De La Rue plc
Annual Report
2023
About De La Rue
Authentication
Currency
De La Rue’s Authentication
division enables governments
and commercial organisations
to protect their citizens and
consumers, revenues and
reputations. We provide
high security digital and
physical solutions, such
as comprehensive supply
chain traceability, physical
authentication tokens and
ID security components.
Our Currency division provides
market-leading end-to-end
currency solutions to over half
the central banks and issuing
authorities around the world,
from finished banknotes to
secure polymer substrate,
banknote security features
and design services.
Protecting goods, supply
chains and identities
Secure, durable and
sustainable banknotes that
enable financial inclusion
– Government Revenue
Solutions
– Brand Protection
– ID Security Solutions
– Banknotes
– Design services
– Polymer substrate
– Security features
Revenue
£91.7m
+1.6%
Revenue
£254.6m
-9.4%
For more information:
delarue.com/authentication
For more information:
delarue.com/currency
Who we are
De La Rue provides
governments and commercial
organisations with products
and services that underpin the
integrity of trade, personal
identity and the movement
of goods.
With a rich history dating back
over 200 years, we have built
strong relationships with
governments, international
brands and central banks
around the world, developing
leading-edge traceability
software while staying at the
forefront of material science
and design.
What we do
Our highly secure digital and
physical solutions provide
surety and control. Our digital
authentication solutions
provide transparency,
engagement and control
across supply chains.
Our physical features and
documents leverage our
design expertise to meet the
needs of a diverse range of
stakeholders and scenarios.
Our purpose is to
secure trust between
people, businesses
and governments
At De La Rue, we are driven by a desire to enable businesses and
individuals to participate securely in the global economy, and to
protect them from the impact of counterfeiting and illicit trade.
We do this by producing secure documents, providing international
support, and offering physical and digital tools that authenticate
goods and protect identities.
Why it matters
Strong economies and thriving societies
require trust. Counterfeits and illicit
trade represent a multi-trillion dollar
issue and 3.3% of global trade, with the
potential to undermine that trust. Our
solutions help to secure trust and both
physical and digital solutions play an
important role in this.
Our digital authentication solutions
provide transparency, engagement and
control across supply chains.
However 5 billion people are not
connected or poorly connected online.
To put the global digital infrastructure in
place to connect them would require
over $400bn.
Physical banknotes include everyone
financially, while contributing towards a
more resilient payments landscape and
protecting the fundamental right to
privacy. Tax stamps, brand protection
physical tokens and passports provide
standalone off-line surety and enable
quick visual authentication.
Contents
IFC About/Highlights
Strategic report
4
Our markets
10 CEO review
16 Our business model
18 Our strategy
20
21
24
46
Engaging with our
stakeholders
Section 172 Statement
Responsible business
report
Key performance
indicators
Financial review
Risk and risk management
50
56
64 Viability statement
Governance report
70
72
74
78
Board statement on
corporate governance
Board of Directors
Governance at a glance
Board leadership and
company purpose
80 Division of responsibilities
83
Composition, succession
and evaluation
Audit, risk and internal
control
101 Remuneration
128 Directors’ report
133
Directors’ responsibility
statement
88
Financial statements
136
Independent Auditor’s
Report
Consolidated income
statement
Consolidated statement
of comprehensive income
Consolidated balance
sheet
Consolidated statement
of changes in equity
Consolidated cash flow
statement
145
146
147
148
149
207
151 Accounting policies
161 Notes to the accounts
205 Company balance sheet
206
Company statement of
changes in equity
Accounting policies
– Company
Notes to the accounts
– Company
211 Non-IFRS measures
214 Five year record
215 Shareholder information
209
De La Rue plc Annual Report 2023
1
Strategic reportGovernance reportFinancial statements Strategic report
2
De La Rue plc Annual Report 2023
10bn+
unique products
are tracked annually,
via our digital
traceability systems
60%
of all commercially
printed banknotes
designed by De La Rue
since 2020
Authentication
Page 11
Currency
Page 12
Why invest?
Page 15
CEO review
Page 10
4
Our markets
10 CEO review
16 Our business model
18 Our strategy
20
Engaging with our stakeholders
21
Section 172 statement
24 Responsible business report
46 Key performance indicators
50 Financial review
56 Risk and risk management
64 Viability statement
De La Rue plc Annual Report 2023
3
Strategic reportGovernance reportFinancial statements Our markets
We are ideally
placed to benefit
from future growth
in our markets
De La Rue operates in a truly global
market, with customers in every continent
other than Antarctica. In countries where
we have customers, it is hard to find a
consumer without one of our products in
their pocket or bag. Both Authentication
and Currency divisions are therefore
subject to a range of global trends.
Group revenue split per region
140
countries in which we
have customers
30
countries with
SAFEGUARD® polymer
substrate banknotes
48
countries signed to World
Health Organization
Framework Convention
on Tobacco Control but
without compliant tax
stamp scheme
Read more:
CEO review – page 10
Our business model – page 16
Our strategy – page 18
16%
UK
20%
Rest of Europe
7%
The Americas
42%
Middle East
and Africa
11%
Asia
4
De La Rue plc Annual Report 2023
4%
Australasia
Banknotes
maintain
dominance
in the global
payments
landscape
Currency:
Banknote demand
Why use banknotes in the
21st century?
– Privacy, including protection from
identity theft
– Does not require electricity or
internet access
– Needs no change of habit or
additional education to use
new technology
– Acts as a storage of value,
particularly in difficult times
– Increases margins, particularly for
small businesses, due to lower
transaction fees
– Can help budgeting
– Sustainable – uses only 17.5% of
the energy consumed by the global
payments industry, according to
the IMF
Electronic payment methods
remain out of reach for many
– 1.4bn do not have a bank account¹
– 5bn have poor or no internet
access²
– 43% of adults in developing
countries have not made a
digital payment¹
– 65 countries pay at least a quarter
of their adults in cash¹
– Over $400bn needed, mostly in
emerging market economies, to get
a global digital infrastructure in
place according to IMF²
Demand for banknotes is
driven by three things:
– To increase the value of cash
in circulation
– To transition to a new series
of banknotes
– To replace banknotes that have
reached the end of their useful life
Value of cash in circulation
continues to increase
– 4.9% increase in the volume of
banknotes in circulation in 2022
– 96 of 98 issuing authorities
surveyed saw an increase in cash in
circulation March 2023 vs 2020
– Inflation was over 10% in 71 countries
in 2022
– Growth in the absolute number of
transactions, caused by a growing
and more economically active
population, also increases use
of cash
Benefits of polymer substrate
Ten years ago De La Rue introduced
SAFEGUARD® polymer substrate and
remains one of the two substantial
manufacturers in this growing market.
Compared to paper, polymer
banknotes are:
– more durable
– harder to counterfeit, particularly
through use of transparent windows
– more easily recycled
– more accessible as they can
incorporate durable blind
recognition functionality
Banknote series are renewed every
7 to 10 years on average, to remain
ahead of counterfeiters. Often the old
notes are replaced rather than being
allowed to wear out.
Annual demand for commercially
printed banknotes (in billions)
De La Rue is the largest commercial
designer of banknotes, creating 60%
of new designs since 2020. We saw
an increase in new design requests
in FY23, an early indicator that
several banknote series are about
to be upgraded.
Notes:
1.
2.
Global Findex 2021 survey
IMF Spring Meeting 2023: Analytical Corner: Tackling
the Digital Divide
For more information:
delarue.com/currency
De La Rue plc Annual Report 2023
5
FY04FY11FY08FY17FY20FY14FY23302520151050Strategic reportGovernance reportFinancial statements Our markets continued
Authentication:
Global counterfeits and illicit trade
The proliferation of illicit
economic activity is a key
global risk according to the
World Economic Forum
Illicit economic activity:
– undermines excise revenues
– damages businesses
– harms consumers
– benefits criminals, including
funding terrorism
– innovation is not rewarded
– goods are produced and
supplied without needing to
meet the health, safety, legal or
environmental requirements of
a legitimate supplier
Governments need to minimise the
impact of illicit trade and protect tax
revenue and identities in order to:
– fulfil a financial and moral duty
– meet legal obligations, such as the
WHO Framework Convention on
Tobacco Control
– decrease tax leakage and so
generate revenue
– provide security for jobs, increase
trade and protect the health and
wellbeing of their citizens
Countries that fail to build strong tax
administrations are missing a
‘tremendous opportunity to improve
the quality of life for their citizens.
In a rapidly developing economy,
a 10 to 15% increase in tax revenues
often translates into an ability to
double expenditures on, for example,
health care or education’ according
to McKinsey1.
The size of the problem
– Sale of counterfeit and pirated
goods represents somewhere
between $1.7trn and $4.5trn per
annum according to the US Patent
and Trademark Office
– 2.5% of all global trade per OECD
– 5.8% of all goods entering the EU
– across all channels – are illicit2
– 25.8% of global alcohol consumption
involves illicit products3
– Estimated to cost 2.5m jobs
every year
– All industries are impacted
– Rise of e-commerce, social media
platforms and cryptocurrencies
provide fertile grounds for the sale
of counterfeit goods
– Weak and disrupted supply chains
also provide avenues for counterfeits
to enter legitimate channels
Types of illicit trade
– Smuggling is the movement of
products between tax jurisdictions
– Counterfeiting involves the
production of fake goods, often
at scale
– Tax evasion arises from undeclared
goods, overproduction in country or
falsification of shipping and taxation
documents, allowing criminals to
take advantage of different tax
levels between territories, without
necessarily moving products
Impacts of illicit trade
Risk to life and public health:
– 1 in 10 medical products in low and
middle income countries are
substandard or counterfeit
according to WHO
Risk to livelihood:
– Africa loses up to 70% of food
production because of low-quality
or counterfeit seeds
– Non-genuine pesticides account
for around 30% of the domestic
agrochemical market in India
– A threat to international security
– Financing of organised crime
and terrorism4
– Economic losses and destabilisation
of legitimate industries
– Environmental damage
– Intellectual property infringement
6
De La Rue plc Annual Report 2023
Preventing illicit trade
– Digital traceability is essential to
combat smuggling
– Physical tokens, increasingly in
combination with digital solutions,
help distinguish real products from
fake ones
– Volume verification of production,
through the use of tax markings
and data analytics, ensures that
excise revenues are correctly
aligned with the actual volume
of goods manufactured
– Protection of travel documents to
protect supply chains from bad
actors and aid law enforcement
De La Rue provides digital and physical
end-to-end authentication solutions
that are reliable, adaptable, and rapid
to implement to protect revenue
and reputations.
We offer comprehensive traceability
software which, together with physical
security token and documents, make
our expertise in preventing illicit and
counterfeit trade world class.
Notes:
1.
2.
3.
4.
McKinsey & Company – Unlocking tax-revenue
collection in rapidly growing markets
http://www.mckinsey.com/insights/public_sector/
ten_quick_steps_to_unlocking_taxrevenue_
collection_in_rapidly_growing_markets
https://dfworldcouncil.com/wp-content/
uploads/2022/09/TTS-Duty-Free-paper-2022_
FINAL.pdf
“Size and Shape of the Global Illicit Alcohol Market”,
Euromonitor International (2018)
https://www.un.org/securitycouncil/ctc/sites/
www.un.org.securitycouncil.ctc/files/ctc_cted_
factsheet_cft_oct_2021.pdf
For more information:
delarue.com/authentication
Global macro trends
Trend:
Rise in electronic payments
Trend:
Rise in online purchases
Trend:
Move to digital from
physical solutions
Why this is important
Online purchases are rising generally.
Without the ability to physically inspect
goods at the point of sale, this offers
more potential for counterfeiters.
The rise in online shopping is linked to
increases in counterfeit and illicit trade,
creating significant issues for brand
owners and governments hoping to
reduce this activity.
Our response
De La Rue’s brand protection solutions
and tax excise schemes provide ways of
verifying genuine products, combating
the spread of counterfeit goods.
Why this is important
There is a trend towards providing
digital solutions, either in combination
with traditional physical ones or as
stand-alone solutions. Our digital
products must evolve to keep pace
with technological advances and our
physical solutions need to interact
seamlessly with them.
Our response
Within Authentication, our solutions
are now digital enabled or digital based.
Our Government Revenue Solutions
(GRS)and Brand systems, DLR Certify™
and Traceology®, offer digitally enabled
end-to-end track and trace systems
together with customer digital
verification. Our solutions are designed
with the needs of all stakeholders along
the supply chain in mind and built on
the best technological solution to deliver
against their needs. Our solutions are
fast to use and easy to implement.
Why this is important
The rise in electronic payments is driven
by technological advancements and
changing consumer behaviour. This is
expected to continue as a steady trend.
In a minority of countries, such as the UK,
concerns about access to cash in the
future are triggering protective measures
and laws.
Our response
While increasing electronic payments
represent more of a risk than an
opportunity for the Currency business
of De La Rue, in many of the significant
countries in which De La Rue operates,
the infrastructure, cultural habits and
global financial literacy levels mean
rapid changes are not expected:
– For central banks and governments
recognising that cash will have
a significant role to play even in
a less-cash society, De La Rue’s
SAFEGUARD® polymer banknotes
offer a more cost-effective solution to
maintaining a functioning cash cycle,
compared with paper banknotes.
– De La Rue is keeping a watching brief
over the rise of digital currencies and
is pro-active in influencing
discussions about access to cash and
central bank digital currencies.
People without a bank account
Percentage of retail sales made online in UK
1.4bn*
* Source: World Bank
30
25
20
15
10
5
0
2015
2016
2017
2018
2019 2020 2021
2022
Source: Office for National Statistics
De La Rue plc Annual Report 2023
7
Strategic reportGovernance reportFinancial statements Our markets continued
Global macro trends
Trend:
Inflation
Trend:
Population growth in
developing countries
Trend:
Aftermath of Covid-19
Trend:
Increasing sophistication
of counterfeiters
Why this is important
Many countries are experiencing a
resurgence of inflation as the world
recovers from the Covid-19 pandemic,
exacerbated by rapidly rising energy
prices following Russia’s invasion
of Ukraine.
Why this is important
Populations are still growing in developing
countries. This leads to a greater need
for goods, services and identification
documents and helps sustain the use
of cash over time.
Why this is important
Many countries stocked up with
banknotes at the beginning of the
Covid-19 pandemic. Several of these
used up foreign currency reserves during
the pandemic and now have little hard
currency in reserve to replace banknotes.
Our response
De La Rue is well placed geographically
to provide banknotes for most countries
where cash will remain a significant
payment tool. We are also well-placed
to deliver solutions for the growing
markets for excisable goods and
identification documents that population
growth brings.
Our response
Currency volumes have been subdued.
We are repositioning our operations
within this division to optimise efficiency
during this time of low banknote
demand, while retaining the ability
to scale up operations when the
market returns.
Percentage revenue from Asia, Middle East
and Africa
Estimated fall in commercially produced
banknotes in 2022
53%
c.15-20%
Annual trade in counterfeit and
pirated goods
$1.7trn+*
Our response
Inflation is both a challenge and an
opportunity for De La Rue.
Inflation provides us with cost challenges.
We have reduced our FY23 cost risk by
managing existing suppliers, realigning
and dual sourcing. We also fixed our UK
energy costs substantially below both
spot prices and the Government’s winter
price cap.
Inflation also provides an opportunity to
our Currency division. Countries with high
levels of inflation require more banknotes
as the purchasing power of a single
denomination drops and ‘storage-of-
value’ banknotes become transactional.
Some countries need to introduce higher
value banknotes to keep their cash
volumes at manageable levels.
Rise in currency in circulation
1.8
1.6
1.4
1.2
1.0
0.8
2020
2021
2022
Lines represent selected De La Rue customers.
Value relative to value in circulation at 1 Jan 2020 = 1.
Source: IMF IFS Currency in Circulation
8
De La Rue plc Annual Report 2023
Why this is important
Counterfeiters are becoming ever
more sophisticated over time and take
advantage of the developments in
commercially available equipment and
materials to produce additional and
more realistic fake products. Counterfeit
goods undermine consumer trust,
expose consumers to greater risk and
weaken economies.
Our response
Whether it is the use of laminated
polycarbonate in the production of ID
documents or the use of increasingly
sophisticated combinations of
components in banknotes, all De La Rue
products and solutions are designed
with the aim of deterring counterfeiters.
Our solutions are extremely challenging,
and consequently expensive, for
counterfeiters to simulate.
Global macro trends
Case study:
Authentication
Trend:
Inflation
Trend:
Population growth in
developing countries
Trend:
Aftermath of Covid-19
Trend:
Increasing sophistication
of counterfeiters
Our track and trace software
systems read billions of unique DLR
codes with sub-second response times
Why this is important
Many countries are experiencing a
resurgence of inflation as the world
Why this is important
Why this is important
Populations are still growing in developing
Many countries stocked up with
countries. This leads to a greater need
banknotes at the beginning of the
recovers from the Covid-19 pandemic,
for goods, services and identification
Covid-19 pandemic. Several of these
exacerbated by rapidly rising energy
documents and helps sustain the use
used up foreign currency reserves during
prices following Russia’s invasion
of cash over time.
of Ukraine.
the pandemic and now have little hard
currency in reserve to replace banknotes.
Our response
Our response
Our response
Inflation is both a challenge and an
De La Rue is well placed geographically
Currency volumes have been subdued.
opportunity for De La Rue.
to provide banknotes for most countries
We are repositioning our operations
where cash will remain a significant
within this division to optimise efficiency
Inflation provides us with cost challenges.
payment tool. We are also well-placed
during this time of low banknote
We have reduced our FY23 cost risk by
to deliver solutions for the growing
managing existing suppliers, realigning
markets for excisable goods and
demand, while retaining the ability
to scale up operations when the
and dual sourcing. We also fixed our UK
identification documents that population
market returns.
energy costs substantially below both
growth brings.
spot prices and the Government’s winter
price cap.
Inflation also provides an opportunity to
our Currency division. Countries with high
levels of inflation require more banknotes
as the purchasing power of a single
denomination drops and ‘storage-of-
value’ banknotes become transactional.
Some countries need to introduce higher
value banknotes to keep their cash
volumes at manageable levels.
Rise in currency in circulation
Percentage revenue from Asia, Middle East
Estimated fall in commercially produced
and Africa
53%
banknotes in 2022
c.15-20%
Why this is important
Counterfeiters are becoming ever
more sophisticated over time and take
advantage of the developments in
commercially available equipment and
materials to produce additional and
more realistic fake products. Counterfeit
goods undermine consumer trust,
expose consumers to greater risk and
weaken economies.
Our response
Whether it is the use of laminated
polycarbonate in the production of ID
documents or the use of increasingly
sophisticated combinations of
components in banknotes, all De La Rue
products and solutions are designed
with the aim of deterring counterfeiters.
Our solutions are extremely challenging,
and consequently expensive, for
counterfeiters to simulate.
Annual trade in counterfeit and
pirated goods
$1.7trn+*
* Source: US Patent and Trademark Office
Within DLR Certify™, enforcement
teams can rapidly read the DLR codes
to confirm authentic product and that
duty has been paid. For both systems,
consumers can use a smartphone
app to reassure them that goods
are genuine.
DLR Certify™ and Traceology®
De La Rue has two proprietary
software systems for the tracking
and tracing of goods.
DLR Certify™ manages products
covered by our GRS schemes and is
compliant with the WHO FCTC. Our
brand protection schemes use our
Traceology® system.
Both systems trace goods through the
supply chain to end user by assigning
a unique code to each product.
Case study:
Currency
100 notes are now on our
SAFEGUARD® polymer substrate
Continued conversion of banknotes
to polymer
The introduction of SAFEGUARD®
ten years ago marked an acceleration
in the rate that central banks converted
to polymer, providing a second source
of supply and removing any business
continuity risks. The recently
introduced new Jamaican series of
banknotes marked SAFEGUARD®
tipping over 100 notes.
The launch of the first two
SAFEGUARD® Egyptian banknotes and
continuation of the UAE series on to
polymer demonstrates De La Rue’s
strategy to grow revenue by selling
more to state print works.
The move towards ASSURE™ level three
covert taggant, only detectable by
central banks, embedded in the core of
SAFEGUARD® opens up new customers.
Polymer now offers every type of
security provided by paper substrate.
Number of Polymer Denominations
in Circulation
250
200
150
100
50
0
2013
Safeguard
launches
1990
1995
2000
2005
2010 2015
2020
De La Rue plc Annual Report 2023
9
Strategic reportGovernance reportFinancial statements CEO review
Well positioned
in growing markets
The actions we have taken over the
past few months, implementing a range
of initiatives about which we provide
further detail below have stabilised
the Company. Specifically, we have
renegotiated terms with our lenders,
leading to covenant relaxation, and
agreed a substantial deferral to our
pension deficit repair contributions.
These factors have allowed us to remove
the ‘material uncertainty’ cited at the
Interims in November 2022, and to
reiterate our guidance for adjusted
operating profit for FY24.
We set out below more detail on these
recent initiatives, together with narrative
on the results for FY23, where adjusted
operating profit and net debt for the
FY23 were in line with guidance
previously given in April 2023.
In FY23 the Currency division was
profitable at the adjusted operating
profit level, generating £13.6m despite
the low levels of demand across the
industry. This compares with £19.5m in
FY22, but demonstrates a continuation
of our commitment, made in FY20, that
the Currency division will be profitable
at this level during downturns, breaking
the historical cycle of losses during
market lows.
Amended bank facilities
Following extensive negotiations with
our banking syndicate, we have agreed
revised terms, which include substantial
relaxations of the covenant ratios to
which we have hitherto been subject.
This reflects the reality of the higher
interest rate environment in which
we now find ourselves, given recent
increases in base rates, which rose
350bps over the course of FY23 and,
with inflation still at high levels, the
prospect of further rises still to come.
We would like to thank our lenders for
their understanding and pragmatism
in reaching this revised agreement,
recognising the challenging competitive
and global economic environment in
which we are operating.
For the remainder of the term of the
loan, which runs to 1 January 2025,
the interest covenant ratio to which
De La Rue is subject has been relaxed to
a minimum of 1.0 times from its current
minimum of 3.0 times. The limit on the
gearing covenant ratio is relaxed to a
maximum of 4.0 times until March 2024
and then 3.6 times for the remaining life
of the facility. For comparison, at the end
of FY23 our interest cover ratio stood at
3.03 and our gearing ratio at 2.21.
An additional liquidity covenant will be
introduced, requiring De La Rue to
maintain ‘headroom’ of at least £25m
on its £175m facilities.
The new facility is subject to a 1%
arrangement fee, reduced to 0.5% if
the facilities are refinanced prior to
31 December 2023. It is payable on
the earlier of 1 January 2025 or the
refinancing of the facility. However, the
margin that we pay at any particular
gearing ratio will not be changing, other
than recognising additional rachets given
the higher ceiling this ratio now has.
Further details of the terms of the new
facility are given within the Financial
Review section on pages 50 to 55.
We remain focused on generating free
cash flow to reduce the average level
of debt.
Clive Vacher
Chief Executive Officer
Following a significant
downturn in Currency
demand over the past
18 months, there are
encouraging signs of
recovery. In addition,
our Authentication division
is on track for significant
revenue growth in FY24.
10
De La Rue plc Annual Report 2023
Authentication
In FY23 the Authentication division
produced an adjusted operating profit
of £14.3m (FY22: £16.3m) on revenue of
£91.7m (FY22: £90.3m).
In FY23 the division benefited from
significant revenue from the contract to
supply ID datapages for the new Australian
passport. The division also onboarded
new GRS schemes in Bahrain, Oman and
Qatar, with all three schemes generating
revenue from the first half of FY23.
With these three latest schemes on
board, De La Rue now runs Framework
Convention for Tobacco Control (FCTC)
compliant schemes across all countries
that have implemented a scheme in the
Gulf Cooperation Council area (totalling
five out of the six countries in the bloc),
a 100% win rate. Our other Government
Revenue Solutions contracts performed
as expected.
In the Brand segment our business with
Microsoft was impacted by the fall in
PC sales globally, with International Data
Corporation (IDC) noting a 16.5% year on
year fall in PC demand/shipments in
2022, and a 29% drop in the first calendar
quarter of 2023, compared to the same
quarter in 2022.
Adjusted operating profit was impacted
by sales mix, and the division also
attracted a greater proportion of central
overheads, having generated a greater
proportion of Group revenue in the year.
The arrival of Dave Sharratt as the
Managing Director, Authentication in
September 2022 has reinvigorated and
refocused marketing and sales efforts
within the division. The immediate focus
in GRS is now on expanding the offering
in territories where we already have
arrangements in place, to cover other
excisable goods, with e-cigarettes,
sweetened juices, mobile phones and
beauty products all being discussed as
additional product types. Three GCC
countries have already committed to
cover soft drinks. In addition, we have
recently secured multi-year GRS contract
renewals with countries across Europe
and Africa, securing our existing revenue
for future years.
Within GRS, the World Health Organization
has been pushing signatories of their
FCTC for compliance by the promised
dates (for example at the Meeting of the
Parties in October 2022). Linked to this,
our level of pre-sales activity is also
increasing: we are in direct conversation
with multiple countries in our focus
regions of Africa and the Middle East who
have expressed an intention to tender for
Digital Tax Stamp solutions within the
next 18 months. Our win rate for tenders
in this space since 2020 is over 50%.
In Brand protection we are targeting
expansion of the customer base, with
investment in the sales force and
implementation of a partner model to
boost opportunities. This approach is
already bearing fruit, with three-year
contracts recently agreed with a
multinational pharmaceutical company
and a wholesale parts manufacturer.
A strong pipeline of further opportunities
is being explored.
Our ID business secured a significant
boost during FY23 when we agreed an
extension to the contract to manufacture
datapages for Australian passports from
five to 10 years out to 2032, building on
our success to date in fulfilling the needs
of the Australian Passport Office (“APO”).
Based on that commitment, we have
invested in a second line to produce
polycarbonate datapages for ID
documents in Malta. This is now fully
operational, with available capacity
initially earmarked to allow the APO to
build up buffer stocks.
The commissioning of the ID data page
second line is the first fully-implemented
part of our Malta expansion. The remaining
expansion for the Authentication division
will considerably increase our capacity
for printing tax stamps and is expected
to be fully operational by the second half
of FY24.
Our software capabilities, with our DLR
Certify™ and Traceology® systems
allow end-to-end track and tracing
of De La Rue authenticated products.
These form a significant part of our
Authentication offering. Shortly after
Dave Sharratt joined De La Rue, he
requested a thorough review of our
software development operation.
Following this review we have mothballed
two projects, resulting in a £2.9m
exceptional write down. However, this
has allowed our team to focus on the
core business and our strategic direction
allows concentration on the areas that
give us the greatest future return.
For more information:
delarue.com/authentication
De La Rue plc Annual Report 2023
11
Our systems
track billions
of products with
sub-second
response times
through supply
chain from
manufacturer
to end-user
100%
of tax stamp schemes in Gulf
Cooperation Council area are
De La Rue schemes
Strategic reportGovernance reportFinancial statements CEO review continued
Currency
Maximising efficiency
and flexibility
throughout this
transformation
60%
Commercially printed banknotes
designed by De La Rue since 2020
+4.9%
Growth in cash in circulation
2021 to 2022
The Currency division in FY23 saw
revenues fall to £254.6m (FY22: £280.9m)
and saw an adjusted operating profit of
£13.6m (FY22: £19.5m).
Currency was impacted by the downturn
in activity in the wake of the Covid
pandemic when central banks stocked
up with currency, and subsequently the
global economic slowdown. This is an
industry-wide trend, as evidenced by
recent public statements made by a
number of competitor companies. This is
also evidenced by our win rate on bids,
which remains at the same high level as
it has been since we implemented the
initial changes back in FY20 and FY21. The
amount of cash in circulation continues
to rise, growing 4.9% between 2021 and
2022, indicating that central banks have
been working down the banknote
inventory buffer they built in response
to the Covid pandemic.
We entered FY24 with the total order
book at £136.8m (25 March 2022:
£170.8m) and the 12-month order book
at £131.7m (25 March 2022: £163.5m).
There are now encouraging signs that
the market is recovering, with strong bid
activity, a continuing positive win rate,
and the substantial majority of FY24
banknote print orders already awarded.
These include recent wins, especially in
Africa, the Middle East and Asia, that have
been received since the end of FY23.
In 2020 we made a clear pledge to
transform Currency, so that it is profitable
on an adjusted operating profit basis
even in downturns. While it is accepted
that Currency has fallen short of
expectations in recent times, the FY23
results of this division bear out that
pledge. In FY20, the Currency division
demonstrated an adjusted operating loss
of £9.4m. In the three subsequent years,
FY21 to FY23, the division’s adjusted
operating profits have been £16.2m,
£19.5m and £13.6m respectively. This
includes the severe downturn in FY23,
from which the market is beginning
to recover.
De La Rue has significantly enhanced
its competitiveness, refining its
manufacturing footprint and cost base,
and is well positioned for when the
market returns.
The termination of the long-term supply
agreement for banknote paper with
Portals in July 2022, eliminating £119m in
commitments for a cash payment of
£16.7m represented a further step in our
transformation. We give more detail on
this and progress on paper tendering
below. The recently completed wind
down of the Kenyan facility further
right-sizes our manufacturing facilities,
focusing on those with the greatest
capability, while maintaining De La Rue’s
position as the number one commercial
printer of banknotes worldwide.
The expansion of our Malta site, where
our new Currency operations will
progressively come online from the
first half of FY25, further refines that
operational flexibility.
For more information:
delarue.com/currency
12
De La Rue plc Annual Report 2023
Kenya
As referenced above, in January 2023,
the Group determined that, owing to
current market demand, and no
expectation of new banknote orders
from the Central Bank of Kenya for a
considerable period, De La Rue Kenya
(a joint venture with the Government
of Kenya) would suspend banknote
printing operations in the country.
Furthermore, operations in our
Authentication division in Kenya have
been wound down.
As a result of the review of the business
in Kenya, an exceptional charge of
£12.6m (FY22: £nil) was made in FY23.
This included redundancy charges of
£5.5m, property, plant and equipment
asset impairments of £4.9m, and
inventory impairments of £2.0m
Deferral of pension deficit
reduction contributions
We have also successfully concluded
negotiations with the Trustee of the
De La Rue Pension Fund, overseen by
the Pensions Regulator, to defer £18.75m
of deficit reduction contributions.
The Trustee has agreed that we will defer
our deficit reduction contributions of
£3.75m per quarter from that due on
5 April 2023, up to and including the
payment that was due on 5 April 2024,
less an amount equivalent to the
arrangement fee agreed with our lenders
on the covenant package, due on or after
5 April 2024. During the second quarter
of FY25, deficit reduction contributions
will recommence at the rate of £3.75m
per quarter. ‘Catch up’ payments, to put
the Scheme in funds for the £17.5m
deferred, will start from July 2025 and
will continue from FY26 to FY29.
The next actuarial valuation of the
scheme is due based on the funding
position as of April 2024.
This deferral significantly eases the
short-term cash outflow for the business
and builds upon the actions previously
taken, such as the March 2022
agreement with the Pension Scheme
Trustees to lower cash payments that
fund the pension deficit. After the
deferral expires, cash payments to repair
the pension deficit will still be £9.5m per
annum lower than they would have been
without this March 2022 agreement.
Going concern
The agreements with our banking
syndicate and the pension fund trustee
are key elements in the Directors’
assessment of going concern, which
has concluded that there is no material
uncertainty with respect to going
concern. A full description of the process
and judgements made in reaching this
conclusion is set out in Going Concern
on pages 65 to 67.
Divisional performance
We set out on pages 11 and 12 more detail
on the trading during FY23 and since
year end within each division of
the business.
Cost base
We made substantial progress during the
year in limiting supply chain headwinds
in a period which saw a step change in
global rates of inflation. We used a
combination of dual sourcing, tendering
and robust negotiation to maintain a
competitive raw material price base.
Our UK energy costs are fixed to at least
September 2024, providing us with a
good degree of forward cost visibility.
The termination of the contract with
Portals Paper to supply banknote paper
in July 2022 marked another step in our
journey to resolve the legacy issues that
have impacted the efficiency of the
business. We have since qualified multiple
additional suppliers and validated the
predicted future cost savings.
De La Rue plc Annual Report 2023
13
Strategic reportGovernance reportFinancial statements CEO review continued
Malta
The substantial expansion to our Malta
facility is progressing well. An additional
line producing ID datapages is now fully
operational and the remaining additional
Authentication space should be
completed in the second half of FY24.
The Currency facilities, including a new
vault, should be ready in FY25.
When complete, the new facilities will
substantially increase our capacity
within Authentication and add
significantly to our Currency capabilities
within Malta.
Conclusion
I would like to express my thanks to my
colleagues throughout the Group, who
have remained focused and resilient
through significant changes in the
business, and through a historically low
demand period in Currency. As we go
forward, we will redouble our efforts to
develop the Company, with a strong
operational plan, now underpinned by
the amendment to the banking
arrangement, a deferral of immediate
pension contributions, and a going
concern assessment that has not
identified any ‘material uncertainty’.
FY23 has been a challenging year for
the Company and its stakeholders.
We remain resolute in our determination
to build on the ongoing transformation
actions and create a positive future.
Clive Vacher
Chief Executive Officer
29 June 2023
Outlook
As noted above, despite the low order
book going into FY24, there are
encouraging signs that the Currency
market is recovering. We expect revenue
in the Authentication division to exceed
£100m for the first time in FY24, driven
by existing contracts, including the full
year impact of the Qatar, Bahrain and
Oman GRS programmes, and a
substantial increase in demand from
the Australian passport programme.
On 12 April 2023, De La Rue announced
that the Board expected full year
adjusted operating profit for FY24 to be
in the low £20m range. Trading for the
first two months of FY24 has been in line
with this and it remains the Board’s
expectation for the full year, albeit with
H1 being broadly break-even at Group
level due to the timing of the recovery
in Currency orders.
Over the last three years we have
taken decisive steps to restructure
the business, driving efficiencies and
innovation, and reducing costs. In FY24
we are continuing this journey, including
making the final payment for the Portals
exit, thereby finally closing out another
major legacy issue. This year, we expect
net debt to rise to around £100m by
both the half year and the year end.
14
De La Rue plc Annual Report 2023
Case study: Authentication
Renewal of GRS
contract in Cameroon
In FY23 De La Rue signed a two-year
contract renewal with Cameroon for
the supply of a digital tax stamp
solution for tobacco goods and
wines and spirits via DLR Certify™.
This extension builds on successful
cooperation with the Government
of Cameroon and the ongoing
deployment of a GRS solution
since 2010.
Case study: Currency
Production of new
King Charles III notes
for Bank of England
De La Rue has been working with
the Bank of England since 2003,
including on the conversion to
polymer banknotes which were first
issued in 2016.
In December 2022 the Bank of
England unveiled updated notes
featuring a portrait of His Majesty
King Charles III. These are a
continuation of the current series
of notes and represent some of the
most technically advanced banknotes
in the world. The new notes are due
to enter circulation by mid-2024.
Our values
Why invest?
De La Rue
is well
positioned
in our chosen
markets
Trust & Transparency
We are honest and transparent
and always act with integrity.
Customer Focus
We seek to understand the
needs of our customer be that
internal or external, through
insight and data. We challenge
the speed of delivery and
quality of output to exceed
their expectation.
Collaboration
We are inclusive and embrace
differences, working together
to deliver results through our
collective knowledge.
Challenge
We challenge ourselves and
each other to deliver the best
results we can, to continuously
improve and to learn from our
mistakes. We are courageous
and don’t shy away from
difficult situations.
Problem Solving
& Innovation
We create solutions that solve
real challenges by applying
new thinking and concepts for
both ourselves and our
customers.
Unique product offering
De La Rue is at the forefront of delivering currency
products and authentication solutions. We
specialise in design, material sciences, international
manufacturing and digital solutions. Our products
and services protect economies, revenue sources
and reputations.
Well positioned in growing markets
We are one of only two significant producers of
polymer banknote substrate. Just 5% of banknotes
are made of polymer, though this is steadily
increasing. We design more banknotes than other
commercial manufacturers.
We provide technologically advanced solutions
that verify bona fide goods and documents,
combating the $3 trillion annual trade in counterfeit
goods. We provide solutions to enable government
tax excise schemes.
Operational resilience
Over the past few years we have reshaped our
manufacturing footprint to a modern, flexible base,
adaptable to the demands of our customers.
We also are honing our operational delivery to use
our assets optimally, with our products meeting
the highest quality standards.
Moving towards free cash flow generation
We have simplified the business, addressing
legacy issues to improve profitability and cash
flow. We expect to move towards free cash
flow generation.
Leaders in responsible business
Engaging in business responsibly lies at the heart
of what we do. We work to improve the world
around us: for our customers, employees, suppliers
and the wider community.
De La Rue plc Annual Report 2023
15
Strategic reportGovernance reportFinancial statements Our business model
How we create value
World leaders in our field,
De La Rue provides expertise in
secure product design, global
manufacturing and software
solutions for supply chain
traceability to governments
and businesses worldwide.
The resources we require
Our people
– We have dedicated and passionate
employees around the world who work
closely with our customers.
1,800
employees
A
grade issued by
CDP* for supplier
engagement on
climate change
14,500m²
extension in
collaboration with
Malta Enterprise
350
years of experience
1,000+
patent portfolio
Suppliers and partners
– We work with suppliers and partners
all over the world to ensure ethical,
sustainable and reliable delivery to
our customers.
Manufacturing and development
capability
– We are investing in world class facilities
for banknote and authentication
product manufacturing in Malta, along
with targeted investments to grow
our authentication software, security
features, polycarbonate datapages and
SAFEGUARD® polymer substrate.
Design expertise
– We have our own design studio, with a
team that has over 350 years of design
and engraving experience. We work with
customers from concept development
through to proofing, trials, qualification
and production.
Patents and know-how
– As well as a wealth of technical know-
how, we have a portfolio of over 850
patents granted, with 370 patents
pending. We specialise in a range of
surface-relief micro-structures, with
proprietary equipment and patents going
out into the late 2030s.
Strong balance sheet
– A strong balance sheet enables us
to compete efficiently and invest for
the future.
16
De La Rue plc Annual Report 2023
*
formerly Carbon Disclosure Project
Manufacturing
– We produce goods of the highest
quality at volume.
– To be verifiable each banknote or tax
stamp must be designed for recognition
and authentication, but at the same
time to be traceable, they must have
unique identifiers.
Operations
– Our physical products are produced
and shipped securely on time.
– Our digital solutions are secure, robust
and reliable. They are designed for
speed of operations and ease of
implementation.
– In order to meet customer timetables
and run our manufacturing facilities
efficiently, we plan our production
timetables across our sites carefully.
– We focus on the environmental
efficiency of our operations to make
sure that they are as sustainable as
possible, complying to ISO 14001 and
international best practice to drive
continuous improvements.
How we add value
Excellence in
Design and technical know-how
– We design products and solutions
that can be produced at scale by us
and are easy to authenticate, but also
resistant to counterfeiting.
– We combine national symbols,
security features, logos, colour and
substrate to produce an attractive,
cost effective, resilient end product,
whether a banknote, brand protection
label, tax stamp or software solution.
– Our brand protection labels and digital
tax stamps are designed to interact
with our digital software offerings.
Understanding customer needs
– Our customers are largely national
tax authorities, international brand
owners, state printing works and
banknote issuing authorities. We
understand the significance of the
introduction of a new banknote series,
ID document or a new tax stamp
scheme and work closely with them
on design and implementation.
– We have built up strong working
relationships with many authorities
and some major brand owners, up
to the highest level over the years.
– Our solutions are increasingly
sustainable, with a general focus on
reducing the impact of our business
operations, the use of durable
recyclable polymer banknotes in
Currency and the ability to introduce
more sustainable physical components
into Authentication solutions.
– Our research and development
activities provide focused innovation,
leveraging our deep knowledge of our
customer needs.
The value we create
for stakeholders
Our products in use in the world
– Enable secure participation in
the economy.
– Help deliver confidence in
the economy.
– Support social and financial
inclusion.
– Protect tax revenues.
– Tackle counterfeit goods and
illicit trade.
Customers gain
– Authentication solutions that
provide security and ability to
trace products.
