Release Date: December 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- De La Rue PLC (DLUEY, Financial) achieved first-half profits ahead of guidance with an adjusted operating profit of GBP7.3 million.
- The company's order book reached a record level of GBP338 million, the highest in at least the last five years.
- The currency division maintained profitability during its traditionally weaker first half, with a high win rate in currency tenders.
- The sale of the authentication division to Crane NXT for GBP300 million is expected to transform the company's financial position.
- De La Rue PLC (DLUEY) is experiencing strong demand for polymer banknotes, with production expected to double in the second half of the year.
Negative Points
- Group revenue fell by over GBP16 million period on period, reflecting a challenging delivery schedule within the currency business.
- The company experienced a GBP17.9 million cash outflow from working capital, impacting operating cash flow.
- Revenue for the period decreased by 10.2% compared to the first half of the previous year.
- The authentication division's operating profits remained broadly flat despite a slight increase in revenue.
- De La Rue PLC (DLUEY) incurred GBP5.5 million in pretax exceptional costs, primarily related to the separation of the authentication business.
Q & A Highlights
Q: How does the high win rate in the currency order book relate to pricing dynamics in the market?
A: Clive Vacher, CEO, explained that pricing is currently favorable due to significant market demand and strong relationships with high-value customers. De La Rue is capturing more of the value chain, particularly with the shift from paper to polymer banknotes and the development of advanced security features, which enhances pricing dynamics.
Q: What is the outlook for the currency division's pipeline given the strong win rate?
A: Clive Vacher, CEO, stated that the pipeline remains robust, with significant business opportunities extending into FY26 and FY27. The company is experiencing a record order book, indicating a positive outlook for the next 2 to 2.5 years.
Q: How does the polymer capacity expansion align with current utilization and future needs?
A: Clive Vacher, CEO, noted that the decision to double polymer capacity was strategic, and both lines at Westhoughton will be fully utilized imminently. This capacity is expected to meet demand through FY26 and FY27, with potential further expansion decisions around FY27 or FY28.
Q: Can you break down the expected costs for the authentication separation and sales?
A: Dean Moore, Interim CFO, indicated that approximately 70% to 80% of the GBP12 million separation costs are related to the physical separation of facilities in Malta. The remaining costs are associated with various fees.
Q: What are the expectations for working capital cash outflow at year-end?
A: Dean Moore, Interim CFO, mentioned that working capital is expected to be an outflow at year-end due to increased sales activity and preparation for future orders. The major issue at the half-year was an increase in receivables, which was resolved shortly after.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
