so far, which is yielding positive improvements across the company.

"Our two ongoing divisions, Authentication and Currency, are performing well. We are building strong order books and have secured a number of important strategic wins in the first half of the year.

"I am impressed by the dedication and resilience of De La Rue's employees, particularly in their execution of the transformation during the COVID-19 pandemic.

"Trading for the financial year 2020/21 has been positive, with the outlook for revenue, adjusted operating profit and net debt for the full year in line with the Board's expectations."

 
 1.   This is a non-IFRS measure. Adjusted revenue excludes "pass-through" 
       revenue relating to non-novated paper and International IDS business 
       contracts where the Group earns nil margin. Presentation of adjusted 
       revenue more meaningful understanding of the underlying performance 
       of the business. See note 17 for further explanations and reconciliation 
       to the comparable IFRS measures. 
 2.   Excludes exceptional items net charges of GBP10.2m (H1 2019/20: 
       net charges of GBP11.0m) and amortisation of acquired intangible 
       assets of GBP0.5m (H1 2019/20: GBP0.4m). 
 3.   Excludes exceptional item net charges net of tax of GBP7.8m (H1 
       2019/20: net charges of GBP9.2m) and amortisation of acquired 
       intangible assets net of tax of GBP0.4m (H1 2019/20: GBP0.3m). 
 4.   Restatement of earnings per share reflects adjustments associated 
       with the Rights Issue with regards to weighted average number 
       of shares. 
 5.   This is a non-IFRS measure. Amortisation of acquired intangible 
       assets is a non-cash item, while exceptional items are considered 
       to be items of income and expenditure which are both material 
       by size/or by nature and not representative of normal business 
       activities. Adjusted revenue excludes "pass-through" revenue 
       relating to non-novated paper business contracts where the Group 
       earns nil margin. By excluding these items from the adjusted 
       operating profit and EPS metrics, the Directors are of the opinion 
       that these measures give a more meaningful understanding of the 
       underlying performance of the business. See note 17 for further 
       explanations and reconciliation to the comparable IFRS measures. 
       See note 9 to the financial statements for details of the net 
       debt calculation). 
 

Enquiries:

 
 De La Rue plc      +44 (0) 7387 122645 
 Clive Vacher       Chief Executive Officer 
 Rob Harding        Chief Financial Officer 
 Matthew Rose       Director of Tax, Treasury and Investor 
                     Relations 
 
 Brunswick          +44 (0) 207 404 5959 
 Stuart Donnelly 
 Imran Jina 
 
 

A conference call will take place at 9:00 am on 25 November 2020, which is accessible via webcast on www.delarue.com .

For the live webcast, please register at https://www.delarue.com/investors/results-and-reports where a replay will also be available subsequently.

De La Rue plc's LEI code is 213800DH741LZWIJXP78.

BUSINESS UPDATE

Group reorganisation

In these results, we report on the financial performance of the Currency, Authentication and Identity Solutions divisions, reflecting the sale of International Identity Solutions in October 2019 and our operating structure after our realignment of the Group in November 2019. 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 the Group, as well as gross profit, and adjusted operating profit for all divisions, together with adjusted controllable operating profit (before enabling function cost allocation) for the current period (see note 17 for definition of controllable operating profit and reconciliation to equivalent IFRS measure).

We have worked with Her Majesty's Passport Office (HMPO) on the completion of the transition of the UK Passport contract during H1 2020/21. As a result, we expect substantially lower revenue from H2 2020/21 onwards and minimal revenue for Identity Solutions during FY 2021/22 compared to the prior year, with an expected cash outflow as we make rebate payments related to this contract. These rebate payments have been accrued to the income statement over the life of the contract.

We note that the UK Passport contract provided a significant proportion of the adjusted operating profit for Identity Solutions and the Group in H1 2020/21 and will contribute substantially lower profits from H2 2020/21 onwards.

On 25 February 2020, we announced details of the Turnaround Plan (the "Turnaround Plan") for the Company and progress to date on the elements of the Turnaround Plan is set out immediately below:

Cost reduction : The Group has taken actions that will contribute targeted savings on an annualised basis from H2 2020/21 of approximately GBP36m. Actions taken in FY 2020/21 are expected to contribute GBP23m of annualised savings during FY 2020/21, with a further GBP7m been identified. Actions taken in FY 2019/2020 contributed GBP6m of savings. The restructuring cash costs for the cost reduction actions within the Turnaround Plan will be approximately GBP16m in FY 2020/21.

In FY 2019/20, enabling function costs represented approximately 8% of Group revenue (these costs being allocated to divisional adjusted operating profit by revenue in FY2019/20). With significantly reduced revenues, this will remain at 8% this year before reducing to approximately 6% of Group revenue in FY 2022/23.

Authentication; Authentication is focused on providing physical and digital solutions to authenticate products through the supply chain and to provide tracking of excisable goods to support compliance with government regulations. Working across the commercial and government sectors, we address consumer and brand owner demand for protection against counterfeit goods. De La Rue is targeting Authentication division revenues of GBP100m by FY 2021/22, with strong operating margins and strong year-on-year growth in this division during the three-year period of the Turnaround Plan, as more countries adopt tobacco tax stamp schemes to comply with the World Health Organisation (WHO) Framework Convention on Tobacco Control (FCTC).

The traditional tax stamp market covering tobacco and alcohol has evolved to include digital solutions and tobacco track-and-trace. The combined physical and digital solutions provided by the Group support governments to protect tax revenue and to comply with intergovernmental policies and international treaties such as the EU Tobacco Products Directive and the World Health Organisation FCTC.

In the first half we have signed multi-year contracts with lifetime values of more than GBP120m. Our brand protection business performed in line with expectations in H1 2020/21, despite two contracts having been impacted with reduced volumes as a result of the pandemic. These are expected to recover with the remainder of the Group's contracts delivering volumes in line with, or higher than, expectations.

We expect year-on-year revenue growth for Authentication during H2 2020/21, as we begin production of tax stamps for our new contract in Ghana and complete the software implementation for the HMRC ID Issuer contract.

We are in discussions with several governments regarding the roll-out of tobacco and drinks tax stamp schemes and in early discussion regarding COVID-19 immunity certification schemes. We continue to invest in software capabilities, service provision and R&D focused on IP generation and are exploring blockchain technologies

Currency: The Currency division is focused on: improving profitability of banknote production, 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.

De La Rue has established a leading position in polymer, with the number of circulating polymer banknotes more than tripling since the first banknote was introduced on SAFEGUARD(R) in 2013. Around 85% of new polymer banknote denominations issued in 2020 have also been on SAFEGUARD(R) and more than half of these have contained a De La Rue hologram in the window of the polymer banknote. De La Rue is also responsible for the design and manufacture of the Bank of England's new GBP50 banknote due for release in 2021.

At the end of H1 2020/21, approximately 3% of the world's banknotes by volume and 12% by denomination had moved to polymer, up from 11% at the start of the financial year. A cornerstone of the Company's strategy is investing in, and supporting customers with, the significant trend of transition from paper to polymer notes. The Turnaround Plan targets a mid-teens adjusted controllable operating profit margin for the Currency division from FY 2020/2021, (before allocation of enabling function overhead - see note 17 for definition of adjusted controllable operating profit and reconciliation to comparable IFRS measure).

H1 2020/21 profitability in banknotes has improved through the delivery of cost reductions and manufacturing efficiencies.

The Currency division continues to see strong ongoing global demand for cash as central banks seek to increase stock levels during the pandemic. We expect to utilise 100% of our remaining available polymer and banknote printing capacity for FY 2020/21 with the mix in banknotes delivering higher revenue and margin during H2 2020/21.

In paper security features, thread sales continue to grow and new banknotes containing KINETIC STARCHROME(R), PUREIMAGE(TM), IGNITE(R) and NEXUS(TM) are expected to be issued into circulation over the next 12 months.

On 30 October 2020, we announced that the Bank of England ("the Bank") has confirmed it will exercise its option to extend its existing banknote print contract by three years, maintaining De La Rue's exclusivity in printing Bank of England banknotes and operating the Bank's facility in Debden, Essex, until 2028.

Gateshead restructuring

On 17 June 2020, we announced our decision to cease banknote printing at our Gateshead site, while retaining some core services and roles at the site. The banknote printing operations will cease at Gateshead in December 2020. UK Passport operations, also in Gateshead, ceased operations during H1 2020/21,

These actions will not lead to a reduction of the Company's worldwide printing capacity. Following a period of transition and the relocation of equipment from Gateshead to other sites, we will retain the same capacity while operating with four currency print factories, down from five.

OUTLOOK

The Directors believe that the equity capital raising provides the Company and its management with operational and financial flexibility to implement the Turnaround Plan.

We have a target of returning the Company to a strong, financial position and an operating platform which will deliver sustainable growth at high operating margins and strong cash generation in the medium term. Following an initial period of cash outflow to fund the Turnaround Plan, by the end of the Turnaround Plan in FY 2022/23, we aim for the Group to be generating positive free cash flow and capable of supporting sustainable cash dividends to shareholders.

Trading for the financial year 2020/21 to date has been positive, with the outlook for revenue, adjusted operating profit and net debt for the full year in line with the Board's expectations.

EQUITY CAPITAL RAISING, DEBT REFINANCING AND PENSION RECOVERY PLAN

De La Rue completed a GBP100m gross (pre-costs) and GBP92.9m (post-costs) equity capital raising on 7 July 2020, strengthening the Group's balance sheet and enabling the Company to deliver the Turnaround Plan.

Effective 7 July 2020, the Group amended the terms of its Bank facilities of GBP275m. This extended the maturity date of the Revolving Cash Facility ("RCF") to December 2023 and included an RCF cash drawdown component of up to GBP175m and bond and guarantee facilities of a minimum of GBP100m.

The Company agreed the terms for a schedule of contributions and a recovery plan, setting out a programme for clearing the UK Pension Scheme deficit (the "Recovery Plan"). As a result of the Recovery Plan pension contributions for H2 2020/21 were GBP7.7m (H1 2019/20: GBP10.7m).

EQUITY CAPITAL RAISE AND DEBT REFINANCING COSTS

Total costs relating to the equity capital raising and bank refinancing were GBP15.1m, broken down as follows:

 
      --   Costs related to the equity capital raise of GBP7.1m have been 
            presented as a reduction to equity within the Balance Sheet; 
      --   Transaction costs related to the debt refinancing of the Group's 
            amended Revolving Credit Facility of GBP4.8m have been capitalised 
            on the balance sheet and will be amortised over the periods until 
            1 December 2023 (and which are excluded from Interest for covenant 
            purposes), and: 
      --   Further costs totalling GBP3.2m have been recorded in exceptional 
            items within the income statement, which includes GBP0.7m relating 
            to the write-off of the unamortised balance of the prepaid loan 
            arranging fees relating to the original RCF prior to amendment 
            of terms. 
 

COVID-19

In 2018, as part of the ongoing business continuity and risk planning activities of De La Rue, the company drew up a pandemic Business Continuity Plan, which has proved effective in the response to 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.

The Group has 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.

During H1 2020/21, all four of our UK sites, and our Malta and Kenya sites have continued to operate with minimal disruption and remained fully operational. Operations at our site in Sri Lanka were suspended for eight weeks between March and May 2020 due to island-wide governmental restrictions.

Our supply chain across both our Currency and Authentication divisions has remained materially unaffected since the outbreak of the COVID-19 pandemic, due to robust and Group led incident management framework.

The Group has received furlough grants of GBP0.4m from the UK Government during the period for employees who were unable to operate in their roles fully due to the impact of COVID-19. The group has recorded the furlough grants as a credit to adjusted operating expenses, however, notwithstanding the limited impact of COVID-19 on the Group, the losses incurred by the Group due to Covid-19 are in excess of the amount of furlough grant received.

BREXIT

We have been undertaking preparations for Brexit since 2018 and have held frequent risk reviews and updates, and enact contingency measures to ensure preparedness and business continuity.

We have engaged with key suppliers relating to their Brexit contingency planning, conducted regular contractual reviews and analysed known tariff and free trade access changes. We continue to actively review the latest positions on trade negotiations and assess the impact this may have on the Group. We are analysing HMRC and other European country published technical notices and their positions on customs, excise and VAT as applicable and aim to adapt processes and systems as part of measures to mitigate the impact of a No-Deal scenario. We have reviewed and aligned contingency stocks and adapted logistics and delivery timescales to avoid the potential risks of congestion and other related supply chain risks.

.

FINANCIAL RESULTS OVERVIEW

We have seen a stabilisation in the market during H1 2020/21 for Currency, with less pricing pressure compared to the previous year combined with a weaker product mix, offset by increased volumes, resulting in adjusted revenue broadly unchanged at GBP126.0m (HY 2019/20: GBP128.7m). Authentication revenue saw a decline in revenue at GBP31.7m (H1 2019/20: GBP34.9m, the most significant factor being GBP1.6m of contracts reported in the prior year related to the Identity Solutions business sold in H2 2019/20 and weakness in two contracts due to the pandemic which are expected to recover offsetting growth elsewhere. As expected, we also saw a decline in adjusted revenue for Identity Solutions in H1 2020/21, due to the impact of the sale of International Identity Solutions in October 2019 and the completion of the UK Passport production contract during the period. Identity Solutions IFRS revenue declined by 60.7% and included GBP0.4m of "pass through" revenue on non-novated contracts post sale.

Group IFRS revenue declined by 22.6% to GBP179.7m (H1 2020/21: GBP232.3m), showing a higher rate of decline than in adjusted revenue, due to substantially lower "pass-through" revenue on paper of GBP4.6m (H1 2020/21: GBP26.4m) as the contracts covered by this arrangement are now largely completed. The Group also reported a small amount (GBP0.4m) of pass-through revenue relating to non-novated International Identity Solutions contracts following the sale of this business in October 2019.