– Durable, high quality banknotes
reflecting key aspects of the country
they represent, embedding a
combination of features that make
counterfeiting as hard as possible.
Suppliers gain
– A long term working relationship with
an ethical partner.
– Repeat orders from a customer that
treats them with respect.
Employees
– We promote an inclusive culture
which values diversity, the health
and wellbeing of our employees
and where they can achieve their
full potential.
Communities and the environment
– We are conscious of our
responsibilities to the communities
in which we work and are committed
to minimising the impact of our
operations on the environment.
Shareholders
– Our strategy (see page 18) is
designed to achieve sustainable
profitability and cash flow and
create long term shareholder value.
De La Rue plc Annual Report 2023
17
Strategic reportGovernance reportFinancial statements Our strategy
The De La Rue strategy
undergoes a formal
review and approval
process each year
In 2022 we considered the evolution of both the markets
in which we operate and the capabilities of De La Rue
in the three years since we set out the Turnaround Plan.
We refined our strategy accordingly.
Our focus can be summarised in three broad pillars: grow
repeatable business, drive efficient operations and invest
for the future. These broad pillars cover Government
Revenue Solutions (GRS), Brand Protection and ID Security
Solutions in Authentication. In Currency they cover security
features, polymer substrate and banknotes.
These are explained in more detail below:
Grow
repeatable
business
Drive
efficient
operations
Invest
for the
future
Increasing our revenue
through relationships
providing ongoing
income
Streamlining our
business to minimise
cost while retaining
flexibility
Focusing our technical
expertise to develop the
solutions of the future
18
De La Rue plc Annual Report 2023
Business area
Group-wide
Authentication
Currency
Grow repeatable business
Expand the GRS offering:
– to cover other excisable goods
– in targeted areas, focusing on the GCC and beyond
Within Brand Protection, grow sales of our highly secure labels and digital
end-to-end traceability
Build on the success of our world-leading polycarbonate datapage
Target the large market of state printworks for sales of:
– polymer
– security features and
– overspill services
Continue to supply secure, innovative banknotes of the highest quality to our customers
Drive efficient operations
Stabilise the funding position of the Group
Right-size Currency operations to match anticipated demand
Resolve remaining legacy issues affecting shareholder value
Deliver further operational efficiency improvement, with strong focus on cash generation
Deliver seamlessly for our customers
Invest for the future
Commercialise the next generation of effects, security features and product formats using
our expertise in surface-relief micro-structures and volume holography
Implement best practice to enhance our digital offering in Authentication
Evolve SAFEGUARD® for the next generation of security features and maintain ‘best for
printers’ position
De La Rue plc Annual Report 2023
19
Strategic reportGovernance reportFinancial statements
Engaging with our stakeholders
While their primary duty is to deliver a return to shareholders that is sustainable over the long term, the Directors are aware of
their wider obligations, both to direct stakeholders and to society more generally. We rely on a number of internal and external
parties and counterparties in order to run our business. Similarly, our business and operations have an impact on a wide range
of stakeholders, as well as the natural environment. We have direct relationships with many of these stakeholders, but rely on,
impact or interact with others with whom we have an indirect relationship only.
We have identified our principal stakeholders as being:
Corporate
Internal stakeholders
– Employees/workforce
– Pension Scheme members
– Independent non-
executive directors of
subsidiary companies
Authentication
– Currency division
– Employees/workforce
– Pension Scheme members
– Trade Unions
– Third party partners
Currency
– Authentication division
– Employees/workforce
– Pension Scheme members
– Trade Unions
– Third party partners
External stakeholders
– direct relationships
– Shareholders and potential
investors
– Lending banks and other
funders
– Pension Scheme trustee
– Tax authorities
– Insurers
– Auditors
– Suppliers of goods and
services
– Minority shareholders
in Group companies
– Suppliers of goods and
services
– Customers – governments,
tax/revenue authorities and
passport offices
– Customers – brand owners,
manufacturers of goods
carrying tax stamps
– Certification agencies
– Trade bodies
– Minority shareholders in
Group companies
– Suppliers of goods and
services
– Customers – governments,
central banks, state print
works and papermakers
– Certification agencies
– Trade bodies
(International Currency
Association, Banknotes
Ethics Initiative etc)
External stakeholders
– indirect relationships
– Stock market users
– Regulators
– Proxy advisory firms
– Sustainability rating agencies
– Media
– Communities close to our
operations – as a source
of our workforce, and as a
group potentially impacted
by our business
– Natural environment
– Competitors
– Trade press
– Potential distributors
– Wider society as end users
of our products and services
– Communities close to our
operations – as a source
of our workforce, and as a
group potentially impacted
by our business
– Natural environment
– Competitors
– Trade press
– Wider society as end users
of our products and services
Stakeholder interactions
The Executive Directors and the other members of the Executive Leadership Team, supported by a number of senior managers,
undertake the vast majority of our engagement with stakeholders. All of our internal and external relationships are built on trust
and we recognise that while this is earned over a long period, it can be lost in an instant. Communication is key to our success
and there are clear accountabilities for relationship management across the business, to ensure that we protect and develop
our reputation with all our partners and counterparties.
The Chairman and Non-executive Directors also meet stakeholders whenever needed. This is either to supplement the work
done by management, or where engagement by them would be more appropriate. The experience or roles of the Non-executive
Directors can sometimes mean that they are particularly well placed to discuss issues with a counterparty: for example, the
Chairman of the Audit Committee routinely meets or holds calls with the internal auditors and external auditors. All of our Board
members are encouraged to spend time in the business and to meet De La Rue’s workforce.
20
De La Rue plc Annual Report 2023
Section 172 Statement
Managing
relationships for
long term success
In their discussions and
decision making during the
year to 25 March 2023, the
Directors have acted in the
way that they consider, in
good faith, would be most
likely to promote the success
of the Company for the
benefit of its members as a
whole. In doing so, they have
had regard to stakeholders’
interests and specifically
each of the matters set out
in section 172(1) (a)-(f) of
the Companies Act 2006.
That includes:
The likely consequence of any
decision in the long term
The Directors recognise that many of
the decisions they make will influence
or drive our long term success. The
principal focus for the Board and
executive management in the year was
on delivering the longer term outcomes
set out in our business strategy. As well
as delivering in-year results, the Board
continues to oversee capital expenditure
to generate transformational change
and a repositioning of the Group’s
technology and manufacturing base
for the long term.
The Directors continue to pursue longer
term sustainability goals, including
carbon targets for 2030 and 2050, in
each case supported by action plans.
The interests of our employees
and wider workforce
While we are a relatively capital-intensive
business, we also rely on our highly
skilled workforce to deliver our business
results. The Directors and Board
understand the strategic importance
of these important stakeholders to our
future and always have due regard to the
interests of our employees, contractors
and other members of the workforce.
There is always the necessity of
balancing competing interests and not
every decision we make will necessarily
result in a positive outcome for each
of these stakeholders. Protecting our
workforce in Sri Lanka, during a time of
significant uncertainty and challenge
in that country, was a concern for the
Board during the year. The Board and its
Committees have had numerous other
discussions in relation to people matters
with the CEO and other members of the
Executive Leadership Team.
The Board has designated an
independent Non-executive Director
to lead on workforce engagement and
Employee Voice Forum meetings were
held during the year with workers at
several of our sites globally, with
findings and recommendations relayed
to the Board. For further information
see page 79.
The need to foster business
relationships with our
suppliers, customers and
other key stakeholders
We are proud that we have served
a large number of our customers for
many years and, in some cases,
decades. We have similarly
longstanding relationships with key
suppliers of goods and services.
The Directors and Board understand
the strategic importance of these and
other stakeholders to our business.
We strive to develop and maintain
business relationships based on mutual
understanding, respect and trust.
While most of the engagement with
customers and suppliers is led by
executive management, the Board kept
the status of our supply chain under
review during the year.
De La Rue plc Annual Report 2023
21
Strategic reportGovernance reportFinancial statements Case study:
Currency
Successful conversion
of the LE10 to polymer
In July 2022 the Central Bank of Egypt
issued polymer banknotes for the first
time, a milestone reflecting an ongoing
partnership with De La Rue supporting
the central bank from design through
to manufacture.
Polymer substrate was selected
due to the increased cleanliness,
durability, cost effectiveness and
the overall reduced environmental
impact of polymer substrate over
other substrates.
The Central Bank of Egypt considers
the introduction of the polymer LE10,
printed at a new state of the art site in
the New Administrative Capital, to have
been a great success and of significant
benefit to the Egyptian public.
Section 172 Statement continued
The impact of our operations on
the community and environment
The Directors and Board understand the
importance of De La Rue being a ‘good
neighbour’. Specifically, they recognise
our responsibilities and obligations in
relation to climate change and the
environment. The Directors have
adopted action plans designed to
achieve carbon neutrality for our own
operations by 2030 and we are aligning
ourselves with the UK Government’s
targets, aiming to reach net zero across
our business by 2050. In 2023 we were
pleased to be ranked in the top
quartile of the Financial Times/Statista
Climate Leaders index, for the third
consecutive year.
The need to act fairly as
between our shareholders
Our shareholders collectively provide
core funding for our business. Every
share carries equal rights, whether held
by an institutional investor or a retail
shareholder. The views of all of our
investors are an important consideration
and are regularly summarised and
presented to the Board.
Well over 80% of our shares are held
by institutional investors. We engage
proactively with the fund managers who
control these shares and discuss a range
of strategic and operational issues
though, importantly, they are given no
privileged access to information.
The balance of our shares are held by
employees or retail shareholders, with
just over 4,500 registered holders. While
it is more challenging to deal directly
with the retail investor audience, we use
the AGM as our primary means of
engagement but will also listen and,
where necessary, respond whenever
views are expressed to us. We provide
a Q&A facility on our website in advance
of general meetings, including the AGM.
During the year the Board reviewed
the outcomes from the first year of
implementing our sustainability strategy,
building on our sector-leading approach
to climate change.
The desirability of maintaining
a reputation for high standards
of business conduct
The Board acknowledges its
responsibility for establishing the
purpose, values and strategy of the
Company and ensuring that the culture,
including adherence to high standards of
business conduct, is aligned with these
goals. The Directors and Board recognise
that trust has to be earned over years
and can be lost in minutes.
During the year the Board reviewed and
approved a new Code of Business
Principles which was launched across
the business in January 2023. They also
considered and approved a Human
Rights Policy Statement.
The Ethics Committee monitors the work
being done to drive a healthy corporate
culture, including monitoring reports made
to our CodeLine whistleblowing service.
The Committee also reviews the
completion of compliance training and
considers employee awareness
programmes to ensure that colleagues
are aware of expected standards of
ethical behaviour.
22
De La Rue plc Annual Report 2023
Key decisions made in FY23
The examples below show how the Directors and Board followed the principles described in the rest of this Section 172
Statement, when dealing with major decisions taken during the year:
Case study: Authentication
New polycarbonate production line in Malta
Investing and
using our
technical
expertise for
the future
In June 2022 the Board approved capital
expenditure by the Authentication division
on a new, second production line for
polycarbonate datapages to be used in
passports. Our key customer, Note Printing
Australia (NPA) who act in partnership with
the Australian Passport Office, significantly
increased their volume requirement for
polycarbonate datapages for Australian
passports over the remaining four years of
the existing contract. In recognition of the
capital expenditure by De La Rue, NPA offered
to extend the contract for the sole-source
supply of the polycarbonate datapages by a
further five years, so that this is now secured
until 2032. We announced this publicly in
September 2022.
Having established the customer’s
requirements, we worked with the suppliers
of the key equipment we needed to install
and selected our Malta site, where the first
production line is located, as the best home
for this. We worked in partnership with Malta
Enterprise, one of our key stakeholders, as
well as our existing employees and the local
contractors who installed and commissioned
the new production line.
The new production line became fully
operational in May 2023. The benefits of
this investment will be enhanced revenue,
operating profits and cash flow from FY24
onwards, to the benefit of the Company’s
investors, lenders and the pension scheme,
as a major creditor. It should also provide job
security for our workforce in Malta and work
for the suppliers of the raw materials and
other consumables used in the production
of the datapages, which includes embedded
silicon chips sourced from a number of
suppliers. The ultimate beneficiary of this
investment will be Australian citizens looking
to obtain new or replacement passports.
For more information see page 11.
Case study: Currency
Exit from the Portals Relationship Agreement
A decision
with financial
benefits in the
short term
and long term
In July 2022 we announced that we had
successfully negotiated the termination of
the long term Relationship Agreement (RA)
with Portals Paper. We entered into the RA
when we disposed of that business in 2018
and it committed the Group to purchase
fixed minimum volumes of security paper,
for Currency banknote printing, until 2028.
We paid £16.7m to exit the RA, which relieved
De La Rue of the obligation to pay £119m,
in addition to the cost of the paper we
purchased, over the remaining term of
the contract.
We worked with the owners of Portals Paper,
Epiris, who treated the termination of the RA
as a catalyst for the closure of Portals’ main
production site at Overton, Hampshire.
The Board identified a number of
stakeholders in this process. These included
third party paper suppliers (who had to be
able to meet our needs) and our customers
(whose acceptance of paper sourced from
those suppliers was critically important).
Other key considerations were the financial
interests of our shareholders and our lending
banks in funding the settlement payments
and avoiding the future liabilities to which
we were otherwise committed.
To date, we have achieved savings in the cost
of paper for banknote printing by running
competitive international tenders, with a
range of suppliers pre-qualified and
acceptable to our customers.
We have successfully protected the long
term interests of our financial stakeholders
(investors, lenders and the pension scheme,
as a major creditor) by achieving these
savings and avoiding the fixed payments that
would otherwise have been owed to Portals.
For more information see page 12.
De La Rue plc Annual Report 2023
23
Strategic reportGovernance reportFinancial statements Responsible business report
Our Authentication and Currency divisions enable our
customers to deliver sustainable services underpinning the
integrity of economies and trade. To achieve our overarching
purpose of securing trust between people, businesses
and governments, it is crucial that we uphold the highest
environmental, social, human rights, ethical and governance
standards in the way we conduct our business.
Our commitments
Environment
– We are committed to leading the
industry on environmental
sustainability, and achieving carbon
neutrality for our own operations
by 2030.
– To minimise the impact of our
operations on the environment
we set clear environmental goals.
Find out more on page 26.
This responsible business report outlines
some of the ways we are fulfilling these
commitments, upholding the principles
of the UN Global Compact, and
contributing to the UN Sustainable
Development Goals. Further information
demonstrating how Environmental, Social
and Governance (ESG) considerations
are embedded in our performance and
strategy to support the long term
interests of the business and its
stakeholders can be found throughout
the annual report and on our website
www.delarue.com.
People
– We treat everyone in an ethical
and respectful way, promoting an
inclusive culture that values diversity,
and protecting human rights both
within our business and in our wider
supply chain.
– We prioritise the health, safety and
wellbeing of our people
– We work hard to maintain regular
engagement with our stakeholders
including investors, customers,
suppliers, and the communities in
which we work.
Find out more on page 37.
Business standards
– Our Code of Business Principles sets
out core principles which define the
way we behave and work daily.
– Our governance system helps us
deliver on our responsibilities to
stakeholders through the operation
of robust policies, processes and
monitoring systems.
Find out more on page 43.
24
De La Rue plc Annual Report 2023
‘De La Rue has been
a participant in the
UN Global Compact
since 2016 and
remains committed
to the initiative.’
Clive Vacher
CEO
De La Rue has been independently
assessed and has satisfied the
requirements to remain a constituent of
the FTSE4Good Index Series. This Index
is designed to measure the performance
of companies demonstrating strong
Environmental, Social and Governance
(ESG) practices. The FTSE4Good indices
are used by a wide variety of market
participants to create and assess
responsible investment funds and
other products.
Governance and management
The Board has oversight of all our ESG
initiatives through regular reporting, both
on a standalone basis and as part of
wider strategic initiatives. Kevin
Loosemore was the nominated Non-
Executive Director with overall
responsibility for our sustainability
strategy until his resignation from the
Board effective 1 May 2023. Clive Whiley
will have responsibility for our
sustainability strategy in the future.
Governance of ESG-related matters is
embedded within our existing Board and
committee structure. See page 75 for an
overview of this structure. The Executive
Leadership Team (ELT) plays a key role,
with responsibility for strategy
implementation, setting targets, ensuring
ongoing monitoring of performance and
that ESG issues are an integral part of
day-to-day business decision making.
For further information about
environmental governance, see page 32.
United Nations Sustainable Development Goals
We believe that, in delivering our purpose of securing trust
between people, businesses and government, and adopting
internal polices and processes which have a positive impact
on our stakeholders, we make a significant contribution to
the following of the 17 United Nations Sustainable
Development Goals:
UN SDG
How De La Rue contributes
UN SDG
How De La Rue contributes
Our highly secure physical and digital
solutions underpin the integrity of
economies and trade. Our Currency
products and services enable all citizens,
including those with little or no access to
the banking system, to participate in the
global economy. Protecting government
revenues supports the provision of
health, education and infrastructure
to alleviate poverty.
See pages 5, 6 and 17 for further
information about our impact.
Our Authentication products help to
tackle illicit trade, protecting populations
from counterfeit goods, including
medicines, food and drink which may be
harmful to health. Through our track and
trace solutions we directly contribute to
strengthening the implementation of the
World Health Organization Framework
Convention on Tobacco Control, a key
target of SDG3.
See pages 6 and 17 for further information
about our impact.
We are proud of our diversity, equity and
inclusion programme and have a gender
target for our management population
which is a KPI. We participated in the UN
Global Compact Target Gender Equality
initiative and report and publish
information in line with our obligations
under the UK Equality Act (Gender Pay
Gap Information) Regulations.
See pages 37, 38 and 49 for further
information about our impact.
We also make a positive contribution to the following SDGs:
We work with governments to secure trust
and build strong economies by providing
solutions which underpin the integrity of
economies and trade. We protect labour
rights and promote safe and secure
working environments for our workers and
expect our suppliers to do the same.
See pages 5, 6, 37 and 40 for further
information about our impact.
We are committed to leading our industry
in sustainability, working on the
sustainability credentials of our products
through their lifecycle and investing in
recycling and waste management
initiatives and carbon footprint models.
We participate annually in the CDP
(formerly known as the Carbon Disclosure
Project), have SBTi targets approved, and
support the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD).
See pages 26 and 34 for further
information about our impact.
Our GRS and brand protection solutions
prevent counterfeiting and illicit trade,
contributing to combatting organised
crime. The provision of secure
components for identity documents,
including holograms and polycarbonate
datapages, supports the target under this
SDG to provide legal identity for all.
See pages 6 and 17 for further information
about our impact.
By delivering on our purpose and working
closely with governments, central banks
and commercial organisations, we provide
products which improve economies,
particularly amongst developing countries.
See pages 5 and 6 for further information
about our impact.
De La Rue plc Annual Report 2023
25
Strategic reportGovernance reportFinancial statements
Responsible business report continued
Environment
We continue to focus on minimising the impact of
our products and operations on the environment.
It has been a year since our ambitious climate
targets were set, and we have made meaningful
progress towards achieving them and building our
environmental strategy.
Climate change is a material
environmental issue for De La Rue.
Credible low carbon strategies require
science-based emission reduction
pathways, and the Science Based Targets
Initiative (SBTi) has approved our near
term science-based emissions reduction
target. In line with the target level of the
Paris Agreement of keeping global
temperature increases below 1.5°C,
De La Rue commits to reduce our
absolute Scope 1 and 2 GHG emissions
by 46.2% by FY30 from a FY20 base year.
We also commit to reducing our absolute
Scope 3 GHG emissions by 46.2% within
the same timeframe. We are committed
to consistency and transparency, and
review our targets. If necessary we will
recalculate and revalidate the targets in
line with SBTi policy.
CDP (formerly Carbon
Disclosure Project)
We have been disclosing to the CDP
since 2010 and publicly since 2013.
We are proud of the progress we have
made: following our 2022 submission
we achieved a score of A for supplier
engagement on climate change and
maintained our overall B climate
change score. In 2022 we also made
our first water security submission,
achieving a C rating. Our aim is to
continue to improve on our climate
change practices as we transition
to a low carbon economy.
26
De La Rue plc Annual Report 2023
We recognise the importance of carbon
offsets and therefore we pledged in FY23
to become carbon neutral by 2030 for
Scope 1 and Scope 2 emissions through
a phased offsetting programme. This will
complement our decarbonisation
journey and support increased
investment in the world’s carbon sinks.
De La Rue will only invest in carbon offset
credits which at a minimum will be
purchased from projects aligned with
PAS 2060, a recognised carbon
neutrality standard. Projects will be
procured from retailers with due
accreditation – i.e. Quality Assurance
Standard (QAS) – to ensure due and
timely credit retirements are made and
independently audited.
De La Rue captures and addresses
environmental initiatives through our
Transform Sustainability programme,
which identifies, assesses and manages
environmental initiatives throughout the
Group. This includes progress against our
climate targets, and initiatives on other
material topics including energy, waste,
single-use plastics and sustainable
procurement. We regularly review our
environmental initiatives to ensure we
are addressing the most material issues
to the business. There were no significant
environmental incidents during the year.
Material issues are those that are
considered as a principal risk to the
business, such as Sustainability and
Climate Change, as it could affect our
business performance. In addition,
issues are considered material if they
are important to our key stakeholders,
our partners, our customers, and our
suppliers and people.
We actively contribute to the
International Currency Association’s
Sustainability Charter and are a member
of their Sustainability Committee. In
terms of external assurance, the
business has a Group Environmental
Management System that is certified to
ISO 14001, a standard first achieved by
the business over 16 years ago, which
is externally audited by Lloyd’s Register
Quality Assurance. We also carry out
internal group audits against the
requirements of our corporate
environmental standards.
Our material issues
e
s
s
u
-
Sin gle
pla s ti c
Im
pro
p
a
c
t
o
f
d
u
c
t
s
E
n
e
r
g
y
n
o
i
t
p
m
u
s
n
o
W ater c
Impact of products: We evaluate the impact of our products
throughout their lifecycle and therefore we will continue to invest in
and develop our product lifecycle assessment (LCA) models and
continue to reduce our emissions.
Water consumption: We understand the importance of sustainable
consumption and have monitored and reduced our water consumption
throughout the years. We are on track to hit our 2% per year water
reduction target for FY24.
Waste management: We are building responsible waste
management practices throughout the Group. We will always look
for the most sustainable end of life treatment for our waste and we
have a zero waste to landfill by 2030 target.
Energy: We are investing in energy efficiency and renewable energy
is key to environmental and business targets. We look to increase the
proportion of energy supplied from renewable sources and further
develop energy reduction schemes.
Waste mana g e m e
t
n
Single-use plastics: We are ensuring the packaging we use for
our products is sustainable and aligned with our responsible
consumption practices.
Risks and opportunities
We look at environmental sustainability
in a balanced way. We strive to manage
our environmental impact to manage risk
and to harness opportunities to achieve
cost savings for our business, secure
competitive advantage and enhance
our partnerships with customers and
other stakeholders.
Significant environmental risks are
identified through the Group Risk
Register which covers Group strategic
risks and site tactical risks. The register
is reviewed at the Group Health, Safety
and Sustainability Committee (GHSSC)
twice-yearly and on a quarterly basis at
the Risk Committee (RC). It is evaluated
using our risk matrix as outlined on
page 56.
Sustainability and Climate change has
been a principal risk for the business
since FY21. Climate-related risks and
opportunities are therefore reviewed by
the GHSSC and the RC and integrated
into our enterprise risk management.
The process for assessing and identifying
climate-related risks is the same for all
principal risks and is described on page
56. We have carried out Climate Scenario
Analysis (CSA) to understand the
potential financial impact of climate-
related risks and inform our strategy and
financial planning in alignment with the
TCFD recommendations. Further
information on CSA and identified risks
and opportunities can be found on
pages 32 to 34.
De La Rue plc Annual Report 2023
27
Strategic reportGovernance reportFinancial statements
Responsible business report continued
Environment continued
Greenhouse gas emissions
De La Rue reports on all the mandatory non-financial disclosures required by the UK Companies Act including our greenhouse
gas (GHG) emissions required by the Streamlined Emissions and Carbon Reporting (SECR) regulation.
UK and
offshore
FY22
Global*
UK and
offshore
FY21
Global*
% of total
tCO2e
% of total
tCO2e
% of total
2.9
1.7
4.6
95.4
64.1
21.8
4.0
5.5
100
3.9
3.6
7.4
92.6
62.0
16.7
2.6
11.3
100
6,122
0
4,036
6,122
537
6,111
8,633
6,648
159,206
106,573
28,676
4,537
19,420
171,976
34.0
5,913
754
328
8,009
3,889
6,241
9,038
8,763
130,576
101,742
14,606
0
14,228
145,580
38.7
4.6
5.7
89.7
69.9
10.0
0.0
9.8
100
35,092,849 23,189,524
31,055,320
25,173,111
31,697,918 24,152,529
Type of emissions
Direct (Scope 1)
Indirect (Scope 2 –
market-based)
Indirect (Scope 2 –
location-based)
Scope 1 & 2 (market-based)
FY23
Global*
UK and
offshore
tCO2e
6,820
430
0
4,341
3,191
6,820
8,128
4,771
Indirect other (Scope 3)**
241,863
Purchased goods
and services
Upstream transport
and distribution
Capital goods
All other categories
Total gross emissions
(market-based)
Intensity ratio Tonnes of gross
CO2e (market based) per £m
turnover (Scope 1 & 2)
Energy consumption used to
calculate Scope 1 and 2
emissions/kWh
162,446
55,333
10,160
13,924
253,454
33.1
Notes:
*
**
Global includes all sites outside of the UK.
Three most material Scope 3 categories reported individually.
28
De La Rue plc Annual Report 2023
De La Rue remains committed to our
journey to decarbonise our operations.
We have seen continual decreases in
emissions for our operations (Scope 1
and 2) and we are working towards our
goal of increasing visibility of our supply
chain and beyond for more accurate and
transparent disclosures. This year,
De La Rue commissioned an
independent third party limited
verification of its direct (Scope 1) and
market-based indirect (Scope 2)
greenhouse gas emissions for FY22
aligned with the ISO 14064-3:2019
standard. This FY22 verification did not
take into account the restatement made
in this year’s Annual Report but it will be
in scope for the FY23 verification which
will take place during FY24. In addition,
as we look towards our goal of achieving
carbon neutrality for Scope 1 and Scope
2 emissions by FY30, we have offset 30%
of FY22’s Scope 1 and 2 emissions in line
with our phased offsetting programme.
Streamlined Emissions and
Carbon Reporting
As a large, listed company, De La Rue is
required to report its energy use and
carbon emissions in accordance with
the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018.
The data detailed above represents
emissions and energy use for which
De La Rue is responsible, including
electricity, gas use, process, and fugitive
emissions in offices.
The Greenhouse Gas Protocol Corporate
Standard methodology has been applied
to calculate the GHG emissions associated
to De La Rue’s operational activities,
along with the UK Government GHG
Conversion Factors for Company
Reporting 2022, IEA Emissions Factors
and AIB6 Residual Mix Emissions Factors.
In FY23, De La Rue continued to procure
100% renewable electricity for all our UK
facilities. In addition, we have purchased
Guarantees of Origin (GoOs) to partially
offset electricity consumption in Malta
and I-RECs that ensured the Sri Lanka
facility ran on 100% renewable electricity
for FY23. In addition to this, the site at
Westhoughton began to generate its own
electricity through solar panels installed
on the roof. Lastly, there were energy
efficiency upgrades that took place on
equipment at the Malta facility.
The emissions for previous years have
been restated within this year’s report.
This is due to new evidence and historical
data on process emissions becoming
available. The methodology to account
for this new information is aligned to the
latest reporting requirements.
We reported an increase in Scope 1
emissions, primarily due to an operating
inefficiency at our Westhoughton site
which has now been isolated and is
being rectified. In contrast, overseas
facilities showed a reduction in Scope 1
emissions, which decreased by 20%
compared to FY22. Investment in
purchased renewable electricity
overseas has also seen our Scope 2
emissions decreasing by 29% on a
year-on-year basis. Despite an increase
in our Scope 1 emissions this year, we are
seeing a 37% decrease against our FY20
base year for our Scope 1 and 2 SBTi
target. We have also seen a sustained
reduction in the total Scope 1 and 2
(market-based) gross normalised
emissions, which have seen a decrease
of 2.8% from 34.04 to 33.10 tCO2e per
£m revenue in FY23 compared to FY22.
Scope 3 emissions account for over
95% of our total carbon footprint. The
majority of these emissions arise from
our Purchased Goods and Services
accounting for roughly 64% of total
emissions. Due to the current lack of
visibility of supplier-specific emissions
data, De La Rue uses a spend-based
emissions factor method. In FY23, there
was significant increase in spend-based
emissions driven largely by a 43%
increase in the average emission factors
used for our supply chain. This has
resulted in emissions in this category
increasing by over 50% and contributing
to a correlating rise in total Scope 3
emissions. As we improve on our
sustainable procurement strategy and
continue to lead engagement with our
suppliers, including through EcoVadis,
we envisage using supplier-specific
emission factors for more reliable and
accurate calculations. Furthermore,
we were affected by global supply chain
and transport disruptions which is why
we see an increase in emissions for
upstream distribution and transport.
De La Rue plc Annual Report 2023
29
Strategic reportGovernance reportFinancial statements Responsible business report continued
Environment continued
Task Force on Climate-related Financial Disclosures (TCFD)
De La Rue supports the recommendations of the TCFD, which was established by the Financial Stability Board with the aim
of improving the reporting of climate-related risks and opportunities. De La Rue has publicly declared support for the TCFD
recommendations and has joined the TCFD Supporters Group to work with like-minded organisations on acknowledging that
climate change represents a financial risk.
In meeting the requirements of Listing Rule 9.8.6.R we have concluded that we are aligned with recommended TCFD disclosures
regarding governance, strategy, risk management and metrics and targets. We acknowledge that there is an ongoing action for
De La Rue to improve on our alignment with the TCFD recommendations as we refine our approach on Climate Scenario Analysis
(CSA), with a focus on delivering insight for our internal and external stakeholders. We aim to better integrate the financial
impacts of climate-related risks and opportunities into future strategic reports.
TCFD at a glance
Pillar
GOVERNANCE
Disclose the
organisation’s
governance around
climate-related risks
and opportunities.
STRATEGY
Disclose the actual and
potential impacts of
climate-related risks
and opportunities on
the organisation’s
businesses, strategy,
and financial planning
where such information
is material.
Recommended
Disclosures
a) Describe the Board’s
oversight of climate-
related risks and
opportunities.
Actions
Ensure governance
structure is
maintained.
b) Describe management’s
role in assessing and
managing climate-related
risks and opportunities.
Executive targets
to be aligned with
carbon reduction
targets.
FY22
FY23
FY24
Location in
Annual Report
page 75
page 119
page 32
Annual review and
further incorporation
into business
strategy.
a) Describe the climate-
related risks and
opportunities the
organisation has identified
over the short, medium,
and long term.
b) Describe the impact of
climate related risks and
opportunities on the
organisation’s businesses,
strategy, and financial
planning.
c) Describe the resilience
of the organisation’s
strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or lower
scenario.
Quantify the impacts
on our financial
planning.
pages 33
and 34
Develop robust
scenario analyses to
test the resilience of
the business.
page 32
–
30
De La Rue plc Annual Report 2023
FY22
FY23
FY24
Partially aligned
Aligned
Continuous improvement
Maintain
Pillar
RISK AND RISK
MANAGEMENT
Disclose how the
organisation identifies,
assesses, and manages
climate-related risks.
METRICS AND TARGETS
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material.
Location in
Annual Report
page 33
Actions
Review process for
identifying and
managing climate-
related risks.
Review our process
for managing climate-
related risks.
page 33
Review our process
for integrating
climate-related risks.
pages 33
and 56
Review and monitor
targets.
pages 35
and 36
Disclose and monitor
our GHG
commitments.
pages 28
and 29
Review and monitor
targets.
pages 35
and 36
Recommended
Disclosures
a) Describe the
organisation’s processes
for identifying and
assessing climate-
related risks.
b) Describe the
organisation’s processes
for managing climate-
related risks.
c) Describe how processes
for identifying, assessing,
and managing climate-
related risks are integrated
into the organisation’s
overall risk management.
a) Disclose the metrics
used by the organisation to
assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
b) Disclose Scope 1, Scope
2, and, if appropriate,
Scope 3 greenhouse gas
(GHG) emissions, and the
related risks.
c) Describe the targets
used by the organisation
to manage climate-related
risks and opportunities
and performance
against targets.
De La Rue plc Annual Report 2023
31
Strategic reportGovernance reportFinancial statements Responsible business report continued
Environment continued
Governance
The Board has overall accountability
for the management of all risks and
opportunities, including climate change.
Further detail on our ESG and Risk
Management governance structure can
be found on pages 57 and 75. While the
Board has overall accountability for
climate change-related matters, our
Chief Financial Officer and Executive
Leadership Team member, Rob Harding,
was responsible for oversight of our
climate change agenda during the year
under review. When Rob Harding leaves
the business, Charles Andrews, Interim
Chief Financial Officer will assume this
responsibility. The Board delegates
specific climate change matters to the
following Board committees:
– Audit Committee: oversees the
monitoring and reviewing of our
internal control and risk management
systems including a synopsis of
material risks which include
sustainability and climate change
from the Risk Committee chair. This
includes reviewing the scope and
results of any internal and external
assurance activities obtained over
the disclosures (See page 89).
– Risk Committee: oversees the
identification, evaluation and
monitoring of climate-related risks.
This includes reviewing the mitigations
and controls relating to those risks
(see page 97).
– Remuneration Committee: oversees
the remuneration policy and supports
the alignment of De La Rue’s incentive
plan to the sustainability agenda and
ambitions (see page 102).
The Board is supported by the Executive
Leadership Team (ELT) and the Group
Health, Safety and Sustainability
Committee (GHSSC). In FY23, the ELT
discussed key strategic sustainability
matters in their monthly meetings with
sustainability subject matter experts
invited to discuss progress against our
climate targets and agenda. The GHSSC
oversees progress against key
sustainability obligations and targets
including compliance.
Executive remuneration for the Executive
Directors and senior executives reporting
to the Chief Executive Officer, are set by
the Remuneration Committee. Changes
to the Annual Bonus Plan (ABP) in FY23,
resulted in ESG metrics accounting for
0% of the weighting attached to the ABP.
Further details can be found on the
pages 105 and 119.
Strategy
Sustainability and climate change is one
of our principal risks and therefore we
consider it to have the potential to
significantly affect our business and
financial results. Climate related risks for
De La Rue comprise physical risks arising
from the effects of climate change and
transition risks associated with the shift
to a low carbon economy. The process
for assessing and identifying climate-
related risks is the same for all principal
risks and is described on page 56. More
details on the risks, opportunities and
mitigating actions De La Rue is taking
can be found on pages 33 to 34.
Scenario analysis:
In alignment with the TCFD recommendations, we have conducted qualitative scenario analyses using two scenarios,
including a well-below 2°C. In developing the scenario analysis, we considered a well-below 2°C scenario by 2100 and a 4°C
by 2100 scenario to map the potential financial impacts of climate change on our business using the International Energy
Association (IEA) Net Zero Emissions by 2050 (NZE) and the UN’s Intergovernmental Panel on Climate Change (IPCC)
Representative Concentration Pathways (RCP) 8.5, respectively. We used these two scenarios to model a simple and discrete
narrative where a well-below 2°C would primarily model transition risks and a 4°C scenario physical risks, with no significant
transition risks assumed. This approach was decided to be suitable for our first iteration of CSA, with an ongoing action to
improve our scenario analyses and quantify financial impacts with greater clarity.
Well-below 2°C assumptions (NZE)
4°C assumptions (RCP 8.5)
General assumptions
– Rapid and persistent transition to
a zero-carbon economy driven by
strengthened policy, legislation and
behaviour change
– Universal global climate action
cooperation
– Global demand for fossil fuels increases
due to rising population and the growing
middle class
– Increased climate adaptation efforts
required
– No De La Rue response
– FY22 baseline for scenario analysis
32
De La Rue plc Annual Report 2023
Key risks and opportunities
In developing our scenario analysis, we
took the two pathways and considered
a range of risk and opportunity types
using the TCFD framework. Risks were
evaluated as transition (market,
technology, policy and legal, reputation)
and physical (acute and chronic).
Opportunity types considered include
resource efficiency, resilience and
innovation. The scope of our assessment
included our operations, our supply
chain, our products and investment in
research and development.
Risks
Risk
Embedding
climate action
and progress
into strategy
Type of risk
Time period
Transition
– Reputation
Short term
Transition
– Market
Medium
term
Increased
scrutiny on
plastic
(Currency)
We have identified the risks and
opportunities which we believe are
significant and have the potential to
impact our business financially. In
alignment with our viability statement
(see page 64) and due to the nature
of climate risks we have considered the
following time periods for our analyses
– short term (within 3 years), medium
term (between 3 to 10 years) and long
term (greater than 10 years).
Below we have summarised our key
climate-related risks and opportunities
relevant to De La Rue’s business and
activities for both scenarios. All the risks
noted below are applicable to both our
divisions unless stated otherwise. These
risks and opportunities were identified
through group forums and discussions
with De La Rue internal stakeholders and
subject matter specialists. The impacts
are not listed in order of significance,
nor are they meant to be exhaustive. In
disclosing the financial impact of risks
and opportunities, any assessment is
scenario based and thus should not be
considered as a financial forecast.
Description and
impact on De La Rue
De La Rue resilience
As a listed company, De La Rue could face
reputational risks related to climate change
from a variety of stakeholders. As ESG and in
particular climate action become embedded
within financial disclosures, a perceived lack
of action could lead to divestment from
De La Rue.
Certain customers may choose to limit or
stop work with the company if they perceive
us as not adequately addressing climate
change. This may have a resulting impact on
revenue and brand perception. In addition,
our ability to externally finance the company
may be impacted.
There has been increased global focus
on plastic and more specifically
single-use plastics.
A potential risk is the cross-over of lobbying
action against polymer banknotes which is a
core aspect of our business. This may result in
a loss of orders and limited market interest
which is likely to impact our revenue figures.
De La Rue is well positioned to respond to this
risk. With Sustainability and Climate Change
as one of our principal risks, we have
implemented several actions to build
resilience including science-based targets.
An opportunity arising from demonstrating
our climate commitments is the ability to
improve our brand image, attract a wider
talent pool, and retain current employees.
We consider ourselves to be very well
positioned to respond to this risk. Polymer
banknotes have been proven to have a lower
carbon footprint compared to conventional
paper banknotes and are also increasingly
secure making them a desirable option for our
customers. Furthermore, as a secure product,
it is rare for banknotes to be discarded freely
and as a polymer product, these banknotes
have multiple recycling options.
With each polymer banknote launch, De La Rue
has worked with central banks and issuing
authorities in developing public education
programmes on the benefits of polymer
banknotes. In a recent survey conducted by
De La Rue, 82% of the world’s polymer
banknotes are recycled. To support our
customers further, we have established a
process for identifying end-of-life options to
provide the most sustainable disposal route.
De La Rue plc Annual Report 2023
33
Strategic reportGovernance reportFinancial statements Responsible business report continued
Environment continued
Risk
Type of risk
Time period
Less visibility
on future
trends
Transition
– Market
Medium
term
Cotton
shortage
(Currency)
Physical
– Acute/
Chronic
Short term
Transition
– Market
Short term
Customer
expectations
for lower
carbon
intensive
products
Opportunities
Description and
impact on De La Rue
De La Rue resilience
A rapidly changing market which responds
to new climate legislation and changes in
consumer behaviour may lead a move to
shorter term contracts or more stringent
contractual provisions.
As a result, De La Rue may lose its ability
to predict cost models beyond a five year
period as change requests may come more
frequently. Decreased visibility of trends may
also reduce our ability to respond to any
changes to the production schedule which
may lead to increased costs.
De La Rue continues to promote the growth
of polymer banknotes, however conventional
paper banknotes are still a significant part of
the business. The raw materials for paper
banknotes come from cotton.
Extreme weather and extended droughts are
likely to have a significant effect on cotton
production resulting in crop output decreases.
This will increase the costs associated with
purchasing cotton which is likely to affect
De La Rue.
As the world transitions to net zero, there will
be increasing demand to lower the carbon
intensity of products. This may lead to
revenue loss as inaction could make
De La Rue’s products undesirable. In addition,
slow action would require rapid investment
which would lead to higher costs for
De La Rue.
A significant proportion of our contracts are
long term enabling us to predict cost models
and reduce the impact of any short term
contracts. In addition, we actively engage
with our suppliers to ensure fair pricing in
our contracts.
De La Rue has built relationships and engaged
with multiple paper suppliers that are
geographically diverse. This will help De La Rue
to mitigate the impacts of cotton shortages.
De La Rue’s Transform Sustainability
programme is aimed at reducing the
environmental impact of our products
(see page 26).
In addition, our SBTi targets have increased
focus on decarbonising the business and we
are defining our strategy to transition into
a low carbon future.
Opportunity type
Time period
Description
Products and
services
Medium term
Resilience
Short/Medium term
Reducing the carbon footprint of our products and activities will help De La Rue transition
into the zero-carbon economy. For example, the switch to polymer from paper banknotes
allowed De La Rue to offer a more environmentally friendly option. Polymer banknotes have
been proven to have a longer lifecycle and are able to be recycled at end-of-life. By
developing our product Life Cycle Assessments we are investing in an opportunity to
understand the carbon impact of our products and subsequently to lower our footprint.
Building resilience as we transition to the low carbon economy is vital. This is why De La Rue
has submitted science-based targets to reduce our carbon footprint and lower our impact.
We expect this will come with an associated cost and as such we are reviewing our trajectory
and aligning it with our financial planning for FY24 and beyond.
34
De La Rue plc Annual Report 2023
Next steps
De La Rue has previously reported on our efforts to mitigate impacts of climate change on the business; however, this was
our first attempt at evaluating our exposure to the impacts of climate change. For FY23 we used two distinct scenarios and
completed a qualitative analysis to understand the potential impacts on our financial planning. In FY24 and beyond, we expect
to review and build upon our analyses to better quantify the impacts of our significant climate related risks.
Risk management
The Risk and Risk Management section on pages 56 to 63 describes our risk framework and how we identify, assess and manage
all principal risks. This includes sustainability and climate related risk which is mentioned on page 60.
Metrics and targets
Performance against FY23 climate objectives
Objective
Outcome
Submit our CDP response for FY22
Achieved. We submitted responses for Climate and Water questionnaires and scored B and
C, respectively. In addition, we achieved a Supplier Engagement score of A.
Further alignment of risk management with
TCFD recommendations
Achieved. We have completed a qualitative climate scenario analysis to support our risk
management process and compliance with the TCFD recommendations.
Conduct a review on the impact of our
facilities on biodiversity with internal
ecological site surveys
Achieved. Our sites in Westhoughton and Malta have completed environmental surveys
considering biodiversity. We look to build upon this further in FY24.
Complete initial review of plastics across sites Achieved. We have begun the process of identifying the current gaps in our data collection
Reduce absolute energy use by 3%
Reduce energy use per tonne of good output
by 7.5%
Reduce waste generated by good tonne of
output by 5.5%
and what we can do to improve.
Not achieved. Unprecedented and greater than expected usage of natural gas at
Westhoughton Sites 1 and 2 severely impacted our progress against this Scope 1 target and it
was not achieved in FY23.
Not achieved. This target was set prior to the beginning of the financial year. FY23 production
volumes varied, decreasing our ability to operate efficiently, meaning that we did not achieve
this target.
Not achieved. This target was set prior to the beginning of the financial year and production
volumes varied meaning that we did not achieve this target in FY23. The destruction of
secure waste delayed to after the pandemic also affected our ability to meet this target.
De La Rue plc Annual Report 2023
35
Strategic reportGovernance reportFinancial statements Responsible business report continued
Environment continued
Ongoing climate objectives
Our short and medium term climate metrics and targets are as follows:
Future goals
Target
Performance to date
Reducing the carbon impact from our
operations and activities
SBTi near term targets, Scope 1, 2 & 3 -46.2%
against FY20 base year by FY30
We have achieved a 37% reduction against
our FY20 baseline for Scope 1 and 2
emissions putting us well on target to meet
our goals in FY30. We saw an increase in
Scope 3 emissions for FY23 against our
baseline year, however, we are still within
our allocated carbon budget to achieve
our SBTi target, and we have identified
pathways to have more accurate
calculations of our Scope 3 impact.
Reduce Scope 1 & Scope 2 by 23% against
FY20 base year by FY26
We remain on track to achieve this target
by FY26.
Suppliers accounting for 80% of total
procurement spend to be invited to
complete/share an EcoVadis scorecard
Since launching our EcoVadis programme in
FY22, suppliers accounting for 40% of our
total spend have now shared or completed
an assessment on EcoVadis. Through our
ongoing EcoVadis programme, we are able
to understand how our suppliers are
engaging on key ESG topics.
Targeting energy efficiency and renewable
energy within the business
Reduce absolute energy use by 20% FY26 vs
FY20 base year
We have currently achieved an energy
reduction of 6% against our FY20 base year.
10% group power use from onsite renewable
sources by FY27
Sustainable consumption and nature solutions Reduce waste to landfill by 45% by FY26
against FY23 baseline. (Zero waste to landfill
by 2030)
Solid waste tonnes per tonne of good output
-3% by FY24 against FY23 performance
Reduce water consumption by 4% by FY24
against FY22 baseline
We have installed solar panels at our
Westhoughton site and we are looking
to have solar installations in Malta and
Sri Lanka.
This goal was introduced during FY23 and
we will report against our target from FY24
against an FY23 baseline.
This goal was introduced during FY23 and
we will report against our target from FY24
against an FY23 baseline.
We have achieved a 2% reduction in FY23
against our FY22 baseline, and we consider
ourselves on track to hit this target.
In FY23, De La Rue conducted a review of all our reporting performance indicators and targets to assess their suitability for the
business. The targets for FY24 detailed in the table above align with what we consider our most material environmental issues:
carbon, energy, waste and water management. We believe these targets will help build resilience as we transition towards a low
carbon economy. Our GHG emissions including Scope 1, 2 and 3 emissions for FY23 can be found on page 28.
In addition, we plan to review our internal carbon tax for relevancy and better integration into our strategy. In FY23, De La Rue has
used an internal carbon price of $50 per tonne of carbon which is primarily used to evaluate internal projects from a carbon
perspective. Changes within the business and our carbon reduction targets warrant this review to inform future Group strategy.
We believe the targets we have set are correct for the Group and have captured the key strategic goals including reducing the
carbon and environmental impact of our products. Regarding our long term carbon reduction target, we are aligning ourselves
with achieving net zero by 2050, or before, in line with the UK Government. We continue to develop our pathways to achieve
these goals.
36
De La Rue plc Annual Report 2023
People
We are committed to creating a culture of respect
and inclusivity for every individual who works
within our business, prioritising their health, safety,
wellbeing and fair treatment. Meaningful engagement
with our employees, customers, suppliers and
shareholders – as well as the communities in which
we operate – enables us to react and respond to
their needs and feedback.
Human rights
De La Rue fully supports the principles
set out in the UN Declaration of Human
Rights and we have effective management
systems in place to protect human rights.
De La Rue has been a participant in the
UN Global Compact (UNGC) since 2016
and is committed to its principles which
include human rights and labour issues.
De La Rue’s Human Rights Policy
Statement, which is published on our
website, confirms our commitment to
fair pay and working conditions, freedom
of association and collective bargaining,
the elimination of forced, compulsory
and child labour, health, safety and
wellbeing, our expectations of our
suppliers and ways to raise concerns.
Our Code of Business Principles covers
human rights issues including fairness
and respect, modern slavery,
employment principles, health and
safety, anti-bribery and corruption and
the protection of personal information.
The Code also highlights that we seek
to provide an environment where
employees can raise any concerns via
a variety of mechanisms, including
a whistleblowing hotline known as
CodeLine which is managed by an
external third party, and a network of
Ethics Champions across the Group
so issues can be raised in confidence.
Our Supplier Code of Conduct also
covers human rights issues. See page 44
for further information.
The business has remedial processes
in place should there be any human
rights infringements. These include
claims procedures and trade union
engagement procedures.
Further information outlining our
approach to specific human rights
matters is detailed below.
Modern slavery
De La Rue directly employs c. 1,800
people and provides livelihoods to
thousands more indirectly. We are
committed to preventing slavery and
human trafficking in our operations and
in our supply chain. Our modern slavery
statement, available on our website,
details the preventative steps we take
and how we comply with the UK Modern
Slavery Act 2015. Online modern slavery
training is mandated for relevant
employees. Suppliers are obliged to
abide by the United Nations Convention
on the Rights of the Child and International
Labour Conventions 138 and 182. Our
supplier onboarding process considers
modern slavery risk.
Diversity, equity and inclusion
Diversity, equity and inclusivity in the
broadest sense remain a key focus at
De La Rue. We continue to promote
diversity in all respects through proactive
initiatives including training, awareness
and continued robust recruitment,
succession and development practices.
We are confident that this will help us
to continue to make De La Rue a place
where differences are embraced.
Our participation in the UN Global
Compact (UNGC) Target Gender Equality
initiative enabled us to self-assess our
current practices and identify areas
for improvement such as a review of
some of our family-friendly policies
and practices.
De La Rue plc Annual Report 2023
37
Strategic reportGovernance reportFinancial statements Responsible business report continued
People continued
While legislation in many countries
prevents us from asking candidates
for diversity data, the UK data that we
collect tells us we attract a broad range
of people across different diversity
types including age, ethnicity and
beliefs and we continue to look for
opportunities to improve our recruitment
and retention practices.
Over the past 12 months, through our
internal communications, we have been
celebrating different cultural events
around the world and asking employees
to share their own stories and photos
with us. For International Women’s Day
in March 2023 we asked employees to
share stories of inspirational women in
their lives. These included colleagues,
friends and family.
Our refreshed company Values and
Code of Business Principles emphasise
the expected behaviours of our people
managers, employees and partners
in relation to creating an inclusive
environment where everyone is treated
with fairness and respect.
As at 25 March 2023 the male:female
gender split across the organisation was
72/28 (versus a target of an average
male/female ratio of 70/30 or better by
FY23) and in management the split was
65/35 (against a target of 60/40). We
continue to work on initiatives to support
the achievement of our gender targets.
Our employees are treated fairly and
equally irrespective of any factor
including gender, transgender status,
sexual orientation, religion or belief,
marital status, civil partnership status,
age, colour, nationality, national origin,
disability or trade union affiliation.
UK gender pay gap
We publish information in line with our
obligations under UK Equality Act 2010
(Gender Pay Gap Information)
Regulations 2017.
Since 2017, any UK organisation that has
250 or more employees must publish
and report specific figures about their
gender pay gap on an annual basis.
The gender pay gap is the difference
between the average earnings of men
and women relative to men’s earnings.
Since we began reporting in 2018, our
gender pay gap has shown improvement
each year in large part as a result of
a greater number of promotions and
appointments to managerial grades
among women.
Our current gender pay gap report is
based on a snapshot of data taken at
5 April 2022.
Further promotions within the managerial
positions, for example senior managers
to directors, have seen the gap close
even further to its position in the latest
snapshot of 3.1% (median), equivalent
to women earning 97p for every £1 men
earn, and 1.8% (mean). We believe that
anywhere within the region of +/- 3% is
a healthy number and will continue to
monitor this. The manufacturing industry
gender pay gap in 2021 was 11.7%
(median) and 8.1% (mean) so it is most
encouraging that the wider industry is
also moving in the right direction.
We remain proud that our data, as at
April 2022, continues to be significantly
better than the average.
The full report can be found on our
website, www.delarue.com
A full breakdown of our workforce by
gender can be found below.
Gender diversity statistics at 25 March 2023
All employees
Management¹
Senior Managers²
Executive
Board
Female
Male
72%
1,328
28%
513
65%
165
35%
87
72%
29
28%
11
60%
3
40%
2
62%
5
38%
3
Notes:
1.
2.
All managerial employees including senior managers but excluding executives.
Includes executive management.
38
De La Rue plc Annual Report 2023
Employee engagement
and culture
We recognise the importance of regularly
engaging with our employees and
particularly during periods of change.
We share regular communications at
group, divisional and site level and
provide many opportunities for
employees to give us feedback and
ask questions.
Many of our sites run local employee
groups to talk about what matters to
them and organise staff events.
Examples of this include an Employee
Involvement Group in our Debden, UK
site who have been discussing wellbeing;
and the ACE (Activities, Culture and
Engagement) team in Logan, USA who
organise charitable collections and
seasonal events. Our Malta site also has
a well-established employee-led Sports
and Social Committee who meet
regularly to plan social activities.
During the year Catherine Ashton took
over from Maria Da Cunha as our
Non-executive Director responsible for
workforce engagement and attended
‘Employee Voice’ meetings held at our
Westhoughton and Basingstoke sites to
find out first-hand what it is like to work
at De La Rue and what our employees
think is working well and what can
be improved.
Our UK National Employee Forum and
European Employee Forum meet
regularly with senior leaders to discuss
company matters. They represent the
views of all employees, whether covered
by a collective bargaining agreement or
not. All available executives and a Board
member attended the Forums’ joint
annual meeting in June and December
2022, and feedback from our employee
representatives who attend the meeting
is consistently positive.
We are extremely grateful to all our
employees and in particular our
representatives who give up their time
alongside their day jobs to show their
commitment to constructive engagement.
In January 2023 we refreshed our Values
to better reflect our organisation and
culture. These Values are a framework of
common behaviours that underpin how
we work with each other and with our
external stakeholders. They help us make
the right decisions in the right way and
set out how we expect everyone to
behave, providing stability, particularly
during periods of change.
We recognise that our line managers
have additional responsibilities to their
team and to the business. We have
therefore developed our People
Managers’ Charter that we expect every
manager to abide by to build strong and
successful teams and outcomes.
Employees and people managers will be
invited to attend workshops to explore
what the Values and Charter mean to
them. The Values and Charter have been
incorporated into our policies and
processes such as our employee
induction, our performance management
standards and our new Code of
Business Principles.
Our Values
Trust & Transparency
We deliver on our promises to each
other, our customers and shareholders.
We are honest and transparent and
always act with integrity.
Customer Focus
We seek to understand the needs of our
customer be that internal or external,
through insight and data. We challenge
the speed of delivery and quality of
output to exceed their expectation.
Collaboration
We are inclusive and embrace
differences, working together to deliver
results through our collective knowledge.
Challenge
We challenge ourselves and each other
to deliver the best results we can to
continuously improve and to learn from
our mistakes. We are courageous and
don’t shy away from difficult situations.
Problem Solving & Innovation
We create solutions that solve real
challenges by applying new thinking
and concepts for both ourselves and
our customers.
Our refreshed values reflect our organisation and culture.
De La Rue plc Annual Report 2023
39
ChallengeCollaborationProblem Solving& InnovationFocusCustomer TransparencyTrust & Strategic reportGovernance reportFinancial statements Responsible business report continued
People continued
Health, safety and wellbeing
Occupational health and safety
We continue to prioritise the health
and safety of our workforce. Our main
manufacturing sites are all certified to
ISO 45001:2018, the international
standard for occupational health and
safety management systems, which is
externally audited by our accredited
providers. We ensure all our health and
safety processes are robust and meet
our responsibility to keep our employees
and everyone visiting our sites safe and
secure. This is done through clearly
defining responsibilities, good
communication and training, risk
assessment and the implementation
of appropriate controls. We continue
to track several key metrics regarding
health and safety, including governmental
reportable accidents, lost time accidents,
near miss reporting and corrective
actions and minor first-aid incidents.
This takes place alongside proactive
measures such as HSE training,
compliance to our safe, secure, and
sustainable inspection programme and
by providing specific health and safety
training for managers and supervisors.
All significant incidents are reported to
the executive leadership team on a
monthly basis to support and agree any
corrective actions required. During the
year we have had major development
and change projects ongoing at
Westhoughton, Malta and Gateshead
and we have had no significant incidents
resulting in harm (injury or ill-health) to
our employees.
Performance against FY23 health and safety objectives
Objective
Outcome
Zero lost time to accidental injuries and a lost
time injury frequency rate (LTIFR) per 200,000
worked hours of ≤0.32 over 12 months.
Ensure that ≥80% of all operational line
managers and process leaders are trained to
IOSH Managing Safely level, or an equivalent or
higher qualification within 12 weeks of starting
a new role.
Increase the number of reported near miss/
my safety concerns and achieve a five day
closure rate of ≥85% at all facilities.
Achieve a ≥90% compliance to our area Safe,
Secure and Sustainable inspection
programmes.
Continue to increase the volume, quality and
variety of online health and safety training
available for employees and reintroduce some
face-to-face training post Covid-19.
Achieved. Our end of year LTIFR rate outcome
is 0.30; globally we had six lost time accidents
of which two were government reportable.
Severity of these lost time accidents was
reduced compared to the previous year.
Achieved. Despite many operational changes
the percentage of managers and process
leaders trained or holding certified
qualifications has averaged 85% within 12
weeks. The exception was our Sri Lanka site
due to ongoing Covid travel restrictions.
Achieved. There has been a 5% increase in
near miss reports per employee per year.
The near miss closure rate has exceeded 90%
on average over the full year.
Not achieved. Compliance to this programme
has run at an average of 85% over the year
due to a significant number of operational
changes and various headcount reductions.
Achieved. We have increased the breadth of
online H&S training available to our employees
and added some further environmental
modules to our Venture in-house training
platform. We have also increased our
face-to-face HSE training post Covid-19.
Achieve good HSE training delivery
performance of over ≥1,700 8hr person days
per year.
Achieved. We have achieved this HSE training
target (1,742) without factoring in employee
headcount reductions.
FY24 health and safety objectives
Objective
Zero lost time accidental injuries and to achieve a lost time injury frequency rate (LTIFR) per
200,000 worked hours ≤50% below the UK Labour Force Survey average calculated LTIFR rate.
Maintain our operational manager and supervisor IOSH Managing Safely (or equivalent or
higher qualification) training at over 80% within 12 weeks of starting a new role.
Increase our near miss/my safety concern reporting to an average of at least 1.4 near misses
per employee, with a five day closure rate of ≥85% at all facilities.
Conduct a review of our safe, secure, and sustainable inspection programmes with a view
to achieving ≥87% compliance at all sites.
Track our HSE person days of training to ensure we achieve ≥90% of employee end of year
headcount in a year of further change, with a strong focus on environmental training.
40
De La Rue plc Annual Report 2023
Wellbeing
Wellbeing support is widely available in
all our sites and we monitor and compare
what we offer to ensure levels of support
are comparable.
In the past year across different
countries we have provided information
and support on a broad range of topics
including men’s and women’s health,
musculoskeletal health, neurodiversity
and financial wellbeing.
We offer free services such as flu
vaccines, health check ups and access
to GP and occupational health services
as well as comprehensive Employee
Assistance Programmes.
Where possible, we have retained hybrid
working to give employees flexibility to
their working hours and location and
have also started bringing people
together face to face to collaborate and
create a sense of community.
All our sites have accredited Mental
Health First Aiders (or equivalent, where
this exists) and we ensure they receive
regular training and support.
Training and development
We provide all employees with access
to our Learning Management System
(LMS) covering an array of learning and
development materials. This gives
employees the opportunity to access
content that aligns their learning styles and
preferences. The content has recently
been aligned to our company Values.
Some training modules are mandatory
and, where required, the content is
delivered face to face as well as on
our LMS.
Employees and managers hold
development conversations as part of
our performance management process
to agree what training is required and
our in-house learning and development
team can support these requests.
We continue to focus on virtual
classroom delivery of workshops such
as understanding self and leading with
inclusion as well as storytelling.
We encourage the use of the
apprenticeship levy for both continuous
professional development and for
building skills and capability across
all sites in the UK, covering areas such
as professional coaching, software
development, finance, project
management and IT.
We have recently launched a
comprehensive training programme
to support our people managers
and leaders.
Working with our unions
We maintain strong and productive
relationships with the unions in the
countries where we have manufacturing
operations and in FY23 we recognised
the following unions: UNITE (UK), General
Workers Union (Malta), Kenya Union of
Printing, Publishing, Paper Manufacture,
Pulp & Packaging Industries (Kenya) and
De La Rue Branch – Internal Company
Employees Union (Sri Lanka). Overall,
around 62% of our employees globally
are part of a collective agreement. During
the year some of the key areas where we
worked closely with our unions were:
– Consultation in our Gateshead,
Debden and Westhoughton sites to
reduce headcount and align shift
patterns to meet changing business
requirements reflecting external
market demand.
– Consultation in our Kenya site
to reduce operational activity
and headcount in line with
market demand.
– Commencing negotiations in relation
to a revised collective bargaining
agreement in Sri Lanka and Malta.
– Attendance from UNITE UK and
General Workers Union external
officials at our annual UK and
European Employee Forum.
Raising concerns
We encourage our employees to
speak up about any concerns regarding
behaviours or business practices.
Internal reporting via line managers,
senior management, Ethics Champions
or our Human Resource teams are
encouraged, but our CodeLine
whistleblowing service, operated by an
independent third party, is available for
all employees to use and gives them
the opportunity to report anonymously.
Regular communications are issued
regarding the importance of speaking up
about ethical issues and how to do so, as
well as ensuring posters are on display at
sites to ensure awareness of the service
is maintained. Further information about
the service can be found in the Ethics
Committee report on page 99.
External stakeholder
engagement
Engagement with our customers,
suppliers and shareholders, as well as
the communities in which we operate,
is crucial to the success of our business.
Some of the ways we interact with them
are summarised below.
Investors
The Board values the importance
of building strong relationships with
shareholders and other investors.
A planned roadshow following full and
half year results where the CEO and
CFO meet significant shareholders is
supplemented by a range of other
meetings and calls. The last planned
roadshow which took place following the
announcement of half year results in
November 2022 included meetings with
a number of active managers, together
holding 62% of the share register.
Further detail can be found in the
Section 172 statement on pages 21 to 23
and in the Corporate Governance report
on page 79.
De La Rue plc Annual Report 2023
41
Strategic reportGovernance reportFinancial statements Responsible business report continued
People continued
Customers
De La Rue maintains close contacts
with many of our business, government
and central bank customers, frequently
updating them on our latest news,
developments and initiatives. Our
in-person interactions are supported by
digital marketing activities that enable
interactions via social media, emails and
the delarue.com website.
A multi-tiered approach is taken towards
customer needs. Macro-level analysis
(e.g. PESTLE – political, economic, social,
technology, legal, environmental –
analysis of our markets) supports some
customer conversations (e.g. future of
banknote demand). Structured surveys,
such as net promoter score, and
voice-of-the-customer interviews
are carried out, feeding into Market
Requirements Documents and product
portfolio considerations. Account
management and support team feedback
is also regularly captured and used
across the business.
The various interactions happen virtually,
via territory visits, via visits to De La Rue
sites and at a range of conferences. This
includes our own events, for instance
De La Rue recently hosted central banks
from Africa, the Middle East, Central
America, Central Asia and Europe at a
two-day event to open the new polymer
line in our Westhoughton site. In
Authentication the inside sales team
engages with our loyal, existing customer
base on a weekly/monthly/quarterly
basis as appropriate to ensure they are
receiving the right support, they know
who to speak to and they are aware of
De La Rue’s solutions.
Suppliers
We have been working in close
partnership with our key suppliers,
including work with our new portfolio of
banknote paper suppliers, to mitigate
and manage the impact of the current
global supply chain challenges and
inflationary headwinds associated with
the global cost of energy, oil and oil
derivatives, and supply disruptions
following the pandemic and the impact
of the war in Ukraine.
42
De La Rue plc Annual Report 2023
We have continued with our Scope 3
analysis work, recognising this significant
carbon impact, and are currently
engaging with a range of our key
suppliers who collectively account for
80% of our total procurement spend
across the business. During the year we
launched the Ecovadis programme and
have invited more than 50 suppliers to
participate in the assessment
programme. This will enable us to drive
both improved understanding and
visibility of our suppliers’ ESG impacts
and sustainability improvements across
our supply chain. We look forward to
widening this approach to all of our key
suppliers during FY24.
The progress of our work with suppliers
on ESG through these initiatives has
resulted in De La Rue achieving an A
score (the highest score available) in the
CDP Supplier Engagement Rating, putting
us in the top 8% for supplier engagement
on climate change.
Charitable and community
activities
We are conscious of our responsibilities
to the wider communities in which our
operations are based. We focus our
charitable activities in the local
community to ensure we are having
a positive impact.
In addition to ongoing support for several
educational initiatives, examples of
charitable activities around our sites
during the year included:
– Our Malta site launched a
collaboration with the Foodbank
Lifeline Foundation that assists people
who find themselves in financial
difficulty by giving them a supply
of staple food items. The site also
participated in an event to support
cancer charities.
– Colleagues in our Logan site in Utah,
USA collected around 30 warm coats
which were donated to a charity that
supports abuse prevention.
– In our head office in Basingstoke UK
we organised a fundraising event for
the national cancer support charity,
Macmillan and held a Christmas
Jumper Day in aid of Save The
Children charity. We also supported
a local primary school for children
with special needs and provided each
pupil with a Christmas gift.
Images of some of the charitable
activities undertaken by colleagues
during the year.
Business standards
It is vital that we conduct our business with integrity,
honesty and transparency. The risks of unethical
conduct are recognised and managed through a
robust governance and compliance structure,
underpinned by our Code of Business Principles,
and comprising internal policies, process and
oversight and compliance assurance standards.
De La Rue’s ethical framework
The graphic below summarises our ethical governance framework.
Supporting policies
Processes
Code of Business
Principles
Our people
Health, safety and
wellbeing
Fairness and respect
Human rights and
modern slavery
Our business standards
Environmental
sustainability
Bribery and corruption
Gifts and hospitality
Fair competition
Conflicts of interest
Fraud, tax evasion and
money laundering
Sanctions
Inclusivity
Modern Slavery and human trafficking
Stress management
Human rights policy statement
Group HSE Sustainability policy
Occupational Health and Safety manual
Anti-bribery and corruption
Competition and anti-trust
Conflicts of interest
Recruitment of PEPs
Prevention of tax evasion
Gifts and hospitality
Supplier Code of Conduct
Fraud
Group HSE Sustainability policy and
EMS manual
Sanctions
Expenses
Charitable giving
Our information
Records and reports
Protecting personal
information
Confidential information
and information security
Market abuse and
insider trading
Acceptable use of Information systems
Data protection
Document retention
Group Baseline Security Manual
Confidential Information and Dealing
Operational Delegation of Authority
Securities Dealing Code
Social Media
Global health and safety
standards and monthly
reporting
ISO management systems
Safe and Secure audits
Grievance and disciplinary
processes
Gifts register
Expenses vetting
Third party onboarding
processes
Legal department
guidelines
Environmental reporting
Global environmental
standards
ISO management systems
Compliance declarations
Separation of duties
External Monitoring
Procedures for managing
confidential & inside
information
Controls over share
dealing
Data protection annual
returns
Oversight, control
and
communication
Training & induction
Benchmarking
CodeLine
ISO certifications
Specialist audits
BnEI accreditation
Internal audit
External audit
Risk reviews
UN Global Compact
SharePoint intranet
Employee surveys
Ethics Committee
Sanctions Board
De La Rue plc Annual Report 2023
43
Strategic reportGovernance reportFinancial statements Responsible business report continued
Business standards continued
The Board encourages a culture of
strong governance across the business.
Our ethical credentials are monitored
by the Ethics Committee, via formal
internal and external audits and senior
management review forums. In addition
to the governance activities described
earlier in this responsible business
report, further details about the activities
of the Board and its Committees can
be found in the Corporate Governance
section of this Annual Report on pages
74 to 127.
Code of Business Principles
In January 2023 we launched our new
Code of Business Principles, bringing our
guidance up to date to reflect legislation
and current best practice. The Code is
available in English, Maltese and Sinhala
to ensure accessibility for all colleagues.
The new Code is divided into three
sections: Our People, Our Business
Standards and Our Information. Further
details about the subject areas covered
in each section are shown in the graphic
on page 43. The Code includes an ethical
decision guide, scenarios based on each
subject covered, and details on how to
raise ethical concerns.
Every employee is required to either
attend a training session in person or
complete an online training module and
confirm that they understand and will
adhere to the Code and will speak up if
they become aware of any breaches.
Our people managers are asked to
complete a version of the online training
which highlights their enhanced
responsibilities under the Code.
If an employee is found to have acted
in breach of the Code, the Group takes
appropriate action to address that
breach, including disciplinary action and
ultimately terminating employment in
the most serious cases. Contractors and
all those acting on our behalf are also
expected to adhere to these standards.
44
De La Rue plc Annual Report 2023
Ethics champions
The Group’s network of Ethics
Champions ensures that each site has
local support and representation for
Code of Business Principles matters and
continues to play an integral part in
ensuring that strong ethical values are
embedded across the business. All new
Ethics Champions receive one-to one
training. Ethics Champions have been
involved with the rollout of the new
Code of Business Principles and, where
possible, are involved with employee
inductions to ensure new starters know
who they can approach with questions
around ethical practices.
Anti-bribery and corruption
We have a zero tolerance policy on
bribery and corruption and have
implemented a robust framework of
polices and processes to prevent our
employees, contractors, third party
partners, consultants and other
representatives from engaging in bribery
or other corrupt practices. All employees
are made aware of our stance through
their acknowledgement of our Code of
Business Principles and those in roles
which may have a higher potential
exposure to bribery and corruption risk
are required to complete detailed
mandatory online training every
two years.
During the year, an anti-bribery
management system review board
was established. This forum is attended
by senior managers from enabling
functions and the divisions and its role
is to monitor the continuing suitability,
adequacy and effectiveness of
the management system. The activities
of this forum are reported to the
Ethics Committee.
We have a clear approval process for
gifts, entertainment and hospitality
offered by or given to our employees.
All employees are required to comply
with the gifts and hospitality policy
which requires all gifts, entertainment
and hospitality above a nominal value
which are given or received to be
recorded on a central gift register.
This register is regularly reviewed by
executive management. Colleagues who
have regular contact with customers
and suppliers are asked to acknowledge
annually their understanding of
and adherence to our gifts and
hospitality policy.
Third party partner sales consultants
(TPPs) and suppliers
We recognise that, as well as our
employees, TPPs who represent us or act
on our behalf around the world could be
exposed to ethical risks. There is a
continuing requirement for TPPs to
undergo our mandatory anti-bribery and
corruption training programme and to
conduct business in compliance with our
expected ethical standards. Due
diligence is undertaken on all our TPPs
before they are engaged and this
process is refreshed on a regular basis.
TPPs are given regular training to ensure
they remain alert to potential risks. We
have risk management measures and
controls in place, including in relation to
remuneration of TPPs and the level of
approval required to onboard or renew
agreements. Fees are based on time and
effort and milestone deliverables to
ensure accountability and transparency.
Activities are monitored through regular
reporting and we ensure that the
remuneration structure does not
incentivise unethical behaviour.
Our Supplier Code of Conduct clearly
sets out the ethical standards to which
we expect our suppliers to adhere,
including in relation to bribery and
corruption and human rights. Further
progress has been made with the rollout
of our online onboarding system for new
suppliers and the cyclical screening of
existing suppliers.
During the year an ethical risk
assessment and management process
was developed and is applied to all key
suppliers. A supplier ethics forum
comprising representatives from
divisional and group procurement
teams and the ethics team has been
established and meets bi-monthly to
discuss any ongoing or emerging issues,
and to ensure that any risks or issues,
once flagged, are escalated and resolved
to our satisfaction.
Accreditations and
certifications
De La Rue is an accredited member
of the Banknote Ethics Initiative (BnEI),
which was established to promote
ethical business practice in the banknote
industry. The initiative sets out a robust
framework for promoting high ethical
standards with a focus on the prevention
of corruption and on compliance with
anti-trust law. Members are required to
commit to the Code of Ethical Business
Practice developed in partnership with
the Institute of Business Ethics.
Compliance with the code is subject
to an external independent audit every
three years which rigorously tests
anti-bribery and anti-trust processes,
procedures and controls against an audit
framework. De La Rue is accredited at
Level 1, the highest level.
In addition to BnEI accreditation,
De La Rue maintains ISO management
system standards for anti-bribery (ISO
37001), occupational health and safety
(ISO 45001), environmental management
systems (ISO 14001), information security
(ISO 27001), security printing (ISO 14298),
quality management (ISO 9001) and
business continuity management
systems (ISO 22301). Our ISO standards
are all certified by a UKAS, INTERGRAF or
international equivalent certified auditing
body. Further information on the auditing
and scope of each standard can be
found on our website.
Non-financial
information statement
This section (pages 24 to 45)
provides information as required by
regulation in relation to:
– Environmental matters
– Our employees
– Social matters
– Human rights
– Bribery and corruption
Other related information can be
found as follows:
– Our business model
Pages 16 to 17
– Key performance indicators
Pages 46 to 49
– Non-financial key performance
indicators
Page 49
– Risk and risk management
Pages 56 to 63
– Corporate governance
Pages 75 to 76 and 78 to 79
– Ethics Committee
Pages 99 to 100
– Directors’ report
Page 128
Training
Regular, relevant and focused training is
important to support high standards of
business behaviours. During the period,
in addition to training on our new Code
of Business Principles mentioned above,
we continued our mandatory online
training programme, allocating anti-
bribery and corruption, competition
law, modern slavery, sanctions, and
gifts and hospitality training to new
joiners in relevant roles. The Ethics
Committee reviews compliance training
completion information.
Tax transparency
It is important that the Group pays the
right amount of tax at the right time,
complying with all relevant tax laws and
regulations in the jurisdictions in which
we do business while both respecting
existing arrangements or seeking to
reach agreements with tax authorities.
De La Rue’s tax strategy is reviewed
annually by the Board and published
on our website.
Cyber security and
data privacy
De La Rue takes the protection and
security of its internal and customer
information very seriously; the information
security and assurance team who
perform the internal governance and
audit function have a separate reporting
line to both the customer and corporate
IT teams to ensure there is no conflict of
interest and clear segregation of duties.
Further information can be found in the
Risk and Risk Management report on
page 56.
Following a review by external experts,
De La Rue’s data protection policies,
procedures and documents have been
enhanced to bring them in line with
best practice.
De La Rue plc Annual Report 2023
45
Strategic reportGovernance reportFinancial statements Key performance indicators
We use a balance of financial
and non-financial key
performance indicators to
measure our performance
Revenue
Adjusted operating profit
Link to our strategic pillars
Link to our strategic pillars
Link to remuneration
Link to remuneration
R
We measure IFRS revenue from each
division, less, in FY21 and before,
‘pass through’ revenue relating to
non-novated contracts following the
sales of certain historic businesses.
IFRS operating profit, less exceptional
items and amortisation on acquired
businesses.
Increasing revenue is the bedrock
upon which the business is able
to grow
This key performance measure of
profitability is followed closely both
within the business and externally.
Revenue in Authentication rose
marginally as additional GRS contracts
came online and sales of datapages for
Australian passports offset weaker
Brand sales. Currency revenues fell by
9.4% as the impact of weak market
demand was felt
Adjusted operating profit fell 24.2%
in FY23, driven by lower revenue in
Currency, a sales mix which had an
adverse impact on margin and
inflationary pressures which were
partially, but not completely, offset
by cost savings.
Definition
Why it is
important
Performance
Historic
performance
Authentication
Currency
Discontinued
(£m)
Authentication
Currency
Discontinued
(£m)
600
500
400
300
200
100
0
70
60
50
40
30
20
10
0
-10
46
De La Rue plc Annual Report 2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Our strategic pillars
Grow repeatable business
Drive efficient operations
Invest for the future
R Find out more in Remuneration
Adjusted EBITDA and
free cash flow
Net debt/EBITDA covenant ratio
EBIT/net interest covenant ratio
Link to our strategic pillars
Link to our strategic pillars
Link to our strategic pillars
Link to remuneration
Link to remuneration
Link to remuneration
R
Adjusted EBITDA is operating profit less
exceptional items, depreciation and
amortisation. Free cash flow is net cash
flow before financing activities, plus
interest paid, lease payments and
dividends paid to minorities.
This is the ratio between year end
net debt and adjusted EBITDA, both
adjusted in accordance with the
definition of the covenant within our
banking agreements.
This is the ratio between adjusted EBIT
and net interest payable, both adjusted
in accordance with the definition of the
covenant within our banking agreements.
Adjusted EBITDA gives an indication of
how much cash the Group is generating
from operations. Free cash flow shows
how much cash is being generated for
shareholders and is a metric used in
assessment of our Performance Share Plan.
Maintenance of this ratio below a certain
level, for FY23 less than 3.0, is a key
covenant within our historic banking
agreements. This ratio has superseded
EBITDA margin as a KPI as it is of more
relevance in managing the business.
Maintenance of this ratio above a
certain level, for FY23 more than 3.0,
is a key covenant within our historic
banking agreements.
Group adjusted EBITDA fell by 13.3% in
FY23. However the outflow of free cash
slowed, from £18.6m in FY22 to £11.4m in
FY23. The business generated cash at the
operating cash level, but paid out £17.4m
to cover exceptional costs, £16.5m of
pension deficit repair contributions and
£21.4m of capital expenditure.
This covenant ratio was 2.21 at 25 March
2023, within the limit set out in our
banking agreements. The ratio has
increased this year given the increase
in net debt and fall in EBITDA.
This covenant ratio was 3.03 at
25 March 2023, within the limit set out
in our banking agreements. The fall in
the ratio compared with prior year was
mostly caused by the increase in interest
payable, driven by the 450bp increase
in Bank of England base rates over
the period.
Authentication
Currency
Discontinued
Free cash flow
(£m)
Limit
(Ratio)
Limit
(Ratio)
75
50
25
0
-25
-50
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.24
2.21
1.3
1.46
0.99
14.0
12.0
12.90
10.0
8.0
6.0
4.0
2.0
0.0
7.40
6.30
5.20
3.03
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
De La Rue plc Annual Report 2023
47
Strategic reportGovernance reportFinancial statements
Key performance indicators continued
Net debt
Total shareholder return
Link to our strategic pillars
Link to our strategic pillars
Link to remuneration
Link to remuneration
R
R
Definition
The net of borrowings and cash and
cash equivalents.
Total shareholder return of De La Rue
shares compared with that of the
FTSE 250 index. The graph below has
been rebased to 100 at 24 February
2020, the day before the Turnaround
Plan was announced.
Why it is
important
This is a key measure of our indebtedness,
monitored both internally and externally.
This is a performance measure under
the Performance Share Plan.
Performance
Historic
performance
Net debt increased by £11.7m in FY23, as
there was an overall net cash outflow in
the business as explained in the EBITDA
KPI opposite.
Share performance over FY23 was
adversely impacted by market reaction
to the trading updates that took place
before and during the year.
(£m)
De La Rue
FTSE 250 (excluding investment trusts)
(Ratio)
0
-20
-40
-60
-80
-100
-120
-52.3
-71.4
-83.1
-102.8
-107.5
200
180
160
140
120
100
80
60
40
20
0
48
De La Rue plc Annual Report 2023
2019
2020
2021
2022
2023
02/20 08/20 02/21 08/21 02/22 08/22 02/23
Our strategic pillars
Grow repeatable business
Drive efficient operations
Invest for the future
R Find out more in Remuneration
Adjusted basic earnings
per share
Gender diversity in management
Energy used per tonne
of good output
Link to our strategic pillars
Link to our strategic pillars
Link to our strategic pillars
Link to remuneration
Link to remuneration
Link to remuneration
R
Adjusted basic earnings per share is
calculated as the earnings attributable
to equity shareholders excluding
amortisation and exceptional items,
divided by the average number of
ordinary shares outstanding during
the year.
We monitor our gender diversity among
our management team, looking to reach
60/40 male/female split by FY23.
We measure our energy efficiency
in terms of the energy used per tonne
of good output, targeting a 7.5% fall
this year.
This is a performance measure under
the Performance Share Plan.