Gross profit was GBP49.4m (H1 2020/21: GBP51.3m), reflecting growth in Currency due mainly to increased efficiencies, lower Authentication gross profitability on reduced volumes, and lower Identity Solutions profitability following the UK Passport contract completion and the sale of the International Identity Solution business.

Adjusted operating expenses excluding the impact of exceptional items and amortisation of acquired intangibles were GBP34.1m, GBP15.1m lower than the prior period (H1 2020/21: GBP49.2m), reflecting the fall in adjusted operating expenses following the benefit of our cost reduction initiatives, the sale of the International Identity Solutions business in October 2019 and the completion of Her Majesty's Passport Office (HMPO) contract.

Adjusted operating profit of GBP15.3m (H1 2019/20: profit GBP2.2m) reflected the benefit of lower adjusted operating expenses. Our two ongoing operating divisions adjusted operating profit was GBP6.4m (H1 2020/21: loss GBP3.9m) an improvement of GBP10.3m year-on-year.

IFRS operating profit of GBP4.6m (H1 2020/21: loss GBP9.2m) was lower than adjusted operating profit due to the recognition of net exceptional item charges of GBP10.2m. Further details are provided below.

Adjusted basic EPS was 6.5p (H1 2019/20 (restated): (loss) 1.4p) and IFRS basic EPS from continuing operations was 1.0p (H1 2019/20 (restated): (loss) 9.8p), the growth reflecting higher profits in H1 2020/21 compared to H1 2019/20, the benefit of which was mitigated by the higher weighted average share numbers post the equity raise.

Cash generated from operating activities was an inflow of GBP4.8m (H1 2019/20: outflow GBP32.2m), as profits from operating activities were partly offset by an adverse working capital movement of GBP3.4m (for further detail see below) and pension funding contributions of GBP7.7m. Cash generated from operating activities is also stated after approximately GBP5.0m of payments relating to exceptional items and discontinued operations.

The total net cash inflow including net proceeds of GBP92.9m from the equity capital raise, but excluding GBP74.3m of net repayments on Group borrowings in the period was GBP81.2m (H1 2019/20: outflow of GBP63.2m), and includes proceeds from the sale of a non-operational property of GBP2.7m, offset by capital expenditure of GBP8.6m, payments of GBP4.8m of transaction costs in relation to the debt refinancing and net interest payments of GBP3.1m. The total net increase in cash and cash equivalents in the period was GBP6.9m (FY 2019/20: decrease of GBP3.7m).

As at 26 September 2020, EBIT/net interest payable was 6.0 times (covenant of >=2.4 times in this financial year), and net debt/EBITDA was 0.45 times (covenant of <=3.0 times), as calculated in accordance with banking covenant definitions.

OPERATING PROFIT AND OPERATING COSTS

Adjusted operating profit in H1 2020/21 was GBP15.3m (H1 2019/20: GBP2.2m) and reflected :

 
      --   A profit of GBP2.5m in Currency (H1 2019/20: loss of GBP12.5m) 
            resulting from a higher gross margin owing to improved production 
            efficiencies and reduced overheads, including the benefit due 
            to the reorganisation following the move to a divisional structure; 
      --   A profit in Authentication of GBP3.9m a reduction on the prior 
            year (H1 2019/20: GBP8.6m) reflecting mainly the divisional 
            cost structure in H1 2020/21 compared to the allocation methodology 
            in H1 2019/20, and reduced gross profit on lower volumes and; 
      --   A profit in Identity Solutions of GBP8.9m (H1 2019/20: GBP6.1m), 
            which will be substantially lower in H2 2020/21 and minimal 
            in FY 2021/22 following the sale of International Identity Solutions 
            and the termination of the UK Passport production contract. 
 

On an IFRS basis, an operating profit of GBP4.6m was recorded (H1 2019/20: loss of GBP9.2m) including, in addition to the factors referred to above, net exceptional charges of GBP10.2m, which primarily related to restructuring charges associated with cessation of banknote production at our Gateshead facility, those related to other cost out initiatives including the restructuring of our central enabling functions, and certain costs related to the equity capital raise and debt refinancing completed in July 2020. Please see note 4 'Exceptional Items' below for more details.

On 14 October 2019, the Group disposed of its International Identity Solutions business. In November 2019, the Group moved from a functional to a divisional operating structure and completed a major reorganisation. Employees from the previous Group-wide functions moved to new roles within the new Currency and Authentication divisions or remained with enabling functions such as legal and finance. The cost base and structure following this reorganisation in H1 2020/21 is materially different to in H1 2019/20, reflecting the above. The Group from FY 2019/20 also changed its methodology for the allocation of enabling function costs into the divisions.

The group has considered the requirements of IFRS 8 with regards to the need to restate prior period segmental results and concluded that the Group is unable to make this restatement because the data is not available and the cost to develop it would be excessive. This is due to the cost base and employee structure of the business under the previous functional model being materially different to the new divisional structure. Therefore, it is not possible to undertake a like-for-like reallocation of costs for new divisions for the comparative period. Although comparatives have not been restated, in the commentaries included in this release, we have provided commentary on the changes in divisional cost base, to enable a year-on-year performance by division.

Due to the substantial changes that have occurred in the divisional structure, key reporting metrics for monitoring the divisional performance will be linked, going forward, to gross profit and adjusted controllable profit (before the allocation of enabling function overheads), with the enabling functional cost base being managed as part of the overall business key turnaround objectives.

Adjusted operating costs are stated net of furlough grant income of GBP0.4m received from the UK Government during the period for employees who were unable to operate in their roles fully due to the impact of COVID-19. The losses incurred by the Group due to COVID-19 are in excess of the amount of furlough grant received.

FINANCE CHARGE

The Group's net interest charge was GBP3.0m (H1 2019/20: GBP2.2m), excluding IAS 19 and IFRS 16 finance amounts and interest income due from the loan notes and preference shares obtained as part of the disposal of Portals paper. The Finance Charge reflects the revision to the available facilities from 7 July 2020 and includes fees for Advance Payment Guarantees consistent with the treatment in prior periods.

The IAS 19 related finance income/charge, which represents the difference between the interest on pension liabilities and assets was a credit of GBP0.8m (H1 2019/20: charge of GBP0.8m), due the opening pension valuation on an IAS 19 basis as at 29 March 2020 being a net surplus of GBP64.8m.

The financing charge associated with lease liabilities recorded under IFRS 16 in H1 2020/21 was GBP0.3m and was in line with the amount reported in H1 2019/20.

Interest due on the loan notes and preference shares held in Mooreco Limited (obtained as part of the consideration for the Portals paper disposal) amounted to GBP0.4m (H1 2019/20: GBP0.4m). The loan notes and preference shares are included in the balance sheet as Other Financial Assets.

The total Group net finance charge was GBP2.1m (H1 2019/20: GBP2.9m).

EXCEPTIONAL ITEMS

Exceptional items during the period were a net charge of GBP10.2m (H1 2019/20: net charge of GBP11.0m).

Exceptional items include the recognition of GBP8.1m of restructuring charges related to cessation of banknote production at our Gateshead facility and a further GBP1.2m of charges relating to other cost out initiatives including the restructuring of our central enabling functions. Exceptional items also included charges of GBP3.2m relating activities on the equity raise and bank refinancing completed in July 2020 which, whilst directly associated with these projects, did not relate to activities which in accordance with IFRS would qualify for recording in equity or capitalisation on the balance sheet as transaction costs associated with the debt refinancing. A credit of GBP2.7m was also included within exceptional items relating to the sale of a non-operational property owned by the Group. Please see note 4 'Exceptional Items' below for more details.

TAXATION

The net tax credit in respect of continuing operations for the first half was GBP0.5m (H1 2019/20: tax credit GBP2.0m). The effective tax rate on continuing operations before exceptional items and the amortisation of acquired intangibles was 15.5% (H1 2019/20: 16.4%). The effective tax rate for FY 2020/21 on continuing operations before exceptional items and amortisation of acquired intangibles is expected to be between 16-17%.

Net tax credits relating to exceptional items in the period were GBP2.4m (H1 2019/20: GBP1.8m). A tax credit of GBP0.1m (H1 2019/20: GBP0.1m) was recorded in respect of the amortisation of acquired intangibles.

EARNINGS PER SHARE

The equity capital raise in July 2020 increased the basic weighted average number of shares for earnings per share (EPS) purposes to 149.6m (HY 2019/20 (restated): 113.5m). IFRS basic earnings per share (EPS) was 1.0p (H1 2019/20 (restated): loss 9.8p) and adjusted basic EPS was 6.5p (H1 2019/20 (restated): loss 1.4p). The growth reflects higher profits in H1 2020/21 compared to H1 2019/20, the benefit of which was mitigated by the higher weighted average share numbers post the equity raise.

CASH FLOW AND BORROWING

Cash flow from operating activities was a net inflow of GBP3.3m (H1 2019/20 outflow of GBP32.2m). The inflow included:

   --      An adverse net working capital movement of GBP3.4m (H1 2019/20: outflow GBP35.1m) due to: 

o a build in inventory (negative impact GBP3.6m), mainly within Currency, which in part was attributable to changes in the delivery schedule on a significant contract;

o a decrease in receivables (positive impact GBP7.6m) mainly reflecting a positive working capital movement on trade receivables and contract assets (GBP9.8m), an inflow in relation to derivative assets (GBP7.6m), offset by a cash collateral balance taken out relating to a material new Currency sales contract; and

o a reduction in payables (negative impact GBP7.4m) due to timing of trade creditor payments which was partially offset by movements in advance payments;

-- an increase in provisions (positive impact of GBP1.0m) following the recognition of the restructuring provision which was partly offset with the utilisation of the onerous contract provision;

   --      Pension fund contributions of GBP7.7m (H1 2019/20: GBP10.7m). 

Cash outflow from investing activities was GBP5.8m (H1 2019/20: outflow GBP9.7m), primarily on capital and development asset expenditure as we invest in the business (GBP8.6m), which was offset by the proceeds from the sale of a non-operational property (GBP2.7m). Capital expenditure is stated net of cash receipts from grants received in the half year of GBP1.3m.

Cashflows from financing activities were a net inflow of GBP9.4m (H1 2019/20: inflow of GBP38.2m) as proceeds from the capital raise of GBP92.9m (stated net of costs GBP7.1m) were partially offset by repayment of the revolving credit facility of GBP74.0m, payment of transactions costs related to the debt refinancing of GBP4.8m, interest payments in relation to the Group's borrowings of GBP3.1m and IFRS 16 lease liability payments of GBP1.3m.

As a result, Group net debt decreased to GBP21.6m at 26 September 2020, from GBP102.8m at 28 March 2020. Net debt at the half year was lower than expected due mainly to the phasing of capital expenditure and positive working capital movements, as set out above.

Cash flows in the second half will be impacted by an outflow of circa GBP12m related to the close out of the UK Passport contract, in addition to capital expenditure and cash exceptionals. Net debt for the full year is forecast to remain in line with the Board's expectations.

The Group has Bank facilities of GBP275m including an RCF cash drawdown component of up to GBP175m and bond and guarantee facilities of a minimum of GBP100m, which currently are due to mature in December 2023. The Group can convert (in blocks of GBP25m) up to GBP50m of the undrawn RCF cash component to the bond and guarantee component if required and can elect to convert this back (in blocks of GBP25m) in order to draw in cash if the bond and guarantee component has not been sufficiently utilised. At the period end, the covenant tests were as follows: EBIT/net interest payable 6.0 times (covenant of >=2.4 times in this financial year), net debt/EBITDA 0.45 times (covenant of <=3.0 times). The covenant tests use earlier accounting standards and exclude adjustments, including IFRS 16.

In order to facilitate the equity capital raising and provide existing Shareholders and new investors with sufficient certainty around the continued availability, and terms, of the Group's financing to successfully implement the Turnaround Plan and support the future growth of the business, the Group agreed terms with its lenders in order to secure (among other things) (i) an extension to the maturity date of the Group's existing revolving facility agreement to 1 December 2023; (ii) a temporary relaxation of applicable financial covenants; and (iii) appropriately sized committed bond and guarantee facilities.

All amendments to the Group's revolving facility agreement were conditional, among other things, upon the Company receiving the proceeds of the equity capital raise in the gross amount of at least GBP100m by no later than 31 July 2020. The Group successfully raised the proceeds via equity funding during July 2020.

PENSION DEFICIT AND FUNDING

The valuation of the Group's UK defined benefit pension Scheme (the "Scheme") on an IAS 19 basis at 26 September 2020 is a net deficit of GBP1.3m (28 September 2019: GBP37.9m, 28 March 2020: surplus GBP64.8m). The movement in the IAS 19 valuation from a net surplus at 28 March 2020 was due to the positive growth in scheme assets due to investment returns being more than offset by the growth in scheme liabilities, primarily driven by a lower discount rate of 1.55% used in the IAS 19 valuation as at 26 September 2020 compared to the discount rate at 28 March 2020 of 2.40%.

The charge to adjusted operating profit in respect of the Scheme in the period was GBP0.9m (H1 2019/20: GBP0.6m) and in addition, GBP0.5m of administration costs directly related to work completed in connection with the equity raise and bank refinancing completed in July 2020 was recorded within exceptional items. Under IAS 19 there was a finance credit of GBP0.8m arising from the difference between the interest cost on liabilities and the interest income on scheme assets, the credit being driven by the fact the scheme was in an IAS 19 surplus at the 29 March 2020 of GBP64.8m (H1 2019/20: charge of GBP0.8m).