This is a key target that we set to
encourage gender diversity at a senior
level within the business.
We believe this is a representative
indicator of the energy efficiency of
our operations.
Adjusted basic EPS fell to a loss of 1.1p in
FY23 due to a fall in adjusted operating
profit and an increase in net finance
expense as explained above.
We did not achieve our target this year.
28% of the management team were
female at 25 March 2023. We continue
to work on initiatives to support the
achievement of this target.
We did not achieve our target this year,
due to the drop in volume of output.
We will continue to measure this ratio,
but are not setting direct targets for
FY24 due to the unpredictability of
volume of output.
IFRS
Adjusted
(p)
Male
72%
Female 28%
(%)
(kWh/tonne)
45
30
15
0
-15
-30
3,633
3,656
3,139
2,903
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0.0
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
De La Rue plc Annual Report 2023
49
Strategic reportGovernance reportFinancial statements
Financial review
Building the
business
To provide increased insight into the
underlying performance of our business,
we have reported revenue, gross profit
and operating profit on an IFRS and
adjusted basis, together with adjusted
EBITDA and adjusted controllable
operating profit (adjusted operating
profit before enabling function
cost allocation), for both ongoing
operating divisions.
In addition our ID business has grown
strongly with our contract with Note
Printing Australia (NPA) meeting
scheduled volumes during FY23, securing
sufficient semi-conductors despite
general supply shortages of these
components. The NPA contract reached
full production volumes shortly after the
year end on the newly commissioned
additional production line in Malta.
Over 99% of Group revenue for FY23 of
£349.7m (FY22: £375.1m) originated from
our ongoing operating divisions of
Currency and Authentication.
Together Currency and Authentication
delivered adjusted operating profit of
£27.9m (FY22: £35.8m), a fall of £7.9m
year-on-year. This largely reflects lower
revenue from the Currency division,
adverse mix and a slight increase in
operating expenses. Identity Solutions
generated an adjusted operating loss of
just £0.1m in the current financial year
with minimal remaining activity (FY22:
£0.6m profit).
Authentication
Our Authentication division protects
revenues and reputations through the
provision of physical and digital solutions
to governments and commercial
organisations. We also manufacture
ID security components.
In contrast, our Brand business saw
lower than expected sales, with Microsoft
particularly impacted during the year
by the fall in PC sales globally, with
International Data Corporation (IDC), a
well-respected industry observer, noting
a 16.5% year on year fall in PC demand/
shipments in 2022, and a 29% drop in
the first calendar quarter of 2023,
compared to the same quarter in 2022.
The supply of Covid vaccine brand
protection seals, strong in FY22, also fell
away due to a change in strategic focus
by the customer.
Overall these movements led to revenue
for the year of £91.7m (FY22: £90.3m),
a slight increase over last year.
Gross profit fell slightly in both absolute
and margin terms with gross profit
margin falling by 110 basis points to 37.1%
(FY22: 38.2%), impacted by sales mix
despite careful cost control.
During FY23 our existing Government
Revenue Solutions contracts have
performed as expected and revenue
benefitted from contracts in Bahrain,
Oman and Qatar coming on-stream
during the year. This was offset by the
HMRC contract ending as expected in
the first quarter.
Rob Harding
Chief Financial Officer
In FY23 we contended with
reduced revenue, an adverse
sales mix and inflationary
headwinds. We have worked
hard to implement cost
savings which have helped
to mitigate this impact.
50
De La Rue plc Annual Report 2023
Authentication
Revenue
Gross profit
Adjusted controllable operating profit*
Adjusted operating profit*
Operating profit
Gross profit margin
Adjusted controllable operating profit margin*
Adjusted operating profit margin*
* Non-IFRS measure.
Adjusted operating profit in
Authentication fell 12.3% to £14.3m
(FY22: £16.3m), mostly driven by a less
profitable mix of sales this year, a rise in
depreciation on capitalised software
development costs and a greater
proportion of enabling costs being
allocated to the Authentication division,
given the higher percentage of revenue
it contributed to the overall business.
Adjusted profit before controllable costs
also fell marginally, down 3.0% to £23.0m
(FY22: £23.7m), hit by an adverse sales
mix. On an IFRS basis, operating profit of
£5.4m (FY22: £15.1m) was impacted by
lower underlying profits and exceptional
costs, relating to asset impairment and
restructuring costs, that were £7.7m
higher than prior year.
Currency
Revenue
Gross profit
Adjusted controllable operating profit*
Adjusted operating profit*
Operating (loss)/profit
Gross profit margin
Adjusted controllable operating profit margin*
Adjusted operating profit margin*
* Non-IFRS measure.
FY23
£m
91.7
34.0
23.0
14.3
5.4
%
37.1
25.1
15.6
FY22
£m
90.3
34.5
23.7
16.3
15.1
%
38.2
26.2
Change
+1.6%
-1.4%
-3.0%
-12.3%
-64.2%
-110bps
-110bps
18.1
-250bps
Currency
De La Rue’s Currency division provides
market-leading end-to-end currency
solutions, from finished banknotes to
secure polymer substrate and banknote
security features to over half the central
banks and issuing authorities around
the world.
The demand for banknotes has recently
been at low levels. As at 25 March 2023,
the De La Rue Currency division’s total
order book stood at £136.8m (26 March
2022: £170.8m), a lower level at this
time of year than in any of the last five
years. The twelve month order book as
at 25 March 2023 stood at £131.7m
(26 March 2022: £163.5m).
Revenue of £254.6m in FY23 (FY22:
£280.9m) for the Currency division was
down 9.4% on the previous year. The fall
in revenue was mostly due to lower
banknote volumes, with a fall in polymer
substrate volumes seen as well.
The post Covid-19 lull in demand,
exacerbated and extended by global
macroeconomic uncertainty, continued
throughout FY23. It is evident that this
slowdown has been experienced across
the Currency manufacturing industry, as
several of our competitors in this area
have commented publicly that they have
seen similar declines.
There are encouraging signs that the
market is recovering, with a number of
substantial new tenders underway since
the year end, but the timing of this
recovery remains uncertain. As of 16 June
2023, we had secured the substantial
majority of the planned FY24 revenue.
Strong cost control and operational
efficiency, together with the benefits
of the Portals agreement termination,
meant that gross profit margin rose
slightly to 22.9% (FY22: 22.5%), though,
given the fall in revenue, gross profit
fell 7.9% in absolute terms to £58.2m
(FY22: £63.2m).
FY23
£m
FY22
£m
254.6
280.9
Change
-9.4%
-7.9%
-11.5%
-30.3%
n/a
63.2
42.5
19.5
15.0
%
22.5
+40bps
15.1
6.9
-30bps
-160bps
58.2
37.6
13.6
(24.8)
%
22.9
14.8
5.3
De La Rue plc Annual Report 2023
51
Strategic reportGovernance reportFinancial statements
Financial review continued
Adjusted operating profit in the Currency
division fell 30.3% to £13.6m (FY22:
£19.5m), impacted mostly by the fall in
revenue but also partly by the rise in
enabling function costs in absolute
terms, despite a smaller proportion of
those overall costs being allocated to the
division. Further detail about enabling
function costs is given below.
On an IFRS basis, the division moved into
an operating loss of £24.8m (FY22: profit
of £15.0m) with £38.4m of exceptional
costs attributed to the division (FY22:
£4.5m), comprising £17.0m of costs
relating to the termination of the
agreement with Portals Paper, £8.5m
of credit loss provision on Portals loan
notes and £12.9m of restructuring and
relocation costs.
Putting aside the impact of exceptional
items and the divisional allocation of
costs incurred centrally by enabling
functions discussed below, we also saw
a slight fall in adjusted controllable
operating profit to £37.6m (FY22:
£42.5m) driven by the fall in revenue,
though amid a background of cost
inflation, controllable operating profit
margin fell only slightly to 14.8%
(FY22: 15.1%).
Identity solutions
As noted above, the legacy Identity
Solutions business saw minimal activity
in FY23 with an operating loss of just
£0.2m (FY22: operating profit of £0.6m).
Enabling function costs
In FY23 enabling function costs of
£32.7m (FY22: £30.4m) rose by 7.6% and
represented 9.4% of Group revenue
(FY22: 8.1%). The rise in enabling function
costs came from the non-recurrence of
various credits received last year, a
reclassification of entity costs previously
deemed discontinued, IBRN (incurred
but not recorded) insurance claims
covering the risk that a claim may be
made in the future related to cyber
security and audit fee increases.
Exceptional items
Exceptional items during the period
constituted a net charge of £47.1m
(FY22: £5.7m) before tax.
52
De La Rue plc Annual Report 2023
Exceptional charges included:
– £17.0m (FY22: nil) relating to the
payments agreed to terminate the
long-term supply agreement with
Portals Paper
– £12.6m (FY22: nil) in relation to
redundancy charges and asset
impairments associated with the
wind down of activity in our Kenyan
operations. Of this, £6.9m relates to
fixed asset and inventory impairments
which are non-cash items.
– £2.9m (FY22: nil) impairment of
capitalised product development
costs within Authentication in relation
to two programs on which work was
mothballed during FY23.
– £1.4m (FY22: £nil) impairment of
software assets relating to the
Currency where future revenue
relating to these assets are minimal.
– £4.2m (FY22: £1.8m) of other site
relocation and restructuring expenses
incurred in connection with cost out
initiatives designed to right-size both
divisions for future operations.
– £8.5m (FY22: £3.1m) recognition
of credit loss provision on other
financial assets. Other financial assets
comprise securities held in the Portals
International Limited group which
were received as part of the
consideration for the paper disposal
in 2018, together with accrued
interest. In accordance with IFRS 9,
management has assessed the
recoverability of the carrying value of
these financial assets and recorded
an expected credit loss provision of
£8.5m in exceptional items. The net
amount remaining on the balance
sheet for other financial assets was
£nil (FY22: £7.4m). This provision will
not impact our efforts to work with
the Portals Group companies to
recover these investments.
– £0.5m (FY22: £0.4m) in relation to
legal fees incurred on rectification
of certain discrepancies identified
in the Pension Scheme rules net of
amounts recovered.
The policy for exceptional items described
in the Annual Report and Accounts is
used when calculating our financial
covenants as agreed with our lenders.
Finance charge
The Group’s net interest charge was
£9.3m (FY22: £5.5m). This included
interest income of £1.2m (FY22: £0.9m),
interest expense of £11.6m (FY22: £6.2m)
and retirement benefit finance income
of £1.1m (FY22: expense of £0.2m).
Interest income of £1.2m (FY22: £0.9m)
included interest accrued on loan notes
and preference shares held in the Portals
International Limited Group of £1.1m
(FY22: £0.8m). Interest received on loan
notes and preference shares is excluded
from the Group’s covenant calculations.
Interest expense included interest on
bank loans of £7.2m (FY22: £3.1m), interest
on lease liabilities of £0.5m (FY22: £0.6m),
net charges relating to the November
2022 debt modification of £0.7m (FY22:
£nil) and other including amortisation of
finance arrangement fees of £3.2m (FY22:
£2.5m). The increase in bank loan interest
paid in FY23 was largely attributable to
the rises in Bank of England base rates
which moved from 0.75% to 4.25% over
the period and now stand at 5.0%.
The IAS 19 related finance cost, which
represents the difference between the
interest on pension liabilities and assets,
was a credit of £1.1m (FY22: £0.2m
charge). The credit in the year was due
to the opening IAS 19 pension valuation
being a surplus of £29.8m.
The net charges relating to the debt
modification of £0.7m (FY22: nil) relate
to a loss in carrying value of the banking
facilities incurred when they were
modified in November 2022, net of the
amortisation of this loss over the period.
The transaction costs will be amortised
over the period of the loan.
Tax related to exceptional items amounted
to £5.1m (FY22: tax credit of £1.8m). As well
as the tax impact of the items detailed
above, it included £4.0m (FY22: £1.5m) of
charge related to the derecognition of a
deferred tax asset relating to the pension
scheme and £6.1m (FY22: nil) relating
to the expected utilisation of tax credits
in Malta, which are expected to be
surrendered for capital grants against
future capital expenditure there.
Taxation
The effective tax rate on continuing
operations before exceptional items and
the amortisation of acquired intangibles
was 123.2% (FY22: 11.0%). This includes
the impact of provisions against deferred
tax asset balances, changes in uncertain
tax provisions and the impact of tax rate
changes in Sri Lanka; the underlying
effective tax rate excluding these items
was 24.9% (FY22: 19.4%).
Including the impact of exceptional items
and the amortisation of acquired
intangibles, the total tax charge in the
consolidated income statement for the
year was £27.6m (FY22: £1.4m).
The net tax charge relating to exceptional
items in the period was £5.1m (FY22: tax
credit 1.8m). A tax credit of £0.3m
(FY22: tax credit £0.3m) was recorded
in respect of the amortisation of
acquired intangibles.
The Group paid tax of £1.0m in FY23
(FY22: £1.8m).
The underlying effective tax rate for
FY24 on continuing operations before
exceptional items and amortisation of
acquired intangibles is expected to be
between 70-80%. This appears
disproportionately high due to the
impact of expected corporate interest
restrictions in the UK.
Earnings per share
The basic weighted average number
of shares for earnings per share (‘EPS’)
purposes was 195.4m (FY21: 195.2m).
Adjusted basic loss per share was 1.5p
(FY22: EPS of 13.0p), reflecting the fall in
adjusted basic earnings. IFRS basic loss
per share from continuing operations
was 28.6p (FY22: EPS of 10.6p) reflecting
a basic loss of £55.9m (FY22: earnings
of £20.7m).
Cash flow and borrowing
Cash flow from operating activities was a
net cash inflow of £23.8m (FY22: £16.5m
inflow), generated after taking into account:
– £29.6m loss before tax (FY22:
£25.1m profit)
– £9.3m of net finance expense
(FY22: £5.5m)
– £20.0m of depreciation and
amortisation (FY22: £18.6m)
– £18.3m net working capital inflow
(FY22: £17.2m outflow). This included:
– £0.5m decrease in inventory (FY22:
decrease £3.4m);
– £6.0m decrease in trade and other
receivable and contract assets
(FY22: decrease £22.6m) mainly
due to timing of cash collections
on certain material customer
contracts; and
– £11.8m increase in trade and other
payables and contract liabilities
(FY22: £43.2m decrease), including
the final settlement payment of
£7.5m relating to Portals Paper
being accrued at year end but not
paid until April 2023.
– £16.5m of pension fund contributions
of (FY22: £16.4m) including amounts
related to administrative costs of
running the Scheme
– £13.9m of non-cash provisions within
exceptional items (FY22: £3.0m),
namely £5.4m (FY22: £0.1m credit)
of asset impairments and £8.5m
(FY22: £3.1m) of credit loss provision
on Portals loan notes
The cash outflow from investing activities
was £20.8m (FY22: £25.8m) driven by
capital expenditure of £21.4m (FY22:
£26.9m) as the Turnaround Plan
investment nears completion and we
continue to invest in the capabilities of
our software based products. Capital
expenditure is stated after cash receipt
from grants received of £4.2m (FY22:
£1.5m), largely relating to the
construction of our expanded facility
in Malta.
The cash inflow from financing activities
was £12.6m (FY22: £7.7m), including
£27.0m net draw down of borrowings
(FY22: draw down of £17.0m), £10.3m
(FY22: £6.2m) of interest payments and
£2.4m (FY22: £2.2m) of IFRS 16 lease
liability payments. Debt issue costs of
£0.9m (FY22: nil) were also paid on the
amendment and extension of the banking
facilities agreed in November 2022.
As a result of the cash flow items
referred to, Group net debt moved from
£71.4m at 26 March 2022 to £83.1m at
25 March 2023.
The Group had Bank facilities of £275.0m
including a Revolving Credit Facility (RCF)
cash drawdown component of up to
£175.0m and bond and guarantee
facilities of a minimum of £100.0m, with a
maturity date of 1 January 2025 following
an extension signed in November 2022.
The £100m of bond and guarantee
facilities provided guarantees or bonds
to participate in tenders and function
as back up to contracts, where the
customers require a guarantee as part of
their procurement process. In addition,
the facilities underpin some advance
payments from customers. The Group
considers the provision of such bonds
to be in its ordinary course of business.
At year end the RCF cash component
stood at £175.0m and the bond and
guarantee component stood at £100.0m.
As at 25 March 2023, the Group, as part
of the £175.0m RCF cash component,
has a total of undrawn committed
borrowing facilities, all maturing in more
than one year, of £53.0m (26 March
2022: £55.0m in more than one year).
The amount of loans drawn at 25 March
2023 on the £175.0m RCF cash
component is £122.0m (26 March 2022:
£95.0m). As at 25 March 2023
guarantees of £52.1m (26 March 2022:
£55.6m) were used from the £100.0m
guarantee facility. The accrued interest in
relation to cash drawdowns outstanding
at 25 March 2023 is £0.3m (26 March
2022: £nil).
During FY23 the financial covenants
required that the ratio of EBIT to net
interest payable will not be less than
three times and the net debt to EBITDA
ratio will not exceed three times. At the
period end the specific covenant tests
were as follows: EBIT/net interest payable
of 3.03 times, net debt/EBITDA of 2.21
times. The covenant tests use earlier
accounting standards and exclude
adjustments including IFRS 16.
On 29 June 2023 the Group reached
agreement with its lenders to
significantly relax its financial covenants
as outlined in the ‘CEO review’ above. In
addition to amending the interest cover
and net leverage ratio, the Company has
also agreed to maintain a minimum
liquidity ratio of £25m. The minimum
liquidity ratio is defined as available cash
and the undrawn portion of the available
RCF. The ratio is tested monthly but on a
weekly basis covering a 13-week historic,
actuals and a 13-week forward basis,
effective from I July 2023. The Group
must ensure liquidity must not drop
below the £25m level in any two week
consecutive period either looking
historically or forward.
De La Rue plc Annual Report 2023
53
Strategic reportGovernance reportFinancial statements Financial review continued
Furthermore, the Group has granted
fixed and floating security over certain
material assets of the Group and has
cancelled £25.0m of the £100.0m bond
and guarantee line. The Group now
has access to £75.0m of bond and
guarantee lines.
Pension scheme
As well as focusing on operational
performance, the Group continues
to look proactively to minimise future
cash outflows, particularly in the
immediate future.
To conserve cash, we have agreed with
the Pension Scheme Trustee to defer
£18.75m of deficit reduction
contributions. We will defer our deficit
reduction contributions of £3.75m per
quarter from that due on 5 April 2023,
up to and including the payment that
was due on 5 April 2024, less an amount
equivalent to the arrangement fee
agreed with our lenders on the covenant
package, due on or after 5 April 2024.
During the second quarter of FY25,
deficit reduction contributions will
recommence at the rate of £3.75m per
quarter. ‘Catch up’ payments, to put the
Scheme in funds for the £17.5m deferred,
will start from July 2025 and will continue
through FY26 to FY29.
In order to preserve and support the
position of the scheme, with the support
of the lenders, the scheme will be
provided with security on a pari passu
basis together with the lenders, as well as
an enhanced information sharing protocol
to ensure ongoing communication
between the Group and the Trustee
remains comprehensive.
On 24 May 2022, the Trustees of the
Main Scheme entered into a partial
pensioner buy-in contract for a
proportion of pension members. In return
for a premium paid from the Scheme’s
assets, from the date of the buy-in,
payments will be made to the Scheme
that match the benefit payments to
those Scheme members covered under
the buy-in contract. The premium paid
to the insurer was £319.0m. As at
25 March 2023, the value of the buy-in
contract was £220.6m. The impact of
the partial pensioner buy-in has been
recognised as a loss on the scheme
assets within the comprehensive
statement of income. This buy-in
reduces the overall future volatility of
the pension fund by fixing the liabilities
of a subset of pensioners.
The valuation of the Group’s UK defined
benefit pension scheme (the “Scheme”)
on an IAS 19 basis at 25 March 2023 is a
net liability of £51.3m (26 March 2022:
net surplus £31.6m). The movement in
the IAS 19 valuation from a net surplus at
26 March 2022 was mainly as a result of
losses on assets, as well as inflation
experience on liabilities (due to actual
inflation being higher than assumed).
This was partially offset by gains on the
Scheme’s liabilities as a result of changes
to the actuarial assumption – the
discount rate assumption increased
from 2.85% to 4.70% – and changes to
the mortality assumption resulting in
lower expectations on future life
expectancy of members.
The charge to adjusted operating profit
in respect of the Scheme in the period
was £1.6m (FY22: £1.8m). Under IAS 19
there was a finance credit of £1.1m
(FY22: £0.2m charge) arising from the
difference between the interest cost on
liabilities and the interest income on
scheme assets.
Capital structure
At 25 March 2023 the Group had net assets of £35.0m (26 March 2022: £161.8m).
The movement year-on-year included:
Opening net assets
(Loss)/Profit for the year
Remeasurement (loss)/gain on retirement benefit obligations
Tax related to remeasurement of net defined benefit liability
Other movements in other comprehensive income
Employee share scheme charges
Other
Closing net assets
FY23
£m
161.8
(57,2)
(100.3)
24.2
5.5
1.9
(0.9)
35.0
FY22
£m
111.4
23.7
35.7
(8.8)
(0.9)
1.7
(1.0)
161.8
54
De La Rue plc Annual Report 2023
Case study:
Authentication
Case study:
Malta expansion
Our Maltese
expansion
increases our
capability
with efficient
use of capital
Australian passport
polycarbonate
datapage
Just seven months after the contract
went live, Note Printing Australia
expressed their confidence in the
highly secure and durable
polycarbonate datapages produced
by De La Rue for the new Australian
passport by extending our
relationship, by five years, to cover a
full decade. This extension helped us
to have the confidence to ramp up
production further and invest in a
second polycarbonate line in Malta
which is now operational.
De La Rue is expanding the Malta facility by
14,500m² to provide significantly greater capacity
for the production of tax stamps and polycarbonate
datapages in Authentication, together with
additional banknote printing capability.
The build is being developed in conjunction
with Malta Enterprise, the Maltese economic
development agency, with De La Rue taking
a lease on the building.
As part of the expansion a range of machinery,
previously used at Gateshead in banknote
manufacture, is being relocated to use in
Malta, maximising the cost efficiency of the
overall project.
The extension is being built in stages, with the
additional polycarbonate datapage line already
operating. The remaining additional Authentication
space should be completed in the second half
of FY24 with the Currency facilities, which include
a new vault, ready by the first half of FY25.
The overall project provides substantial additional
manufacturing capacity for the Authentication
division and additional capability for the
Currency business.
De La Rue plc Annual Report 2023
55
Strategic reportGovernance reportFinancial statements Risk and risk management
How we manage our
principal risks and
uncertainties
How we manage risk
Risk management is the responsibility
of the Board, supported by the Risk
Committee, which comprises members
of our Executive Leadership Team (ELT)
and is attended by the Group Director
of Security, HSE and Risk. The Risk
Committee is accountable for
identifying, mitigating and managing
risk. Further details about the
Committee can be found on page 97.
Our formal risk identification process
evaluates and manages our significant
risks in accordance with the
requirements of the UK Corporate
Governance Code. Our divisional risk
registers feed into a group risk structure
that identifies the risks, their potential
impact and likelihood of occurrence,
the key controls and management
processes. We then establish how to
mitigate these risks, and the investment
and timescales required to reduce the
risk to an acceptable level within the
Board’s risk appetite.
The Risk Committee meets four times
a year to review risk management and
monitor the status of key risks as well
as the actions we have taken to
address these at both Group and
functional level. It also examines
possible emerging risks by considering
both internal and external indicators
and challenges, together with whether
it has identified the principal risks that
could impact the business in the
context of the environment in which
we operate.
The Board receives regular updates on
risk management and material changes
to risk, while the Audit Committee also
reviews the Group’s risk report.
Management is responsible for
implementing and maintaining controls,
which have been designed to manage
rather than eliminate risk. These controls
can only provide reasonable, but not
absolute, assurance against material
misstatement or loss. See page 58
for further information regarding
internal controls.
Principal risks and uncertainties
The following pages set out the principal
risks and uncertainties that could
crystallise over the next three years.
The Board has undertaken a robust risk
assessment to identify these risks, which
are referred to as principal risks to the
business. There may be other risks that
we currently believe to be less material.
These could become material, either
individually or simultaneously, and
significantly affect our business and
financial results. We have modelled
potential scenarios of these risks
crystallising to support the disclosures
in the Viability Statement and assess the
Group’s risk capacity. See page 64 for
further details. Due to the nature of risk,
the mitigating factors stated cannot be
viewed as assurance that the actions
taken or planned will be wholly effective.
Risk appetite
The Board has reviewed our principal
risks and considered whether they
reflect an acceptable level of risk. Where
this is not the case, the Board has also
considered what further investment is
being made to reduce the likelihood and
potential impact of the risk. The Board
either approves the level of risk being
taken or requires management to reduce
the risk exposure.
For core areas of the business, the Board
uses several methods to ensure that
management operates within an
accepted risk appetite. These include
delegated authority levels, the approval
of specific policies and procedures and
the approval of the annual insurance
programme. The Board receives regular
feedback on the degree to which
management is operating within
acceptable risk tolerances.
This feedback includes regular
operational and financial management
reports, internal audit reports, external
audit reporting and any reports to the
whistleblowing hotline. All members of
the ELT have individual or joint ownership
of one or more of the principal risks.
Management of those risks forms part
of their personal objectives.
56
De La Rue plc Annual Report 2023
De La Rue’s risk management framework
Board of Directors and Company Secretary
Audit Committee
Ethics Committee
– Reviews the effectiveness of internal controls
– Approves the annual internal and external audit plans
– Reviews findings from selected assurance providers
– Reviews ethical risks, policies
and standards
Risk Committee
– Reviews and proposes the
business risk profile
– Monitors the management of
key risks
– Tracks implementation of actions
to mitigate risks
– Examines and considers
emerging risks that could impact
the business
Sanctions Board
– Responsible for ensuring internal
control procedures are in place
to mitigate the risk of breaching
applicable trade sanctions
and embargoes
Executive Leadership Team (ELT)
– Accountable for the design
and implementation of the
risk management process
and the operation of the
control environment
Group Health, Safety and
Sustainability (Global HSS)
Committee
– Sets Health, Safety and
Sustainability standards
– Agrees and monitors
implementation of HSE strategy
– Monitors Health, Safety and
Sustainability performance
Group policies
Functional management
– Policies for highlighting and
managing risks
– Procedures and internal controls
– Ensures that risk management is
embedded into business culture,
practice, and operations
De La Rue plc Annual Report 2023
57
Strategic reportGovernance reportFinancial statements Risk and risk management continued
How we manage principal risks
Risk
Internal controls
External assurance
Bribery and corruption
The pressure to meet sales
targets, on either a third party or
an employee, could increase the
risk of the payment of a bribe on
behalf of De La Rue or anti-
competitive behaviour, leading to
damage to our reputation from a
successful prosecution, financial
loss and disbarment from tenders
and substantial fines.
Link to our strategic pillars
Quality management and
delivery failure
A failure in our Quality
Management System, including
specification, controls and
enforcement issues, could lead to
a major customer quality incident,
resulting in late delivery penalty
clauses and increased costs.
Link to our strategic pillars
Change
Oversight
forum
Ethics
Committee
Risk
Committee
Audit
Committee
– Whistleblowing policy and
associated procedures are
integral aspects of the
compliance framework,
which is complemented by
a whistleblowing hotline.
– Mandatory training on anti-
bribery and corruption, and
competition law.
– Our rigorous process for the
appointment, management
and remuneration of third
party partners (TPPs),
operating independently
from the sales function.
– We have a focus on raising
awareness through local
Ethics Champions.
– We have Level 1
accreditation to the
Banknote Ethics
Initiative (BnEI), which
provides governments
and central banks
assurance regarding
our ethical standards
and business
practices.
– We maintain
certification to ISO
37001, the anti-bribery
management system,
which assists the
organisation to
prevent, detect and
address bribery
attempts.
– External PwC audit of
TPP fee structure.
– Implementing a product quality
strategy to reduce instances
and costs of quality incidents.
– All sites are certified
to ISO 9001, quality
management system.
Divisional
business
reviews
– Regular customer
quality audits.
Business
Process Review
(BPR) updates
Risk
Committee
– Operational management
boards monitoring KPIs.
– Design approval process.
– Regular reviews and audits of
critical suppliers to ensure
standardisation.
– Central quality team inspect
and test regime for all
processes and features.
– Service monitoring tools in
place to manage performance
and response times to remain
within SLAs.
– 24/7 support and IT coverage
to minimise downtimes.
– In process inspection systems
validating key areas.
58
De La Rue plc Annual Report 2023
Change
Oversight
forum
Divisional
business
reviews
Business
Process Review
updates
Risk
Committee
Change in risk levels in FY23 (last 12 months)
Increased
Static
Decreased
New risk
Risk
Internal controls
External assurance
– A robust prioritisation process
– Third party risk
with regular reviews of
programmes and projects.
– A robust incident management
framework, including annual
exercising.
management alerting
(hotspots/regions of
concern) and risk
reporting.
– External auditing of risk
– Procurement conducting single
and resilience.
and sole source supplier
reviews as well as risk
assessments on financial and
operational risks from suppliers
– Regular reviews of the
anticipated impacts of pricing
pressures in the Supply Chain
fed into the established BPR
and budget review processes.
– Maintain strong employee
relations in all locations.
– A comprehensive travel
management programme.
– A comprehensive insurance
programme.
– Consideration of contracts
being designated in GBP or
hard currency, if possible,
subject to local regulations.
– Regular monitoring of financing
and fiscal matters, seeking early
advice, diversification, longer
term funding, and hedging, if
facilities are available.
– ELT monthly functional review
meetings.
Macroeconomic and geo-
political environment
As a manufacturing business
operating worldwide, the Group is
exposed to the challenges of the
prevailing macro-economic
environment, inflationary pressures,
supply chain headwinds and stress
to sales pipelines which could
impact its operations and ability
to financially forecast accurately.
The Group also maintains both
Authentication and Currency
operations in territories that are
exposed to economic and/or
political instability. This type of
instability, which includes the
uncertainties of regime change,
creates risks both for our
manufacturing footprint and locally
based direct sales operations.
Link to our strategic pillars
Loss of key site or process
The loss of a key site or process,
due to external threats or internal
system failures, could lead to
reduced operational capacity and
result in disruption to customer
service delivery, brand damage
and increased costs.
Link to our strategic pillars
Group
integrated
security and
business
continuity
steering
committee
Risk
Committee
Audit
Committee
– We invest in capacity,
– Under a central
equipment and facilities,
multiple sources of supply
to drive down single points
of failure.
– We hold business continuity
planning (BCP) stock for critical
activities.
– Monthly KPI’s monitor BCP
preparedness.
– Internal audit of all
manufacturing sites, including
BCP preparedness.
– Supplier strategy and sourcing
reviews.
– Business Continuity
coordinators at all sites,
supported by a central
coordinator.
certification we are
certified at Head Office
and all production and
storage sites to ISO
22301:2019 standards,
ensuring a robust
business continuity
management system
throughout the Group.
– External PwC
compliance audits
were conducted in
2021 including
benchmarking to
international standards
and industry best
practice.
– The appropriate levels
of business
interruption insurance
are in place to satisfy
the needs of the
business.
De La Rue plc Annual Report 2023
59
Strategic reportGovernance reportFinancial statements
Risk and risk management continued
Risk
Internal controls
External assurance
Sustainability and climate
change
Climate change is recognised
as a significant global and
business risk.
Governments, the financial
community, and businesses
(including our own and our
customers) see the current
decade 2020-2030 as a call
to action, with major new
commitments to achieving net
zero emissions by 2050.
– De La Rue is committed to be
carbon neutral for our own
operations by 2030 through
using a phased carbon offset
programme for Scope 1 and
Scope 2 emissions within
our control.
– Our own internal audit
programme verifies the Group
environmental management
system and assures good
practices.
– We are tracking our annual
progress against our approved
Science Based Targets (SBTi)
Link to our strategic pillars
– We have subscribed to
EcoVadis, a global sustainability
rating system for suppliers and
are targeting our most
significant suppliers regarding
engagement with this.
– We embarked upon a Transform
Sustainability Project in 2020,
which has 11 workstreams
centred around carbon
reduction, reduced energy
usage and waste management
– monitored by a project
board monthly.
– We have mandated
environment and sustainability
awareness training at all sites.
Loss of key talent
Due to external pressures on the
Group there is a reduced ability to
attract and retain key talent, with
the required skills and knowledge.
This is likely to impact the
organisational ability to deal with
the current level of change.
Link to our strategic pillars
– Remuneration structure
designed to support retention.
– Organisational talent process
and succession planning to
provide early identification of
single points of failure and
capability gaps.
– Set clear objectives for the
coming financial year that
people can align around.
– Train Senior Leaders and
Managers on expectations and
how to deliver against these.
– All our manufacturing
sites are certified to
ISO 14001 standard
which helps the
organisation reduce its
environmental impact.
– We participate in the
CDP (formerly Carbon
Disclosure Project) and
have submitted data
for the past 11 years,
enabling us to review
and reduce our carbon
impact.
– Our alignment with the
recommendations of
the Task Force on
Climate-related
Financial Disclosures
(TCFD) is described
within Responsible
Business on pages
24 to 45.
– We have structured
Science Based Targets
(SBTi) in support of
keeping global
temperature increases
below the 1.5°C limit.
– We comply with the
TCFD recommended
disclosures and have
completed a
qualitative climate
scenario analysis which
can be found on pages
24 to 45.
– Benchmarking to
known best practice.
– External auditing of
people risk.
Change
Oversight
forum
Risk
Committee.
Global Health,
Safety and
Sustainability
(HSS)
Committee
Monthly ELT
updates
HR Leadership
Team reviews.
Talent Board
reviews
annually.
Risk
Committee.
60
De La Rue plc Annual Report 2023
Change in risk levels in FY23 (last 12 months)
Increased
Static
Decreased
New risk
Risk
Internal controls
External assurance
Breach of information security
A breakdown in the control
environment:
– Including collusion or non-
compliance (excluding external
attack) could lead to a breach
of data.
– Resulting in an external attack
(including malware, ransomware
and/or hacking).
Either of which could lead to a
cyber security breach/incident
impacting the confidentiality,
integrity and/or availability
of customer and/or other
critical data.
Link to our strategic pillars
– Under a central
certification we are
certified across the
Group to ISO 27001
standards, ensuring we
manage information
security under a robust
framework.
– The appropriate levels
of professional
indemnity and cyber
insurance are in place
to satisfy contractual
and business
requirements, including
internal and external
incident response
support.
– External PwC
compliance audits are
conducted on a regular
basis, including
benchmarking to
international standards.
– We have instigated a
programme of both
internal and external
penetration and
vulnerability testing
on corporate and
customer facing
systems.
– Regular customer
compliance and
regulatory audits.
– We have implemented control
measures around customer,
company, and employee data,
demonstrating a clear approach
to identify and mitigate
information security risks.
– On an annual basis we conduct
internal audits of our customer
and ISO standards to an agreed
plan. Any findings are risk
assessed and remediation
activities agreed and tracked.
– Data classification policy and
handling process with
monitoring of classification
changes and email traffic.
– We have cyber awareness
training at all levels of the
business.
– Group policies support and
enable our integrated security
management system.
– IT technical controls include
security incident and event
management software (SIEM),
event logging and management,
managed by an in-house
security operations centre
(SOC). Ensuring information
security is designed in from the
ground up for all deployed
hardware and software,
including the use of multi-
factor authentication (MFA)
where appropriate.
– Due diligence performed on
software and suppliers.
– Contractually bound data
protection provisions with third
parties handling personal data.
Change
Oversight
forum
Group
integrated
security and
business
continuity
steering
committee
Monthly ELT
updates
Risk
Committee
Audit
Committee
Board briefings
De La Rue plc Annual Report 2023
61
Strategic reportGovernance reportFinancial statements
Change
Oversight
forum
Monthly
divisional and
ELT updates
Board updates
Risk and risk management continued
Risk
Internal controls
External assurance
Supply chain failure
The failure of a key supplier to
deliver the products or services
that we need on time or to
specification, through either a
supply failure or a business failure,
could lead to disruption to our
operations and associated costs,
an inability to fulfil customer
contractual requirements,
resulting in penalties and forfeit
of performance bonds, loss of
customer contracts and
reputational damage.
The ethical failure of a key supplier,
such as a failure to adhere to our
requirements on Modern Slavery
or Bribery and Corruption in our
supply chain, could lead to major
reputational and financial damage
and potentially prosecution, and
a failure to control and limit price
inflation in our supply chain
could lead to significant erosion
of our profitability.
Link to our strategic pillars
Breach of security – product
security
A breakdown in the control
environment, including collusion,
non-compliance, or an external
attack, could lead to a security
breach resulting in the loss of
client-sensitive product and
significant damage to De La Rue’s
reputation.
Link to our strategic pillars
– Key supplier risk assessments
reviewing the risk of supply
failure, credit risk, price
increases and ethical failure.
– Prioritised, supplier-specific
action plans for key risks with
monthly reporting on progress
to ELT.
– We are externally
audited for ISO 14298
(Security Print), ISO
22301 (Business
Continuity) and PwC
on procurement and
supply chain controls.
– Supplier Quality Audit
– Supplier vetting platform to risk
programme.
assess all key and new
suppliers, engaging SMEs to
review standards across ethics,
quality, information and product
security and environmental
management.
– Regular reviews of the risk
assessment to ensure that it
remains up to date with latest
available data.
– Ensure that all key strategic
supplier contracts are fit
for purpose.
– Deepened Supplier Relationship
Management programme, with
direct and regular engagement
at executive level with all key
suppliers, to provide early
warning of issues and ensure
that De La Rue’s needs are
prioritised by our key suppliers.
– Utilise and fully deploy spend
analytics tool to increase
visibility of the full supply base
and drive integrated data-
driven action planning.
– Monthly security KPIs monitor
and maintain the holistic
security environment.
– We ensure that all shipment
routes and transit plans are
appropriately risk assessed and
have appropriate mitigations in
place, by air, sea, or road.
– Dedicated security
professionals at all sites,
supported by a central
function.
– Layered auditing at all sites,
enhancing security behaviours
and culture.
– Materials control to ensure
product security verification
and reconciliation.
– All manufacturing sites
certified to ISO 14298
and INTERGRAF
Certification to the
highest possible levels,
which ensures an
aligned security print
management system
across the Group.
– We are subject to
regular regulatory and
customer compliance
audits.
Group
integrated
security and
business
continuity
steering
committee
Risk
Committee
62
De La Rue plc Annual Report 2023
Change in risk levels in FY23 (last 12 months)
Increased
Static
Decreased
New risk
Risk
Internal controls
External assurance
– A robust request for approval
– We ensure both
internal and external
audit of sanctions
compliance
programme.
Change
Oversight
forum
Sanctions
Board
Audit
Committee
Board briefings
(RFA) process ensures
commercial bid teams to
consider risk.
– As a responsible business we
ensure the monitoring and due
diligence of customers,
suppliers and partners.
– We conduct an Internal audit
of sanctions compliance
programme annually.
– We mandate sanctions training
to raise awareness of risks and
to clarify escalation routes for
concerns.
– Sanctions impact reviewed on
a case-by-case basis against
a known list of sanctioned
territories and potential
customers.
– Manage and develop
relationships with existing and
new banks to continue to
support the business in its
liquidity, bonding and ancillary
needs.
– Regular dialogue with ELT,
banking partners and other
stakeholders.
– Active monitoring of the
available limits and proactive
management for both cash and
borrowings as well as
guarantees to make best use
of capacity.
– Continue to seek additional
counterparties for foreign
exchange.
– Compliance with financial
covenants
Sanctions
Entering a contract or other
commitment with a customer,
supplier or partner which is
subject to a sanction or trade
embargo could lead De La Rue to
be in breach of sanctions. Breach
could result in imprisonment and
substantial fines for individuals,
the leadership team (including the
Board) and De La Rue. In addition,
it may lead to a withdrawal of our
banking facilities, as well as
disbarment from future tenders.
De La Rue may be unable to
effect payments or to be paid by
customers due to compliance
matters when operating in higher
risk and sanctioned territories.
Additionally banking partners may
not be willing to support bonds or
guarantees for some countries.
Link to our strategic pillars
Banking facilities
The Group maintains banking
facilities that provide liquidity
(ensure all liabilities can be
funded), bonding (to support
existing contracts and new
contracts where bonding is
required) and ancillary lines.
The main facilities will mature on
1 January 2025. The Group will be
seeking to extend these facilities
in what remains a challenging
competitive and global economic
environment. The ability to access
bonding services to the Group in
our existing facility given the
regions we operate in and our
lenders appetite to that risk is also
becoming increasingly complex.
If alternative capacity for foreign
exchange transactions cannot be
secured from main rated banks,
then the Group may need to either
operate with less hedging or
consider unrated counterparties
for foreign exchange contracts.
Link to our strategic pillars
– External auditing by EY.
– Due diligence by banks
and their agents prior
to agreement to a
covenant amendment.
Functional risk
reviews
ELT reviews
Risk
Committee
De La Rue plc Annual Report 2023
63
Strategic reportGovernance reportFinancial statements Viability statement
Viability statement and
going concern assessment
Viability statement
The Directors have considered the
longer-term viability of De La Rue Plc in
line with the recommendations under
the UK Corporate Governance code.
The Directors when determining the
Viability assessment period took
consideration to the existing facility
agreement ending on 1 January 2025.
The Directors will be looking to extend/
renew the facility by November 2023
and are of firm belief that, for the
reasons set out in the Going Concern
assessment on pages 65 to 67, there
are reasonable prospects for this
extension being given.
The Directors believe that an
appropriate period to consider the
Group’s viability is over a two-year
period from the balance sheet date
(FY24 and FY25) or 21 months from
the date of approval of these financial
statements, to 29 March 2025. This
includes the period to the end of the
existing facility agreement and an
assumption this facility would be
renewed with a target date set for
November 2023 until at least the
end of the viability period.
Since the FY23 strategy process was
completed by the Board in October
2023, key strategic decisions have
been taken on footprint reduction in
the group which will be incorporated
into the next 3 year strategic cycle,
which is to be developed later in FY24.
This, combined with a business that is
inherently less predictable beyond this
two year period as good visibility of the
order book is only available over this
shorter-term horizon, justifies the
current two-year cycle selected (which
is a reduction to the three year cycle
adopted in the prior year).
In assessing the viability of the Group,
the Directors have reviewed the principal
risks as set out in pages 56 to 63 and
considered foreseeable scenarios of one
or more of the principal risks crystallising
in the same time period in the context of
its strategic plan.
b. Net debt/EBITDA less than or equal to
4.0x times until the Q4 2024 testing
point, reducing to less than or equal
to 3.6x times from Q1 FY25 through to
the end of the current agreement to
1 January 2025 (3.0x times previously)
c. Minimum Liquidity testing monthly,
The main risks modelled to have an
impact on the viability of the Group are
set out below, with the quantitative
impacts modelled being consistent with
those adopted for the Going Concern
period as set out in page 65 to 67:
– Risk 1 Bribery and Corruption – illicit
trade impact on Authentication
business
– Risk 3 Macroeconomic and
geo-political
– Risk 10 Banking facilities – including
possible cash collateral requirements
vs advanced payments
– Risk 11 Kenya taxation and exit strategy
– Risk 13 Currency pipeline
The Directors have focused on principal
risks that could plausibly occur and
result in the Group’s future operational
results, financial condition and future
prospects to materially differ from
current expectations. The Directors
believe that to maximise stakeholder
value refinancing is required over the
period of recovery and ahead of the
maturity date of 1 January 2025 (with
a target date set for November 2023).
This will allow business as usual in
Authentication and for recovery in the
Currency business and the solidification
of growth. A key area of focus has
been the impact of these principal risks
to the recovery and the impact on the
financial covenants:
The Financial quarterly and monthly
liquidity testing levels are as set
out below.
a. EBIT/net interest payable more than or
equal to 1.0 times (3.0x times previously)
testing at each week-end point on a
four week historical basis and 13 week
forward looking basis. The minimum
liquidity is defined as ‘available cash
and undrawn RCF greater than or
equal to £25m’, although reduces
to £20m if £5m or more of cash
collateral is in place to fulfil guarantee
or bonding requirements.
There are a number of additional
requirements under the recently
amended facility agreement and
pensions Trustee arrangements
that include conventional enhanced
monitoring measures and progress
on the development of future options.
Progress has already been made on
ensuring that the right processes are
in place to be able to meet the non-
financial conditions and terms agreed
with the lenders, and the Directors are
confident that all of these additional
conditions and terms will be met in
the timeframe required.
There are certain scenarios that the
Directors have not individually modelled
(e.g. a terrorist attack or an event of
nature) as either sufficient insurance
coverage exists or the risk is covered
by the modelling performed on certain
scenarios for other principle risks.
The Directors have assumed that the
current revolving credit facility (with
the new recently amended terms)
remains in place with the same covenant
requirements through to 29 March 2025,
and that the Group would either renew
the facility thereafter, or have sufficient
time to agree an alternative source of
finance, on terms which are broadly
64
De La Rue plc Annual Report 2023
consistent with the current facility
for the remainder of the viability
assessment period. In the event the
current lenders were not supportive of
an extension to the facility at FY24 Half
Year, the Group would consider and
implement alternative financing options
at that time. The directors continue to
assess these alternative financing
options, including but not limited to:
alternative lenders; alternative finance
vehicles; equity injections; and/or the
sale of trade and assets. However, the
Directors are confident this scenario
won’t manifest given its confidence in
refinancing and extending the facility
at FY24 Half Year.
In the event that the risks modelled in
the severe but plausible downside were
to materialise together, the Group would
be able to continue operating within its
covenants and the Group’s credit
facilities would not be exhausted.
The result of reviewing plausible
downside scenarios is that the Directors
have a reasonable expectation that the
Group is viable and will be able to meet
its obligations as they fall due up to
29 March 2025.
Going concern
Background and relevant facts
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out on pages 4 to 63 of the
Strategic Report. In addition, pages 176
to 185 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. The financial
position of the Group, its cash flows,
liquidity position and borrowing facilities
are described on pages 50 to 54 of the
Strategic Report.
Following the interim results for the
period ended 24 September 2022 there
has been a difficult period of trading and
rising market interest rates, meaning the
Group forecast that they would breach
financial covenants in their going
concern period to 29 June 2024. As
a result, they entered into extensive
negotiations with the pension trustee
and the Group’s banking syndicate.
A deferral letter from the trustee was
signed on 28 June 2023 agreeing to
deferral of deficit repair contributions
as set out in the paragraph below and
an amended facility agreement for the
Group’s financing facilities was signed
on 29 June 2023, which includes a
relaxation of the financial covenant ratios
along with the introduction of a new
minimum liquidity requirement.
Deferral of deficit repair contributions
The Group has successfully concluded
negotiations with the Trustee of the
De La Rue Pension Fund to defer
£17.5m of the £18.75m of deficit repair
contributions that was targeted in the
Group’s April trading update.
The Trustee has agreed to defer the
Group’s deficit repair contributions of
£3.75m per quarter from that due on
5 April 2023 up to and including that
payment that was due on 5 April 2024.
From July 2024, deficit repair
contributions will recommence at the
previously agreed £3.75m per quarter.
‘Catch up’ payments for the £18.75m of
deferred payments will start from FY26
and will continue through to FY29.
This deferral significantly eases the
short term cashflow burden on the
business and has been incorporated
into all modelling.
Amended Facility Agreement
Under the amended facility agreement,
which was executed by all parties on the
29 June 2023, the Group continues to
have access to a revolving credit facility
(‘RCF’) of £250m that expires on 1st
January 2025, which allows the drawing
down of cash up to the level of £175m and
the use of bonds and guarantees up to
the level of £75m. The amendment to the
debt agreement reduces the available
facility by £25m from £275m to £250m,
with the cash draw-down component
remaining unchanged and the use of the
bonding and guarantee lines reduced to
£75m from the prior £100m level.
The continued access to these borrowing
facilities is subject to quarterly covenant
tests which look back over a rolling
12-month period. In each covenant test
in FY23 the Group has met its covenant
ratios on the historical covenant quarterly
levels. At 25th March 2023, EBIT/net
interest payable was 3.0 times and Net
debt/EBITDA was 2.2 times with net debt
of £83.1m and bonding and guarantees
in place totalling £52m. The Group is
additionally in compliance with all
covenant requirements at 29 June 2023.
The quarterly covenant levels (which will
continue to be tested on a 12-month
rolling basis) have been revised from the
first testing period at 1st July 2023 (Q1
FY24). These are now subject to monthly
minimum liquidity testing and quarterly
covenant tests from this date. The terms
include consideration of future options
for the group, provision of further
non-financial deliverables and milestones
that the banks will monitor, and these are
fully within management’s control.
From 1 July 2023, the revised financial
covenants and spread levels were
as follows:
– EBIT/net interest payable more than or
equal to 1.0 times, (3.0 times previously)
– Net debt/EBITDA less than or equal to
4.0 times until the Q4 2024 testing
point, reducing to less than or equal
to 3.6 times from Q1 FY25 through to
the end of the current agreement to
1st January 2025. (3.0 times previously)
– Minimum Liquidity testing monthly,
testing at each weekend point on a
4 week historical basis and 13 week
forward looking basis. The minimum
liquidity is defined as “available cash
and undrawn RCF greater than or
equal to £25m”, although reduces to
£20m if £5m or more of cash collateral
is in place to fulfil guarantee or bonding
requirements (new test)
– Increases in spread rates on the
leverage ratio as a result of the
relaxation of levels:
Leverage
(consolidated net debt to EBITDA)
Greater than 3.5:1
Greater than 3.0:1 and less than or
equal to 3.5:1
Greater than 2.5:1 and less than or
equal to 3.0:1
Margin
(% per
annum)
4.35
4.15
3.95
In order to determine the appropriate
basis of preparation for the financial
statements for the year ended March
2023 the Directors must consider
whether the Group can continue in
operational existence for a period
until 29th June 2024 taking into
account the above liquidity and
covenant requirements.
De La Rue plc Annual Report 2023
65
Strategic reportGovernance reportFinancial statements Viability statement continued
Testing assumptions and
headroom level
The Group has prepared and reviewed
profit and cashflow forecasts which
cover a period up to 29th June 2024
(Q1 FY25), the going concern period, and
this includes the following quarters: Q1,
Q2, Q3, Q4 FY24 & Q1 FY25 as well as
monthly liquidity testing points
throughout this period.
Management’s assessment is that a
period of 12 months to 29 June 2024 is
an appropriate going concern period for
the following reasons:
– A 12 month period is consistent with
De La Rue modelling and approach
over a number of years, which in prior
periods has also included a facility
termination shortly after the going
concern period (such as in FY22).
– The Directors have considered events
after the end of this period, including
the re-financing requirement for the
RCF which is at 1 January 2025, which
is considered further below
Base case assumptions and headroom
The base case forecasts over the going
concern period have been built taking
into consideration the uncertainty
around the timing of the Currency
market recovery. Revenue growth in
Authentication to over £100m is expected
to be driven from the annualization of
contracts already won in prior periods.
The base financials over the going concern
period reflect further restructuring and
refinancing costs that have already been
initiated. This will help to right size the
business for the current demand with any
ramp up required over the going concern
period to be carefully managed in line
with pipeline capacity requirements and
orders to avoid significant negative
fluctuations vs base plans.
The Group entered FY24 with the
Currency total order book at £136.8m
(25 March 2022: £170.8m) and the
12 month order book at £131.7m
(25 March 2022: £163.5m). The win rate
of over 70% since 2020 on Currency
bids remains high. By 16 June 2023, over
80% of the Currency business plans
revenues for FY24 are secured, with key
wins in Asia providing a solid foundation
for expectations for the year.
The Group’s base case modelling shows
headroom on all covenant thresholds
and the minimum liquidity requirement
across the period.
66
De La Rue plc Annual Report 2023
Severe yet plausible downsides
and headroom
The downside modelling produced has
factored in the Directors’ assessment of
events that could occur in a “severe yet
plausible downside” scenario. The risks
modelled are directly linked to the Risk
Committee “principal risks” described on
pages 56 to 63 of the annual report. The
most significant material risks modelled
were as follows;
Risk 3 Macroeconomic and
geo-political risk
– Authentication new wins and
implementations are not achieved
in the timescales modelled in the
base case. In the severe yet
plausible downside scenario 100% of
revenues with new customers have
been excluded.
Risk 10 Banking Facilities
– Following the recent interest rate rises,
the Group will be paying an interest
rate on its facilities of approximately
8.5% based on the current SONIA rate
of 5% and the applicable margin.
Based on the base case numbers in
FY24, the combined rate would need
to reach c16% before a breach in the
interest covenant would be triggered,
with an implied SONIA rate of 9.2%.
Whilst management had used 5.3%
as their interest rate in a severe but
plausible scenario, based on the
stress testing procedures described
above, they have assessed the risk of
a breach triggered by rising interest
rates as remote given the current
SONIA rate applicable is 5%, the
sensitivity, and that these sensitised
rates would need to apply for the
entire FY24 period.
Risk 11 Kenya taxation and exit strategy
– Cash outflow assumed over and
above the base case, which includes
acceleration of outflows for site exit
and legal settlements.
Risk 13 Currency pipeline
– Volumes and budget margins not
achieved as forecasted in the going
concern period. For currency pipeline
downside risks modelled, margins have
been determined using the average
production cost as opposed to using
the facilities with the lowest production
costs where there is modelled
capacity. As at 26 March 2023,
Currency total order book at £136.8m
(25 March 2022: £170.8m) and the
12-month order book at £131.7m
(25 March 2022: £163.5m). By 16 June
2023, over 80% of the Currency
business plan revenues for FY24 are
secured, with key wins in Asia providing
a foundation for expectations for
the year.
– As a result of the new liquidity testing
requirement, the Directors also
considered historical monthly working
capital swings over the last three
years as well as weekly cash outflow
averages to ensure that adequate
considerations have been made to
capture “in month” working capital
swings that the Group can see given
the volatility of working capital in the
Currency business in particular.
A £20m working capital outflow was
demonstrated to be suitable for a
plausible severe downside to apply
monthly to liquidity testing, assuming
no mitigation at all on liquidity at any
given testing period.
If all of these modelled downside risks
were to materialise in the Going
Concern period, the Group would still
meet its required covenant ratios and
liquidity requirements.
There remains headroom against all
covenant thresholds in a “severe yet
plausible” downside scenario across the
going concern period.
Minimum Liquidity testing monthly
Company modelling of the severe but
plausible downside (including taking into
account working capital swings and
potential cash collateral requirements)
also shows headroom to the liquidity
requirement throughout the period, with
further controllable mitigations such as
reduction in discretionary capex that
could be applied.
The level of reduction that would be
required to breach the liquidity covenant
is considered to be remote by
management on the basis that in the
tightest observable period of the severe
but plausible downside scenario in £27m
and £17m if taking into account working
capital swings and potential cash
collateral requirements. This assessment
excludes the potential further mitigations
available.
Stress-Testing
Under the base case modelling, EBIT and
EBITDA would need to drop by £10m
(46)% and £11m (27%) respectively, or
liquidity would need to drop £30m from
the lowest point, for any breach to occur.
In the severe but plausible scenario
modelling, EBIT and EBITDA would need
to drop by £6m (32%) and £6m (15%)
respectively, or liquidity would need to
drop £27m from the lowest point (£17m
including a negative working capital
swing of £20m and cash collateralisation
savings of £10m), for any breach to
occur. Management concluded that
a breach is remote given that:
– Trading to the end of P2 indicates the
Group is on-track to deliver the FY24
budget from an EBIT and EBITDA
perspective. The Group has
experienced working capital drag
which has led to Net Debt levels being
worse than those forecast in the base
case scenario. The working capital
drags are in line with those modelled
in the severe but plausible downside
scenario and the Group has seen
positive movements to recover
working capital in P3.
– Liquidity stress testing excluded
controllable mitigating actions (as
described above) that management
could employ and still showed
headroom.
– Management are comfortable that
any non-financial conditions and
reporting requirements can be
achieved. The Directors have assumed
that the current revolving credit
facility remains in place with the same
covenant requirements through to its
current expiry date (1 January 2025),
which is beyond the end of the period
reviewed for Going Concern purposes.
The Directors have concluded that the
Group will either renew the facility
thereafter or have sufficient time to
agree an alternative source of finance
from 1 January 2025 onwards.
Other Requirements
As referred to earlier, there are a number
of additional requirements under the
recently amended facility agreement
and pensions Trustee arrangements
that include conventional enhanced
monitoring measures and progress on
the development of future options.
Progress has already been made on
ensuring that the right processes are
in place to be able to meet the non-
financial conditions and terms agreed
with the lenders, and the Directors are
confident that all of these additional
conditions and terms will be met in the
timeframe required.
Reasonable prospects beyond the
going concern period
The Directors have also considered the
pension trustee’s and the lenders’
on-going support for the business given
that further refinancing discussions are
likely to occur over the going concern
period with the current facility due to
terminate on 1st January 2025.
Specifically, an extension by November
2023 is necessary to have adequate
facility duration for going concern
purposes at FY24 Half Year.
Management has concluded that there
are realistic prospects for refinancing to
occur ahead of facility termination as a
result of:
– Lenders have continued to support
the Group through a amended facility
agreement. This was signed on
29 June 2023, and the covenants
(financial and non-financial) were set
to levels that allows the Group to
continue to meet its covenant in a
severe but plausible downside
scenario. The Directors see no reason
that the lender’s support will not
continue given the level of relaxation
of covenants that has been agreed.
– As stated above, prior to the 30th
September 2023 Half-Year
announcement in November 2023,
the Group will have to agree an
extension with its existing lenders
for the facility that comes to end on
1 January 2025. Discussions will
commence over the coming months
with the banks on the future options
open to the Group, and subject to the
Group achieving specific financial and
non-financial milestones that the
Directors are confident in achieving.
To maximise stakeholder value for all
parties, the lenders would need to
provide the business with continued
support through the Currency market
recovery and continued growth in
the Authentication division. It is the
Directors’ judgement that based on
the current support of the lenders the
extension will be achieved.
– In the event the current lenders were
not supportive of an extension to the
facility at FY24 Half Year, the Group
would consider and implement
alternative financing options at that
time. The directors continue to assess
these alternative financing options,
including but not limited to: alternative
lenders; alternative finance vehicles;
equity injections; and/or the sale of
trade and assets. However, the
Directors are confident this scenario
won’t manifest given its confidence in
refinancing and extending the facility
at FY24 Half Year.
The Directors have therefore assessed
that the Group will either renew the
facility or have sufficient time to agree
an alternative source of finance. The
costs of refinancing are included in the
base case.
Conclusion
The base and severe but plausible
forecasts show headroom above the
covenant levels agreed with the lenders
and support the position that the Group
will be able to operate within its available
banking facilities and covenants
throughout the going concern period
to 29 June 2024.
Accordingly, the Directors are satisfied
that the Group is able to manage its
business risks and to continue in
operational existence for the going
concern period. Accordingly, the
Directors continue to adopt the going
concern basis in preparing the
Consolidated Financial Statements.
Strategic Report
This Strategic Report (comprising pages 1 to 67 inclusive) was approved by the Board
on 29 June 2023.
By order of the Board
Jon Messent
Company Secretary
29 June 2023
De La Rue plc Annual Report 2023
67
Strategic reportGovernance reportFinancial statements Governance report
High standards of
corporate governance
are vital in helping
create and protect value
68
De La Rue plc Annual Report 2023
Induction in action
Page 87
How we engage with
our workforce
Page 79
How we manage the
relationship with our auditors
Page 94
70 Board statement on corporate governance
72 Board of Directors
74 Governance at a glance
78 Board leadership and company purpose
80 Division of responsibilities
83 Composition, succession and evaluation
88 Audit, risk and internal control
101 Remuneration
102 Directors’ remuneration report
128 Directors’ report
133
Directors’ responsibility statement
De La Rue plc Annual Report 2023
69
Strategic reportGovernance reportFinancial statements Dear Shareholder,
The last nine months have been a
difficult time for De La Rue. The market
conditions in which each of our
Authentication and Currency divisions
are operating are discussed in the
Strategic report, but have created
unprecedented challenges.
As a Board, we retain a deep conviction
that the fundamentals of De La Rue’s
business remain sound. We are
approaching the future with energy and
urgency and are confident that we will
chart a course through to calmer waters.
The Company’s businesses have
significant market opportunities and
clear plans for how to address these.
While the recent past has been
immensely challenging, there are now
clear signs that the markets in which
we operate are improving.
The right conditions for
success are in place
Delivering our purpose requires clear and
visible leadership, the right culture and
robust corporate governance. We believe
that we have all three of these in place.
The Board and our Executive Leadership
Team (ELT) each comprise leaders drawn
from a diverse range of backgrounds and
provide clear direction to the business.
Through a divisional structure with clear
goals, expectations and accountabilities,
we provide clarity to the organisation.
We are operating in very volatile times
with rapid and significant changes in the
business environment and the markets in
which we operate and compete. At the
same time, our strategy requires that the
Group is transforming at a significant pace.
As a Board, we closely monitor the
culture, practices and behaviour within
the Company to ensure that they are
aligned with our values and strategy and
will support the long term sustainable
success of the Group. This is crucial in
maintaining the trust of our employees
and wider workforce, our customers,
suppliers and other key stakeholders.
The ELT members and our divisional
leadership teams play an integral role in
our governance framework by exhibiting
and promoting positive behaviour.
We have a strong corporate governance
framework. While it is unlikely that good
governance will, in itself, create value, it is
certainly the case that it can help preserve
value. As Board members, we all seek to
provide the critical challenge that is
essential in reaching the best decisions in
the face of often dynamic and uncertain
situations. Our governance framework
also creates checks and balances within
the business, with every employee
encouraged to speak out if they can see
ways of improving our performance.
While our primary duty remains to
deliver economic returns to shareholders,
sustainably over the long term, we
recognise that this cannot be done
unless we also understand and respect
the interests of a much wider range of
stakeholders. The section 172 statement
on pages 21 to 23 describes how we took
our wider responsibilities into account
during the year.
Board changes and
succession planning
At the AGM in July 2022, Maria da Cunha
retired from the Board after seven years’
service as a Non-executive Director, as
advised in this report a year ago.
Board statement on
corporate governance
De La Rue’s purpose is
securing trust between
people, businesses
and governments.
We operate globally in
markets where security,
integrity and accountability
are paramount.
Delivering our purpose
requires clear and visible
leadership, the right culture
and robust corporate
governance. This enables
us to earn and repay our
stakeholders’ trust.
70
De La Rue plc Annual Report 2023
Responsible business
As noted opposite, we have
responsibilities to a wide range of
stakeholders. Delivering business results
is clearly of huge importance, but how
we go about delivering those results is
equally important. We are striving to
build a sustainable business that can
deliver profits and cashflow throughout
the economic cycle. Of necessity, this
means that we have to take a long term
view and ensure that whatever we do is
done properly. Everyone who works in
our business, from the factory floor to
the Boardroom, is aware of the importance
of conducting our business responsibly,
taking stakeholders’ interests into account.
Looking forward
We believe that De La Rue is at an
inflection point. The second half of FY23
has by any historical measure been
exceptionally challenging, but we are
confident that we can weather the storm.
We are confident that we and the ELT
are providing the leadership necessary
to take the business forward. De La Rue
has a positive, proactive and responsible
corporate culture that gets the right
things done in the right ways. Our robust
corporate governance framework,
described on the following pages, helps
create the checks and balances needed
so that we deliver the business outcomes
and financial results that we and our
shareholders wish to see.
By order of the Board
Jon Messent
Company Secretary
29 June 2023
On 26 June 2023 we appointed Dean
Moore as a Non-executive Director. He
has deep experience of listed companies
across a wide range of industry sectors,
both as a senior executive and as a
non-executive director.
We are confident that both Clive and
Dean will be valuable additions to the
Board team.
We will continue to keep the Board’s
composition, and in particular the
diversity and blend of backgrounds,
skills, experience present at the Board,
under review.
Our succession plans extend further
than just the Board. During the year
the Nomination Committee reviewed
succession plans for members of the
Executive Leadership Team and their
first and second reports. Succession
planning is important in ensuring that
management is fully prepared for
planned or sudden departures from
key positions. This remains an ongoing
focus and our goal is the development
of a diverse pipeline of talented and
experienced people supporting us and
the ELT in delivering our strategic goals
and fulfilling our purpose.
People
As a Board we are, as always, deeply
impressed by the commitment of our
people, who have been through
significant change over the last three
years. Redesigning and repositioning an
organisation is never straightforward and
we have asked much of our workforce,
who have been required to deliver
immense change. We all feel privileged
to be part of an organisation that
has delivered such a fundamental
transformation since 2020 and
immensely grateful for the efforts of
every one of our people during that time.
We will, of necessity, continue to ask
them to deal with more change, but are
confident that this will leave us well
placed for success in the short and
long term.
In September 2022 we were delighted to
welcome Mark Hoad as a Non-executive
Director. A chartered accountant,
he is the Chief Financial Officer of TT
Electronics plc and brings vast knowledge
and experience to our deliberations.
Mark will take over the chairmanship of
the Audit Committee from the 2023
AGM. Nick Bray, who currently chairs
the Audit Committee, has served as a
Non-executive Director since July 2016
and has agreed to extend his tenure for
a further term beyond the 2023 AGM.
Given that we have a new lead audit
engagement partner and a new Chief
Financial Officer, Nick’s knowledge and
experience will provide invaluable
continuity and support to the Audit
Committee and, of course, to the Board
as a whole.
In January 2023 the Company
announced that Rob Harding, our Chief
Financial Officer, had resigned to take
on a new role as Chief Financial Officer
of PayPoint plc. Rob will leave us in
July 2023 and we thank him for his
contribution and wish him all the very
best in his next role. In April 2023
Charles Andrews joined us as interim
Chief Financial Officer and as a member
of the ELT but not as a Director. There
has been a successful handover from
Rob to Charles, who brings wide-ranging
experience and a proven ability to lead
change and transformation at an
executive level.
On 1 May 2023 Kevin Loosemore
resigned as a Director and as the
Chairman of the Board. On 12 June
Catherine Ashton resigned as a Non-
executive Director in order to create
time to take up future international
commitments. On 19 June we announced
that Margaret Rice-Jones had decided
not to seek re-election at the 2023 AGM,
in light of her other business commitments.
We would like to acknowledge the
significant contributions that each of
them has made to De La Rue and thank
them for their service and commitment.
On 18 May 2023 we appointed Clive
Whiley as a Director and as the Chairman
of the Board, following an accelerated
search process. We believe that Clive’s
breadth and depth of experience
and skills are what is required to pilot
the business.
De La Rue plc Annual Report 2023
71
Strategic reportGovernance reportFinancial statements Board of Directors
The Board provides leadership to the Company.
The responsibilities of the Board, and how it
discharges its duties, are explained in this
Corporate Governance report.
Key for committees
Audit Committee
Nomination Committee
Risk Committee
Ethics Committee
Remuneration Committee
Committee Chair
Appointed to the Board on 18 May 2023
Appointed to the Board in October 2019
Clive
Whiley
Chairman
Rob
Harding
Chief
Financial
Officer
Current directorships and business interests
– Mothercare plc, Chairman
– Sportech plc, Senior Independent Director
– Griffin Mining Limited, Senior Independent Director
Career, skills and experience
Clive has 40 years’ experience, both as an executive and
non-executive director, across a wide range of industries
and geographies in regulated and listed company
governance positions. He was previously Chairman of
Dignity plc and a non-executive director of Grand Harbour
Marina plc (listed in Malta), Camper & Nicholsons Marina
Investments Limited and Stanley Gibbons Group plc.
Clive was responsible for successfully guiding Mothercare’s
emergence as an internationally-focused brand business
alongside, at Dignity, leading 12% of the UK funeral market
in the eye of the Covid-19 pandemic.
Contribution to long term sustainable success
Clive’s track record demonstrates that he is capable
of operating in all operational, financial or regulatory
circumstances and the Board believes his depth
of experience and skills are what is required to pilot
the business.
Appointed to the Board in October 2020 and will leave
our employment and the Board in July 2023
Career, skills and experience
Rob has more than 10 years’ experience of managing
finance functions in complex organisations. Throughout
this time, he has also held additional responsibilities for
strategic development, risk, debt and capital raising.
Rob joined De La Rue as Interim Chief Financial Officer
in March 2020 and played a key role as the business
successfully raised £100m equity capital, refinanced its
debt, and delivered its cost reduction programme. In
October 2020, Rob took on the permanent role and was
appointed to the Board.
Prior to joining De La Rue, Rob was Interim Chief Financial
Officer of Co-Op Insurance, where he supported the
refinancing and sale of the business. Before this, Rob served
as Chief Financial Officer and Strategy and Risk Director
at Swinton Insurance, where he transformed its cost base
and played a key role in its successful sale of the business
back in 2018.
Rob has also held senior roles with Aviva, Standard Life
and Ageas. He is a qualified Chartered Accountant with
Arthur Andersen.
Rob resigned as Chief Financial Officer in January 2023 in
order to take up the position of Chief Financial Officer of
PayPoint plc after the expiry of his notice period at the end
of July 2023.
72
De La Rue plc Annual Report 2023
Clive Vacher
Chief Executive
Officer
Career, skills and experience
Clive has extensive experience in running complex P&Ls
for global industrial companies in both the commercial and
government/defence sectors. He has a track record of
turnarounds, international business transformation and
strategic development, including leading divisions of
international corporations and standalone listed companies.
Clive was a director, president and Chief Executive Officer
of Canadian-listed Dynex Power, leading its privatisation
sale to the Chinese Rail and Rolling Stock Company in
March 2019. Previously, he held senior leadership positions
with Pratt and Whitney, Rolls-Royce, General Dynamics
Corporation and B/E Aerospace.
Clive is an alumnus of MIT, Stanford, Columbia and the
LSE and currently sits on the advisory board of the Lincoln
International Business School at the University of Lincoln, UK.
Contribution to long term sustainable success
Clive has a strong track record of delivering successful
turnaround strategies in a range of industries.
Appointed to the Board in April 2021
Career, skills and experience
Ruth joined De La Rue in 1988 as a graduate trainee and
has spent over 30 years working in the international
government sector, living and working in the UK, Mexico,
Colombia, Spain and Malaysia.
Ruth
Euling
Executive
Director &
MD, Currency
During her career at De La Rue, she has held a number
of executive management positions within the Currency,
Identity and Brand businesses in Sales, Marketing,
Manufacturing and General Management. Ruth was
appointed Managing Director of the Currency Division
in 2019. Prior to that she was Sales Director for the
Currency businesses from 2012 until 2019.
In 2018, Ruth joined the advisory board of the
International Currency Association, helping lead the
currency industry in creating a single, cohesive voice.
She was elected its Vice-Chair in 2022. She is also a
member of the advisory council for Commonwealth
Enterprise and Investment Council.
Contribution to long term sustainable success
Ruth has an unrivalled knowledge of the international
currency market, and extensive contacts in finance ministries,
central banks and state print works around the world.
Margaret
Rice-Jones
Senior
Independent
Director
Appointed to the Board in September 2020 and is not
seeking re-election at the 2023 AGM
Current directorships and business interests
– Origami Energy Limited, Chair
– Holiday Extras Investments Ltd, non-executive director
– ScaleUp Institute, Chair
– Calnex Solutions plc, non-executive director
Career, skills and experience
Margaret has an extensive background in innovative
technology businesses, bringing particular expertise in
software and digital platforms and M&A. Building on an
engineering and product marketing background she has
operated at board level for over 20 years. Amongst these
roles she was Chair of Confused.com until its sale in 2021
and Chair of Skyscanner Limited from 2013 until its sale
in 2016 to Ctrip for £1.4bn. She is now Chair at the
ScaleUp Institute, a not-for-profit company working with
government and industry to build the right environment in
the UK for scaling businesses. On the public markets she
was a director of Xaar plc from 2015 to 2020, where she
was Senior Independent Director and Chair of the
Remuneration Committee. She is currently a non-executive
director of AIM-quoted test and measurement provider
Calnex Solutions plc.
Contribution to long term sustainable success
Margaret has extensive experience of guiding and leading
the strategic development of a range of businesses,
particularly in the IT and tech sectors.
Nick Bray
Independent
Non-executive
Director
Appointed to the Board in July 2016
Current directorships and business interests
– Travelport Worldwide Ltd, CFO and EVP
Career, skills and experience
Nick has extensive international experience in the
technology and information security industries. In 2019,
he was appointed as Chief Financial Officer of travel
technology company, Travelport. Before joining
Travelport, he served as Chief Financial Officer of
security software firm, Sophos Group plc, for over nine
years. Nick was also Chief Financial Officer at Micro
Focus International plc, having previously held CFO roles
at Fibernet Group plc and Gentia Software plc. Prior to
that, he held various senior financial positions at
Comshare Inc. and Lotus Software.
Contribution to long term sustainable success
Nick is a chartered accountant and highly experienced
CFO, with strong strategic management skills.
Mark Hoad
Independent
Non-executive
Director
Appointed to the Board on 28 September 2022
Appointed to the Board on 26 June 2023
Current directorships and business interests
– TT Electronics plc, CFO and Executive Director
Career, skills and experience
Mark is a chartered accountant with a deep understanding
of finance and operational activities, acquired during a
career spent in senior finance/management roles with FTSE
listed companies. He has been a director of TT Electronics
plc and its Chief Financial Officer since January 2015 and
previously held equivalent roles with BBA Aviation plc. His
other previous experience includes several years working
in a variety of management roles in Continental Europe and
Australia, as well as a strong focus on driving business
transformation in the US.
Mark has spent the last 25 years working in global industrial
businesses and has extensive experience of driving
business and functional re-structuring and transformation,
M&A, and equity and debt capital markets.
Contribution to long term sustainable success
Mark is a strategically-minded chartered accountant, with
extensive financial management experience in complex
global manufacturing businesses and strong experience
in listed companies and public markets.
Current directorships and business interests
– Cineworld Group plc, Senior Independent Director
– Griffin Mining Ltd, independent Non-executive Director
– THG plc, independent Non-executive Director
– Volex plc, Senior Independent Director
Dean Moore
Independent
Non-executive
Director
Career, skills and experience
Dean is a chartered accountant with over 35 years of
public company experience in companies operating in
many different sectors and environments. He is a highly
respected finance professional and non-executive
director with a proven track record.
He was previously chief financial officer at Dignity plc,
Cineworld plc (on an interim basis), N Brown Group plc,
T&S Stores plc and Graham Group plc, and formerly
Non-Executive Chair at Tuxedo Money Solutions Limited
and independent Non-Executive Director at Dignity plc.
Contribution to long term sustainable success
Dean’s significant experience of the strategic
development of listed companies, in both senior
executive roles and in non-executive appointments is
ideally suited to supporting the Board and the executive
team in delivering future growth.
Appointed as General Counsel on 3 April 2023 and as
Company Secretary on 11 April 2023
Career, skills and experience
Jon brings to De La Rue a wealth of experience in Company
Secretarial, Legal and Governance, having held numerous
executive roles in both listed and private companies
operating in industrial, manufacturing, property, security
and the defence sectors. His most recent role was as
Group General Counsel and Company Secretary with
QinetiQ Group plc, a multi-national FTSE 250 operating
primarily in the defence, security and critical national
infrastructure markets.
Jon Messent
General Counsel
and Company
Secretary
In addition to the Directors named above, three other Directors held office
during FY23:
– Maria da Cunha served as a Non-executive Director until she retired from
office at the AGM on 27 July 2022.
– Kevin Loosemore served as a Non-executive Director and as Chairman
of the Board throughout FY23. Shortly after the year end he resigned as
a Director and ceased to hold office on 1 May 2023.
– Catherine Ashton served as a Non-executive Director throughout FY23.
She resigned as a Director and ceased to hold office on 12 June 2023.
De La Rue plc Annual Report 2023
73
Strategic reportGovernance reportFinancial statements Governance at a glance
Corporate governance is the system
by which companies are directed and
controlled, being a combination of
people, structures and processes
Governance in support of the
corporate purpose
Our corporate purpose is to secure
trust between people, businesses
and governments.
To enable us to fulfil our purpose and
support our customers and others who
benefit from our products and services,
De La Rue needs robust internal
structures and processes. These are
designed to ensure, as far as possible,
that we are ourselves deserving of our
stakeholders’ trust.
Those structures and processes
combine to make up our corporate
governance framework. By training our
people in what is expected of them and
how we expect things to be done, we
create the conditions under which we
will fulfil our corporate purpose.
Corporate governance
framework
The Company’s governance structure is
intended to ensure that the right people
are able to focus on the right issues, at
the right time. The goal is to create and
preserve value for all our stakeholders,
including our shareholders.
As well as the Board Committees
recommended by the UK Corporate
Governance Code (the Code) we have
created a mix of Board and management
bodies and meetings to consider some
of the key issues and risks facing the
Company. This enables groups with the
required subject matter expertise to
devote time and attention to the areas
where they can make a difference.
Reports from the principal Board
Committees are included later in this
Corporate Governance report.
Compliance statement
The Board encourages a culture
of strong governance across the
business and continues to apply the
principles of good governance set out
in the Financial Reporting Council’s
(FRC) July 2018 edition of the UK
Corporate Governance Code (the
Code), which is available on the FRC’s
website, frc.org.uk.
The Board considers that it and the
Company have, throughout the period
to 25 March 2023, complied with all of
the provisions of the Code.
74
De La Rue plc Annual Report 2023
Our governance framework
Certain Board responsibilities are delegated to formal Board Committees
which play an important governance role through the work they carry out:
Board
Board committees
Management committees
The Board
CEO
Disclosure
Committee
Ethics
Committee
Remuneration
Committee
Audit
Committee
Nomination
Committee
Provides leadership to
the business and sets
‘tone from the top’.
Develops strategic
recommendations for
the Board and then
implements agreed
business plans.
Oversees relations
with stakeholders.
For more information
on the CEO’s role:
see page 81
For Clive’s biography:
see page 72
Oversees the
implementation of
the governance
procedures
associated with the
assessment, control
and disclosure of
inside information in
accordance with the
UK Market Abuse
Regulation.
Makes
recommendations to
the Board on ethical
matters and reinforces
the Group’s
commitment to
ensuring business
ethics are a
fundamental and
enduring part of the
Group’s culture.
Implements the
approved Directors’
remuneration policy,
sets pay for the
Chairman and
Executive Directors
and monitors the
policies and practices
applied to senior
management
remuneration.
Reviews and monitors
the integrity of the
Company’s financial
reporting, risk
management systems
and internal controls
and the effectiveness
of the internal audit
function and external
auditors.
Reviews the structure,
size and composition
of the Board and its
Committees,
managing succession
planning to ensure
a balance of skills,
knowledge and
experience and having
regard to diversity
considerations.
For more information:
see page 99
For more information:
see page 102
For more information:
see page 89
For more information:
see page 85
Sanctions
Board
Responsible for
ensuring internal
control procedures
are in place to
mitigate the risk of
breaching applicable
trade sanctions and
embargoes.
Risk
Committee
Oversees the Group’s
risk management
framework. Identifies,
evaluates and
monitors the principal
risks facing the Group
and reviews mitigation
activities.
For more information:
see page 97
Executive Leadership Team
Transform Sustainability
Programme Board
Group Health, Safety and
Sustainability Committee
– Operates under the direction and authority
– Addresses the Group sustainability and climate
– Makes recommendations on health & safety
of the Chief Executive Officer
change risk
and sustainability strategy
– Manages the day-to-day running of the Group
– Reviews the key improvement workstreams on
– Monitors compliance with H&S and
and its business
a monthly basis to create accountability
sustainability obligations
– Develops and implements strategy, monitoring
– Reviews any significant planned expenditure
the operating and financial performance and the
prioritisation and allocation of resources
relating to sustainability
– Tracks key H&S and sustainability KPIs
– Recommends appropriate training and actions
– Reviews any key actions related to workstreams
and the Transform Sustainability programme
to maintain H&S and sustainability
improvements and performance
For more information:
see page 82
For more information:
see page 34
For more information:
see page 27
De La Rue plc Annual Report 2023
75
Strategic reportGovernance reportFinancial statements Governance at a glance continued
Key matters considered by the Board in FY23
During the year ended 25 March 2023 the Board considered a wide range of matters, alongside its normal oversight of
operational and financial performance. The table below shows some of the key matters considered by the Board and the
business outcomes that flowed from these.