On 31 May 2020, the Trustee and the Company agreed the terms for a schedule of contributions and a recovery plan, setting out a programme for clearing the UK Pension Scheme deficit (the "Recovery Plan"). The latest actuarial valuation of the UK Pension Scheme as at 31 December 2019, which was based on intentionally prudent assumptions, revealed a funding shortfall (technical provisions minus the value of the assets) of GBP142.6m. The Recovery Plan makes an allowance for post-valuation market conditions up to 30 April 2020 (at which point there is an estimated funding shortfall of GBP190m), including the impact of COVID-19 on financial markets to that date.

The GBP190m deficit is addressed by payments of GBP15m per annum (payable quarterly in arrears) under the Recovery Plan payable from 1 April 2020 until 31 March 2023 and then payments of GBP24.5m per annum (payable quarterly in arrears) from 1 April 2023 until 31 March 2029 (whereas under the recovery plan agreed with the trustee in 2016 ("2015 Recovery Plan"), the payments would have been GBP22.2 million between 1 April 2020 and 31 March 2021, GBP23.1 million between 1 April 2021 and 31 March 2022 and GBP23 million per annum thereafter until 31 March 2028). Additional contingent contributions in exceptional circumstances will become payable by way of an acceleration of the contributions due in later years where: (i) the leverage ratio (consolidated net debt: EBITDA) is equal to or greater than 2.5x in either FY 2021/2 or FY2022/23, up to a maximum of GBP4m in each financial year and GBP8m in total and/or (ii) the Company or any its subsidiaries take any action which will cause material detriment (defined in section 38 Pensions Act 2004) to the UK Pension Scheme, of GBP23.3m (GBP7.2m in FY 2020/21, GBP8.1m in FY 2021/22 and GBP8m in FY 2022/23) over the period up to 31 March 2023.

The funding of the Recovery Plan is to be sourced from cash generation of the future business activities, but the Trustee has contractually agreed not to request any portion of the equity capital raising proceeds. This agreement with the Trustee of the UK Pension Scheme was conditional on an amount in full settlement of the equity capital raising in the gross amount of at least GBP100m having been received by the Company by no later than 31 July 2020. The equity raising was successfully completed on 7 July 2020.

OPERATING REVIEW

Authentication

The Authentication division comprises mainly GRS and brand protection products and includes elements of the identity business that were not transferred as part of the sale of International Identity Solutions .

 
 
                                     H1 2020/21     H1 2019/20 Restated**      Change 
================================  =============  ========================  ========== 
 IFRS Revenue (GBPm)                       31.7                      34.9         -9.1% 
 Adjusted Revenue (GBPm)                   31.7                      34.9       -9.1% 
 Gross Profit (GBPm)                       13.8                      15.6      -11.5% 
 Adjusted Gross Profit margin             43.5%                     44.7%    -120bpts 
 IFRS operating profit (GBPm)**             3.2                       8.2      -61.0% 
 IFRS operating margin                    10.1%                     23.5%   -1340bpts 
 Adjusted operating profit* 
  (GBPm)                                    3.9                       8.6      -54.7% 
 Adjusted operating margin*               12.3%                     24.6%   -1230bpts 
================================  =============  ========================  ========== 
 
 

*Excludes exceptional item charges of GBP0.1m (H1 2019/20: net charges of GBPnil) and amortisation of acquired intangibles of GBP0.5m (H1 2019/20: GBP0.4m).

** Authentication and Identity Solutions results for H1 2019/20 have been restated in line with the adjustment noted in the current year 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 above to Authentication: Revenue of GBP1.9m, Gross Profit of GBP1.2m and Adjusted operating profit of 0.9m and IFRS operating profit of GBP0.6m that would have been presented in the Identity Solutions division previously.

IFRS and adjusted revenue were GBP31.7m (H1 2019/20: GBP34.9m), a decrease of 9.1% due to the H1 2019/2020 comparative including revenues of GBP1.6m relating to contracts sold to as part of the International Identity Solutions Business disposal, and lower volumes on two contracts which are expected to recover, the impact of which was partially offset by growth in ongoing sales to current customers.

IFRS operating profit of GBP3.2m (H1 2019/20: GBP8.2m) and adjusted operating profit of GBP3.9m (H1 2019/20: GBP8.6m) were lower reflecting mainly the divisional cost structure in H1 2020/21 compared to an allocation methodology in H1 2019/20, and reduced gross profit on lower volumes, which has resulted in more costs being included within the Authentication division than would have been the case in the prior period (see page 7 for further details).

Adjusted controllable operating profit for H1 2020/21 was GBP6.7m, with no comparator to the prior year due to the Group reorganisation.

Currency

The Currency business comprises banknote print, polymer and security features.

 
 
 
                                         H1 2020/21     H1 2019/20     Change 
====================================  =============  =============  ========= 
 IFRS Revenue (GBPm)                          130.6          155.1     -15.8% 
 Adjusted Revenue (ex-paper) 
  (GBPm)*                                     126.0          128.7      -2.1% 
 Gross Profit (GBPm)                           24.3           18.5      31.3% 
 Adjusted Gross Profit margin                 19.3%          14.4%    490bpts 
 IFRS operating (loss)/profit 
  (GBPm)                                      (5.7)         (12.3)      53.7% 
 IFRS operating margin                        -4.4%          -7.9%    350bpts 
 Adjusted operating profit/(loss)** 
  (GBPm)                                        2.5         (12.5)       120% 
 Adjusted operating margin**                   2.0%          -9.7%   1170bpts 
------------------------------------  -------------  -------------  --------- 
 
 

*Excludes "pass through" revenue of GBP4.6m (H1 2019/20 GBP26.4m) related to non-novated paper contracts relating to the Portals De La Rue sale.

** Excludes exceptional item net charges of GBP8.2m (H1 2019/20: net credit of GBP0.2m).

Overall, we saw an increase in banknote and polymer volumes, partially offset by a reduction in average banknote price, and lower security feature volumes with an improved mix. Adjusted revenue was GBP126.0m (H1 2019/20: GBP128.7m) and IFRS revenue was GBP130.6m, 15.8% lower than the prior year and includes the recognition of GBP4.6m of "pass-through" paper revenue. As at 26 September 2020, the 12-month order book for Currency was GBP192m (28 March 2020: GBP172m) and the total order book for Currency was GBP277m.

We saw an increase in adjusted profit from a loss of GBP12.5m in H1 2019/20, to a GBP2.5m profit in H1 2020/21 due to the implementation of manufacturing cost reductions and production volume efficiencies delivered in H1 2020/21 as well as lower overheads following the move in H2 2019/20 to the divisional structure, which has resulted in less costs being included within the Currency division than would have previously been the case.

Adjusted controllable operating profit for H1 2020/21 was GBP13.8m, with no comparator to the prior year due to the Group reorganisation.

Identity Solutions

The Identity Solutions business comprises mainly our passport and other personal identity products.

 
 
                                                  H1 2019/20 
                                   H1 2020/21      Restated*      Change 
==============================  =============  =============  ========== 
 IFRS Revenue (GBPm)                     17.4           42.3        -58.9% 
 Adjusted Revenue (GBPm)                 17.0           42.3      -59.8% 
 Gross Profit (GBPm)                     10.6           16.9      -37.3% 
 Adjusted Gross Profit margin           62.4%          40.0%   -2240bpts 
 IFRS operating profit (GBPm)             8.9            6.1      +45.9% 
 IFRS operating margin                  51.1%          14.4%    3180pbts 
 Adjusted operating profit 
  (GBPm)                                  8.9            6.1      +45.9% 
 Adjusted operating margin              52.4%          14.4%    3310bpts 
==============================  =============  =============  ========== 
 
 

* Authentication and Identity Solutions results for H1 2019/20 have been restated in line with the adjustment noted in the current year 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 above to Authentication: Revenue of GBP1.9m, Gross Profit of GBP1.2m and Adjusted operating profit of 0.9m and IFRS operating profit of GBP0.6m that would have been presented in the Identity Solutions division previously.

IFRS revenue and adjusted revenue was GBP17.4m (H1 2019/20: GBP42.3m), with the reduction driven by lower volumes within our UK Passport business ahead of the completion of the transition to the new supplier for the UK Passport production contract, and the sale of the International Identity Solutions business. H1 2020/21 includes revenue in relation to the DSA supply agreement entered into with HID related to the International Identity Solutions business disposal. IFRS and adjusted operating profit of GBP8.9m is higher than in H1 2019/20, reflecting lower overheads following the move in H2 2019/20 to the divisional structure, which has resulted in less costs being included within Identity Solutions than would have previously been the case.

We worked with Her Majesty's Passport Office on the completion of the transition to the new supplier for the UK Passport production contract, and we expect substantially lower operating profits from this contract from H2 2020/21 onwards.

BOARD CHANGES

On 17 June 2020, we announced that Sabri Challah has informed the Board of his intention to step down as a Director due to his other commitments. Sabri stood down as the Senior Independent Director and Board member at the Annual General Meeting on 6 August 2020.

On 22 September, we announced the immediate appointments of Rt Hon Baroness Catherine Ashton and Margaret Rice-Jones as a Non-executive Directors of the Company. Both Directors have become members of the Audit, Remuneration, Nomination and Ethics Committees.

On 1 October 2020, we announced the appointment of Rob Harding as Chief Financial Officer and as an Executive Director on the Board of the Company to take effect immediately. Rob joined De La Rue as Interim Chief Financial Officer on 9 March 2020.

Clive Vacher

Chief Executive Officer

25 November 2020

Cautionary note regarding forward-looking statements

These results include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout these results and the information incorporated by reference into these results 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 involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond De La Rue's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition, liquidity, dividend policy and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in these results and/or the information incorporated by reference into these results. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group and the development of the industry in which it operates, are consistent with the forward-looking statements contained in these results and/or the information incorporated by reference into these results, those results or developments may not be indicative of results or developments in subsequent periods.

Other than in accordance with its legal or regulatory obligations, De La Rue does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

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 cost effective.

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/ regulatory, information risks and financial risks (currency risk, credit risk, liquidity risk, interest rate risk and commodity price risk).

The principal risks and uncertainties were outlined in the 28 March 2020 Annual Report and Accounts. Since the publication of these, the risks have been reviewed taking into account the successful equity capital raise and bank refinancing and now include: COVID-19, quality management and delivery failure, failure of a key supplier, bribery and corruption, failure to Implement the Turnaround Plan and run the business, loss of a key site or process, banking, loss of material contract, breach of information security, breach of product security and breach of sanctions. In addition, during FY 2020/21, the Group identified an additional risk: sustainability and climate change.

A copy of the Annual Report and Accounts for the year ended 28 March 2020, is available on the Company's website www.delarrue.com.

Going Concern

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 17 of the Strategic report in the 2020 Annual Report. In addition, pages 134 to 142 of the 2020 Annual Report 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.

In the Group's Annual Report for 2020, the Directors concluded there was a material uncertainty that could cast significant doubt on the Group's ability to continue as a going concern. This uncertainty related to a shareholder vote to approve a GBP100m equity capital raise, a vote which had not yet taken place at the time the Annual Report was issued. At a General Meeting of the Group on 6 July 2020, the shareholders voted overwhelmingly in support of the capital raise, hence removing the material uncertainty. Following the shareholder approval, effective 7 July 2020, the Group amended the terms of its banking facilities of GBP275m.The relevant amendments among other things, extend the maturity of the RCF to December 2023 and give the Group access to an RCF cash drawdown component of GBP175m and bond and guarantee facilities of a minimum of GBP100m.The continued access to these borrowing facilities is subject to quarterly covenant testing. At 26 September 2020, the group had drawn down GBP43m of the GBP175m cash element of the RCF leaving GBP132m of undrawn committed borrowing facilities available to the Group. Since 26 September 2020 the Group has also reallocated GBP25m of the cash component to the bond and guarantee component (see note 9 for further details).

Taking into account the result of the shareholder vote on 6 July 2020, the trading result for the 6-month period to 26 September 2020 and ability of the Group to deliver on its current orderbook, the Directors have made their Going Concern assessment for these interim financial results. The Group's updated forecasts and projections, which cover a period up to 31 December 2021, take into account the base case forecast as well as plausible downside scenarios. In performing this assessment, the Directors have considered the potential impact of COVID-19, taking into account its impact on the company in the period to date as well as actions taken by the company to mitigate its impact. These forecasts and projections show that the Group will be able to operate within its available banking facilities and financial covenants throughout this period.

As a consequence, the Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed interim financial statements

A copy of the 2020 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.

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge the condensed set of financial statements, which have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as a whole as required by DTR 4.2.4R and the management report includes a fair review of:

 
      --   the important events that have occurred during the first half 
            of the financial year and their impact on the condensed set 
            of financial statements; 
      --   the principal risks and uncertainties for the remaining half 
            of the financial year; and 
      --   related party transactions that have taken place in the first 
            half of the financial year and any changes in the related party 
            transactions described in the previous annual report that have, 
            in either case, materially affected the financial position or 
            performance of the Group during the first half of the current 
            financial year. 
 

The Board of Directors of De La Rue plc at 28 March 2020 and their respective responsibilities can be found on pages 44 and 45 of the De La Rue plc Annual Report 2020. Changes since that date are discussed above under "Board Changes".