Topic and link to
strategy pillars
Developing and
implementing strategy
Key matters considered
Outcomes
– Review of implementation of strategy
– Approval of capex for Authentication and
Currency in Malta
– Business plan and budget for FY23
– Refined the FY23 budget
– Review of new strategy to end FY25
– Approval of strategy
– Future of the Kenyan operations
– Cessation of operations in Kenya
– Business plan and budget for FY24
– FY24 budget reviewed and approved
Monitoring and
managing risk
– Covid-19 response
– Economic situation in Sri Lanka
– Confirmed that Covid-19 should be treated
as a business as usual risk
– We were able to keep the production site
running throughout the local disruption
Business and
stakeholder
imperatives
– Review of principal risks and risk appetite
– Confirmed the risk appetite and which risks
should be insured
– Economics of the Portals Relationship
– Termination of the Relationship Agreement
Agreement
– Funding of the business
– Amendment and extension of the
bank facilities
– Feedback following engagement with
– Decision to hold a General Meeting in
Crystal Amber
December 2022
– Feedback from Employee Voice Forum
– Focus on means of enhancing internal
sessions
communications
– Review of the ESG strategy
– Re-confirmed support for the ESG strategy
– Review of material new contracts
– Approval of tenders, TPP appointments
Reporting and
accountability
– Reviewed financial performance through
– Scrutinised performance against prior
the year
year outcomes and current year budget
and forecasts
– Reviewed results of the auditor’s interim
– Interim results released; full year results
review and full year statutory audit
announcement and Annual Report released
– Matters to be proposed at the 2023 AGM
– All Directors standing for re-election
reappointed; adoption of new Sharesave
Scheme
Ensuring good
governance
– Succession planning for retirement of
– Appointed Mark Hoad as a Non-executive
Nick Bray
Director
– 2022 Board effectiveness review
– Site visit to Westhoughton to demonstrate
visible leadership to the business and
familiarise the directors with this key site
– Feedback from institutional investor
– Refinement of market messaging
roadshows following results announcements
– 2023 Board effectiveness review
– Strengthening of the Board’s processes
76
De La Rue plc Annual Report 2023
Attendance at scheduled Board and Committee meetings
The Board met on six scheduled occasions during the year, with additional meetings held as required to provide approvals or
discuss matters at short notice, which did not always require attendance from all Board members. Attendance at the scheduled
Board meetings and at all Committee meetings is shown below.
Where a Director is unable to participate in a Board or Committee meeting they review the meeting materials and communicate
their opinions and comments on the matters to be considered to the Chairman of the Board or the relevant Committee Chair.
Key:
meeting attended
meeting missed
Director
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Ethics
Committee
Kevin Loosemore¹
Clive Vacher
Rob Harding
Ruth Euling
Catherine Ashton²
Nick Bray
Maria da Cunha³
Mark Hoad⁴
Margaret Rice-Jones
Notes
1.
2.
3.
4. Appointed to the Board on 28 September 2022.
Following the year end, Kevin Loosemore resigned as a Director with effect from 1 May 2023.
Following the year end, Catherine Ashton resigned as a Director on 12 June 2023.
Retired from the Board on 27 July 2022.
De La Rue plc Annual Report 2023
77
Strategic reportGovernance reportFinancial statements
Section 1: Board leadership
and company purpose
Code Principle A:
A successful company is led by an
effective and entrepreneurial board,
whose role is to promote the long-
term sustainable success of the
company, generating value for
shareholders and contributing to
wider society.
Code Principle B:
The board should establish the
company’s purpose, values and
strategy, and satisfy itself that
these and its culture are aligned.
All directors must act with integrity,
lead by example and promote the
desired culture.
The Board is committed to pursuing
the highest standards of corporate
governance, which it believes are critical
to creating and preserving value for
shareholders and other stakeholders.
The Company’s purpose is securing
trust between people, businesses and
governments and our business model
and strategy are explained on pages 16
to 19. The Board believes that its
business model is sustainable on a long
term basis as we expect there to be
resilient demand for the Currency and
Authentication products and services we
offer. The Company’s strategy pre-empts
market changes in some areas, for
example the ongoing transition from
paper to polymer banknotes within our
Currency business. Where new risks
emerge or existing risks evolve, the
Board’s processes for the governance of
risk should enable us to identify these on
a timely basis and adapt our strategies
and plans accordingly. In this way, the
Board seeks to balance its leadership of
the Group’s business with a clear focus
on risk and control.
The Board is highly entrepreneurial, with
two Executive Directors who are directly
profit-accountable, a commercially-
minded CFO and Non-executive
Directors who have played senior
executive roles in growing successful
multi-billion pound revenue companies.
The Directors’ experience also includes
the strategic design and delivery of
corporate transactions that created
significant value for shareholders.
The Board is cognisant of its duties to
a wide range of stakeholders, though its
overriding purpose is the delivery of
returns to shareholders sustainably over
the longer term. For more details of our
approach to stakeholders’ interests,
please see the section 172 statement
on pages 21 to 23.
The Board sets the Group’s purpose,
strategy and goals and monitors the
delivery of these. The Company’s
purpose is clear – that of securing trust
between people, businesses and
governments. The corporate strategy
is explained on pages 18 and 19. Business
is about taking considered risks to earn
a return, and a key responsibility of the
Board is in overseeing and monitoring
(with the support of the Audit
Committee, the Risk Committee and
the Ethics Committee) our risk
management programme and internal
control environment.
For further details of our risk
management programme and the
principal risks that the Group faces,
please see pages 56 to 63. For further
information on our approach to audit,
risk and internal control, please see
section 4 of this Corporate Governance
report on pages 88 to 100.
Having the right corporate culture is a
critical enabler for both the delivery of
profits and the maintenance of effective
risk management and internal control.
The Board continues to develop a
framework through the Executive
Leadership Team (ELT) for regular
oversight of the culture within the Group.
In so doing, the Directors are aware that
they must lead by example, setting tone
from the top, promoting integrity and
ethical behaviour in line with the
Company’s standards. We continue to
build a high-performance culture across
the business to support the delivery of
our strategy and during the year we
refreshed our corporate values and
launched a revision of our Code of
Business Principles. This was
supplemented by the launch of a People
Managers Charter, which sets out our
expectations for all levels of leadership.
The intention is to ensure De La Rue’s
values are integral to the performance
management of the senior leadership
group and other employees, and that the
incentive structure in place supports and
encourages behaviours consistent with
those values. Training and development
activities, covering job-related,
inter-personal skills and general
personal development, are provided for
our employees on an ongoing basis.
Code Principle C:
The board should ensure that the
necessary resources are in place for
the company to meet its objectives
and measure performance against
them. The board should also establish
a framework of prudent and effective
controls, which enable risk to be
assessed and managed.
The diverse range of skills and
experience that the Chairman and the
Non-executive Directors bring to the
Company means that they are well
qualified to understand the resources
needed to run our business properly
and sustainably. As ‘critical friends’,
they scrutinise performance and provide
support and constructive challenge to
the Executive Directors and wider
leadership team as appropriate.
In recent years, we have significantly
reviewed and refined the resources
that the Group needs to deliver on its
objectives. We will continue to do so in
the light of volatile market conditions,
both locally in our production sites and
sales offices and centrally. The Board
and its Committees continue to monitor
the effectiveness of the management
structure in delivering operating and
financial results.
Our internal control environment is well
established. For further information
please see section 4 of this Corporate
Governance report on page 96.
78
De La Rue plc Annual Report 2023
The Board keeps under review the ways
in which it engages with stakeholders or
otherwise ascertains and understands
their views. This will always be an iterative
process, as the nature and interests of
those groups change over time.
Code Principle E:
The board should ensure that
workforce policies and practices are
consistent with the company’s values
and support its long-term sustainable
success. The workforce should be
able to raise any matters of concern.
Every business depends on a skilled,
dedicated and motivated workforce to
deliver the business results it seeks. It is
critical that the way in which the Company
manages its workforce supports the long
term sustainable success of the Group
and we have adopted a range of policies
and practices with this aim. Our values
inform much of this and establishing
two-way communications with our
workforce and, where relevant, their
elected representatives, is an important
factor in achieving that success.
The work undertaken by Maria da Cunha
and Catherine Ashton during the year in
direct workforce engagement on behalf
of the Board is an important bolstering
of our existing processes.
A dedicated whistleblowing hotline
allows our workforce to raise concerns
about ethical breaches confidentially, or
anonymously if preferred, by a range of
methods. For further information, please
see the Ethics Committee report on
page 99.
Code Principle D:
In order for the company to meet its
responsibilities to shareholders and
stakeholders, the board should
ensure effective engagement with,
and encourage participation from,
these parties.
The section 172 statement on pages 21
to 23 explains how the Board took the
interests of key stakeholders into
account in its discussions and decision
making on the key topics considered
during the year.
The Board has asked one of the Non-
executive Directors to take responsibility
for leading its workforce engagement
activities. Until her retirement at the
2022 AGM, Maria da Cunha held this role,
which was then assumed by Catherine
Ashton. The designated Non-executive
Director gathers the views of the workforce
at all levels of the organisation and shares
these views with the Board at relevant
points in its discussions and decision
making. We believe that this approach
works well for the Company, the Board
and, most importantly, our workforce.
During FY23 we continued to operate our
regular ‘Employee Voice Forum’ sessions
across our sites. These complement the
other formal and informal workplace
forums and networks we operate.
Sessions were held in person at the
Westhoughton production site and at
our Basingstoke offices, with further
sessions planned for the production
plants in Sri Lanka, Malta, Debden and
Logan to ensure that on a rolling basis
the Board is able to interact with the
workforce across all our major locations.
In addition, Catherine attended a one
day in-person meeting of our UK/
European Employee Forum in December
2022. The Forum comprises elected
representatives from our workforce in
the UK and EU countries and enables
management to present business
updates while listening and responding
to whatever questions and concerns the
attendees may raise. The Forum enables
the general sentiment of our workforce
to be assessed.
Feedback from all of these meetings was
presented to the Board in March 2023.
The key message was for the Board and
senior management to continue to
communicate, openly and frankly, with
the Group’s entire workforce. For details
of how we do this, please see page 130.
Subsequent to the year end, Catherine
Ashton resigned as a Non-executive
Director on 12 June 2023. The Board
recognises the importance of the role of
the workforce engagement director and
currently intends to appoint another
Non-executive Director in this capacity.
These activities complement the data
and information gathered through formal
surveys and working groups as part of
the normal management process. Where
appropriate, actions to address concerns
raised by employees are then resolved
and communicated to employees via
various internal newsletters and direct
all-employee communications by the
Chief Executive Officer. Further details
of progress made this year are set out in
the Responsible Business report on
pages 24 to 45.
The interests of employees, suppliers
and customers are regularly discussed
by the Board, which also considers
ethical, environmental and social impacts
wherever relevant. The importance of
fostering strong relationships and
developing a positive reputation for
high standards of business conduct
underpins the Board’s work, all of which
is aimed at sustaining De La Rue’s
standing as a successful business over
the long term.
We look to engage with shareholders
whenever possible. We run an active
investor relations programme with our
major shareholders, led by the CEO and
CFO but in which the Chairman and the
Senior Independent Director are also
active participants.
While our principal engagement with
the retail shareholder base is at the AGM,
we also welcome contacts from them
throughout the year. All Directors attend
the AGM, where the Committee Chairs
are available to answer questions. All
votes are taken on a poll, so that we take
into account the proxy votes cast by
those unable to attend the meeting.
De La Rue plc Annual Report 2023
79
Strategic reportGovernance reportFinancial statements The Chairman and each of the Non-
executive Directors have a breadth of
strategic, management and financial
experience gained in their specialist
areas in a range of multinational
businesses. No one individual or small
group of individuals dominates the
Board’s decision making.
The Board has established a process
to review at least annually any actual or
potential conflict of interest. The most
recent review was in March 2023. Any
transactional conflicts are required to
be notified, and would be reviewed, as
they arise.
There is a clear division of responsibilities
between the Chairman and the Chief
Executive Officer, which is set out in
writing and has been agreed by the
Board, and is available on the Company’s
website, www.delarue.com. The table
opposite summarises the role and
responsibilities of the different members
of the Board.
The Directors are, individually and
collectively as a Board, accountable to
shareholders for their performance. Each
Director serving at the date of this report
will retire from office at the AGM on
7 September 2023 and offer themselves
for re-election, other than Rob Harding,
and Margaret Rice-Jones, as noted above.
Section 2:
Division of responsibilities
Code Principle F:
The chair leads the board and is
responsible for its overall
effectiveness in directing the
company. They should demonstrate
objective judgement throughout
their tenure and promote a culture
of openness and debate. In addition,
the chair facilitates constructive
board relations and the effective
contribution of all non-executive
directors, and ensures that directors
receive accurate, timely and
clear information.
The Chairman is responsible for
leadership of the Board, including its
overall effectiveness in directing the
Company’s affairs. While the Chairman
is not regarded as an independent
Director under the Code, the Board is
satisfied that Kevin Loosemore
demonstrated independent and
objective judgement throughout his
tenure. The Board believes that Clive
Whiley will also demonstrate independent
and objective judgement.
The role of the Chairman at Board
meetings is primarily to facilitate
constructive Board relations and the
effective contribution of all Directors,
promoting a culture of openness and
debate. He has primary accountability,
with the support of the Company
Secretary, for ensuring that the Directors
receive accurate, timely, clear and
complete information.
Code Principle G:
The board should include an
appropriate combination of executive
and non-executive (and, in particular,
independent non-executive)
directors, such that no one individual
or small group of individuals
dominates the board’s decision-
making. There should be a clear
division of responsibilities between
the leadership of the board and the
executive leadership of the
company’s business.
As at 25 March 2023 the Board had eight
members, being the Chairman, three
Executive Directors (the CEO, the CFO
and the MD, Currency) and four
independent Non-executive Directors.
Biographies setting out the skills and
experience of the Directors are set out
on pages 72 and 73.
As noted on pages 70 and 71 there has
been a material change in the Board’s
composition since the year end. In
addition, the current CFO, Rob Harding,
will leave the Company’s employment in
July 2023 and the Senior Independent
Director, Margaret Rice-Jones, has
decided not to seek re-election at the
2023 AGM due to the time demands
of her other business commitments.
All of the Non-executive Directors who
served during the year and to the date
of this report are considered by the
Board to be independent, both in
thought and relative to the criteria set
out in the Code.
Kevin Loosemore worked for the Group
from 1997 to 1999 and receives a small
pension from the Company’s defined
benefit pension scheme. Similarly,
Margaret Rice-Jones worked for the
Group from 1997 to 2000 and has a
deferred pension entitlement in that
scheme, as does Ruth Euling, whose
accrual of benefits ceased in March
2013. These potential conflicts of interest
have been declared to and authorised by
the Board, under its normal processes.
80
De La Rue plc Annual Report 2023
Chairman
– Provides leadership of the Board, setting its agenda, style and tone to promoting constructive
challenge and debate.
– Ensures good information flows from the Executive Directors to the Board, and from the Board
to key stakeholders.
– Takes overall responsibility for the composition and capability of the Board, its Committees
and senior management, including acting as Chair of the Nomination Committee.
– Ensures that high standards of corporate governance and probity are maintained throughout
the Group.
Chief Executive Officer
– Maintains and motivates a senior management team with the appropriate knowledge,
experience, skills and drive to manage the Group’s day-to-day activities.
– Demonstrates personal leadership and a management style which encourages excellent and
open working relationships at all levels within the Group.
– Ensures, through the Chief Financial Officer, the implementation, control and coordination
of the Group’s financial and funding policies approved by the Board.
– Ensures that the Group has in place appropriate systems of risk management and internal
control, including in relation to the health, safety and well being of its workforce.
– Proposes for Board approval operational plans and financial budgets to deliver the agreed
strategy for creating value for shareholders.
– Communicates with the Company’s shareholders and other key stakeholders and briefs the
Board on any material views and issues.
– Available to shareholders if they have concerns which contact through the normal channels
of Chairman, Chief Executive Officer or Chief Financial Officer has failed to resolve, or for which
such contact is inappropriate.
– Available to the other Directors should they have any concerns which are not appropriate to
raise with the Chairman or which have not been satisfactorily resolved by the Chairman.
– The Senior Independent Director will also lead any recruitment of a new Chairman, other than
when being considered for the position themself.
– The Chief Financial Officer supports the Chief Executive Officer and is responsible for
managing the Group’s finance strategy, financial reporting, risk management and internal
controls, investor relations programme and the leadership of the Finance function.
– The MD, Currency reports to the CEO and has executive responsibility for delivery of her
division’s operational and financial performance.
– As members of the ELT, each of the Executive Directors has a wider responsibility for
monitoring the delivery of intended goals across the entire business, and for implementing
and maintaining appropriate risk management and internal controls.
Senior Independent
Director
Other Executive
Directors
Independent Non-
executive Directors
– Strategy: constructively challenge and contribute to the development of strategy.
– Performance: review the performance of management in meeting agreed goals and objectives
and delivering against business plans and budgets or forecasts.
– Reporting to shareholders: monitor the accuracy and completeness of financial and narrative
information provided to the market.
– Risk and internal control: as part of the Board, establish a framework of prudent and effective
controls, which enable risk to be assessed and ensure that the systems of risk management
and internal control are robust and defensible.
– People: monitor succession planning and management development. Ensure that the voice
of the workforce and other stakeholders is considered by the Board.
General Counsel and
Company Secretary
– Supports the Chairman in ensuring a timely flow of high quality information to the Directors
– Advises the Board on matters of corporate governance and supports the Chairman and
Non-executive Directors individually.
– The point of contact for investors on matters of corporate governance.
– Ensures probity and good governance practices at Board level and throughout the Group.
De La Rue plc Annual Report 2023
81
Strategic reportGovernance reportFinancial statements The Chief Executive Officer has
responsibility for matters relating to the
Company or its business that are not
reserved to shareholders, the Board or
one of its Committees. To empower the
wider management team, there is a formal
schedule of delegations of authority
through him to members of the ELT and
other levels of management, which is
reviewed and approved by the Board.
The ELT meets regularly to communicate,
review and agree on issues and actions
of Group-wide significance. It develops,
implements and monitors strategic and
operational plans, and considers the
continuing applicability, appropriateness
and impact of risk. It leads the
development and implementation of the
Group’s culture and aids the decision
making of the Chief Executive Officer and
other Executive Directors in managing
the business in the performance of
their duties.
The Chief Executive Officer leads the
reporting on the Group’s activities to the
Board, who receive regular reports from
him and the Chief Financial Officer and
have the opportunity to ask questions or
seek further clarification as necessary.
Section 2: Division of responsibilities continued
Code Principle H:
Non-executive directors should have
sufficient time to meet their board
responsibilities. They should provide
constructive challenge, strategic
guidance, offer specialist advice and
hold management to account.
The basis on which the Board identifies
the skills, experience and personal
attributes required of the Non-executive
Directors is described in the Nomination
Committee report on pages 85 to 87.
As part of the selection process,
candidates are asked to confirm that
they will have sufficient time to meet
their responsibilities as Directors and
to undertake not to accept any further
appointment without first clearing the
proposed role with the Chairman.
The role of the Non-executive Directors
is described in the table on page 81.
The Non-executive Directors come from
diverse backgrounds and have a wide
range of skills and experience. We believe
that there is a distinct synergy benefit
from this diversity and that the Board’s
discussions benefit from the range of
perspectives it provides.
Code Principle I:
The board, supported by the
company secretary, should ensure
that it has the policies, processes,
information, time and resources it
needs in order to function effectively
and efficiently.
The Board is satisfied that it has the
policies, processes, information, time and
resources it needs to perform its role
both effectively and efficiently.
The Board meets regularly throughout
the year and follows a formal work
programme to ensure that all matters are
considered on a timely basis. For more
detail of the key matters discussed
during FY23, please see page 76. To
ensure that the Directors maintain overall
control over strategic and other material
issues, the Board has adopted a schedule
of matters which are required to be
brought to it for decision.
The key areas for the Board’s sole
decision are:
– Group strategy, long term objectives,
annual budgets
– The Group’s values, culture and key
Group-wide policies that support
these
– Approval of the annual and interim
results
– Acquisitions, disposals and material
business changes
– Ensuring that a sound system of
internal control and risk management
is maintained and approval of the risk
appetite
– Changes to the Group’s capital
structure
– Dividend policy and the declaration
or recommendation of dividends
Where the Board’s oversight
responsibilities require dedicated focus
on specific areas, the Board has
established Committees to provide the
relevant insight, whose roles and activities
are explained later in this Corporate
Governance report.
The matters reserved to the Board and
the terms of reference for each of its
Committees, which are reviewed
regularly, can be found on the Company
website at www.delarue.com. These were
last reviewed in March 2023 and are
compliant with the recommendations
of the Code.
The Board met formally on six occasions
during FY23, with additional meetings
held as required to provide approvals or
discuss matters at short notice, which
did not always require attendance from
all Board members. Attendance at the
scheduled meetings and at those of the
Committees is shown in the table on
page 77. Where a Director is unable to
participate in a Board or Committee
meeting, they review the meeting
materials and communicate their opinions
and comments on the matters to be
considered to the Chairman of the Board
or the relevant Board Committee Chair.
82
De La Rue plc Annual Report 2023
Section 3: Composition, succession
and evaluation
Code Principle J:
Appointments to the board should
be subject to a formal, rigorous and
transparent procedure, and an
effective succession plan should be
maintained for board and senior
management. Both appointments
and succession plans should be
based on merit and objective criteria
and, within this context, should
promote diversity of gender, social
and ethnic backgrounds, cognitive
and personal strengths.
Securing the best possible candidate
for every role is critical. The Nomination
Committee report on pages 85 to 87
provides more information on how we
create the candidate specification for a
Director appointment, including diversity
considerations, and then identify and
appoint candidates. The Board
recognises the importance of having an
inclusive culture and the value that
diversity brings to De La Rue and aims
to reflect this within the composition of
the Board.
Code Principle K:
The board and its committees
should have a combination of skills,
experience and knowledge.
Consideration should be given to
the length of service of the board
as a whole and membership
regularly refreshed.
The Chairman seeks to ensure that the
composition of the Board includes
individuals whose varied backgrounds,
experience, knowledge and expertise
bring a wide range of perspectives to its
discussions and decision making. This
helps to mitigate the risk of ‘group-think’
with the intention of best supporting the
delivery of the Group’s operational and
financial results.
Non-executive Directors’ tenure
FY16
FY17
FY18
FY19
FY20 FY21
FY22
FY23
Beyond
Clive Whiley
Kevin Loosemore
Maria da Cunha
Nick Bray
Catherine Ashton
Margaret Rice-Jones
Mark Hoad
Dean Moore
First three year term
Second three year term
Additional term beyond six years
Non-executive Directors are appointed
for an initial period of three years with
the expectation of serving one further
three year term, subject to satisfactory
performance and annual re-election by
shareholders. Terms beyond this period
are considered on a case-by-case basis
and only following rigorous review, taking
account of performance and ability to
contribute to the Board in light of the
knowledge, skills, experience and
diversity required.
All new Directors receive a tailored
induction on joining the Board, including
meetings with senior management,
key advisors and visits to key Group
locations. They also receive a detailed
briefing which includes details of their
duties and responsibilities as a Director
and other governance-related issues.
For further information on how this
operates in practice, please see page 87
where Mark Hoad explains the process
he followed on joining the Board.
Directors are continually updated on the
Group’s businesses, the markets in which
the Group operates and changes to the
competitive and regulatory environments.
All Directors are encouraged to undertake
additional training where it is considered
appropriate for them to do so and to
visit the Group’s production sites.
Code Principle L:
Annual evaluation of the board should
consider its composition, diversity
and how effectively members work
together to achieve objectives.
Individual evaluation should
demonstrate whether each director
continues to contribute effectively.
The Chairman is responsible, with the
support of the Nomination Committee,
for ensuring that the Company has an
effective Board with a suitable range
of skills, knowledge, experience and
diversity. The Company conducts a
formal annual performance evaluation
process for the Board, its Committees
and individual Directors, including the
Chairman. The Chairman routinely holds
one-to-one meetings with all Directors
to review their contribution to the Board.
De La Rue plc Annual Report 2023
83
Strategic reportGovernance reportFinancial statements
Section 3: Composition, succession and evaluation continued
As explained in last year’s annual report, the Board commissioned a performance evaluation in FY22, using an external
independent facilitator, Lintstock Limited, which has no other connection with the Company or individual Directors. This was
presented to the Board in May 2022. The conclusions were that the performance of the Board, its Committees and individual
Directors was effective but the Board felt that two changes should be made to its future ways of working. These changes,
and what was done during the year are:
Agreed change
What happened in FY23?
Succession planning – after a period of rapid and
fundamental change in management, the Board
believes that it should now devote more attention to
developing a longer term succession plan for roles in
the executive leadership team and senior management
– The Nomination Committee reviewed succession plans for the top three levels of
management (being the ELT members, and their first and second reports)
– The Nomination Committee also reviewed the Company’s processes for identifying,
nurturing and retaining high potential individuals who could become the future
leaders of the Company
Visible leadership – reintroduce a regular
programme of site visits and meetings
– The Board visited polymer production site at Westhoughton in July 2022, meeting
a wide range of employees and managers. The visit spanned both the original
production hall and the new facility completed during 2022
– Mark Hoad also visited Westhoughton as part of his induction programme, after he
joined the Board in September 2022
During FY23 we undertook performance evaluations of the Directors (including the Chairman) and of the Board and its
Committees. The processes used for these reviews were as follows:
Review of the Chairman’s effectiveness
A set of structured questions was
circulated to each Director by
Margaret Rice-Jones, the Senior
Independent Director
The Directors met without the Chairman
present, in a private session led by
Margaret, using the questions as a guide
to their discussions
Feedback was provided to the Chairman
privately in a face-to-face meeting
The conclusion was that Kevin Loosemore was highly effective as Chairman of the Board, with a deep understanding of the
Company’s businesses and playing a significant role in helping the Board focus on the key strategic drivers of performance.
Review of the Board’s and Committees’ effectiveness
A tailored set of questions
was developed by the
Company Secretary and
the Chairman
Each Director completed the
tailored questionnaire, using
an online system managed
by Lintstock
Lintstock produced a report
summarising the results of the
survey, with both quantitative
and qualitative data
The Board discussed the
report of the survey’s findings
and agreed what actions it
would take in response
The conclusion was that the Board and its Committees were functioning effectively. There were two procedural changes that
were agreed by the Board, both of which have already been actioned:
Agreed change
What has happened subsequently?
Each Board meeting should commence with
a private session for the Chairman and other
Non-executive Directors, and be followed by
a joint session with the Chief Executive Officer
– All scheduled (and, where appropriate, ad hoc) Board meetings now begin with
these private sessions
– These allow the Non-executive members of the Board to share any concerns or specific
matters that they wish to see discussed in the formal part of the Board meeting
During a period of significant uncertainty in the
Company’s markets and the challenging business
context that this creates, to re-introduce a Directors’
call in those months with no scheduled Board meeting,
following publication of the management accounts
– These calls have been scheduled for the first six months of FY24, after which the
Board will review whether the practice should continue
Review of the individual Directors’ effectiveness
Following the year end, the Nomination Committee reviewed the effectiveness, commitment and contribution of each Director.
They concluded that each Board member was performing at or beyond the required standard and recommended to the Board
that those Directors who intended to stand for re-election at the 2023 AGM should do so, and that the Board should
recommend to shareholders that each of those Directors should be appointed. The Board supported this recommendation.
84
De La Rue plc Annual Report 2023
Nomination Committee
Clive Whiley
Chairman of the
Nomination Committee
“Ensuring we have
a Board of Directors
and leadership team
possessing the skills,
knowledge and
experience to drive
the evolution of the
Group’s business.”
Dear Shareholder,
I am pleased to present the Nomination
Committee report for the period ended
25 March 2023.
The Chairman, the independent
Non-executive Directors and the Chief
Executive Officer are the members of
the Committee. The Group HR Director
attends by invitation when appropriate.
Committee members
The members of the Committee during
FY23 were:
– Kevin Loosemore (Committee Chair)
– Clive Vacher
– Catherine Ashton
– Nick Bray
– Maria da Cunha (until 27 July 2022)
– Mark Hoad (from 28 September 2022)
– Margaret Rice-Jones
Members’ attendance at Committee
meetings is shown in the table on
page 77.
Following the year end, Kevin Loosemore
resigned as a Director with effect from
1 May 2023, and Clive Whiley was
appointed as a member and the
Chairman of the Committee on
18 May 2023.
Operation of the Committee
The Committee considers the
composition of the Board and
succession planning for Directors and
senior management (being broadly the
first layer of executives reporting to
the CEO). Where Board change is
warranted, the Committee leads the
change process, making recommendations
to the Board as appropriate. In performing
its duties, the Committee has full regard to
the benefits of diversity, in all its forms.
Activities during the period
The Committee met twice during FY23.
The principal matters considered at its
meetings were:
– Recommending to the Board that
Mark Hoad should be appointed as
a Non-executive Director, to ensure
that the skills and experience
available at the Board table remain
appropriate. The recruitment
process took diversity
considerations into account
– Considering whether the Directors
collectively possessed sufficient
skills, knowledge and experience of
technology to drive the evolution
of the Group’s business
– Reviewing succession plans for the
top three levels of management
(being the ELT members, and their
first and second reports) and the
Company’s processes for identifying,
nurturing and retaining high potential
individuals
– Reviewing the commitment,
contribution and effectiveness of
the Directors seeking re-election
at the AGM, following a formal
performance appraisal process
The Committee’s annual evaluation
concluded that the Committee
continues to operate effectively.
Principal responsibilities
Board composition
– Review the structure, size and
composition of the Board and its
Committees, to ensure they remain
appropriate, aiming to maintain a
balance of skills, experience,
knowledge and diversity
– Ensure that all Board appointments
are made on a formal, rigorous and
transparent basis
Succession
– Consider succession plans for the
Board and senior management,
anticipating the challenges and
opportunities facing the Company
and the need for a diverse pipeline
of talent
– Oversee the Board’s diversity policy
and its implementation
Effectiveness
– Review the independence and
time commitment of the
Non-executive Directors
– Act on the results of effectiveness
reviews in relation to individual
Directors
De La Rue plc Annual Report 2023
85
Strategic reportGovernance reportFinancial statements Section 3: Composition, succession and evaluation continued
Nomination Committee continued
Gender balance
As at 25 March 2023
At Board level
5/3
Executive
Leadership Team
3/2
Direct reports
to ELT members
17/18
Male
Female
Approach to succession
planning and talent
The Committee recognises that having
the right Directors and senior
management is crucial for the Group’s
success. A key task of the Committee
is to ensure that there is a robust and
rigorous succession process to ensure
that there is the right mix of skills and
experience available to the Group as its
business evolves. The Committee’s
approach to succession planning is
linked to the Company’s overall strategy,
values and mission and includes diversity
considerations. Our policy is to appoint
the best people available for each role
and to ensure that the Board members
are collectively able to provide the range
of perspectives, insights and constructive
challenge required to deliver effective
decision making. Appointments are
therefore made on merit by assessing
candidates against objective criteria,
including considerations reflecting the
benefits of greater diversity.
To ensure that we identify candidates
from the widest pool, the Committee
may instruct search consultants or
consider open advertising.
The Board meets the ELT members and
other key managers both formally and
informally to exchange views and ideas.
During the period, the Board undertook
a succession planning review which
included considerations in relation
to diversity.
86
De La Rue plc Annual Report 2023
Board appointments and
process followed
As noted in the ‘Activities’ section above,
the Committee oversaw a process to
find a new Non-executive Director with
the skills and experience to chair the
Audit Committee of the Board, as well
as making a positive contribution to
the Board’s wider discussions and the
strategic development of the Company.
A detailed role and candidate
specification was drawn up and an
executive search consultancy, Russell
Reynolds (which has no other connection
with the Company or any of its Directors)
was retained to identify suitable
individuals, with the benefits of diversity
stressed in the brief provided to them.
This process culminated in the
Committee recommending to the Board
that Mark Hoad should be appointed as
a Non-executive Director. The Board
appointed Mark on 28 September 2022
and he will take over as Chair of the Audit
Committee following the 2023 AGM.
Board diversity policy
and practice
Diversity, equality and inclusion
continue to be areas of focus for the
Committee and the Board. The Board’s
diversity policy is aligned with that of
the wider Group, which is to strive to
have a workforce representative of the
communities that host our operations.
The Company has adopted a clear and
simple strapline for all our employees
reflecting that aspiration: Be Heard,
Be Valued, Be You.
While the primary objective and
responsibility when making new
appointments is to ensure the strength
of the Board, we are committed to
promoting a culture of respect and
inclusivity for every single unique
individual involved in our business.
We continue to promote a culture
that values and thrives on diversity in
all areas, including an inclusive and
diverse culture in terms of ideas, skills,
knowledge, experience, education,
gender, social and ethnic backgrounds,
cognitive and personal strengths and
other factors.
The Committee and Board are satisfied
with the progress being made in
achieving objectives in relation to gender
diversity, as illustrated in the charts above
and opposite, but recognises that more
remains to be done in relation to other
facets of diversity.
Gender balance of the Board and Executive Leadership Team (ELT)
As at 25 March 2023
Mark Hoad on:
Induction in action
Number of
senior
positions on
the Board
(CEO, CFO,
SID and
Chair)
Number in
executive
management
(ELT)
Percentage of
executive
management
(ELT)
Number of
Board
members
Percentage of
the Board
Men
Women
Not specified/prefer not to say
5
3
n/a
62%
38%
n/a
3
1
n/a
3
2
n/a
60%
40%
n/a
Re-election of Directors at the
2023 AGM
All Directors serving at the date of this
report will stand for re-election at the
2023 AGM, with the exceptions of Rob
Harding, who leaves our employment in
July 2023 and Margaret Rice-Jones who
will retire in order to devote more time to
her other business interests.
The Committee has carried out a formal
performance evaluation (as explained
above) and considers each of the
Directors to be effective in their
respective roles. It judges that they
demonstrate commitment and is of the
opinion that all Directors continue to
provide valuable contributions to the
long term success of the Company. The
Board strongly supports their re-election
to the Board and recommends that
shareholders vote in favour of the
relevant resolutions at the 2023 AGM.
Clive Whiley
Chairman of the Nomination Committee
29 June 2023
The Committee has followed the
development and implementation of the
new Listing Rules requirements in relation
to diversity. As these only apply to
accounting periods commencing on or
after 1 April 2022, they do not apply to
the Company in respect of FY23.
As at 25 March 2023, the gender balance
of the Board and Executive Leadership
Team (ELT) was as shown in the table
above. Shareholders will note that at
the year end date, one of the four senior
positions on the Board of Directors
was held by a woman, being the
Senior Independent Director,
Margaret Rice-Jones.
The Committee intends to review its
diversity, equity and inclusion policy
early in FY24 to take into account the
policy and reporting requirements of
the new Listing Rules.
Subsequent to the year end, Catherine
Ashton resigned as a Director on 12 June
2023 and on 19 June 2023 we announced
that Margaret Rice-Jones had decided
not to seek re-election at the 2023 AGM,
in each case to create time to be able to
fulfil external commitments.
On 26 June 2023 Dean Moore was
appointed as an independent
Non-executive Director.
I joined the Board in September
2022. While I am an experienced
CFO and executive director of
listed companies, this is my first
non-executive role.
The induction process I followed
was tailored to my main role
responsibilities as the chairman-
designate of the Audit Committee.
The key activity was 1:1 meetings with
the audit engagement partner and key
members of his audit team, the senior
members of the internal audit team
and all the key people within the
Company’s finance team. I also met
senior managers from key central
functions including legal and risk. In
relation to my duties as non-executive
director of a listed company, I met
with the Company’s brokers and
corporate lawyers.
As I joined the Board, it was
considering an evolution and
refinement of the corporate strategy,
which provided a good introduction
to De La Rue’s business and market
opportunities. I also visited the
polymer production site at
Westhoughton, which provided
a practical glimpse into the sheer
scale of the Company’s operations.
Overall, the induction process
covered the finance and governance
issues thoroughly and gave me the
opportunity to glean insights from
and build relationships with key
individuals. I have provided feedback
to the Company Secretary on the
process, which will help inform
induction activities for future
Board appointees.
Mark Hoad
Independent Non-executive Director
De La Rue plc Annual Report 2023
87
Strategic reportGovernance reportFinancial statements
Section 4:
Audit, risk and internal control
Code Principle M:
The board should establish formal
and transparent policies and
procedures to ensure the
independence and effectiveness of
internal and external audit functions
and satisfy itself on the integrity of
financial and narrative statements.
The Board has delegated power to the
Audit Committee so that it has primary
responsibility for providing oversight of
the integrity of the Group’s financial
statements and associated narrative
reporting and acting as guardians of the
independence and effectiveness of the
internal audit function and the external
audit process.
For further details, please refer to the
Audit Committee report on pages
89 to 96.
The Board has determined the
Company’s risk appetite, being the
nature and extent of the principal risks it
is willing to take in order to achieve its
long term strategic objectives. The most
recent assessment of this was in March
2023. The Board has carried out a robust
assessment of the Company’s principal
and emerging risks. Further details of the
principal risks and the Group’s approach
to risk management can be found in the
risk management section on pages 56
to 63, with a description of how this is
overseen by the Risk Committee on page
97 and an explanation of how the Audit
Committee oversees this on page 96.
The Board oversees the Group’s internal
control framework, with the Audit
Committee taking a leading role in this
work. The Board has carried out a review
of the effectiveness of the Company’s
systems of risk management and internal
control, covering all material controls,
including financial, operational and
compliance controls. For further details,
please refer to the Audit Committee
report on pages 89 to 96.
The Board’s responsibility does not
extend to associated companies or joint
ventures where the Group does not have
management control.
Code Principle N:
The board should present a fair,
balanced and understandable
assessment of the company’s
position and prospects.
The Directors believe that the annual
report and accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
financial position, performance, business
model and strategy.
For details of the process that was
followed to enable the Board to make
this statement, please refer to the Audit
Committee report below.
Code Principle O:
The board should establish
procedures to manage risk, oversee
the internal control framework, and
determine the nature and extent of
the principal risks the company is
willing to take in order to achieve its
long-term strategic objectives.
The Board retains overall responsibility
for identifying, evaluating, managing and
mitigating the principal risks faced by the
Group and for monitoring the Group’s
risk management and internal control
systems. Such systems are designed to
manage rather than eliminate the risk of
failure to business objectives and can
only provide reasonable and not
absolute assurance against material
misstatement or loss.
88
De La Rue plc Annual Report 2023
Audit Committee
Nick Bray
Chairman of the
Audit Committee
“Ensuring our internal
and external audits
take account of the
Group’s risks, and
monitoring the Group’s
financial and
narrative reporting.”
Dear Shareholder,
I am pleased to present the Audit
Committee report for the period ended
25 March 2023.
Committee members
The members of the Committee during
FY23 were:
– Nick Bray (Committee Chair)
– Catherine Ashton
– Maria da Cunha (until 27 July 2022)
– Mark Hoad (from 28 September 2022)
– Margaret Rice-Jones
All members of the Committee are
independent Non-executive Directors.
Members’ attendance at Committee
meetings is shown in the table on
page 77.
Nick Bray is a chartered accountant and
is regarded by the Board as having
relevant and recent financial experience
by virtue of his long career as a senior
finance professional and his current
position as Chief Financial Officer
of Travelport.
Mark Hoad is also regarded by the Board
as having relevant and recent financial
experience. He is an experienced
chartered accountant and currently
serves as a director and the Chief
Financial Officer of TT Electronics plc.
The Board is also satisfied that the
Committee as a whole has competence
relevant to the sector in which the
Group operates. No member of the
Committee has any connections with
the external auditors.