For and on behalf of the Board

Kevin Loosemore

Chairman

25 November 2020

INDEPENT REVIEW REPORT TO DE LA RUE PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 26 September 2020 which comprises the Group condensed consolidated interim income statement, the Group condensed consolidated interim statement of comprehensive (loss)/income, the Group condensed consolidated interim balance sheet, the Group condensed consolidated interim statement of cash flows, the Group condensed consolidated interim statement of changes in equity and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 26 September 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

Reading, UK

25 November 2020

 
 GROUP CONDENSED CONSOLIDATED INTERIM 
  INCOME STATEMENT - UNAUDITED 
  FOR THE HALF YEARED 26 SEPTEMBER 2020 
------------------------------------------------------------------------------------------------------------- 
 
                                                                                                     Restated   Restated(2) 
                                                                                                      (1),(2) 
                                                                              2020/21                 2019/20       2019/20 
                                                                            Half Year               Half Year     Full Year 
                                                                Notes            GBPm                GBPm              GBPm 
 
           Revenue from customer contracts                        2            -179.7                   232.3         466.8 
           Cost of sales                                                      (130.3)                 (181.0)       (360.9) 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Gross Profit                                                          49.4                    51.3         105.9 
           Adjusted operating expenses                                        -(34.1)                  (49.1)        (82.2) 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Adjusted Operating profit                                            -15.3                     2.2          23.7 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Adjusted items: 
           Amortisation of acquired intangible 
            assets                                                             -(0.5)                   (0.4)         (0.9) 
           Net exceptional items                                  4           -(10.2)                  (11.0)          20.0 
                                                                                    - 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Operating profit                                                      -4.6                   (9.2)          42.8 
 
  Interest income                                                                -0.4                     0.7           1.0 
           Interest expense                                                    -(3.3)                   (2.8)         (6.1) 
           Net retirement benefit obligation finance 
            income/(charge)                                                      0.8-                   (0.8)         (1.6) 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Net finance expense                                                 -(2.1)                   (2.9)         (6.7) 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Profit/(loss)before taxation from continuing 
           operations                                                            -2.5                  (12.1)          36.1 
  Taxation                                                                       -0.5                     2.0             - 
 
           Profit/(loss) for the period from continuing 
           operations                                                            -3.0                  (10.1)          36.1 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Loss from discontinued operations                3                  -(0.1)                   (0.7)         (0.3) 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Profit/(loss) for the period                                          -2.9                  (10.8)          35.8 
          -----------------------------------------------  --------------  ----------  ----------------------  ------------ 
           Attributable to: 
   -Owners of the parent                                                          1.4                  (11.8)          34.1 
   -Non-controlling interests                                                     1.5                     1.0           1.7 
   Profit/(loss) for the period                                                   2.9                  (10.8)          35.8 
 -----------------------------------------------           --------------  ----------  ----------------------  ------------ 
 
           Earnings per ordinary share 
   Basic 
   Basic EPS continuing operations                                               1.0p                  (9.8p)         30.3p 
   Basic EPS discontinued operations                                           (0.1p)                  (0.6p)        (0.3p) 
   Total basic earnings per share                                                0.9p                 (10.4p)         30.0p 
           Diluted 
   Diluted EPS continuing operations                                             1.0p                  (9.8p)         30.2p 
   Diluted EPS discontinued operations                                         (0.1p)                  (0.6p)        (0.3p) 
   Total diluted earnings per share                                              0.9p                 (10.4p)         29.9p 
 
 
 

Note:

(1) The prior period column has been restated to show cost of sales separate from total operating expenses as reported in previous periods, thus allowing presentation of gross profit. The inclusion of this level of information is considered useful and will provide greater insight into the performance of the business. For HY 2019/20 total operating expenses - total ordinary operating expenses of GBP230.5m was originally reported (including GBP1.1m disclosed separately as expected credit losses). This was made up of costs of inventories recognised as an expense of GBP174.9m, negative manufacturing variances of GBP6.1m, adjusted operating expenses of GBP49.1m (being operating expenses adjusted for amortisation of acquired intangible assets and net exceptional items) as an expense and the negative manufacturing variances have been presented combined on the cost of sales line (net value GBP181.0m) and amortisation of acquired intangible assets of GBP0.4m. Consistent with the new presentation format above, the prior period amounts of cost of inventories recognised and adjusted

operating expenses  of GBP49.1m have been presented   separately. 
   (2)   Prior year EPS figures have been restated for the impact of the Rights Issue. 
 
 GROUP CONDENSED CONSOLIDATED INTERIM 
  STATEMENT OF COMPREHENSIVE (LOSS)/INCOME - UNAUDITED 
  FOR THE HALF YEARED 26 SEPTEMBER 2020 
 
                                                                 2020/21     2019/20     2019/20 
                                                               Half Year   Half Year   Full Year 
                                                                    GBPm        GBPm        GBPm 
       Profit/(loss) for the financial period                        2.9      (10.8)        35.8 
      ------------------------------------------------------  ----------  ----------  ---------- 
       Other comprehensive income 
       Items that are not reclassified subsequently 
        to income statement: 
       Re-measurement (losses)/gains on retirement 
        benefit obligations                                       (74.1)        29.0       114.1 
       Tax related to remeasurement of net defined 
        benefit liability                                           14.0       (5.1)      (20.5) 
       Items that may be reclassified subsequently 
        to income statement: 
  Foreign currency translation difference for 
   foreign operations                                                1.1         2.9         3.3 
  Foreign currency translation difference reclassified 
   to income statement on 
   disposal of subsidiary                                              -           -         1.3 
  Change in fair value of cash flow hedges                           0.4         2.0         1.4 
  Change in fair value of cash flow hedges transferred 
   to income statement                                             (0.3)         0.4         1.4 
       Change in fair value of cash flow hedges transferred            -         0.2           - 
        to non-current assets 
        Income tax relating to components of other                   0.1       (0.3)           - 
         comprehensive income 
       Other comprehensive (loss)/income for the 
        period, net of tax                                        (58.8)        29.1       101.0 
      ------------------------------------------------------  ----------  ----------  ---------- 
       Total comprehensive (loss)/income for the 
        period                                                    (55.9)        18.3       136.8 
      ------------------------------------------------------  ----------  ----------  ---------- 
 
       Total comprehensive (loss)/income for the 
        period attributable to: 
       Equity shareholders of the Company                         (57.4)        17.3       135.1 
  Non-controlling interests                                          1.5         1.0         1.7 
 -----------------------------------------------------------  ----------  ----------  ---------- 
                                                                  (55.9)        18.3       136.8 
      ------------------------------------------------------  ----------  ----------  ---------- 
 
 
 
 GROUP CONDENSED CONSOLIDATED INTERIM 
  BALANCE SHEET - UNAUDITED 
  AT 26 SEPTEMBER 2020 
------------------------------------------------------------------------------------------------ 
 
                                                    Notes      2020/21      2019/20      2019/20 
                                                             Half Year    Half Year    Full Year 
                                                                  GBPm         GBPm         GBPm 
       ASSETS 
       Non-current assets 
  Property, plant and equipment                                  109.1        127.4        114.6 
  Intangible assets                                               31.2         31.9         31.0 
  Right-of-use assets                                             11.6            -         12.9 
  Retirement benefit obligations                                     -            -         64.8 
  Deferred tax assets                                             14.8         16.3          5.5 
  Derivative financial instruments                    8            0.6          2.4          2.1 
  Other financial assets                                           8.4          7.6          8.0 
                                                                 175.7        185.6        238.9 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
       Current assets 
  Inventories                                                     56.7         62.4         53.9 
       Trade and other receivables                                76.6         94.9         67.1 
        Contract assets                                            9.9         18.0         18.3 
  Current tax assets                                               0.2          1.6          0.3 
  Derivative financial instruments                    8            8.4          8.0         14.5 
  Cash and cash equivalents                                       21.5         11.2         14.6 
       Assets classified as held for sale                            -         31.6            - 
                                                                 173.3        227.7        168.7 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
  Total assets                                                   349.0        413.3        407.6 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
 
       LIABILITIES 
       Current liabilities 
  Current borrowings                                             (0.1)      (180.9)      (116.6) 
       Trade and other payables                                (129.5)      (154.5)      (133.3) 
        Contract liabilities                                     (0.9)        (0.2)        (0.3) 
  Lease liabilities                                              (2.2)        (2.8)        (2.8) 
  Current tax liabilities                                       (11.3)       (11.8)       (12.5) 
  Derivative financial instruments                    8          (8.0)        (7.4)       (14.0) 
  Provisions for liabilities and charges                        (11.6)       (11.0)       (10.6) 
       Liabilities as held for sale                                  -       (10.8)            - 
                                                               (163.6)      (379.4)      (290.1) 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
       Non-current liabilities 
       Non-current borrowings                                   (38.5)            -            - 
  Retirement benefit obligations                     10          (3.1)       (39.9)        (1.8) 
  Deferred tax liabilities                                       (2.9)        (3.7)        (8.8) 
  Derivative financial instruments                    8          (0.6)        (2.3)        (2.1) 
  Lease liabilities                                             (10.3)       (12.3)       (11.1) 
  Other non-current liabilities                                      -            -        (0.5) 
                                                                (55.4)       (58.2)       (24.3) 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
  Total liabilities                                            (219.0)      (437.6)      (314.4) 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
  Net assets/liabilities                                         130.0       (24.3)         93.2 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
       EQUITY 
  Ordinary share capital                                          88.6         47.8         47.8 
  Share premium account                                           42.2         42.2         42.2 
  Capital redemption reserve                                       5.9          5.9          5.9 
  Hedge reserve                                       8            0.3        (0.2)          0.1 
  Cumulative translation adjustment                               10.7          7.9          9.6 
  Other reserves                                                (31.7)       (83.8)       (83.8) 
  Retained earnings                                              (2.7)       (59.2)         56.2 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
  Total equity attributable to shareholders 
   of the Company                                                113.3       (39.4)         78.0 
  Non-controlling interests                                       16.7         15.1         15.2 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
  Total equity                                                   130.0       (24.3)         93.2 
 ------------------------------------------------  ------  -----------  -----------  ----------- 
 
 
 GROUP CONDENSED CONSOLIDATED INTERIM 
  STATEMENT OF CASH FLOWS - UNAUDITED 
  FOR THE HALF YEARED 26 SEPTEMBER 2020 
                                                             2020/21     2019/20     2019/20 
                                                                Half   Half Year   Full Year 
                                                                Year 
                                                 Notes          GBPm        GBPm        GBPm 
 Cash flows from operating activities 
 (Loss)/profit before tax(1)                                     2.4      (12.9)        35.9 
 Adjustments for: 
 Finance income and expense                                      2.1         2.9         6.7 
 Depreciation                                                    7.8         8.9        16.9 
 Amortisation                                                    2.3         1.7         3.9 
 (Increase)/decrease in inventories (2)                        (3.6)      (21.8)      (12.1) 
 (Increase)/decrease in trade and other 
  receivables (2)                                                7.6       (5.8)        10.2 
 (Decrease)/increase in trade and other 
  payables (2)                                                 (7.4)       (7.5)      (19.2) 
 Increase/(decrease) in provisions                               1.0         7.7         7.4 
 Pension funding contributions                                 (7.7)      (10.7)      (21.3) 
 Share based payment expense                                   (0.1)         0.1       (0.6) 
 Add back of non-cash GMP pension liability 
  adjustment                                                       -           -       (8.7) 
 (Profit)/Loss on disposal of business                             -       (0.7)      (22.7) 
 Profit from sale of Property, plant and                       (2.7)           -           - 
  equipment 
 Add back of non-cash net credit loss 
  provision                                                      0.2         1.1         1.0 
 Add back impairment of Property, plant 
  and equipment and accelerated depreciation 
  charges included within exceptional items                      1.2         1.3         2.3 
 Other non-cash movements                                        1.7         2.4         1.9 
--------------------------------------------------------  ----------  ----------  ---------- 
 Cash generated from operations                                  4.8      (33.3)         1.5 
 Tax received/(paid)                                           (1.5)         1.1         3.5 
 Net cash flows from operating activities                        3.3      (32.2)         5.1 
--------------------------------------------------------  ----------  ----------  ---------- 
 Cash flows from investing activities 
 Proceeds from the sale of subsidiary 
  (net of cash disposed)                                           -           -        42.0 
 Purchases of property, plant and equipment 
  and software intangibles                                     (7.2)       (5.9)      (11.4) 
 Development expenditure capitalised                           (1.4)       (3.8)       (5.8) 
 Proceeds from sale of property, plant                           2.7           -           - 
  and equipment 
 Interest received                                               0.1           -         0.2 
 Receipt of RDEC                                                   -           -         0.6 
 Net cash flows from investing activities                      (5.8)       (9.7)        25.6 
 Net cash flows before financing activities                    (2.5)      (41.9)        30.7 
---------------------------------------------  ---------  ----------  ----------  ---------- 
 Cash flows from financing activities 
 Proceeds from issue of share capital                        92.9(3)         0.1         0.2 
 Net (repayment)/drawdown of borrowings                    (74.3)(4)        59.0       (1.5) 
 Payment of transactions costs associated                      (4.8)           -           - 
  with the debt refinancing 
 Lease liability payments                                      (1.3)       (1.1)       (2.3) 
 Interest paid                                                 (3.1)       (2.5)       (6.0) 
 Dividends paid to shareholders                                    -      (17.3)      (17.3) 
 Dividends paid to non-controlling interests                       -           -       (0.6) 
-----------------------------------------------  -------  ----------  ----------  ---------- 
 Net cash flows from financing activities                        9.4        38.2      (27.5) 
-----------------------------------------------  -------  ----------  ----------  ---------- 
 Net (decrease)/increase in cash and cash 
  equivalents in the period                                      6.9       (3.7)         3.2 
 Cash and cash equivalents at the beginning 
  of the period                                                 14.5        11.3        11.3 
 Exchange rate effects                                             -         0.1           - 
-----------------------------------------------  -------  ----------  ----------  ---------- 
 Cash and cash equivalents at the end of 
  the period                                                    21.4         7.7        14.5 
-----------------------------------------------  -------  ----------  ----------  ---------- 
 Cash and cash equivalents consist of: 
 Cash at bank and in hand                                       21.5        11.2        14.6 
 Cash transferred to held for sale                                 -         0.6           - 
 Bank overdrafts                                               (0.1)       (4.1)       (0.1) 
-----------------------------------------------  -------  ----------  ----------  ---------- 
 
 

(1) Profit before tax includes continuing and discontinuing operations.

(2) Working capital movements include in HY 2019/20 amounts relating to International IDS which have been transferred to held for sale in order to show true cashflows for the period. The International IDS business was presented as held for sale at 28 September 2019 prior to final disposal on 14 October 2019.

(3) Stated net of associated costs of GBP7.1m.

(4) In the period HY 2020/21 the majority of the equity capital raise proceeds were used to subsequently repay a substantial part of the RCF shortly after amendment on 7 July 2020.

 
 
 
                                                 GROUP CONDENSED CONSOLIDATED INTERIM 
                                              STATEMENT OF CHANGES IN EQUITY - UNAUDITED 
                                               FOR THE HALF YEARED 26 SEPTEMBER 2020 
                                                                                                         Non-controlling   Total 
                                            Attributable to equity shareholders                              interest      equity 
                    ---------------------------------------------------------------------------------- 
                                Share      Capital                   Cumulative 
                     Share     premium    redemption      Hedge      translation    Other    Retained 
                     capital   account      reserve       reserve    adjustment    reserve    earnings 
                     GBPm       GBPm         GBPm          GBPm         GBPm        GBPm        GBPm          GBPm         GBPm 
 
 
 Balance at 31 
  March 2019         47.7         42.1            5.9        (2.5)           5.0    (83.8)      (54.6)               9.9   (30.3) 
 Loss for the 
  period             -               -              -            -             -         -      (11.8)               1.0   (10.8) 
 Other 
  comprehensive 
  income, net 
  of tax             -               -              -          2.3           2.9         -        23.9                 -   29.1 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Total 
  comprehensive 
  income             -               -              -          2.3           2.9         -        12.1               1.0   18.3 
 Transactions        -               -              -            -             -         -           -                 -   - 
 with owners 
 of the company 
 recognised 
 directly 
 in equity: 
 Transactions 
  with 
  non-controlling 
  interests (see 
  note11)            -               -              -            -             -         -         0.8               4.2   5.0 
 Share capital 
  issued             0.1           0.1              -            -             -         -           -                 -   0.2 
 Employee share      -               -              -            -             -         -           -                 -   - 
  scheme: 
 - value of 
  services 
  provided           -               -              -            -             -         -         0.1                 -   0.1 
 Income tax on 
  income and 
  expenses 
  recognised 
  directly 
  in equity          -               -              -            -             -         -       (0.3)                 -   (0.3) 
 Dividends paid      -               -              -            -             -         -      (17.3)                 -   (17.3) 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Balance at 28 
  September 2019     47.8         42.2            5.9        (0.2)           7.9    (83.8)      (59.2)              15.1   (24.3) 
 
 Profit for the 
  period             -               -              -            -             -         -        45.9               0.7   46.6 
 Other 
  comprehensive 
  income, net 
  of tax             -               -              -          0.3           1.7         -        69.9                 -   71.9 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Total 
  comprehensive 
  income             -               -              -          0.3           1.7         -       115.8               0.7   118.5 
 Transactions 
 with owners 
 of the company 
 recognised 
 directly 
 in equity: 
 Share capital       -               -              -            -             -         -           -                 -   - 
  issued 
 Employee share 
  scheme: 
 - value of 
  services 
  provided           -               -              -            -             -         -       (0.8)                 -   (0.8) 
 Income tax on 
  income and 
  expenses 
  recognised 
  directly 
  in equity          -               -              -            -             -         -       (0.1)                 -   (0.1) 
 Other               -               -              -            -             -         -         0.5                 -   0.5 
 Dividends paid      -               -              -            -             -         -           -             (0.6)   (0.6) 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Balance at 28 
  March 2020         47.8         42.2            5.9          0.1           9.6    (83.8)        56.2              15.2   93.2 
 Profit for the 
  period             -               -              -            -             -         -         1.4               1.5   2.9 
 Other 
  comprehensive 
  income, net 
  of tax             -               -              -          0.2           1.1         -      (60.1)                 -   (58.8) 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Total 
  comprehensive 
  income             -               -              -          0.2           1.1         -      (58.7)               1.5   (55.9) 
 Transactions        -               -              -            -             -         -           -                 -   - 
 with owners 
 of the company 
 recognised 
 directly 
 in equity: 
 Transactions        -               -              -            -             -         -           -                 -   - 
 with 
 non-controlling 
 interests (see 
 note 11) 
 Share capital       -               -              -            -             -         -           -                 -   - 
  issued 
 Employee share 
  scheme:            -               -              -            -             -         -       (0.2)                 -   (0.2) 
 - value of          -               -              -            -             -         -           -                 -   - 
 services 
 provided 
 Rights issue        40.8           --             --            -             -      52.1           -                 -   92.9 
 Income tax on       -               -              -            -             -         -           -                 -   - 
 income and 
 expenses 
 recognised 
 directly 
 in equity 
 Dividends paid      -               -              -            -             -         -           -                 -   - 
------------------  --------  --------  -------------  -----------  ------------  --------  ----------  ----------------  ------- 
 Balance at 26 
  September 2020     88.6      42.2               5.9          0.3          10.7    (31.7)       (2.7)              16.7   130.0 
 
 

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.

Other reserve

On 1 February 2000, the Company issued and credited as fully paid 191,646,873 ordinary shares of 25p each and paid cash of GBP103.7m 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 GBP83.8m 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 GBP100m, 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 GBP100m). 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 GBP52.1m was recorded. 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 (GBP40.8m) and merger reserve equal to the difference between the total proceeds net of costs and share capital. As the cash proceeds received by DLR plc where loaned via intercompany account to a subsidiary company to enable a substantial repayment of the RCF, the increase to other reserves of GBP52.1m was treated as an unrealised profit and hence not currently considered distributable as at 26 September 2020. This judgement might be revised in future periods, subject to certain internal transactions enabling the settlement of intercompany positions.

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.

 
 NOTES TO THE CONDENSED CONSOLIDATED INTERIM 
  FINANCIAL STATEMENTS - UNAUDITED 
 
 
 1               Basis of preparation and statement of compliance 
 
                  These condensed consolidated financial statements have been prepared 
                  on a Going Concern basis. These condensed consolidated half-yearly 
                  financial statements of De La Rue plc (the Group) have been prepared 
                  in accordance with International Accounting Standard (IAS) 34 Interim 
                  Financial Reporting. The annual consolidated financial statements 
                  of the Group are prepared in accordance with EU-endorsed International 
                  Financial Reporting Standards (IFRSs). These condensed consolidated 
                  half-yearly financial statements do not comprise statutory accounts 
                  within the meaning of Section 435 of the Companies Act 2006 and should 
                  be read in conjunction with the Annual Report March 2020. The comparative 
                  figures for the period ended 26 September 2020 are not the Group's 
                  statutory accounts for that financial year. The March 2020 financial 
                  statements have been reported upon by the Group's auditor and delivered 
                  to the registrar of companies. The report of the auditor was unqualified 
                  and did not contain statements under Section 498 (2) or (3) of the 
                  Companies Act 2006. The above notwithstanding, the auditor's report 
                  for the period ended 28 March 2020 drew attention to, without modifying 
                  the conclusion, the Group's disclosure of a material uncertainty in 
                  respect of going concern, specifically in relation to the securing 
                  of Shareholder approval for the equity capital raise. Refer to the 
                  Going Concern statement on page 14 for further details of the Director's 
                  Going Concern assessment. 
 
                  The accounting policies adopted in the preparation of these condensed 
                  consolidated half-yearly financial statements to 26 September 2020 
                  are consistent with the accounting policies applied by the Group in 
                  its consolidated financial statements as at, and for the period ended, 
                  28 March 2020 as required by the Disclosure Guidance and Transparency 
                  Rules of the UK's Financial Conduct Authority, with the exception 
                  of the adoption of new and amended standards as set out below. The 
                  comparative figures for HY 2019/20 have been restated to show cost 
                  of sales separate from total operating expenses as reported in previous 
                  periods (see footnote under the income statement on page 17 for further 
                  details). 
 
                  New and amended standards adopted by the Group 
 
                  During the period, the following new and amended IFRS became effective 
                  for the Group: 
                   *    Definition of a business - Amendments to IFRS 3 
 
 
                   *    Interest rate benchmark reform Phase 1 and temporary 
                        relief has been taken to continue to apply hedge 
                        accounting. 
 
 
 
                  These changes have not had a material impact to the financial statements. 
                  Additional disclosure on the impact of amendments will be provided 
                  in the Annual Report and Accounts. 
 
                  COVID-19 
                  The Annual Report for the period ended 28 March 2020 including an 
                  assessment of the potential impact of COVID-19 on the financial position 
                  of the Group as a March 2020. The directors still consider this assessment 
                  to be appropriate for the half-yearly financial statements based on 
                  the current position. It is noted that impairments and accelerated 
                  depreciation charges of GBP1.2m have been recorded in the period, 
                  but that these relate to the cessation of manufacturing at the Gateshead 
                  facility and not due to Covid-19 related issues. 
 
          2            Segmental analysis 
              The continuing operations of the Group have three main operating 
               units: Currency, Identity Solutions and Product Authentication 
               & Traceability. The Board, which is the Group's Chief Operating 
               Decision Maker, monitors the performance of the Group at this 
               level and there are therefore three reportable segments. The principal 
               financial information reviewed by the Board is revenue and adjusted 
               operating profit. 
              The Group's segments are: 
                *    Currency - provides printed banknotes, polymer 
                     substrates and banknote security components 
 
 
                *    Authentication - the supply of a range of physical 
                     and digital solutions such as: tax stamps and 
                     supporting software solutions, authentication labels 
                     and associated brand protection digital solutions, 
                     cheques and bank cards for Africa, and ID security 
                     components including polycarbonate. 
 
 
                *    Identity Solutions - involved in the provision of 
                     passport, ePassport, national ID and eID, driving 
                     licence and voter registration schemes 
 
 
               Inter-segmental transactions are eliminated upon consolidation. 
               NOTES TO THE CONDENSED CONSOLIDATED INTERIM 
               FINANCIAL STATEMENTS - UNAUDITED 
               The segment note is focused on three divisions which reflects 
               what has been reported to the Chief Operating Decision Maker, 
               this is in line with the commentary in the front half on the financial 
               performance. The commentary in the front half relating to the 
               future strategy only refers to the Currency and Authentication 
               divisions. 
               On 14 October 2019, the Group disposed of its International Identity 
               Solutions business. In November 2019, the Group moved from a functional 
               to a divisional operating structure and completed a major reorganisation. 
               Employees from the previous Group-wide functions moved to new 
               roles within the new Currency and Authentication divisions or 
               remained with enabling functions such as legal and finance. The 
               cost base and structure following this reorganisation in H1 2020/21 
               is materially different to in H1 2019/20, reflecting the above. 
               The Group from FY 2019/20 also changed its methodology for the 
               allocation of enabling function costs into the divisions. The 
               group has considered the requirements of IFRS 8 with regards to 
               the need to restate prior period segmental results and concluded 
               that the Group is unable to make this restatement because the 
               data is not available and the cost to develop it would be excessive. 
               This is due to the cost base and employee structure of the business 
               under the previous functional model being materially different 
               to the new divisional structure. Therefore, it is not possible 
               to undertake a like-for-like reallocation of costs for new divisions 
               for the comparative period. Although comparatives have not been 
               restated, in the commentaries included in this release, we have 
               provided commentary on the changes in divisional cost base, to 
               enable a year-on-year performance by division. Due to the substantial 
               changes that have occurred in the divisional structure, key reporting 
               metrics for monitoring the divisional performance will be linked, 
               going forward, to gross profit and adjusted controllable profit 
               (before the allocation of enabling function overheads), with the 
               enabling functional cost base being managed as part of the overall 
               business key turnaround objectives. See note 17 for adjusted operating 
               expenses reconciliation. 
 
 
 2020/21 Half Year                    Currency   Authentication     Identity   Unallocated       Total 
                                                                   Solutions                  of continuing 
                                                                                               operations 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
                                          GBPm             GBPm         GBPm          GBPm          GBPm 
 Total revenue from contracts 
  with customers                         130.6             31.7         17.4             -            179.7 
 Less: inter-segment revenue                 -                -            -             -                - 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Revenue from contracts 
  with customers                         130.6             31.7         17.4             -            179.7 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Cost of sales                         (106.3)           (17.9)        (6.9)           0.7          (130.3) 
 Gross Profit                             24.3             13.8         10.5           0.7             49.4 
 Adjusted operating expenses            (21.8)            (9.9)        (1.6)         (0.7)           (34.1) 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Adjusted operating profit                 2.5              3.9          8.9             -             15.3 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Adjusted items: 
 Amortisation of acquired 
  intangibles                                -            (0.5)            -             -            (0.5) 
 Net exceptionals                        (8.2)            (0.1)            -         (1.9)           (10.2) 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Operating profit/(loss)                 (5.7)              3.3          8.9         (1.9)              4.6 
 Interest income                             -                -            -           0.4              0.4 
 Interest expense                            -                -            -         (3.3)            (3.3) 
 Net retirement benefit 
  obligation finance expense                 -                -            -           0.8              0.8 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Net finance expense                         -                -            -         (2.1)            (2.1) 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Profit/(loss) before taxation           (5.7)              3.3          8.9         (4.0)              2.5 
-----------------------------------  ---------  ---------------  -----------  ------------  --------------- 
 Segment assets                          207.9             48.1         17.4      75.6                349.0 
 Segment liabilities                    (83.2)           (13.2)       (19.0)       (103.6)          (219.0) 
 Capital expenditure on 
  property, plant and equipment(1)         5.9                -          0.6           0.7              7.2 
 Capital expenditure on 
  intangible assets                        0.1              1.3            -             -              1.4 
 Impairment of property,                     -                -            -             -                - 
  plant and equipment and 
  intangible assets 
 Depreciation of property, 
  plant and equipment                      6.1              1.0            -           0.7              7.8 
 Amortisation of intangible 
  assets                                   0.9              1.1            -           0.3              2.3 
 
 

(1) Capital expenditure is stated net of receipt of grant income of GBP1.3m, all allocated to the Authentication segment.