Nick Bray will retire as Committee Chair
at the conclusion of the 2023 AGM,
from which time Mark Hoad will serve
in that capacity. Nick will remain as a
member of the Committee to provide
continuity, given the recent change in
lead audit engagement partner and the
imminent change of CFO.
Biographical details of the members of
the Board who held office up to the
date of this report can be found on
pages 72 and 73.
Principal responsibilities
Financial reporting
– Review the integrity of the interim
and full year financial statements
– Review significant financial reporting
issues and accounting judgements
– Review the adoption of new
accounting standards
External audit
– Oversee the relationship with the
external auditors, including the
scope and extent of the external
audit and the fees payable
– Review and monitor the external
auditor’s effectiveness,
independence and objectivity,
including the nature and
appropriateness of any non-audit
work and the associated fees
Internal audit
– Oversee the relationship with the
internal auditors, including the
internal audit charter, annual work
programme and fees and their
independence and effectiveness
– Monitor management’s response to
internal audit findings and whether
these are being implemented in a
manner that supports the work of
the internal auditors
Risk management and internal control
– Monitor and review the effectiveness
of the systems of internal control
and risk management
De La Rue plc Annual Report 2023
89
Strategic reportGovernance reportFinancial statements Financial reporting
The integrity of the Group’s financial
reporting is of critical importance and it
is a core responsibility of the Committee
to review this reporting and the key
accounting judgements contained in the
financial statements.
Key accounting matters in
relation to FY23
The Committee reviews whether suitable
accounting policies have been adopted
and applied consistently and assesses
if management has made appropriate
estimates and judgements in the
preparation of the financial statements.
In addition, the Committee has reviewed
and considered and challenged a
number of key accounting areas and
judgements in preparing the financial
statements, as set out opposite and on
the following pages:
Section 4: Audit, risk and internal control continued
Audit Committee continued
Operation of the Committee
The Committee provides independent
oversight of the Group’s financial
reporting processes. In support of that
overarching objective, it oversees the
relationships with the internal and
external auditors, it monitors the
development and effectiveness of the
Group’s internal financial controls and
the internal controls more generally,
and it reviews the Group’s principal risks
and the effectiveness of its systems of
risk management.
Committee meetings are attended, by
invitation, by the Chairman of the Board,
Chief Executive Officer, Chief Financial
Officer, General Counsel and Company
Secretary and the Group Financial
Controller, as well as the internal and
external auditors.
The Group Director of Security, HSE
and Risk and the Group Director of Tax
and Treasury also attend Committee
meetings as required. The internal
auditors and external auditors each
meet the Committee members without
Executive Directors or other employees
being present.
The Committee’s effectiveness was
reviewed as part of the overall Board
effectiveness review. For further
information on how this was conducted,
please see page 84.
90
De La Rue plc Annual Report 2023
Activities during the period
The Committee met five times during
the period ended 25 March 2023.
The principal matters considered at
its meetings were:
– The half and full year financial
statements, including any key
accounting matters
– The annual report and other
narrative reporting
– Plans and fees for the external audit
and the auditors’ review of the half
year results
– The effectiveness, independence and
objectivity of the external auditors
– The representation letters to be
provided to the external auditors
– The external auditors’ reviews of the
financial statements and associated
narrative reporting
– The use of the going concern basis
of accounting
– The basis of preparation of the long
term viability statement
– The internal audit programme and the
alignment of this with the Group’s
principal risks and the interaction with
the work of the external auditors
– The Group’s principal risks and
uncertainties, informed by reviews
of these by the Risk Committee
– The assurance available in relation to
the Group’s risks, including:
– Internal audit findings and
recommended improvement actions
– Reviews of the effectiveness of
the systems of internal control and
risk management
– Business continuity planning
– Review of the annual policy and
control self-assessment
declarations
– The results of other compliance
audits
– Approval of an updated version of
the Fraud Policy and a review of the
procedures for whistleblowing in
relation to fraud and financial
misstatements
– The further implementation of the
Company’s ERP system and further
enhancements of the internal control
environment,
– The resourcing and maturity of the
Company’s cyber security
arrangements and the approach
to the 2023 insurance renewal.
Topic
Revenue
recognition
What is the risk?
Revenue (and therefore
profit) is not recorded
in the correct financial
year, resulting in an
incorrect statement of
performance
UK post-
retirement
benefit
obligations
The valuation of the
pension scheme assets
and/or liabilities is
incorrectly or
inappropriately valued.
This would result in the
balance sheet being
misstated
What did the
Committee do?
The Committee considered the Group’s revenue recognition
policies and procedures to ensure that they remained
appropriate and that the Group’s internal controls were
operating effectively in this area.
Feedback was also sought from the external auditors over the
application of the revenue recognition policy including ongoing
compliance with IFRS 15. Specific focus was given to revenue
recognised on a ‘bill and hold’ basis and where revenue on new
contracts entered into in the year was being accounted for on
an ‘over time basis’.
What conclusion
did it reach?
Following a review of
the varied sources of
information received,
the Committee
concluded that the
accounting treatments
and judgements were
reasonable and
appropriate.
The Committee
considered the
difference in valuation
caused by the year end
and reporting dates to
not be significant when
compared to total UK
defined benefit pension
scheme assets of circa
£0.7m. However, the
Committee decided
that the critical
accounting judgement
on this should be
disclosed – see pages
158 and 159.
The Committee received and considered reports from
management based on analysis prepared by independent
actuaries and the external auditors in relation to the valuation
of the UK defined benefit pension scheme and challenged the
key actuarial assumptions used in calculating the scheme
liabilities, especially in relation to discount rates, RPI and CPI
inflation rates and mortality. The Committee discussed the
reasons for the movement on the IAS 19 valuation from a net
surplus to a net deficit. The Committee was satisfied that the
assumptions used were appropriate and were supported by
independent actuarial specialists. Details of the key
assumptions used are set out in note 24.
The Committee also noted that the UK Multi Asset Credit and
secured Finance funds account for approximately £61m and
£139m of the pension assets respectively (FY22: £63m and
£143m respectively). During the period from 28 February to
25 March, based on the movement in relevant market indices,
we have estimated that the value of the funds has decreased
by £4.4m. The total UK pension scheme assets value is
£678.2m. This £4.4m decrease includes £3.9m relates to the
updated third-party valuation data as at the year end date and
the remaining £0.5m is based on day-to-day market volatility
of high yield market indices. A 0.1% change in these market
indices would result in a £0.6m increase in the pension
scheme assets.
The potential impact has been estimated by observing what
were considered to be the most relevant comparable indices
to establish the level of day-to-day volatility in the market.
De La Rue plc Annual Report 2023
91
Strategic reportGovernance reportFinancial statements Section 4: Audit, risk and internal control continued
What did the
Committee do?
The Committee noted that management has carefully
assessed the recoverability of the other financial assets on the
balance sheet as at 25 March 2023 based on information
available to them determining that an expected credit loss
provision of £8.5m (see note 5 exceptional items for further
details) is required which will fully impair these other financial
assets. Management had considered the following factors in
making this determination:
1) The public announcements from the Portals group relating to
the wind down of the Overton paper mill and its sale of assets.
2) The latest available financial position of Portals International
Limited group as presented in its 2022 consolidated financial
statements including significant losses for the period and a net
liabilities position.
3) The announcement of the sale of the Fedrigoni business to
IN Groupe in May 2023.
This provision accounts for the risk that the full amounts
due will not be recovered rather than the instruments being
credit impaired.
The Group holds a number of provisions relating to warranties
for defective products and contract penalties. The Committee
reviewed and discussed reports from management and the
external auditors concerning the significant provisions held for
such matters including any provisions with notable movements
and challenged management over the judgements applied in
determining the value of provisions required.
The Committee enquired of management and the external
auditors as to the existence of other matters potentially
requiring a provision to be made. The Committee concluded
that it was satisfied with the value of provisions held.
The Committee reviewed Managements assessment that
judged the new grant as a replacement award for two
SAYE grants which are due to vest in FY24 and FY25 that
were cancelled by employees at the time of the new grant
and applied modification accounting rather than
cancellation accounting.
What conclusion
did it reach?
The Committee has
concluded that it
supports the expected
credit loss provision of
£8.5m that has been
recorded in FY23.
The Committee noted
that if factors change
again in the future, this
may alter the
judgements made
resulting in a revision to
the value of expected
credit loss provision to
be recognised.
The Committee has
considered the latest
available information
provided by
management including
the latest view of
external advisers and is
confident with the
judgements made in
preparing the financial
statements in the
current period.
The Committee
concluded that the
accounting treatment
was appropriate.
The Committee reviewed Management’s assessment of
impairments made in the year in particular in relation to the
wind down of the Kenya operations and capitalised product
development costs.
The Committee
concluded that the
impairments made in
the year were
appropriate.
Audit Committee continued
Topic
Recoverability
of other
financial assets
What is the risk?
The carrying value of
the investments made
by the Group in entities
within the Portals
group is recognised
at an incorrect or
inappropriate value in
the balance sheet,
resulting in an under-
or over-statement
of assets
The value of provisions
at the balance sheet
are incorrectly or
inappropriately
calculated, resulting
in a misstatement of
profits for the year and
of the closing balance
sheet position
The accounting for the
new Save As You Earn
(‘SAYE’) share option
grant made under
modification
accounting should have
been cancellation
accounting instead.
The impairment
assessments carried
out by the Group have
not identified all
applicable impairments.
Estimation of
and provisions
Replacement
of Savings
Related Share
Scheme
granted
Recoverability
assessment
and
impairment
charges related
to plant and
machinery and
capitalised
product
development
costs
92
De La Rue plc Annual Report 2023
Topic
Accounting for
the extension
of the factory
site in Malta
What is the risk?
The timing of the
accounting for new
lease on the Malta site
extension was not
recorded appropriately.
What conclusion
did it reach?
The Committee
concluded that
Management’s
assessment that the
lease will be recognised
when the building
becomes available for
use is appropriate.
What did the
Committee do?
The Committee reviewed Management’s judgement as to
whether the Company has control of the Malta site during the
construction period. If the Group has the right to control the
use of the identified asset for only a portion of the term of the
contract, the contract contains a lease for that portion of the
term. In order to control the asset, the lessee must have the
right to obtain substantially all of the economic benefits from
the use of the asset and the right to direct the use of the asset.
It was determined that control exists only after the build is
completed and site becomes available for use. Management
considers that given the building was under construction at the
year-end date and therefore there were no economic benefits
as the asset was not ready for use at that time.
Therefore, management have concluded that no lease should
be recognised in FY23. The lease will be recognised when the
building becomes available for use.
Classification
of exceptional
items
Costs or income are
incorrectly categorised
as, or omitted from,
exceptional items,
resulting in a
misstatement of profits
for the year
As part of the Committee’s deliberations over whether the
annual report and accounts, taken as a whole, is fair, balanced
and understandable, the Committee also considered the
amounts disclosed as exceptional items. The nature of the
items classified as operating exceptional items during the
period is described in note 5.
The Committee considered the accounting treatment and
disclosure of these items in the financial statements including
seeking the views of the external auditors.
On the basis of its
review, the Committee
concluded that the
accounting treatment
and disclosures in
relation to these items
were appropriate.
Impairment of
investment in
subsidiaries in
the Company
(only) financial
statements
The carrying value of
the investment in
subsidiaries in the Plc
Company financial
statement is misstated
The Committee considered management’s assumptions and
decision to record an impairment against the investment in
subsidiaries in the parent company (only) financial statements
of £85.6m for FY23.
Going Concern
The use of an
inappropriate basis of
accounting, should the
Group prove not have
access to sufficient
liquidity to pay its
debts as they fall due
in the near term.
The Committee gave careful consideration to the going
concern statements made in the half and full year financial
statements. The Committee conducted rigorous reviews of the
Group’s financial forecasts, challenging key assumptions and
giving careful consideration to the plausible downside
scenarios modelled, when assessing the impact these would
have on the going concern status of the Group.
The Committee
considers this
appropriate given the
significant reduction
in the market
capitalisation of the
group to approximately
£71m at 27 June 2023
versus approximately
£214m market
capitalisation as at
26 March 2022 given
the resetting of market
expectations on
FY24 and revised
outlook guidance.
The Committee
concluded that the
Group had adequate
resources to continue
in operational existence
for the required period
and that it was
appropriate for the
Directors to use the
going concern basis
of accounting.
De La Rue plc Annual Report 2023
93
Strategic reportGovernance reportFinancial statements Section 4: Audit, risk and internal control continued
Audit Committee continued
Fair, balanced and
understandable view
At its May 2022 meeting the Committee
reviewed, at the Board’s request, the
content of the 2022 Annual Report and
Accounts and advised the Board that,
in its view, when taken as a whole that
document is fair, balanced and
understandable and provides the
information necessary for shareholders
to assess the Group’s position and
performance, business model and strategy.
The same process has been followed by
the Committee in relation to the Annual
Report for FY23. In making its
recommendation to the Board the
Committee drew on its experience
during that and prior financial years,
supplemented by:
– Reviews of the monthly management
accounts, enabling trends and key
business dynamics to be monitored
through the year
– Clear guidance provided to all section
authors on the requirement to draft in a
fair, balanced and understandable way
– Reviews of the annual report
undertaken at different levels of the
Group and by the Executive
Leadership Team, with an opinion that
the reporting meets the required
standards confirmed in writing to
the Committee
– The review of the narrative reporting
conducted by the external auditors’
as part of their review
– Reviews of the narrative reporting by
the Audit Committee Chairman and
other Directors prior to formal
consideration of the draft Annual
Report by the Board.
External audit
Relationship with the external
auditors
Ernst & Young LLP (EY) have been the
Company’s auditors since June 2017,
when they were appointed by the Board
following a competitive tender that was
led by the Committee. They have been
re-appointed by shareholders at each
subsequent AGM. The original lead audit
engagement partner, Kevin Harkin, retired
from the audit team at the 2022 AGM in
accordance with the mandatory
five year partner rotation requirement.
The statutory audit of the FY23 financial
statements is therefore the first to be
undertaken under the leadership of the
new lead audit engagement partner,
San Gunapala.
The EY audit partner attends each
Committee meeting to ensure two-way
communication of matters relating to the
audit and also has regular contacts with
both the Committee Chairman and the
CFO. The scope and key focus of the
forthcoming year’s audit is discussed
with and approved by the Committee,
who also review and approve the fees for
that audit and the review of the half year
financial statements.
The Committee has regular discussions
with the auditors, without management
being present, covering a range of
financial reporting, accounting, internal
control and risk matters and receives
and reviews the auditors’ reports and
management letters, which are one of
the main outputs from the external audit.
Audit quality: Independence
and objectivity of external
auditors
The Committee places great emphasis
on audit quality. This encompasses
monitoring the skills and knowledge of
the audit team, their mindset and culture
and the quality of the judgements
reached by the senior members of the
audit team. In terms of approach, the
objectivity of the Company’s auditors in
reviewing the financial statements that
are issued to shareholders is of crucial
importance. In all of their dealings with
key members of the audit team, the
Committee looks for evidence that their
work is being done from a position of
independence, with an entirely objective
eye and appropriate professional
scepticism. The Committee also receives
the views of senior members of the
finance team on their, and their teams’,
dealings with the external auditors and
whether there are any indications that
audit quality is being compromised in
any way, or means by which it could be
further enhanced.
In turn, EY put safeguards in place to
avoid compromising their objectivity and
independence. They provide a written
report to the Committee on how they
comply with professional and regulatory
requirements and best practice
designed to ensure their independence.
Key members of the EY audit team rotate
and the firm ensures, where appropriate,
that confidentiality is maintained
between different parts of the firm
providing services to the Group.
The Committee also reviewed two Audit
Quality Inspection and Supervision
Reports published by the FRC in July
2022; one relating to the larger UK audit
firms, the other being specific to EY.
94
De La Rue plc Annual Report 2023
Over the last three financial years, the
fees paid to EY and its associates and
the split between audit and non-audit
related fees was:
£’000
Audit fees
Audit-related fees
(review of interim
financial statements)
Non-audit services
FY23
FY22
FY21
869
740
778
177
-
80
-
77
-
Total fees paid to EY
1,046
820
855
Non-audit fees relative
to audit fees (%)
20%
11%
10%
Over the three financial years non-audit
fees have averaged 14% of the audit fee.
None of the non-audit services provided
by the external auditors was regarded as a
significant engagement by the Committee.
Effectiveness of the external
auditors and proposal for
re-election at the AGM
The Committee assesses annually the
qualification, expertise, resources and
independence of the external auditors,
as well as the effectiveness of the
external audit process. The Committee’s
assessment is performed by an audit
satisfaction questionnaire completed by
the Chairman, Committee members and
relevant members of senior management.
The Committee is satisfied that
the external auditors remain fully
independent, objective and effective
and has recommended to the Board
that a resolution for the reappointment
of Ernst & Young LLP should be put to
shareholders at the 2023 AGM.
Use of the auditors to provide
non-audit services
In certain limited circumstances it may
be cost effective or otherwise
advantageous for EY to provide certain
non-audit services, in particular where
their skills, experience and familiarity
with the Group make that firm the most
suitable supplier.
An important safeguard on the
independence of the external auditors is
that they do not earn disproportionate
fees from the provision of non-audit
services which could, or could give the
appearance, of compromising that
independence.
To maintain this position, the Committee
has adopted a detailed policy, most
recently reviewed in November 2022,
which requires that no non-audit
services may be undertaken by the
external auditors unless all the
requirements of that policy have been
fulfilled. The policy sets out:
– The circumstances in which it may be
appropriate to procure non-audit
services from the external auditors
and a list of permitted services;
– A list of prohibited services including,
but not limited to, tax advisory work,
services where EY would audit or rely
on their own work, where they would
act in an advocacy role for the Group
or where they would provide
management, payroll, valuation, legal,
internal audit, financing or
underwriting or HR services;
– The procedures for approval of
proposed fees, which required the
approval of:
– For fees of up to £25,000, the CFO;
– For fees between £25,000 and
£50,000, the CFO and Committee
Chairman; and
– For fees of more than £50,000,
the CFO, Committee Chairman
and Board.
– A cap on the fees for permitted
services, which must not exceed 70%
of the average of the fees paid for
such services in the last three
consecutive financial years; and
– Regular reporting of any such fees
payable to the external auditors and
annual certifications by the external
auditors and CFO that they are
satisfied that the independence of the
external auditors has been maintained.
Internal audit
Internal auditors
The internal audit function provides
an important assurance role and is
complementary to the work of the
external auditors. PricewaterhouseCoopers
LLP (PwC) have provided internal audit
services to the Group since FY14. The
personnel involved in the internal audit
team have changed over PwC’s tenure
and the Committee is satisfied that they
have maintained their independence.
The appointment of the internal auditors
is overseen by the Committee, which
also reviews and approves the internal
audit charter and annual programme of
audit assignments, as well as the fees
payable. The annual internal audit plan is
aligned with the Company’s risk register
and forms part of a medium term rolling
programme of audit assignments,
predicated on a risk-led basis. The
Committee meets regularly with the
internal auditors, without management
being present, to discuss their findings,
the implementation of remedial actions
and the Group’s internal control
environment more generally.
The FY23 internal audit plan was
approved by the Committee in March
2022 and kept under review during the
year. All of the internal audit assignments
were completed during the period, other
than one where fieldwork was deferred
to April/May 2023 as a result of an
internal reorganisation. In March 2023 the
Committee reviewed and approved the
internal audit charter and plan for FY24.
A review of the effectiveness of the
internal auditors was completed and
presented to the Committee in May
2023. This was undertaken by means
of a questionnaire circulated to those
audited in the year, senior members of
the Finance function and the Committee,
and supplemented the Committee’s
ongoing monitoring of PwC’s work. The
Committee concluded that the quality,
experience and expertise of the internal
auditors was appropriate for the
business and were also satisfied that
the actions management has taken to
implement agreed improvement actions
support the effective working of the
internal audit function.
De La Rue plc Annual Report 2023
95
Strategic reportGovernance reportFinancial statements Section 4: Audit, risk and internal control continued
Effectiveness review: internal
control environment
The Committee is responsible for
reviewing, on behalf of the Board, the
effectiveness of the Group’s internal
control systems, which covers all material
controls, including financial, operational
and compliance controls and which
operates within the corporate culture
and values set by the Board.
A formal effectiveness review was
performed during the year and considered
by the Committee, which concluded
that none of the areas identified for
enhancement constituted a significant
failing or weakness for the Group.
Nick Bray
Chairman of the Audit Committee
29 June 2023
Risk management
The key elements of the Group’s risk
management framework and procedures
are set out on pages 56 to 63. At each
meeting the Committee reviews the
principal risks facing the Group and
reviews the emerging risks throughout
the year, receiving reports from the Risk
Committee on the matters they have
considered. In addition, each of the
principal risks is discussed by the Board
at various points during the year.
Combined assurance model
The Group’s internal control environment
operates a ‘three lines of defence’
model, which is monitored by the
Committee. The first line of assurance
is the work of operational and line
management, supported by local
operating procedures and systems.
The second line of assurance comes
from checks by central functions against
Group policies and standards, and senior
management assurance, reporting and
monitoring. This work is bolstered by the
independent audits that take place
across a range of areas as part of our
programme of BnEI and ISO accreditations
and certifications. The third line of
assurance is provided by the internal
audit function, which primarily focuses
on the processes and procedures
followed both locally and Group-wide.
By reviewing the collective outputs from
these various sources of assurance, the
Committee and Board gain assurance
over the design and operation of internal
controls across the Group on an
ongoing basis.
Audit Committee continued
Internal control and
risk management
Internal control
The Committee oversees the
implementation and maintenance of
the Group’s internal controls, with a
particular focus on internal financial
controls. It does so through reports
received from the internal audit function
and any reports from the external
auditors on internal control matters
noted as part of their audit work.
In addition, the Group operates a system
of annual self-assessment internal policy
and control declarations. These are
made at various levels of management
and detail and certify that the control
environment in their business area is
appropriate and functioning. Any
non-conformances are notified as part
of this process and, where remedial
actions are appropriate, these are
followed up by senior management
to ensure that a satisfactory internal
control environment is maintained.
These controls and procedures are
designed to manage, but not eliminate,
the risk of failure of the Group to meet its
business objectives and, as such, provide
reasonable but not absolute assurance
against material misstatement or loss.
Internal controls over
financial reporting
Management is responsible for
establishing and maintaining adequate
internal controls over financial reporting,
including over the Group’s consolidation
process. Internal controls over financial
reporting are designed to provide
reasonable assurance regarding the
reliability of financial reporting and the
preparation of financial statements for
external reporting purposes.
A comprehensive strategic planning,
budgeting and forecasting system is in
place. Monthly financial information,
including trading results and cash flow
statements are reviewed by senior
management and reported to the Board.
The ELT reviews performance against
budget and forecast on a monthly basis
and senior financial managers regularly
carry out Group consolidation reviews
and analysis of material variances.
96
De La Rue plc Annual Report 2023
Risk Committee
Jon Messent
Chair of the Risk Committee
“Overseeing the
identification and
management of risks
that could affect our
corporate performance.”
Dear Shareholder,
I am pleased to present the Risk
Committee report for the period ended
25 March 2023.
Committee members
The members of the Committee during
FY23 were:
– Clive Vacher (Committee Chair from
27 July 2022)
– Jane Hyde (Committee Chair and
member to 27 July 2022)
– Natasha Bishop
– Andrew Clint (to 2 September 2022)
– Ruth Euling
– Rob Harding
– Dave Sharratt (from 12 September 2022)
In addition, Jon Messent joined the
Committee on 3 April 2023 and became
its Chairman from 18 May 2023.
Operation of the Committee
The Directors have overall responsibility
for the Group’s systems of internal
control and risk management, which
includes the identification of the Group’s
principal and emerging risks. Details of
how the Directors fulfil this responsibility
and the principal risks the Group faces
can be found on pages 56 to 63.
The primary responsibility of the Risk
Committee is supporting the Board by
leading oversight of the identification
and evaluation of the risks facing
the Group and monitoring how these
are managed.
The Committee comprises all of the
Executive Directors and the rest of
the ELT members. The Group Director
of Security, HSE and Risk attends the
Committee’s meetings and other
managers with operational or
functional ownership of risks will
attend by invitation.
Any Director may attend meetings and
the Board may appoint any other
individual as they determine.
Activities during the period
The Committee met three times during
the period and considered the following
material items:
As routine items considered at
every meeting:
– The Group’s principal risks and
uncertainties (for details of these
risks, please refer to pages 56 to 63)
and the status of the mitigating
actions and controls relating to
those risks
– Reviews of emerging risks not
included in the Group risk register,
including ‘horizon scanning’ sessions
In addition the following matters were
also considered during the period:
– Review of the risk disclosures and
the Committee’s report within the
2022 Annual Report
– Review of the risk disclosures within
the FY23 Interim Report
Principal responsibilities
– Monitor and develop the risk
management policy and oversee
the implementation of the Group-
wide risk management framework
for identifying and managing risks
– Promote a risk management culture
and control environment
– Identify and keep under review the
principal risks faced by the Group,
and review the mitigations and
controls relating to those risks
– Identify and assess any emerging
or developing risks
– Review the effectiveness of the
Group’s system of risk management
– Provide reports on the status of risk
management within the Group to
the Audit Committee and Board,
and externally through this report
De La Rue plc Annual Report 2023
97
Strategic reportGovernance reportFinancial statements
Section 4: Audit, risk and internal control continued
The Committee’s work interfaces with
that of a number of other Board
Committees, most notably the Audit
Committee. The Committee Chairman
reports on the material matters
discussed at each Committee meeting
to the next meeting of the Audit
Committee. The minutes of meetings of
the Risk Committee are shared with the
Directors. Feedback from the Board or
Audit Committee is shared at the next
Committee meeting.
The Committee is supported in its work
by other management meetings and
committees, including divisional and
central enabling functions’ risk
committees and other meetings and
bodies dealing with specific risk areas
such as sanctions, HSE and security
and the Ethics Committee.
Jon Messent
Chair of the Risk Committee
29 June 2023
Risk Committee continued
– ‘Deep dive’ sessions with operational
or functional risk owners:
– Breach of Product security with a
specific focus on the handling of
materials within the Currency
business
– Breach of Information Security, an
overall review encompassing the
risk of the loss of Company,
customer or employee data and
the separate risk of an external
cyber attack. A subsequent
session reviewed an internal audit
assignment which had utilised the
US National Institute of Standards
and Technology’s framework to
assess the maturity of De La Rue’s
cyber security arrangements,
ahead of the insurance renewal
– Banking facilities and the
Company’s ability to operate within
the covenants to which the facility
is subject
– Quality management in the
Currency business, reviewing the
issues that had arisen in the year to
date and their root causes
– Performance of, and communications
between, our divisional and central
enabling functions’ risk committees
– Insurance market conditions,
particularly in relation to cyber
risks insurance
– Business Continuity Planning
– Review of our risk management policy
and framework
– Review of the Committee’s
effectiveness
98
De La Rue plc Annual Report 2023
Ethics Committee
Clive Whiley
Chair of the
Ethics Committee
“Delivering results
is important, but
delivering those results
in the right way is the
only basis on which we
can be successful on a
sustainable basis over
the long term.”
The Committee comprises all of the
Non-executive Directors. The CEO, CFO
and other senior management may
attend meetings at the invitation of the
Committee. Members of the ELT and
other employees, including senior
members of divisional leadership teams,
may be asked to attend from time-to-
time to address specific matters.
Activities during the period
During the period to 25 March 2023,
the Committee focused on the
following activities:
CBP-related initiatives, including:
– The launch of a new Code of
Business Principles in January 2023
– Monitoring the completion of online
compliance training modules
including anti-bribery and
corruption, competition law and
sanctions awareness
– Ongoing and planned awareness-
raising initiatives and training to
ensure expected ethical standards
are maintained and further
embedded throughout the
organisation
The management of the TPP
programme including:
– Reviewing the ongoing management
of third party sales consultants
Dear Shareholder,
I am pleased to present the Ethics
Committee report for the period ended
25 March 2023.
Committee members
The members of the Committee during
FY23 were:
– Kevin Loosemore (Committee Chair)
– Catherine Ashton
– Nick Bray
– Maria da Cunha (until 27 July 2022)
– Mark Hoad (from 28 September 2022)
– Margaret Rice-Jones
Members’ attendance at Committee
meetings is shown in the table on
page 77.
Following the year end, Kevin Loosemore
resigned as a director with effect from
1 May 2023, and Clive Whiley was
appointed as a member and the Chairman
of the Committee on 18 May 2023.
Operation of the Committee
The Committee oversees, on the Board’s
behalf, the Group’s compliance with
ethical business practices including the
appointment and remuneration of our
Third Party Partner sales consultants
(TPPs), our Code of Business Principles
(CBP) and compliance with its provisions
and any whistleblowing reports. The
Committee makes recommendations to
the Board on how these matters should
be addressed, reinforcing the Group’s
commitment to ensuring that sound
ethical practices are embedded in the
way we do business.
Principal responsibilities
– Assist the Board in fulfilling its
– Monitor compliance with the
oversight responsibilities in respect
of ethical matters, with the aim that
the Group conducts its business
with integrity and honesty
Company’s policies and procedures
on ethical matters, including the
operation of its whistleblowing hotline
– Oversee the investigation of any
– Advise the Board on the
identification of ethical risk and the
development of strategy and policy
on ethical matters
material irregularities identified or
reported and review any subsequent
findings and recommendations
De La Rue plc Annual Report 2023
99
Strategic reportGovernance reportFinancial statements Section 4: Audit, Risk and Internal Control continued
Ethics Committee continued
Oversight of other business ethics matters:
– Update on activities related to the
ISO 37001 anti-bribery management
system and the Banknotes Ethics
Initiative (BnEI) accreditations
including reviewing the findings from
the audits of both standards which
took place during the year and the
responses of the business to the
recommended improvements
– Review of sanctions risks and actions
undertaken or planned to manage
those risks, including updates
regarding sanctions monitoring
– Review of the gift register for
Executive Directors
– Review of reports on issues raised
through the whistleblowing hotline
– CodeLine – and other channels and
review of results of any investigations
into ethical or compliance breaches
or allegations of misconduct
Ethical risks
It is vital that we uphold the highest
ethical standards in the way we conduct
our business in order to maintain the
trust and confidence of customers and
everyone we deal with. We recognise that
our business is exposed to risks of
unethical conduct because of the nature
and value of many of our contracts, and
because standards of integrity may not
be consistent across all the countries in
which we operate. We have a robust
compliance programme in place to
manage these risks. Further information,
including a description of our ethical
framework can be found in the
Responsible Business report on pages
24 to 45.
Training
Regular, relevant and focused training on
ethics-related subjects is important and
the Committee receives regular reports
about our ethics and compliance
training programme. Training during the
period included:
– E-learning and face-to-face training
relating to the rollout of the new Code
of Business Principles including
acknowledgement by colleagues
that they understand and will comply
with it
– Anti-bribery and competition law
training where relevant for new starters
and those changing roles and bi-
annual refresher anti-bribery training
– Sanctions awareness training
– Online training modules for TPPs
– One-to-one training for new site
Ethics Champions
– Modern slavery awareness training
– Confirmation of understanding
of and adherence to gifts and
hospitality policy
Whistleblowing
We encourage all employees and people
acting on our behalf to speak up if they
have any concerns. Ethical questions or
concerns can be raised through an
externally operated confidential
reporting service. All reports are taken
seriously and investigated as appropriate
and all findings and remedial actions are
reported in detail to, and reviewed by, the
Ethics Committee.
Clive Whiley
Chair of the Ethics Committee
29 June 2023
100
De La Rue plc Annual Report 2023
Code Principle R:
Directors should exercise independent
judgement and discretion when
authorising remuneration outcomes,
taking account of company and
individual performance, and wider
circumstances.
Each of the Remuneration Committee
members is an independent Non-
executive Director. They exercise their
independence and personal judgement
when considering pay arrangements and
remuneration outcomes and will exercise
discretion whenever and wherever
warranted. The Committee members have
regard to Company performance and
wider circumstances, as well as individual
performance, in determining pay.
For further information, please refer to
the Remuneration Committee report that
follows in this section.
Section 5:
Remuneration
Code Principle P:
Remuneration policies and practices
should be designed to support strategy
and promote long-term sustainable
success. Executive remuneration
should be aligned to company
purpose and values, and be clearly
linked to the successful delivery of
the company’s long-term strategy.
Our remuneration policies and practices
are designed to support the delivery of
the Group’s strategy. During FY23 there
was a review of whether the approach
followed in recent years truly continues
to support the needs of the Company,
its shareholders and management.
The intention is to provide a range of
fixed and variable pay that promotes
the success of the Company through
the sustained delivery of operational
and financial results over the long term.
The Annual Incentive Plan provides an
incentive to deliver in-year financial
results and stretching personal
objectives, and a portion of any bonus
earned is delivered (through our Deferred
Bonus Plan) in shares which are only
released 12 or 24 months after the end
of the financial year.
Our long term incentive arrangement,
the Performance Share Plan (PSP),
incentivises the delivery of outcomes
to shareholders (assessed in terms of
growth in EPS and Total Shareholder
Return relative to FTSE 250 companies,
in each case measured over three years).
Any value derived from the PSP is only
available to the executive Directors and
other ELT members after five years and
is settled in shares.
The remuneration arrangements we have
put in place are clearly aligned with the
Company’s purpose and values. For
further information, please refer to the
Remuneration Committee report that
follows in this section.
Code Principle Q:
A formal and transparent procedure
for developing policy on executive
remuneration and determining director
and senior management remuneration
should be established. No director
should be involved in deciding their
own remuneration outcome.
While management has the primary role
in developing proposals on executive
remuneration, at Director level this must
be done within the limits set out in the
Directors’ remuneration policy. This was
last approved by shareholders at the 2020
AGM and an amended version will be
proposed for approval at the 2023 AGM.
The remuneration arrangements for
the first layer of management reporting
to the CEO are scrutinised by the
Remuneration Committee, which is
comprised solely of independent
Non-executive Directors.
Pay outcomes are reviewed by the
Remuneration Committee, who retain
discretion to adjust formulaic outcomes
where appropriate. All of our processes
are formal and transparent. Save for the
Chairman, whose fees are determined by
the Remuneration Committee, the fees
for the Non-executive Directors are
determined by the Board, and the NEDs
absent themselves from any discussion
or decision-making on this. No Director
is involved in deciding their own
remuneration outcome.
For further information, please refer to
the Remuneration Committee report that
follows in this section.
De La Rue plc Annual Report 2023
101
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Chair’s Introduction to Remuneration
This report is presented in three main
sections: an annual statement from the
Chair of the Committee; the Directors’
remuneration policy; and the annual
report on remuneration for FY23. The
Directors’ remuneration policy was
approved by shareholders at the AGM
on 6 August 2020 and had a binding
effect from that date. An updated
policy will be proposed for shareholder
approval at the 2023 AGM.
Dear Shareholder,
As Chair of the Remuneration
Committee, I am pleased to present the
Directors’ remuneration report for the
period ended 25 March 2023, my first as
Chair which has been prepared by the
Committee and approved by the Board.
I would like to extend my thanks to Maria
Da Cunha, who stepped down as Chair
of the Committee on 27 July 2022.
Margaret Rice-Jones
Chair of the
Remuneration Committee
‘Despite progress to
continue to address
legacy issues and
develop an agile
footprint which has
ensured profitability in
a challenging year, the
results have remained
disappointing and
this is reflected in
our remuneration
outcomes.’
Principal responsibilities
Remuneration
– Setting and reviewing the
Incentive plans
– Determination of the design,
conditions and coverage of annual
and long term incentive plans for
Directors and senior executives and
approval of total and individual
awards under the plans
– Determination of targets for any
performance-related pay plans
remuneration of the Chairman,
Executive Directors and senior
executives who report to the Chief
Executive Officer
– Ensuring that all remuneration paid
to Directors is in accordance with
the Company’s previously approved
remuneration policy
– Ensuring that all contractual terms
on termination, and any payments
made, are fair to the individual and
the Company
– Monitoring the reward policies and
practices throughout the business
102
De La Rue plc Annual Report 2023
This year, I would like to focus on two
themes: the changes that we are
proposing to make to the remuneration
policy which will, if approved by
shareholders, apply from the 2023 AGM;
and the performance of the Group in
FY23, which resulted in no bonus under
the Annual Incentive Plan being payable
to Executive Directors and the PSP
awards granted in 2020 lapsing.
The Committee understands the need
to create a remuneration framework that
incentivises effectively for significant
achievements in performance and
associated return to shareholders, and
acts as a retention mechanism for senior
executives, and we have consulted
widely with our shareholders in advance
of making recommendations in relation
to the policy.
As outlined in earlier sections of this
Annual Report, we face continued
headwinds to address both the ongoing
legacy challenges the business faces
while mitigating the continuing impacts
of the current macro environment.
We have experienced an
unprecedentedly volatile external market
impacting us in every market sector in
which we operate. Increased materials
and energy costs, supply chain challenges
and material shortages, increases in
inflation and a global pandemic have led
to a slower market growth in both
Currency and Authentication than
originally anticipated.
Governance and compliance
– Ensuring that provisions relating to
disclosure of remuneration as set
out in the relevant legislation, the UK
Listing Rules and the UK Corporate
Governance Code are fulfilled
However, despite these issues, in the last
three years we have continued to make
progress to ensure we have a strong
underlying business and have been able
to remain profitable even in the most
difficult of market downturns, something
that was unachievable three years ago.
The business has introduced a new
leadership team into Authentication to
focus on accelerating growth, capitalising
on existing GRS schemes and expansion
of these beyond the GCC countries
and driving growth in Brand and ID
components. In Currency we have taken
significant further cost from the business
and redefined the operating model and
product roadmap to ensure that we are
as optimal and efficient as possible. This
allows us to remain competitive in the
market against our key competitors.
We continue to tackle many of the
legacy issues in our business particularly
in addressing our cost base. Over the
course of the three years since we
commenced turnaround, we have
removed in excess of £40m of cost,
reducing annual pension payments,
saving £57m of future cash spend and
exited the Portals Relationship
Agreement, avoiding future outlays of
£119m. We have equally prioritised a
continued focus on creating a flexible
and competitive footprint and optimal
operating model.
We believe that it is critical that executive
remuneration is fair and competitive so
that the Group continues to attract,
motivate and retain the highly talented
people required to deliver the challenging
targets to which we have committed.
Above all, the Committee’s objective is to
ensure that our Directors’ remuneration
policy incentivises and rewards the
delivery of sustainable shareholder value.
Committee meetings
The Remuneration Committee consists
exclusively of Non-executive Directors,
all of whom are regarded as independent.
The Committee met seven times during
FY23 and details of attendance can be
found in the table on page 77. The Chief
Executive Officer and the Group Director
of Human Resources attended these
meetings by invitation. The General
Counsel and Company Secretary, who is
the secretary to the Committee, advised
on governance issues.
No Executive Director or employee is
present for or takes part in discussions
in respect of matters relating directly to
their own remuneration.
Activities in the period
– Approval of the Executive Leadership
Team (ELT) group and strategic
individual objectives for the year
– Triennial review of Directors
Remuneration Policy including
extensive consultation
– Review of performance targets for
short and long term incentive plans
– Approval of pay awards for the
Chairman, the Executive Directors and
the other ELT members
– Review and approval of the Directors’
remuneration report for FY22
– Review of market trends and latest
developments in governance
– Review of inclusion principles for ESG
in incentives
– Awards under the UK Sharesave scheme
– Review broader workforce
remuneration in consideration of
executive remuneration
– Review of the report on gender pay
gap and action plan
Structure of Directors’
remuneration report
This report is presented in three main
sections: an annual statement from
the Chairman of the Committee; the
Directors’ remuneration policy to be
approved by shareholders at the 2023
AGM; and the annual report on
remuneration for FY23.
In accordance with the regulations, we
will be asking shareholders to vote on
two separate remuneration resolutions
as follows:
– The binding triennial vote on the
proposed Directors’ remuneration
policy as set out on pages 105 to 111
which will, subject to shareholder
approval, become formally effective
from the 2023 AGM
– An advisory vote on the annual
report on remuneration as set out on
pages 105 to 125 which provides
details of the remuneration earned
by Directors for performance in FY23
A copy of the remuneration policy
approved in 2020 can be found in the
annual report 2020 on the Company’s
website: www.delarue.com.