(2) Impairments and accelerated depreciation of GBP1.2m have been included within exceptional items (see note 4).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS - UNAUDITED

Unallocated assets principally comprise of deferred tax assets of GBP14.8m (HY 2019: GBP16.3m), cash and cash equivalents of GBP21.5m (HY 2019: GBP11.2m) which are used as part of the Group's financing offset arrangements and derivative financial instrument assets of GBP9.0m (HY 2019: GBP10.4m) as well as current tax assets, associates and centrally managed property, plant and equipment.

Unallocated liabilities principally comprise overseas retirement benefit obligations of GBP3.1m (HY 2019: GBP39.9m), borrowings of GBP38.6m (HY 2019: GBP180.9m), current tax liabilities of GBP11.3m (HY 2019: GBP11.8m) and derivative financial instrument liabilities of GBP8.6m (HY 2019: GBP9.7m) as well as deferred tax liabilities and centrally held accruals and provisions.

 
 2019/20 Half Year                    Currency   Authentication*      Identity   Unallocated       Total 
                                                                    Solutions*                  of continuing 
                                                                                                 operations 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
                                          GBPm              GBPm          GBPm          GBPm          GBPm 
 Total revenue from contracts 
  with customers                         155.4              34.9          42.3             -            232.6 
 Less: inter-segment revenue             (0.3)                 -             -             -            (0.3) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Revenue from contracts 
  with customers                         155.1              34.9          42.3             -            232.3 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Cost of sales                         (136.6)            (19.3)        (25.4)           0.3          (181.0) 
 Gross Profit                             18.5              15.6          16.9           0.3             51.3 
 Adjusted operating expenses*           (31.0)             (7.0)        (10.8)         (0.3)           (49.1) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Adjusted operating profit/(loss)*      (12.5)               8.6           6.1             -              2.2 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Adjusted items: 
 Amortisation of acquired 
  intangibles                                -             (0.4)             -             -            (0.4) 
 Net exceptionals                          0.2                 -             -        (11.2)           (11.0) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Operating profit/(loss)                (12.3)               8.2           6.1        (11.2)            (9.2) 
 Interest income                             -                 -             -           0.7              0.7 
 Interest expense                            -                 -             -         (2.8)            (2.8) 
 Net retirement benefit 
  obligation finance expense                 -                 -             -         (0.8)            (0.8) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Net finance expense                         -                 -             -         (2.9)            (2.9) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Profit/(loss) before taxation          (12.3)               8.2           6.1        (14.1)           (12.1) 
-----------------------------------  ---------  ----------------  ------------  ------------  --------------- 
 Segment assets                          222.9              46.0          56.6          87.8            413.3 
 Segment liabilities                    (93.9)            (14.8)        (37.4)       (291.5)          (437.6) 
 Capital expenditure on 
  property, plant and equipment(1)         3.3               1.6         (1.4)           2.2              5.8 
 Capital expenditure on 
  intangible assets                        1.0               1.1           0.9           0.8              3.8 
 Impairment of property, 
  plant and equipment on 
  intangible assets                        0.2                 -             -           0.4              0.6 
 Depreciation of property, 
  plant and equipment                      6.0               0.9           1.1           0.9              8.9 
 Amortisation of intangible 
  assets                                     -               0.1           0.3           1.3              1.7 
 
 

(1) Capital expenditure is stated net of receipt of grant income of GBP3.9m. Allocated between the segments as follows: Currency (GBP1.5m), Identify Solutions (GBP1.6m) and, Authentication (GBP0.8m).

*The above prior year comparatives have been restated to show cost of sales separate from total operating expenses as reported in previous periods, thus allowing presentation of gross profit by segment. The inclusion of this level of information is considered useful to the users of the Annual Report and Accounts and will provide greater insight into the performance of the business. In addition, the Authentication and Identity Solutions results for H1 2019/20 have been restated in line with the adjustment noted in the current year 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 above to Authentication: Revenue of GBP1.9m, Gross Profit of GBP1.2m, Adjusted operating profit of GBP0.9m and IFRS operating profit of GBP0.3m that would have been presented in the Identity Solutions division previously.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS - UNAUDITED

Revenue from contracts with customers:

Timing of revenue recognition across the Group's revenue from contracts with customers is as follows:

 
 HY 2020/21                                     Currency   Authentication     Identity      Total of 
                                                    GBPm             GBPm    Solutions    Continuing 
                                                                                  GBPm    Operations 
                                                                                                GBPm 
 Timing of revenue recognition: 
 Point in time                                     107.3             31.7         17.4         156.4 
 Over time                                          23.3                -            -          23.3 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 Total revenue from contracts with customers       130.6             31.7         17.4         179.7 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 
 
 HY 2019/20                                     Currency   Authentication     Identity      Total of 
                                                    GBPm             GBPm    Solutions    Continuing 
                                                                                  GBPm    Operations 
                                                                                                GBPm 
 Timing of revenue recognition: 
 Point in time                                     128.4             33.0         40.1         201.5 
 Over time                                          26.7                -          4.1          30.8 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 Total revenue from contracts with customers       155.1             33.0         44.2         232.3 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 
 
 
 FY 2019/20                                     Currency   Authentication     Identity      Total of 
                                                    GBPm             GBPm    Solutions    Continuing 
                                                                                  GBPm    Operations 
                                                                                                GBPm 
 Timing of revenue recognition: 
 Point in time                                     273.6             68.5         65.7         407.8 
 Over time                                          41.5                -         17.5          59.0 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 Total revenue from contracts with customers       315.1             68.5         83.2         466.8 
---------------------------------------------  ---------  ---------------  -----------  ------------ 
 
 
 Geographic analysis of revenue 
                             2020/21     2019/20     2019/20 
                           Half Year   Half Year   Full Year 
                                GBPm        GBPm        GBPm 
 Middle East and Africa         79.1        81.9       188.4 
 Asia                           11.2        39.0        86.5 
 UK                             62.5        64.1       109.8 
 The Americas                   19.2        18.1        41.5 
 Rest of Europe                  0.6        18.4        24.8 
 Rest of world                   7.1        10.7        15.8 
                               179.7       232.2       466.8 
------------------------  ----------  ----------  ---------- 
 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS - UNAUDITED

3 Discontinued operations

The Group completed the sale of the entire issued share capital of Cash Processing Solutions Limited and related subsidiaries (together 'CPS') to CPS Topco Limited, a company owned by Privet Capital on 22 May 2016. The loss on discontinued operations in the period of GBP0.1m relates to the winding down of remaining activity related to CPS (net of associated tax credits). Charges in HY 2019/20 and FY 2019/20 included net costs associated with a loss-making CPS contract that was not novated post disposal. This contract is expected to conclude in FY 2021/22.

 
 
         4 Exceptional Items 
 
                                                        2020/21          2019/20                2019/20 
                                                      Half Year        Half Year              Full Year 
                                                           GBPm             GBPm                   GBPm 
         Site relocation and restructuring              (9.3)              (8.2)                  (9.3) 
         Costs associated with the equity               (3.2)                  -                      - 
          raise and bank refinancing 
         Pension underpin costs                         (0.4)              (0.5)                  (1.1) 
         Gain on resolution of a historical 
          issue relating to UK defined benefit 
          pension scheme                                  -                    -                    8.7 
         Gain on sale of PPE                             2.7                   -                      - 
         Costs associated with disposal of                -                (2.0)                      - 
          subsidiary 
         Costs associated with the close                  -                (1.0)                      - 
          out of hedge positions relating 
          to the Venezuela contract 
         Gain on disposal of subsidiary                   -                  0.7                   22.7 
          Venezuela credit loss provision                 -                    -                  (1.0) 
         Total exceptional items - (charge)/credit     (10.2)             (11.0)                   20.0 
        -------------------------------------------  ----------  ---------------  --------------------- 
         Exceptional items - tax credit/(charge)         2.4                 1.8                    2.5 
        -------------------------------------------  ----------  ---------------  --------------------- 
 
 
           Site relocation and restructuring costs 
           Site relocation and restructuring costs in HY 2020/21 included: the 
           recognition of GBP8.1m of restructuring charges related to cessation 
           of banknote production at our Gateshead facility (primarily being 
           redundancy costs but also including amounts for impairment and accelerated 
           depreciation charges for property, plant and equipment) and a further 
           GBP1.2m of charges relating to other cost out initiatives including 
           the restructuring of our central enabling functions and the restructuring 
           of the Group into the new divisional structure. Costs in relation 
           to this programme are expected to be incurred until the end of FY 
           2021/22. 
 
           Site relocation and restructuring costs in FY 2019/20 and HY 2019/20 
           related to the reorganisation during the period of the Group into 
           our new divisional structure and other cost out programmes, primarily 
           being redundancy costs and in addition to consultant and advisor 
           fees. 
 
           Costs associated with the equity raise and bank refinancing 
           During HY 2020/21 certain costs were incurred in relation to the 
           equity raise and bank refinancing projects that, whilst directly 
           associated with these, did not relate to activities which in accordance 
           with IFRS would qualify for recording in equity or capitalisation 
           on the balance sheet as transaction costs in relation to the debt 
           refinancing. These costs included: GBP0.7m write-off of prepaid arrangement 
           fees on the previously signed RCF which was amended on 7 July 2020 
           (due to the substantial repayment of the amounts outstanding at that 
           time this has been accounted for as a settlement); costs of GBP1.5m 
           associated with advisors fees in connection with the new pension 
           deficit funding plan put in place in July 2020 following the equity 
           raise and bank refinancing and other fees totalling GBP1.0m related 
           to equity raise and bank refinancing which whilst directly related 
           to these projects, did not meet the IFRS criteria for capitalisation 
           on the balance sheet or recording within equity. 
 
           Pension underpin costs 
           Relate to legal fees 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. 
 
           Gain on sale of PPE 
           A GBP2.7m gain was made in HY 2020/21 on the sale of a non-operational 
           property held by the Group net of sales costs. 
           NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 
           - UNAUDITED 
 
 
           Gain on resolution of a historical issue relating to the UK defined 
           benefit pension scheme 
           In FY 2019/20 a gain of GBP8.7m has been recorded following the resolution 
           of a historical issue in respect to a change in revaluation rates 
           for certain deferred pension scheme members. This resulted in an 
           equivalent reduction to the liabilities in the pension scheme as 
           at 28 March 2020. 
 
           Venezuela Credit loss provision 
           In FY 2019/20 GBP1m was recognised relating to the close out of the 
           hedge position taken out in relation to Venezuela receivables for 
           which a credit loss of GBP18.1m was provided and reported in exceptional 
           items in FY 2018/19. The hedge position was closed out in H1 2019/20 
           as subsequent to the FY 2018/19 year end sanctions have further tightened 
           against Venezuela. 
 
           Costs associated with disposal of subsidiary 
           In HY 2019/20 costs resulting from the sale of our IDS business to 
           HID Global of GBP2.0m were incurred comprising advisor fees coupled 
           with salaries for contractors and temporary employees employed to 
           work solely on the sale. 
 
           Gain/(Loss) on disposal of subsidiary and associated costs 
           Following the sale of the Group's International Identify Solutions 
           business on 14 October 2019, the Group has recorded a gain of GBP25.3m 
           before the deduction of costs associated with the disposal. The gain 
           was calculated based on an estimate for the working capital adjustment 
           which at FY 2019/20 year end remained subject to agreement with HID 
           in accordance with the sales agreement. Subsequent to 26 September 
           2020 but prior to the issue of this report, the final working capital 
           balance has been agreed. The final payment to be made by the Group 
           is not materially different from the amount including in the original 
           disposal accounting in FY 2019/20 and consequently an immaterial 
           incremental adjustment byway of loss will be recorded in exceptional 
           items in H2 FY 2020/21. Costs associated with the disposal of the 
           subsidiary in FY 2019/20 were GBP3.3m. In addition during FY 2019/20 
           a GBP0.7m gain was made in H1 on the final release of the recompense 
           provision provided for in relation to the sale of the Portals De 
           La Rue business. Delivery against the remaining contracts for which 
           a recompense provision was recognised has now been satisfactorily 
           completed and as such no further risk of the recompense provision 
           being triggered is considered to exist. 
 5       Taxation 
 
           A tax rate of 15.5% (H1 2019/20: 16.4%, FY 2019/20: 15.8%) represents 
           management's best estimate of the effective rate of tax for the 
           year arising on the profit before exceptional items and tax on the 
           amortisation of acquired intangibles giving rise to a tax charge 
           for the period of GBP2.0m (on a non-IFRS basis). In addition, tax 
           credits of GBP0.1m in relation to the tax on the amortisation of 
           acquired intangibles and GBP2.4m on exceptional items recognised 
           in the period as described in Note 4, result in an overall tax credit 
           on continuing operations for the period of GBP0.5m (on an IFRS basis). 
 
           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 the 26 September 2020 Financial Statements. 
 
 
 
           NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 
           - UNAUDITED 
 6      Earnings per share 
                                                                       *Restated   *Restated 
                                                        2020/21          2019/20     2019/20 
                                                      Half Year        Half Year   Full Year 
                                                      pence per        pence per       pence 
                                                          share            share         per 
                                                                                       share 
 
        Earnings per share 
  Basic earnings per share from continuing 
   operations                                               1.0            (9.8)        30.3 
  Diluted earnings per share from continuing 
   operations                                               1.0            (9.8)        30.2 
  Basic earnings per share from discontinued 
   operations                                             (0.1)            (0.6)       (0.3) 
  Diluted earnings per share from discontinued 
   operations                                             (0.1)            (0.6)       (0.3) 
  Basic earnings per share - total                          0.9           (10.4)        30.0 
  Diluted earnings per share - total                        0.9           (10.4)        29.9 
        Adjusted earnings per share 
  Basic earnings per share from continuing 
   operations                                               6.5            (1.4)        11.1 
 
          *The prior years have been restated following the Rights Issue. 
 
        Earnings per share is calculated by dividing the profit attributable 
         to equity shareholders by the weighted average number of shares. The 
         weighted average number of ordinary shares used in the calculations 
         for earnings per share is 149.6m (H1 2019/20 (restated): 113.5m; FY 
         2019/20 (restated): 113.7m) for basic earnings per share. The dilutive 
         impact of shares options for H1 2020/21 was 149.8m and for FY 2019/20 
         (restated) was 113.9m for diluted earnings per share after adjusting 
         for dilutive impact of share options. Due to the loss for H1 2019/20 
         potential ordinary shares which may be issued to satisfy share option 
         awards have not been included in the calculation of a share number 
         for diluted earnings per share as their inclusion would be anti-dilutive. 
 
                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 
 
        Reconciliations of the earnings used in the calculations are set out 
         below: 
 
                                                        2020/21          2019/20     2019/20 
                                                      Half Year        Half Year   Full Year 
                                                           GBPm             GBPm        GBPm 
 Earnings for basic earnings per share - 
  Total                                                     1.4           (11.8)        34.1 
 Add: Earnings for basic earnings per share 
  - discontinued operations                                 0.1              0.7         0.3 
---------------------------------------------------  ----------  ---------------  ---------- 
 Earnings for basic earnings per share - 
  continuing operations                                     1.5           (11.1)        34.4 
 Add: amortisation of acquired intangibles                  0.5              0.4         0.9 
 Add: exceptional items (excluding non-controlling 
  interests)                                               10.2             11.0      (20.0) 
 Less: tax on amortisation of acquired intangibles        (0.1)            (0.1)       (0.2) 
 Less: tax on exceptional items                           (2.4)            (1.8)       (2.5) 
 Earnings for adjusted earnings per share                   9.7            (1.6)        12.6 
---------------------------------------------------  ----------  ---------------  ---------- 
 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

 
      7                       Equity dividends 
                                                                                     2020/21      2019/20       2019/20 
                                                                                   Half Year    Half Year          Full 
                                                                                                                   Year 
                                                                                        GBPm         GBPm          GBPm 
 
 
                              Final dividend for the year ended 30 March 
                               2019 of 16.7p paid on 03 August 2019                        -         17.3          17.3 
                                                                                           -         17.3          17.3 
                             ------------------------------------------------  -------------  -----------  ------------ 
 
 8     Financial Instruments 
       Carrying amounts 
       versus 
       the fair values 
 
                                                                   Total fair       Carrying   Total fair    Carrying 
                                                                        value         amount        value      amount 
                                                                     Sep 2020       Sep 2020     Mar 2020    Mar 2020 
         Financial assets                                                GBPm           GBPm         GBPm        GBPm 
       Trade and other 
        receivables                       Level 
        (1)                                   3                          70.1           70.1         61.9        61.9 
                                          Level 
       Contract assets                        3                           9.9            9.9         18.3        18.3 
       Other financial assets             Level 
        (2)                                   3                           8.2            8.2          7.8         7.8 
       Cash and cash                      Level 
        equivalents                           1                          21.5           21.5         14.6        14.6 
       Derivative financial 
       instruments: 
       - Forward exchange 
        contracts 
        designated as cash 
        flow                              Level 
        hedges(5)                             2                           3.6            3.6          6.7         6.7 
       - Short duration swap 
        contracts 
        designated as fair 
        value                             Level 
        hedges(5)                             2                             -              -          1.0         1.0 
       - Foreign exchange 
        fair 
        value hedges - other 
        economic                          Level 
        hedges(5)                             2                           1.6            1.6          2.1         2.1 
       - Embedded                         Level 
        derivatives(5)                        2                           3.8            3.8          6.8         6.8 
       Total financial assets                                           118.7          118.7        119.2       119.2 
      -----------------------  ----------------  ----------------------------  -------------  -----------  ---------- 
 
       Financial liabilities 
       Unsecured bank loans 
        and                               Level 
        overdraft (3)                         2                        (43.1)         (43.1)      (117.4)     (117.4) 
       Trade and other                    Level 
        payables(4)                           3                       (128.1)        (128.1)      (130.7)     (130.7) 
       Derivative financial 
       instruments: 
       - Forward exchange 
        contracts 
        designated as cash 
        flow                         Level 
        hedges(5)                      2                                (3.4)          (3.4)        (6.5)       (6.5) 
       - Short duration swap 
        contracts 
        designated as fair 
        value                             Level 
        hedges(5)                             2                         (0.2)          (0.2)        (0.1)       (0.1) 
       - Foreign exchange 
        fair 
        value hedges - other 
        economic                          Level 
        hedges(5)                             2                         (4.0)          (4.0)        (9.2)       (9.2) 
       - Embedded                         Level 
        derivatives(5)                        2                         (0.9)          (0.9)        (0.1)       (0.1) 
       - Interest rate                    Level 
        swaps(5)                              2                         (0.1)          (0.1)        (0.2)       (0.2) 
       Total financial 
        liabilities                                                   (179.8)        (179.8)      (264.2)     (264.2) 
      -----------------------   ---------------------------------------------  -------------  -----------  ---------- 
            (1) Excludes prepayments 
             (2) Excludes ordinary shares of GBP0.2m which are accounted for as 
             fair value through profit and loss 
             (3) Excludes unamortised pre-paid loan arrangement fees 
             (4) Excludes social security amounts 
             (5) Level 2 valuations 
 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

Fair Value measurement for derivative financial instruments

Fair value is calculated based on the 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. 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, while 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.

 
 9     Analysis of net debt 
                                                                     2020/21        2019/20     2019/20 
                                                                   Half Year      Half Year   Full Year 
                                                                        GBPm           GBPm        GBPm 
       Cash at bank and in hand                                         21.5           11.2        14.6 
       Short term bank deposits                                            -              -           - 
       Bank overdrafts                                                 (0.1)          (4.1)       (0.1) 
      ----------------------------------------------------  ----------------  -------------  ---------- 
       Cash and cash equivalents                                        21.4            7.1        14.5 
       Other debt due within one year                                      -        (177.8)     (117.3) 
  Other debt due after one year                                       (43.0) 
       Net debt at end of period                                      (21.6)        (170.7)     (102.8) 
      ----------------------------------------------------  ----------------  -------------  ---------- 
 
    Effective 7 July 2020, the Group amended the terms of its Bank facilities 
    of GBP275m.The relevant amendments, among other things, extend the 
    maturity date of the Revolving Cash Facility ("RCF") to December 2023, 
    reset the interest cover ratio and provide available committed bond 
    and guarantee facilities that do not need to be cash collateralised 
    in most cases. In addition, the majority of the equity capital raise 
    proceeds were used to subsequently repay a substantial part of the 
    RCF shortly after the amendment on 7 July 2020. This was accounted 
    for as a settlement under IFRS 9 and consequently the unamortised balance 
    on the loan arrangement fees on the old RCF of GBP0.7m was written-off 
    to the income statement and included within exceptional items. 
 
    The Group has Bank facilities of GBP275m including an RCF cash drawdown 
    component of up to GBP175m and bond and guarantee facilities of a minimum 
    of GBP100m, which currently are due to mature in December 2023. The 
    Group can convert (in blocks of GBP25m) up to GBP50m of the undrawn 
    RCF cash component to the bond and guarantee component if required 
    and can elect to convert this back (again in blocks of GBP25m) in order 
    to draw in cash if the bond and guarantee component has not been sufficiently 
    utilised. 
 
    The drawdowns on the RCF facility are typically rolled over on terms 
    of between one and three months. However, as the Group has the intention 
    and ability to continue to roll forward the drawdowns under the facility, 
    the amount borrowed has been presented as long term at HY 2020/21. 
    This is a different presentation to the position as at 28 March 2020 
    when the borrowings were presented as current ahead of the completion 
    of the bank refinancing. 
    As at 26 September 2020, the Group had a total of undrawn committed 
    borrowing facilities, all maturing in more than one year, of GBP132m 
    (28 September 2019: GBP97.5m, 28 March 2020: GBP158m, all maturing 
    in more than one year). The amount of loans drawn on the GBP175m facility 
    is GBP43m. Since 26 September 2020 the Group has reallocated GBP25m 
    of the cash component to the bond and guarantee component. 
 
    Net debt above is presented excluding unamortised capitalised transaction 
    costs in relation to the debt refinancing of GBP4.5m. Net debt also 
    excludes GBP12.5m of lease liabilities recognised following the adoption 
    of IFRS 16 
 
 
 
    NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 
    UNAUDITED 
 
 
 
 10    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. 
 
                                                            2020/21      2019/20     2019/20 
                                                          Half Year    Half Year   Full Year 
                                                               GBPm         GBPm        GBPm 
       UK retirement benefit (liability)/surplus              (1.3)       (37.9)        64.8 
       Overseas retirement benefit (liability)                (1.8)        (2.0)       (1.8) 
      ------------------------------------------------  -----------  -----------  ---------- 
       Retirement benefit (liability)/surplus                 (3.1)       (39.9)        63.0 
 
       The majority of the Group's retirement benefit obligations are in 
        the UK: 
       Amounts recognised in the consolidated 
        Balance Sheet: 
       Fair value of plan assets                            1,104.7      1,116.8     1,046.9 
       Present value of funded obligations                (1,101.1)    (1,149.4)     (977.6) 
      ------------------------------------------------  -----------  -----------  ---------- 
       Funded defined benefit pension plans                     3.6       (32.6)        69.3 
       Present value of unfunded obligations                  (4.9)        (5.3)       (4.5) 
      ------------------------------------------------  -----------  -----------  ---------- 
       Net liability                                          (1.3)       (37.9)        64.8 
      ------------------------------------------------  -----------  -----------  ---------- 
 
       Amounts recognised in the consolidated 
        Income Statement: 
       Included in employee benefits expense: 
       Administrative expenses                               (1.4)*        (0.6)       (2.2) 
       Past service credit                                        -            -       8.7** 
       Included in net finance cost: 
       Net retirement benefit obligation finance 
        credit/(charge)                                         0.8        (0.8)       (1.6) 
  Total recognised in the consolidated Income 
   Statement (credit/charge)                                    0.6        (1.4)         4.9 
 -----------------------------------------------------  -----------  -----------  ---------- 
 
 

*includes GBP0.5m of costs presented within exceptional items as they were in connection with the equity raise and bank refinancing completed in July 2020.

**During FY 2019/20 a past service credit of 8.7m relating to the resolution of a historical issue in respect to a change in revaluation rates for certain UK defined benefit pension deferred scheme members was recorded in the income statement within exceptional items. The Directors continue to assess any residual impact from these changes.

 
  Principal actuarial assumptions:                 2020/21       2019/20       2019/20 
                                                 Half Year     Half Year     Full Year 
                                                        UK            UK            UK 
                                                         %             %             % 
  Discount rate                                       1.55          1.85          2.40 
  Inflation rate - RPI                                2.80          3.00          2.60 
  Inflation rate - CPI                                1.80          1.90          1.60 
 ------------------------------------------  -------------  ------------  ------------ 
 
  At 26 September 2020 mortality assumptions were based on tables issued 
   by Club Vita, with future improvements in line with the CMI model, 
   CMI_2019 with a smoothing parameter of 7.5 and a long-term future 
   improvement trend of 1.25 per cent per annum. 
 
   On 31 May 2020, the Trustee and the Company agreed the terms for a 
   schedule of contributions and a recovery plan, setting out a programme 
   for clearing the UK Pension Scheme deficit (the "Recovery Plan"). 
   The latest actuarial valuation of the UK Pension Scheme as at 31 December 
   2019, which was based on intentionally prudent assumptions, revealed 
   a funding shortfall (technical provisions minus the value of the assets) 
   of GBP142.6m. The Recovery Plan makes an allowance for post-valuation 
   market conditions up to 30 April 2020 (at which point there is an 
   estimated funding shortfall of GBP190m), including the impact of COVID-19 
   on financial markets to that date. 
 
   The GBP190m deficit is addressed by payments of GBP15m per annum (payable 
   quarterly in arrears) under the Recovery Plan payable from 1 April 
   2020 until 31 March 2023 and then payments of GBP24.5m per annum (payable 
   quarterly in arrears) from 1 April 2023 until 31 March 2029 (whereas 
   under the recovery plan agreed with the trustee in 2016 ("2015 Recovery 
   Plan"), the payments would have been GBP22.2 million between 1 April 
   2020 and 31 March 2021, GBP23.1 million between 1 April 2021 and 31 
   March 2022 and GBP23 million per annum thereafter until 31 March 2028). 
   Additional contingent contributions in exceptional circumstances will 
   become payable by way of an acceleration of the contributions due 
   in later years where: (i) the leverage ratio (consolidated net debt: 
   EBITDA) 
   NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 
   UNAUDITED 
 
   is equal to or greater than 2.5x in either FY 2021/2 or FY2022/23, 
   up to a maximum of GBP4m in each financial year and GBP8m in total 
   and/or (ii) the Company or any its subsidiaries take any action which 
   will cause material detriment (defined in section 38 Pensions Act 
   2004) to the UK Pension Scheme, of GBP23.3m (GBP7.2m in FY 2020/21, 
   GBP8.1m in FY 2021/22 and GBP8m in FY 2022/23) over the period up 
   to 31 March 2023. 
 
   The funding of the Recovery Plan is to be sourced from cash generation 
   of the future business activities, but the Trustee has contractually 
   agreed not to request any portion of the equity capital raising proceeds. 
   This agreement with the Trustee of the UK Pension Scheme was conditional 
   on an amount in full settlement of the equity capital raising in the 
   gross amount of at least GBP100m having been received by the Company 
   by no later than 31 July 2020. The equity raising was successfully 
   completed on 7 July 2020. 
 11 Transactions with non controlling interests 
 
  Kenya JV 
  On 16 April 2019 the Group commenced a commercial partnership with 
   the Government of Kenya on our currency and secure printing site in 
   Nairobi, Kenya. Under the terms of the agreement, the National Treasury 
   of Kenya has taken a 40% stake in De La Rue's wholly owned subsidiary 
   De La Rue Kenya EPZ Limited, for a consideration of GBP5 million which 
   was received in September 2017 and included within advance payments 
   on the balance sheet as at 31 March 2019. 
 
   In the prior period, the Group recognised an increase in non controlling 
   interests of GBP4.2m and an increase in equity attributable to owners 
   of the parent of GBP0.8m. The effect on the equity attributable to 
   the owners of De La Rue plc during the prior period on completion 
   of the transaction is summarised as follows: 
                                                  Half Year  Half Year 
                                                   2020/21    2019/20 
                                                    GBP m      GBP m 
 
   Consideration received                                 -        5.0 
   Carrying amount of non controlling interests 
    disposed of                                           -      (4.2) 
   Excess of consideration received recognised 
    in the transactions with non controlling 
    interests reserve within equity                       -        0.8 
                                                  =========  ========= 
 
 
 
   Ghana JV 
   On 8 June 2020 the Group and Buck Press Limited ("BPL") established 
   a new Joint Venture company in Ghana for the distribution of printed 
   and personalized excise tax stamps - De La Rue Buck Press Limited, 
   which is owned by De La Rue International Limited (49%) and BPL (51%). 
   This was to enter into a contract with the Ghana Revenue Authority 
   which is expected to run for 5 years. 
 
   This contract builds on the Group's long and successful history of 
   supplying security products in Ghana and more widely across Africa. 
 
   In applying the definitions of control identified in IFRS 10, it has 
   been determined that the Group controls De La Rue Buck Press Limited 
   due to the fact that it has a majority of the Board membership and 
   is able to use this to control the key business decisions of the JV 
   entity and affect exposure to variable returns. As such the results 
   of the subsidiary are fully consolidated into the Group's financial 
   statements. 
 
   A nominal value of share capital was invested in the JV on formation 
   and an immaterial value of trade has occurred for the period to 26 
   September 2020. 
 
 
 
   NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 
   UNAUDITED 
 
 
   12 Related party transactions 
  During the year 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 
   GBP10.1m (H1 2019/20: GBP6.1m) for the purchase of ink and other consumables 
   on an arm's length basis . At the balance sheet date there was GBP1.6m 
   (H1 2019/20: GBP3.8m) 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. 
 
 
 13   Contingent assets and liabilities 
 

In June 2019 De La Rue International Limited terminated its agency agreement and sales consultancy agreement with Pastoriza SRL, a company which provided agency and sales consultancy services to the Group in the Dominican Republic from 2016 to 2019. Pastoriza SRL disputed the termination and claimed compensation for the termination. De La Rue commenced arbitration proceedings in London. The arbitration tribunal found in favour of De La Rue declaring that the agreements had been correctly terminated and no compensation was due.

In response to De La Rue International Limited terminating the agency agreement and the sales consultancy agreement, Pastoriza SRL commenced a commercial lawsuit in the Dominican Republic for a claimed amount of approximately US$8million (plus monthly interest). De La Rue International Limited filed evidence to the courts in the Dominican Republic. The points disputed by De La Rue International Limited in respect of Pastoriza SRL's claim include whether the courts of the Dominican Republic should have jurisdiction in relation to the claim. A claim hearing took place on 19 October 2020, where Pastoriza SRL made an application for a further extension to file further documents. The Court granted the application and Pastoriza filed its papers on 3 November 2020. De La Rue is currently preparing its response to those documents. A hearing is set for 7 December 2020. The Group does not consider it probable that an economic outflow will occur under this claim and accordingly under IAS 37 no provision has been made in respect of the proceedings in the Dominican Republic.

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, provision may be required subject to the particular circumstances including an assessment of its recoverability.

 
 14                     Capital commitments 
                                                          2020/21                      2019/20   2019/20 
                                                        Half Year                    Half Year      Full 
                                                                                                    Year 
                                                             GBPm                         GBPm      GBPm 
                        Capital expenditure 
                        contracted but not provided: 
                        Property, plant and equipment        11.3                         22.6       2.3 
                        Other commitments                   461.8                        526.1     492.5 
                       ------------------------------  ----------  ---------------------------  -------- 
                                                            473.1                        548.7     494.8 
                       ------------------------------  ----------  ---------------------------  -------- 
 
     Other commitments in the table above is an amount in relation to the 
     sale of Portals De La Rue Limited to EPIRIS Fund II on 29 March 2018. 
 
     As part of the transaction Portals De La Rue Limited will supply security 
     paper to meet the Group's anticipated internal requirements with pre-agreed 
     volumes and price mechanisms until March 2028. Based on the terms of 
     the agreement the Group had a capital commitment of approximately GBP626.9m 
     over 10 years from the date of sale. The contract is assessed to be 
     at market rates. 
 
 
 
 
     NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 
     UNAUDITED 
 15                      De La Rue Financial 
                          Calendar: 2020/21 
 
                         Financial year end                                      27 March 2021 
 
 
 
 16   Subsequent events 
 

On 20 November 2020, the High Court issued its latest ruling in relation to the equalisation of pension benefits between men and women relating to Guaranteed Minimum Pensions (or "GMP"). The High Court ruled that statutory cash equivalent transfer values ("CETVs") paid from defined benefit pension schemes are subject to challenge and a top-up payment may be required if the CETV value insufficiently reflected the value of an equalised GMP benefit accrued between 17 May 1990 and 5 April 1997. As this ruling has occurred after the balance sheet date, and information on historical transfer values will take time to obtain, the impact of this announcement on the De La Rue Pension Scheme is yet to be determined. The Company will work with the Trustees to calculate the impact with a view to reflecting the impact, if material, in our full year results. Any impact on the Income Statement will be included within exceptional items in accordance with the Group's exceptional items policy consistent with the treatment applied to the previous GMP ruling in FY 2018/19.

 
 17   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 acquired intangibles. Amortisation of acquired intangible assets and exceptional items are excluded 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, curtailments on defined benefit pension arrangements or changes to the pension scheme liability which are considered to be of a permanent nature such as the change in indexation or the GMPs, and non-recurring fees relating to the management of historical scheme issues, restructuring of businesses, asset impairments and costs associated with the acquisition and integration of business combinations.

All exceptional items are included in the appropriate income statement category to which they relate.

Adjusted revenue

Adjusted revenue excludes "pass-through" revenue relating to non-novated contracts following the paper and international identify solutions business sales. The following amounts of "pass through" revenue have been excluded: Paper GBP4.6m (HY 2019/20: GBP26.4m; FY 2019/20: GBP33.5m) and Identify Solutions: GBP0.4m (HY 2019/20: GBPnil; FY 2019/20: GBP6.6m).

 
                                     2020/21     2019/20     2019/20 
                                   Half Year   Half Year   Full Year 
                                        GBPm        GBPm        GBPm 
 Revenue on an IFRS basis              179.7       232.3       466.8 
--------------------------------  ----------  ----------  ---------- 
 - Exclude pass-through revenue        (5.0)      (26.4)      (40.1) 
 Adjusted revenue                      174.7       205.9       426.7 
--------------------------------  ----------  ----------  ---------- 
 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

Adjusted operating profit

Adjusted operating profit represents earnings from continuing operations adjusted to exclude exceptional items and amortisation of acquired intangible assets.

 
                                                  2020/21     2019/20     2019/20 
                                                Half Year   Half Year   Full Year 
                                                     GBPm        GBPm        GBPm 
 Operating profit from continuing operations 
  on an IFRS basis                                    4.6       (9.2)        42.8 
---------------------------------------------  ----------  ----------  ---------- 
 - Amortisation of acquired intangible 
  assets                                              0.5         0.4         0.9 
 - Exceptional items                                 10.2        11.0      (20.0) 
---------------------------------------------  ----------  ----------  ---------- 
 Adjusted operating profit from continuing 
  operations                                         15.3         2.2        23.7 
---------------------------------------------  ----------  ----------  ---------- 
 
 

Adjusted basic earnings per share

 
                                                    2020/21     2019/20     2019/20 
                                                  Half Year   Half Year   Full Year 
                                                       GBPm        GBPm        GBPm 
 Profit attributable to equity shareholders 
  of the Company from continuing operations 
  on an IFRS basis                                      1.5      (11.1)        34.4 
-----------------------------------------------  ----------  ----------  ---------- 
 - Amortisation of acquired intangible 
  assets                                                0.5         0.4         0.9 
 - Exceptional items                                   10.2        11.0      (20.0) 
 - Tax on amortisation of acquired intangibles        (0.1)       (0.1)       (0.2) 
 - Tax on exceptional items                           (2.4)       (1.8)       (2.5) 
-----------------------------------------------  ----------  ----------  ---------- 
 Adjusted profit attributable to equity 
  shareholders of the Company from continuing 
  operations                                            9.7       (1.6)        12.6 
-----------------------------------------------  ----------  ----------  ---------- 
 Weighted average number of ordinary shares 
  for basic earnings*                                 149.6       113.5       113.7 
-----------------------------------------------  ----------  ----------  ---------- 
 
 

*Prior year share numbers are restated following the Rights issue

 
                                                              *Restated     *Restated 
                                                   2020/21      2019/20       2019/20 
                                                 Half Year    Half Year     Full Year 
                                                 pence per    pence per         pence 
                                                     share        share     per share 
 Basic earnings per ordinary share continuing 
  operations on an IFRS basis                          1.0        (9.8)          30.3 
----------------------------------------------  ----------  -----------  ------------ 
 Adjusted basic per ordinary share for 
  continuing operations                                6.5        (1.4)          11.1 
 
 

*Prior year numbers are restated following the Rights issue

Net debt

Net debt is a non-IFRS measure. See note 9 for details of how net debt is calculated.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

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 will be linked, going forward, 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 turnaround objectives.

The group has considered the requirements of IFRS 8 with regards to the need to restate segmental results and concluded that the Group is unable to make this restatement. This is due to the cost base and employee structure of the business under the previous functional model being materially different to the new divisional structure. Therefore, it is not possible to undertake a like-for-like reallocation of costs for new divisions for the comparative period. Although comparatives have not been restated, in the commentaries included in this release, we have provided commentary on the changes in divisional cost base, to enable a year-on-year performance by division.

 
 2020/21 Half Year                   Currency   Authentication     Identity   Central       Total 
                                                                  Solutions              of continuing 
                                                                                          operations 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
                                         GBPm             GBPm         GBPm      GBPm          GBPm 
 Operating profit/(loss) 
  on IFRS basis                         (5.7)              3.3          8.9     (1.9)              4.6 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Amortisation of acquired 
  intangibles                               -              0.5            -         -              0.5 
 Net exceptional items                    8.2              0.1            -       1.9             10.2 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted operating profit/(loss)         2.5              3.9          8.9         -             15.3 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Enabling function overheads             11.3              2.8            -    (14.1)                - 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted controllable 
  operating profit/(loss)                13.8              6.7          8.9    (14.1)             15.3 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 
 

Adjusted operating expenses reconciliation

Due to the cost base and employee structure of the business under the previous functional model being materially different to the new divisional structure, the table below is presented to show the Group adjusted operating expenses make-up for H1 2019/20 and H1 2020/21.

 
 2020/21 Half Year                   Currency   Authentication     Identity   Central       Total 
                                                                  Solutions              of continuing 
                                                                                          operations 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
                                         GBPm             GBPm         GBPm      GBPm          GBPm 
 Gross Profit                            24.3             13.8         10.6       0.7             49.3 
 Divisional overhead                   (10.5)            (7.1)        (1.7)    (14.8)           (34.0) 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted controllable 
  operating profit/(loss)                13.8              6.7          8.9    (14.1)             15.3 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Enabling function overheads           (11.3)            (2.8)            -      14.1                - 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted operating profit/(loss)         2.5              3.9          8.9         -             15.3 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Amortisation of acquired 
  intangibles                               -            (0.5)            -         -            (0.5) 
 Net exceptional items                  (8.2)            (0.1)            -     (1.9)           (10.2) 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Operating profit/(loss) 
  on IFRS basis                         (5.7)              3.3          8.9     (1.9)              4.6 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 
 
 2019/20 Half Year                   Currency   Authentication     Identity   Central       Total 
                                                                  Solutions              of continuing 
                                                                                          operations 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
                                         GBPm             GBPm         GBPm      GBPm          GBPm 
 Gross Profit                            18.5             15.6         16.9       0.3             51.3 
 Divisional overhead                        -                -            -         -                - 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted controllable                    n/a              n/a          n/a       n/a              n/a 
  operating profit/(loss) 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Central overhead base                 (31.0)            (7.0)       (10.8)     (0.3)           (49.1) 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Adjusted operating profit/(loss)      (12.5)              8.6          6.1         -              2.2 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Amortisation of acquired 
  intangibles                               -            (0.4)            -         -            (0.4) 
 Net exceptional items                    0.2                -            -    (11.2)           (11.2) 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 Operating profit/(loss) 
  on IFRS basis                        (12.3)              8.2          6.1    (11.2)              9.2 
----------------------------------  ---------  ---------------  -----------  --------  --------------- 
 

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IR PPGMAGUPUPGC

(END) Dow Jones Newswires

November 25, 2020 02:00 ET (07:00 GMT)

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