Proposed remuneration policy
Our remuneration policy is key to
delivering both in year performance
and the longer term transformation of
De La Rue.
This year we have carried out our
triennial review of the policy.
The proposed policy is designed to
support the business in delivering a
sustainably profitable and cash
generative business, targeting growth
opportunities in Authentication and,
in Currency. We will continue to shape
our Currency division’s printing capacity
to market demand across our sites in
Malta, Sri Lanka, and the UK and to
address and resolve legacy issues
across the group.
De La Rue plc Annual Report 2023
103
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Chair’s Introduction to Remuneration continued
The last two years have represented
a challenging period for the business
driven primarily by the delayed impact of
Covid-19 creating market pressures and
we share our shareholders’ disappointment
in relation to share price performance
during this time. It is with this in mind
that we have considered any changes
to the remuneration policy.
We are proposing a change to our current
long term incentive arrangements by
introducing a proportion of higher
leveraged reward for both executives and
senior management for overachievement
of targets that results in an increase in
shareprice. Long Term Incentives (LTIPs)
have previously been applied as
Performance Share Plans (PSP) subject to a
three year performance period measured
against two equally weighted metrics,
followed by a two year holding period.
Following review of appropriate metrics
and consultation with our shareholders
we are proposing that LTIP will be made up
of a mix of PSP and market value options.
Full details of this new plan, to be known
as De La Rue Investor Return Plan, are set
out in the policy section of the report on
pages 105 to 116, and will be subject to a
binding shareholder vote at the AGM on
7 September 2023.
The changes proposed will:
– Strongly align executive and
shareholder interests
– Allow for common and unified
reward amongst all senior management
and Executive Directors, aligning
all participants
– Provide greater levels of reward where
longer term focus results in improving
the share price
– Provide a mechanism to attract, retain
and motivate executives and leaders
over the longer term to deliver our
strategic goals
– Promote a high-performance culture
We remain confident that all other
aspects of the Policy are fit for purpose
and are not proposing any further
material changes.
Implementation of the policy
in FY24
If approved by shareholders at the
forthcoming AGM, the Committee
intends to apply the revised
remuneration policy as follows:
– Base salary and benefits: No material
change to the Executive Directors’
base salary level or pension and
benefits arrangements.
– Annual Bonus Plan (ABP): For FY24
the current maximum opportunity
level of 135% of salary for the CEO will
continue to apply, with 60% of any
bonus payable in cash and 40%
deferred into shares released half
after one year and the remaining half
after a further year. The Committee
has carefully considered bonus
performance metrics for FY24 and
concluded that the current measures
remain highly relevant for the current
turnaround situation
– De La Rue Investor Return Plan: The
Remuneration Committee has given
detailed consideration to the most
appropriate Long Term Incentive (LTIP)
arrangements that provide a strong
link between business performance,
shareholder return and executive
reward. For awards from FY24
onwards, the Committee proposes to
implement a new policy proposal. Plan
participants will receive their LTIP
award in two elements. Firstly, awards
under the existing Performance Share
Plan, subject to two performance
conditions (Free cash flow and EPS)
both equally weighted and measured
over three year periods. The second
portion of award will be made as
market value options, to be granted
under the new Investor Return Plan.
Vesting of these awards will be
subject to an underpin that our Total
Shareholder Return at least equals the
return of the FTSE mid-250 (excluding
Investment Trusts) index measured
over a three year performance period
The Committee carried out an extensive
consultation exercise in relation to the
proposed new policy with our largest
shareholders. All key shareholders and
main UK institutional investor bodies
were written to and encouraged to
attend a meeting to discuss proposals
in detail. Eight shareholders, collectively
holding 48% of our equity, took up
this opportunity to discuss proposed
policy changes.
The feedback we received was both
constructive and in a large measure
supportive and it was clear that our
shareholders, while understandably
disappointed in the share price
performance, have a good appreciation
of the challenges that De La Rue is
dealing with and the need for significant
change. I hope you will welcome the
conclusions the Committee has reached
on this matter as a result of the
consultation process which we believe
acknowledges the challenges facing the
business and demonstrates our
commitment to a high level of alignment
between the interests of shareholders
and the senior management of the
business. The Committee believes that
the above Policy is in the best interests
of shareholders as it will encourage,
reinforce and reward the delivery.
Activities in FY23
The primary focus for the business
during the FY23 financial year has been:
– Increased focus on driving efficiency
and greater cost competitiveness to
help offset the challenges faced
throughout the year, helping to
mitigate supply chain cost inflation
– Proactive procurement strategies to
manage raw material shortages
– Targeted profitable growth and
conversion of customers, in key
product segments of Polymer,
– Features and both Brand and GRS
– Ongoing footprint and capacity review
adding production capability and
flexibility with Malta expansion and
new polymer line at Westhoughton
– Positive cash management
– Releasing a clearly articulated ESG
strategy outlining the key priorities
and targets set out under all areas
– Supporting high levels of employee
engagement and communication
– Creating certainty on potential future
cost pressures by securing structured
pay awards while maintaining focus on
balanced rewards and wellbeing for
all employees
– Continuing to align executive and
shareholder interests
No changes were made to the
application of the policy this year.
104
De La Rue plc Annual Report 2023
Employee experience
During FY23, our operating sites in the
UK, Malta, Kenya, Sri Lanka and the US
remained operational. Despite significant
disruption due to global events including
the economic situation in Sri Lanka we
were able to deliver in full to customers
as required during the financial year.
The impact of the headwinds and
slowing of our market on overall business
performance is reflected appropriately
in the outturn of the Annual Bonus Plan
with no eligible employees receiving an
award under these plans.
We also conducted a salary review
during the year for all eligible employees.
The employees in Collectively bargained
agreements received the second year
increase negotiated through the multi-
year pay deals in FY22. The wider workforce
remuneration was taken into account in
our decisions on executive remuneration.
We have continued to expand our
wellbeing benefits and support in all
locations, branching out into financial
wellbeing alongside both health and
mental health wellbeing.
As a result of the changes to market
performance we were required to reduce
costs and continue to right size our
manufacturing footprint and ensure we
had optimal structures in both Currency
and Authentication. This did mean that
redundancy exercises were conducted in
both our Kenyan and Westhoughton
manufacturing sites as well as across a
number of teams and departments both
in the UK and internationally.
We continued to maintain all our formal
and informal forums and communicate
openly and transparently to ensure that
our employees remain aware of the
business performance and challenges
as well as successes and that all views,
questions and concerns had a mechanism
through which to be raised.
Shareholder experience
Business performance in FY23 was
impacted due to the extremely tough
trading conditions for both divisions
of De La Rue. Currency experienced
the worst market background for
many years.
While strong supply chain management
mitigated much of the cost risks
identified at the beginning of the year,
adjusted operating profit fell substantially
versus prior year which has had a
negative impact on the shareprice.
While substantial progress was made
during the second half, through a variety
of actions, designed to maximise profit
despite lower volumes and a continued
focus on cash management and a
reduction in net debt, overall the
performance did not achieve the
underpin required above which an annual
bonus would have been payable and
accordingly no ABP will be paid for FY23.
During FY23 we incorporated ESG on a
formulaic basis with having a 10% weighting
attached to a target reduction of solid
waste per good output.
The Board does not expect to pay
dividends unless and until the Company
is generating sustainable positive free
cash flow.
Further details on our performance
against bonus measures is set out on
page 118.
Remuneration outcomes FY23
As discussed elsewhere in the Annual
Report, the business faced a number of
significant challenges during the year
with lower than expected volumes
impacting both divisions. This has been
well documented throughout the year
resulting in a re-basing of profit
expectations for the year.
Primarily thanks to the steps the
management team have taken to
mitigate legacy issues including
continuing to reduce complexity in our
footprint, reduce costs and improve
efficiencies across the Group we have
been able to offset the impact of the
headwinds reporting an adjusted
operating profit of £27.8m in line with
revised market expectations.
ABP scorecard financial measures
account for 80% of maximum ABP with
the remaining 20% based on achievement
against strategic personal objectives
including a specific ESG metric.
We still believe that measures for ABP
are the right ones and believe that the
balance of remuneration between both
short and long term incentives is
appropriate for the business.
The performance period for the PSP
awards granted in 2020 concluded
during the year. Performance did not
meet threshold levels and none of these
awards have vested.
The Committee reviewed all remuneration
outcomes in context of the business
outcomes and the experience of the
shareholders and the wider workforce.
In all cases it decided not to adjust the
formulaic outcomes. There was therefore
no reward payable under either the
ABP or PSP to any Executive Director
during FY23.
As outlined we are making proposed
changes to the long term incentive
arrangements. Our aim is to achieve
an appropriate balance between
incentivising Executive Directors and
ensuring that variable remuneration will
only be payable on performance that
delivers sustainable value to shareholders.
We believe that the changes in our policy
in relation to the Long Term Incentive
Awards will meet that aim.
De La Rue plc Annual Report 2023
105
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Chair’s Introduction to Remuneration continued
We are pleased that our previous
Remuneration report was supported by
shareholders at the AGM on 27 July 2022,
with almost 87% of votes cast in favour
and a minimal level of votes withheld.
We welcome and are grateful for the
constructive feedback our shareholders
have provided in the last year, which has
informed our deliberations and helped
shape our approach to remuneration.
Executive Director changes
As announced in January 2023 Rob
Harding resigned as Chief Financial
Officer and will leave the business in
July 2024.
Priorities for FY24
The work of the Committee in FY24
will continue to focus on ensuring that
executives are fairly rewarded for their
contribution to the Group and
incentivised to deliver returns for
shareholders, while driving a strong
culture aligned to its ESG strategy. The
Committee is supportive of the specific
Environment, Social and Governance
(ESG) measures introduced during FY23.
Key metrics on Health and Safety,
diversity and specific steps to support
the environmental sustainability journey
will also continue to form part of
personal strategic objectives for
Executive Directors and the wider
management population.
I trust you will find the policy and
implementation reports clear and
informative and the Committee can
continue to receive your support on both
votes at this year’s AGM.
Margaret Rice-Jones
Chair of the Remuneration Committee
29 June 2023
106
De La Rue plc Annual Report 2023
Current ABP structure and weighting %
Revenue
Profit
Net debt
Strategic ESG objective
Strategic personal objectives
20
30
30
10
10
Compliance statement
This report has been prepared on
behalf of, and has been approved by,
the Board. It complies with the Large
and Medium-sized Companies and
Groups (Accounts and Reports)
Regulations 2008 (SI 2008/410) as
amended, the UK Corporate
Governance Code and the FCA’s
Listing Rules and takes into account
the policies of shareholder
representative bodies. The
Companies Act 2006 and the Listing
Rules require the Company’s auditor
to report on the audited information
in their report, and to state that this
section has been properly prepared in
accordance with these regulations.
Directors’ remuneration policy
Introduction
This section of the report contains
details of the Directors’ remuneration
policy that will govern the Company’s
future remuneration payments.
The Remuneration Committee has
established the policy on the
remuneration of the Executive Directors
and the Chairman. The Board has
established the policy on the remuneration
of the other Non-executive Directors.
Awards and benefits granted under the
previous Directors’ remuneration policy
will be honoured.
Proposed remuneration policy
The Group’s remuneration policy aims
to align the interests of the Executive
Directors and other senior executives
with those of shareholders.
The policy will take effect from
7 September 2023, subject to shareholder
approval at the AGM. The remuneration
policy is designed to ensure execution of
the Group’s strategy and to align with the
interests of shareholders.
As indicated in the annual statement
from the Chairman of the Remuneration
Committee, we believe that the previous
remuneration policy remains in the
majority fit for purpose and does not
require fundamental change. Therefore,
we are only proposing a variation to our
Long Term Incentive Arrangements (LTIP).
The Committee believe that with the
current external market pressures
and a need to capitalise on growth
opportunities over the next three years,
a change to the LTIP will help ensure we
can attract and retain the appropriate
talent within the business required to
deliver consistent business performance
and shareholder return. The changes
proposed remain true to the underlying
current method of long term reward
through Performance Share Plan but
provide higher leveraged outcomes for
the achievement of significant growth
during this period.
The overriding objective of the policy
review is to ensure that the executive
remuneration policy both encourages,
reinforces and rewards the delivery of
sustainable shareholder value while
providing an effective mechanism to
attract, retain and motivate executives
and senior management to deliver long
term growth and value.
The Remuneration Committee believes
executives should be rewarded through
performance-related pay scales that
are commensurate with the delivery of
value for the business and with annual
increases comparable to awards across
the majority of the workforce.
Incentives and particularly long term
incentives should account for a
significant proportion of the overall
remuneration package of Executive
Directors so that their reward is aligned
with shareholder interests and the
Group’s performance, without
encouraging excessive risk-taking.
Performance-related elements of
remuneration therefore form a significant
proportion of the total remuneration
packages. This is illustrated on page 115.
The Committee continues to take into
account performance on environmental,
social and governance matters with
annual bonus having a direct link to both
delivery against strategic personal
objectives and a specific measurable
ESG measure.
Policy table
The remuneration package for Executive
Directors consists of fixed base salary,
pension and other benefits and a
significant proportion of variable pay
including annual bonus and long term
share based incentives. The following
table summarises each element of the
proposed remuneration policy for
the Executive Directors and explains
how each works and is linked to the
corporate strategy.
De La Rue plc Annual Report 2023
107
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Directors’ remuneration policy continued
Purpose and link
to strategy
Base Salary
Fixed competitive
remuneration set at
levels to recruit and
retain talent.
Determination informed,
but not led, by reference
to the marketplace for
companies of similar
size and complexity.
Reflects individual skills,
experience and
responsibility necessary
to deliver business
strategy.
Rewards individual
performance.
Operation
Maximum potential
opportunity
Performance metrics
Individual performance is the
primary consideration in setting
salary alongside overall Group
performance, affordability and
market competitiveness.
Reviewed annually and fixed for
12 months (but may be reviewed
more frequently).
Influenced by:
– Role, experience, responsibilities
and performance
– Change in broader workforce salary
– Group profitability and prevailing
market conditions
– Salary levels across the Group
generally
– Eliminating the gender pay gap
Increases are not automatic.
To avoid creating expectations
of Executive Directors and
other employees, no maximum
base salary has been set.
Increases will not normally
exceed the average of
increases awarded within the
rest of the Group in the UK.
Larger increases may be
awarded in certain
circumstances including, but
not limited to:
– Increases in scope or
responsibility
– Where market conditions
indicate a lack of
competitiveness and risk to
attracting or retaining
executives
Where the Remuneration
Committee exercises its
discretion to award increases
above the average for other
employees, a full explanation
will be provided in the next
annual report on remuneration.
Benefits
Market competitive
benefits sufficient to
recruit and retain the
talent necessary to
develop and execute the
business strategy.
Provision of car allowance, life
assurance and private medical scheme.
Executive Directors are also provided
with permanent health insurance.
Executive Directors can also participate
in the annual leave flexibility scheme.
While the Remuneration
Committee has not set an
absolute maximum, benefits
will be market competitive
taking into account role and
individual circumstances.
Not applicable
Pension
To provide market
competitive post-
retirement income
sufficient to recruit and
retain executives.
Other benefits may be provided on an
individual basis such as, but not limited
to, relocation allowances including
transactional and legal costs, disturbance
and travel and subsistence costs.
Executive Directors are offered
membership of a defined contribution
pension plan or choice of cash in lieu
(for example, where contributions to
the plan would cause an Executive
Director to exceed the HM Revenue and
Customs (HMRC) annual allowance or
lifetime allowance limits). The
contribution rates offered are aligned
with pension contributions for the
wider workforce and based on base
salary only.
108
De La Rue plc Annual Report 2023
Not applicable.
The contribution rates for
newly appointed Executive
Directors will be aligned to
rates for the wider workforce
at the date of appointment.
The Executive Directors may
choose to receive a cash
allowance in lieu of
contributions. The allowance
is equal to the pension
contribution that would
otherwise have been paid less
the Company’s national
insurance contribution to
ensure cost neutrality.
Operation
Purpose and link
to strategy
Annual Bonus Plan (ABP)
To incentivise and
reward delivery of
financial and personal
performance targets
that address the distinct
commercial and
strategic needs of the
business, and align with
shareholder interests.
The Remuneration Committee sets
Group financial targets and agrees
personal objectives for each Executive
Director at the start of each year.
Reference is made to the prior year and
to budgets and business plans while
ensuring the levels set are appropriately
challenging but do not encourage
excessive risk-taking.
To ensure a consistent
and stable reward
structure throughout
the management group
that will remain fit
for purpose.
To support a pay for
performance philosophy.
To help attract and
retain top talent and be
cost effective.
Compulsory deferral
of shares supports
alignment with
shareholder interests
and also provides a
retention element.
Payments are determined by the
Remuneration Committee after the
year end. The bonus plan is non-
contractual and may be offered on
a year by year basis.
Sixty per cent of annual bonus is
payable immediately in cash. Forty per
cent of annual bonus is payable in
deferred shares (deferred bonus plan)
and released in tranches, subject to
continued employment (with early
release in certain circumstances). There
are no further performance conditions.
Fifty per cent of deferred shares are
released one year after cash payout
and the remaining 50% two years after
cash payout.
The Remuneration Committee may
increase the number of shares subject
to a deferred share award to reflect
dividends that would have been paid
over the deferral period on shares
that vest.
The deferred share element (DBP)
will be disclosed in the annual report
on remuneration.
The cash and deferred share element
are subject to malus and clawback
provisions to allow the Company to
recoup three years from award in the
event of material financial misstatement
of results, gross misconduct, other acts
or omissions that could bring the
business into disrepute and or cause
reputational damage or corporate failure.
The Committee may also make
discretionary adjustments, up and
down, to the formulaic outcome of
short and long term plans if there is
misalignment with the Group’s strategic
goals or shareholder interests.
Maximum potential
opportunity
Performance metrics
The current annual maximum
bonus opportunity of 135% of
salary for the Chief Executive
Officer and 115% of salary for
the Chief Financial Officer
linked to business performance
will continue to apply.
The Remuneration Committee
has the discretion to increase
the overall maximum bonus
level to 150% of salary, subject
to this not being above the
competitive market range.
The bonus payout level is
determined by achievement of
Group financial performance
measures with an element
based on personal objectives.
The metrics, while stretching,
do not encourage inappropriate
risks to be taken.
The Remuneration Committee
will maintain discretion to
consider the financial underpin in
respect of awards under the ABP.
Financial targets and weightings
will be disclosed in the annual
report on remuneration.
De La Rue plc Annual Report 2023
109
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Directors’ remuneration policy continued
Operation
Purpose and link
to strategy
Long Term Incentive Plan awards
A share-settled long
term incentive aligned
closely to corporate
strategy and
shareholders interests.
Executive Directors receive share
awards annually under either or both
of: (a) an award under the existing
Performance Share Plan and (b) a
market value share option under the
proposed Investor return plan. The
overall value of award will not exceed
the policy limit in any year.
PSP awards vest subject to continued
employment and meeting stretching
performance conditions. These consist
of two components, measured
separately and in each case over
a period of three financial years.
IRP awards vest subject to continued
employment and an underpin linked to
the Company’s Total Shareholder
Return relative to a market benchmark.
Performance metrics while challenging
will not encourage excessive risk taking.
In each case, vested awards cannot be
exercised or received by an Executive
Director until after a further two-year
holding period.
The Committee may determine that
the award holder will receive additional
shares equal to the value of any
dividends which would have been paid
(to end of the holding period) on the
shares subject to an award which vest.
PSP and IRP awards may vest early in
‘good leaver’ circumstances. This can
include on a change of control (or other
similar event) subject to satisfaction
of the performance conditions and,
unless the Committee determines
otherwise, pro-rating for time in the
performance period.
The Committee has the right to impose
‘malus’ on any unvested awards and to
‘claw back’ any awards within three
years of the vesting where there has
been material misstatement of results,
gross misconduct, any act or omission
that could bring the business into
disrepute and or cause reputational
damage or corporate failure, for which
the participant was culpable.
The Committee may also make
discretionary adjustments, up and
down, to the formulaic outcome of any
incentive plans if it judges that there is
misalignment with the Group’s strategic
goals or shareholders’ interests.
Awards under the
Performance Share Plan
require delivery of key
business metrics
assessed over a
three-year performance
period, which should
result in the delivery of
value to shareholders
Awards under the
Investor Return Plan will
only have value if the
share price exceeds the
option price, and vesting
requires that we have
delivered market-
competitive total returns
to shareholders
For Executive Directors,
there is a further
two-year holding period
before any reward can
be realised. All awards
are share-settled, to
further align executives’
and shareholders’
interests.
The strategic alignment
is to:
– drive performance,
measured using key
strategically aligned
performance metrics,
over the longer-term
– ensure that
shareholder value,
and in particular
share price growth,
is prioritised
– ensure that there has
been performance
before pay can be
delivered
– attract, retain and
motivate talented
individuals of the
calibre needed to
drive the Company’s
future development
and performance
110
De La Rue plc Annual Report 2023
Maximum potential
opportunity
Performance metrics
The maximum face value
of awards granted to any
Executive Director or other
eligible employees in any
financial year shall be an
amount not exceeding 100%
of salary as at the award date.
The Committee retains
discretion in exceptional
circumstances to grant awards
with a face value of up to 150%
of salary.
Awards under the PSP will
normally vest subject to the
achievement of Group
performance over a period of
three financial years against key
metrics set by the Remuneration
Committee which are aligned
to commercial business needs
and strategy.
The Remuneration Committee
must be satisfied that vesting
reflects the underlying
performance of the Group and
retains the flexibility to adjust
the vesting amount to ensure it
remains appropriate to the
business performance achieved.
Awards under the IRP will only
vest subject to an underpin that
the Company’s Total
Shareholder Return matches or
exceeds that of the FTSE
mid-250 (excluding Investment
Trusts) index, measured over an
initial three-year period or other
suitable underpin as deemed
appropriate by the
Remuneration Committee.
The Committee regularly
reviews the performance
conditions and targets to
ensure they continue to be
aligned with the Group’s
business objectives and
strategy and retains the
discretion to change the
measures and their respective
weightings to ensure continuing
alignment with such objectives
and strategy.
The Committee maintains the
ability to adjust or set different
performance measures if events
occur or circumstances arise
which cause the Committee to
determine that the performance
conditions have ceased to be
appropriate. If varied or
replaced, the amended
performance conditions must,
in the opinion of the Committee,
be materially no more or less
difficult than the original
condition when set and these
will be disclosed in the annual
report on remuneration.
Operation
Purpose and link
to strategy
All employee share plans
To encourage
employees including the
Executive Directors to
build a shareholding
through the operation of
all employee share plans
such as the HMRC
approved De La Rue
Sharesave scheme in
the UK.
Executive Directors may participate in
the Sharesave scheme on the same
terms as other employees.
Under the UK Sharesave scheme, the
option price may be discounted by up
to 20%. Accumulated savings through
payroll may be used to exercise an
option to acquire shares.
Under the Employee Share Purchase
Plan, employees in the US may be
offered the opportunity to purchase
the Company’s shares at a 15%
discount to the market price. Any
purchases are funded through
accumulated payroll deductions.
Maximum potential
opportunity
Performance metrics
No performance measures but
employment conditions apply.
The maximum savings is in line
with the legislative limit which
is currently £500 per month
over a three or five year period
under the Company’s
Sharesave scheme. The rules
of the scheme provide for
savings up to the legislative
limit of £500 per month.
Shareholders approved the Rules
of Sharesave and the ESPP at the
2022 AGM.
Shareholding requirement for
Executive Directors
The Remuneration Committee believes
that it is vital that the interests of
Executive Directors should be closely
aligned with those of shareholders.
Executive Directors are required to build
up a shareholding equivalent to two
times salary. It is intended that this is
met by Executive Directors retaining
100% of vested post-tax Deferred Bonus
shares, restricted shares and performance
shares until the requirement is met in full.
A post-employment shareholding
requirement will apply of two times
salary (or the actual shareholding at date
of exit if lower) for the first year following
exit and 50% of this level for the second
year following exit.
For the purposes of the in-employment
shareholding requirement, the following
types of shares will be included:
– Fully beneficially owned shares,
We continue to maintain an appointed
Non-executive Director with direct
accountability for listening to
employee views.
including shares purchased by the
individual out of own funds
– Deferred Bonus shares (on a net-of-
tax basis)
– PSP awards, from the point where the
performance conditions have been
assessed and the award has vested
(on a net-of-tax basis)
– IRP options, from the point where
the awards has vested (on a net-of-
tax basis)
For the purposes of the post-
employment holding requirement,
the above categories of shares will be
required to be held, with the exception of
shares purchased by the individual out
of own funds, so as to avoid potentially
disincentivising share purchases.
Employee considerations
In line with best practice and as outlined
in our Responsible Business section of
this report, the Remuneration Committee
and main Board ensure a constant
understanding of the level of engagement
and views of our employees through
regular and direct contact.
Through this role we have taken steps
to engage with employees on European
Employee Forum and UK employee
forums on the proposed remuneration
policy and its application when
determining the remuneration
arrangements for Executive Directors.
Decisions on Executive remuneration
consistently take into consideration the
pay and conditions of employees
throughout the Group.
In particular, the Committee is kept
informed of the structure and application
of reward policies across the Group,
including:
– Salary increases for the general
employee population
– Overall spend on variable pay,
including annual bonus and other
incentive and commission schemes in
operation across the Group
– Participation in the ABP and Long
Term Incentives
– Gender pay gap
– CEO pay ratio analysis
De La Rue plc Annual Report 2023
111
Strategic reportGovernance reportFinancial statements Non-executive Directors
All Directors offer themselves for annual
re-election at each AGM in accordance
with the UK Corporate Governance
Code. Service contracts for Executive
Directors and letters of appointment for
Non-executive Directors are available for
inspection at the registered office
address of the Company.
Payment for loss of office
In determining compensation for early
termination of a service contract, the
Remuneration Committee carefully
considers the specific circumstances,
the Company’s commitments under the
individual’s contract and the individual’s
obligation to mitigate loss. The table below
outlines the framework for contracts for
Executive Directors. Should additional
compensation matters arise, such as a
settlement or compromise agreement, the
Remuneration Committee will exercise
judgement and will take into account the
specific commercial circumstances.
Section 5: Remuneration continued
Directors’ remuneration policy continued
Pay review budgets for senior managers
and executives are set at levels which
are typically lower or the same as those
agreed with our trade unions for
employees whose pay is collectively
bargained. The principle of fair pay
aligned to performance operates across
the Group at all levels. The remuneration
policy applied to the Executive
Leadership Team and the most senior
executives in the Group is consistent
with the policy for the Executive
Directors, in that a significant element
of remuneration is dependent on Group
and individual performance and tied to
longer term growth of the business
aligned to shareholder interests. The
Group aims to offer competitive levels
of remuneration, benefits and incentives
to attract and retain talented individuals
at all levels with the experience and
capability to deliver the business strategy.
The Chief Executive Officer consults
with the Remuneration Committee on
the remuneration of executives directly
reporting to him and other senior
executives and seeks to ensure a
consistent approach across the Group
taking account of seniority, market
practice and the key principles of
remuneration outlined above.
On authority of the Committee, the Chief
Executive Officer has discretion to make
Long term incentive awards to a limited
number of employees not being
Executive Directors or Executive
Leadership Team members.
These arrangements ensure that the
application of the policy is heavily
influenced by remuneration
arrangements for all employees.
Remuneration Committee
discretion
The Remuneration Committee reserves
the right to adjust or set different
performance measures for both short
and long term plans if events occur or
circumstances arise in which performance
conditions have ceased to be appropriate.
These events include substantial
changes in business structure or
strategy, acquisition or divestment.
The Committee may also make
discretionary adjustments, up and down,
to the formulaic outcome of short and
long term plans if there is misalignment
with the Group’s strategic goals or
shareholder interests. Any use of this
discretion will be carefully considered
by the Committee and fully disclosed.
Shareholder views
The Remuneration Committee engages
in regular dialogue with shareholders to
discuss and take feedback on its
remuneration policy and governance
matters. The Committee approached the
holders of 77% of our equity including
the main UK institutional Investor bodies
as at March 2023 and extensively
engaged with regards to the proposals
for the new directors’ remuneration
policy. The policy remain subject to a
binding vote at the AGM on 7 September
2023. The Committee welcomes an open
dialogue with shareholders and intends
to continue to consult with major
shareholders before implementing any
significant change to the Directors’
remuneration policy.
Service contracts
Current and new Executive Directors
are employed on contracts that have
a notice period that should not exceed
six months.
The Remuneration Committee
recognises that in the case of
appointments to the Board from outside
the Group, it may be necessary to offer
a longer initial notice period, which would
subsequently reduce to six months after
that initial period.
112
De La Rue plc Annual Report 2023
Policy
Notice period on termination by
the Company
Termination payment at the
Company’s sole discretion
Change of control
Vesting of incentives for leavers
Pension benefits
Maximum of six calendar months. The Remuneration Committee recognises that in
the case of appointment to the Board from outside the Group, it may be necessary
to offer a longer initial notice period, which would subsequently reduce to six
months or less.
On termination by either the Company or the relevant Executive Director, the
Company retains the discretion to make a payment in lieu of notice not exceeding
six months’ basic salary, excluding bonus but including benefits in kind (including
company car or car allowance and private health insurance) and pension
contributions (or cash in lieu of pension).
Benefits provided in connection with termination payments may also include,
but are not limited to, outplacement and legal fees.
Under the ABP, share awards will vest in full on change of control. Awards under the
PSP or Long term incentives will vest early on a change of control (or other similar
event) subject to satisfaction of the performance conditions and, unless the
Remuneration Committee determines otherwise, pro-rating for time lapsed in the
performance period.
The Remuneration Committee has the discretion to determine appropriate bonus
amounts taking into consideration the circumstances in which an Executive Director
leaves. Typically for ‘good leavers’, bonus amounts (as estimated by the Remuneration
Committee) will be pro-rated for time in service to termination and will be subject to
performance, paid at the usual time. ‘Good leavers’ will be those individuals who die
in service or leave De La Rue as a result of their ill-health, injury, disability or the sale
of their employing company or business out of the Group or in any other
circumstances at the discretion of the Committee.
– The vesting of share awards is governed by the rules of the appropriate incentive
plan approved by shareholders. Typically for ‘good leavers’:
– Under the DBP, the provisions allow awards to vest in full at the normal vesting
date or earlier at the discretion of the Remuneration Committee
– Under the PSP and the proposed IRP, awards are pro-rated to reflect the
proportion of the performance period that was worked (unless the Remuneration
Committee determines otherwise), and then vest at the normal vesting date to
the extent that the relevant performance targets have been met. Participants then
have a short window in which to exercise their options. The Remuneration
Committee has the discretion to test the performance targets early and
accelerate vesting to the point of cessation of employment
– Good leavers under the Sharesave scheme, which is an HMRC tax-advantaged
scheme, are entitled to exercise options, using their accumulated savings plus any
early closure interest
– If awards are made on recruitment, the treatment on leaving would be determined
at the time of grant at the Remuneration Committee’s discretion, in accordance
with the relevant plan rules.
These will be paid in accordance with the rules of the pension scheme. Where an
early retirement pension is paid from a legacy UK defined benefit pension scheme,
a reduction will be made to the pension to reflect early receipt using factors
determined and set by the Trustees from time to time.
De La Rue plc Annual Report 2023
113
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Directors’ remuneration policy continued
Remuneration policy for the Chairman and Non-executive Directors
Element
Chairman fees
Operation by the Company
The remuneration of the Chairman is set by the Remuneration Committee. Fees are
set at a level which reflects the skills, knowledge and experience of the individual,
while taking into account market data.
Non-executive Director fees
Non-executive Directors do not have service contracts but are appointed for fixed
terms of three years renewable for a further three years. Terms beyond this period
are considered on a case-by-case basis.
The Board (excluding Non-executive Directors) is responsible for setting Non-
executive Directors’ fees. Fees are structured as a basic fee for Board and
Committee membership. Committee Chairmen and the Senior Independent Director
receive an additional fee. Reasonable expenses for attending Board meetings are
reimbursed by the Company and the Group may pay any tax due on such benefits.
Fees may be paid in the form of De La Rue shares.
Total fees paid to Non-executive Directors will remain within the limit set out in the
Company’s articles of association of £750,000 per annum.
Non-executive Directors are not eligible for pension scheme membership and do
not participate in any of the Group’s annual incentive plans, or share option
schemes. No compensation is payable to the Chairman or to any Non-executive
Director if the appointment is terminated.
Generally (though not necessarily in all
circumstances) the Committee will
favour share awards with appropriately
stretching performance targets attached
and, at a minimum, expects that:
– If forfeited remuneration was in the
form of shares, compensation will be
in the form of shares
– If forfeited remuneration was subject
to achievement of performance
conditions, compensation will be
subject to no less challenging
performance conditions
– The timing of any compensation will,
where practicable, match the vesting
schedule of the remuneration forfeited
A newly-appointed Executive Director
may be provided with reasonable
relocation support.
Internal appointments will receive a
remuneration package that is consistent
with the remuneration policy. Legacy
terms and conditions would be
honoured, including any outstanding
incentive awards. Company pension
contribution rates would be set in line
with the rates available to the wider
workforce at the date of appointment.
Subject to the limit on additional
maximum variable remuneration set out
below, incentive awards may be granted
within the first 12 months of appointment
above the maximum award opportunities
set out in the policy table above.
Excluding payments or awards to
compensate for remuneration forfeited
on resignation from a previous employer,
the maximum level of variable
remuneration which may be awarded to
a new Executive Director, above the
maximum levels set out in the policy
table above, is one times base salary.
The Remuneration Committee will ensure
that variable remuneration is linked to
the achievement of appropriate and
challenging performance measures
and will be forfeited if performance or
continued employment conditions are
not met.
Fees payable to a newly-appointed
Chairman or Non-executive Director will
be in line with the fee policy in place at
the time of appointment.
Remuneration policy for new
appointments
When considering the appointment of
Executive Directors, the Committee
balances the need to attract candidates
of sufficient calibre while remaining
mindful of the need to pay no more than
necessary. The Committee will typically
align the remuneration package with the
above remuneration policy. Base salary
may be set at a higher or lower level than
previous incumbents. Where possible,
salary may be set at an initially lower
level with the intention of increasing it
over the following two years dependent
on performance in the role and
experience gained. In certain
circumstances, to facilitate the
recruitment of individuals of the required
calibre, incentive arrangements and
awards may also be higher. The
Remuneration Committee retains the
discretion to make payments or awards
which are outside the policy to facilitate
the recruitment of candidates of the
appropriate calibre to implement the
Group’s strategy. In addition,
remuneration forfeited on resignation
from a previous employer may be
compensated. The form of this
compensation would be considered
on a case-by-case basis and may
comprise either cash or shares.
114
De La Rue plc Annual Report 2023
Summary of remuneration policy
The following charts illustrate the potential value of the Executive Directors’ remuneration package in various scenarios
in a typical year. Salary levels are as at 1 July 2023.
Annual Bonus Plan
Long Term Incentive Plan
80% Group
financial performance
10% strategic
personal
objectives and 10% ESG
Performance Share Plan
Investor Return Plan
50% EPS
50% free cash
flow
TSR underpin*
60% cash
40% deferred shares
Performance-tested vesting after three years
two year post-vesting holding period
Malus and clawback and shareholding requirements
Note:
* Median performance vs FTSE250 3 year performance
Illustration of the application of remuneration policy
The following charts illustrate the potential value of the Executive Directors’ remuneration package in various scenarios
in a typical year. Salary levels are as at 26 March 2023
Chief Executive
Minimum
100%
Target
55.1%
19.7% 13.1%12.1%
Maximum
32.6%
Maximum with
50% growth
26.7%
23.2%
19.0%
15.5%
28.7%
19.0%
35.3%
Managing Director, Currency
Minimum
100%
Target
58.4%
17.4% 11.6%12.6%
Maximum
35.0%
20.9%
13.9%
30.2%
Maximum with
50% growth
28.6%
17.1%
17.1%
37.2%
544,728
988,621
1,672,458
2,041,969
183.571
314.585
525.000
640.926
Fixed remuneration
Annual Incentive Plan (Cash)
Annual Incentive Plan (Deferred Shares)
Long Term Incentive Plan
De La Rue plc Annual Report 2023
115
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Directors’ remuneration policy continued
Illustrative scenario charts
Performance scenarios for the ABP and LTIP assume the following:
Minimum
Target
Maximum
Maximum with share growth of 50%
There is no cash bonus or deferred
share award under the ABP or
vesting under the Long Term
Incentive Plan
Target cash bonus and deferred
shares under the ABP, target
vesting under the Long Term
Incentive Plan
Maximum cash bonus, maximum
deferred shares under the ABP,
maximum vesting under the Long
Term Incentive Plan
Maximum cash bonus, maximum
deferred shares under ABP,
maximum vesting under the Long
Term Incentive Plan with share
price growth of 50%
Assumptions for the scenario charts
Minimum
Target
Maximum
Maximum with share growth of 50%
Fixed pay (base salary, benefits
and pension)
Fixed pay (base salary, benefits
and pension)
Fixed pay (base salary, benefits
and pension)
Fixed pay (base salary, benefits
and pension)
No bonus payout
50% of maximum bonus
opportunity (67.5% of salary for
CEO, 57.5% of salary for CFO and
other Executive Directors)
100% of maximum bonus
opportunity (135% of salary for
CEO, 115% of salary for CFO and
other Executive Directors
100% of maximum bonus
opportunity (135% of salary for
CEO, 115% of salary for CFO and
other Executive Directors
No vesting under ABP or the Long
Term Incentive Plan
60% will be payable immediately
in cash and 40% will be deferred
in shares
60% will be payable immediately
in cash and 40% will be deferred
in shares
25% of shares vesting (25% of
salary for CEO and CFO and other
Executive Directors)
100% of shares vesting (100% of
salary for CEO, CFO and other
Executive Directors)
60% will be payable immediately
in cash and 40% will be deferred
in shares. 40% of ABP deferred
shares vesting valued at 60%
100% of shares vesting valued
at 150%
Executive Director remuneration mix FY24
Based on the above performance scenarios the table below illustrates that a significant proportion of Executive Directors’
remuneration is biased towards variable pay at maximum:
CEO
MD, Currency
Fixed
Variable
Fixed
Variable
% of pay at
minimum
achieved
% of pay at
target
achieved
% of pay at
maximum
achieved
100
–
100
–
55
45
58
42
33
67
35
65
The remuneration mix above is based on the remuneration policy as it is intended to be operated for FY24. For further
information on the director’s remuneration policy please see pages 105 to 115.
116
De La Rue plc Annual Report 2023
Annual Report on remuneration
This section of the Directors’ remuneration report shows how the Remuneration Committee implemented the policy on
Directors’ remuneration in the year ended 25 March 2023 including all elements of remuneration received by Executive
Directors and the incentive outturns for FY23.
Single figure of remuneration for each Director (audited)
The table below shows how we have applied the current remuneration policy during FY23. It discloses all the elements
of remuneration received by the Directors during the period.
Salary
and feesa
Fixed
Benefits
(excluding
pensions)b
Pensionse
2023
£’000
2022
£’000
2023
£’000
2022
£’000
2023
£’000
2022
£’000
Variable
Total
Fixed
2023
£’000
Bonusc
Long term
incentive (PSP)
(vested)d
Total
Variable
Total
2023
£’000
2022
£’000
2023
£’000
2022
£’000
2023
£’000
2023
£’000
2022
£’000
Executive Directors
Clive Vacher
Rob Harding
Ruth Euling
Chairman
Kevin Loosemore
Non-executive Directors
Nick Bray
Maria da Cunha (Retired on
27 July 2022)
Mark Hoad (Appointed on
28 September 2022)
Margaret Rice-Jones
Catherine Ashton (Resigned
12 June 2023)
477
291
265
464
283
260
1,033
1,007
206
202
60
20
26
65
52
59
59
–
57
51
17
14
37
68
–
–
–
–
–
–
17
17
36
70
–
–
–
–
–
–
48
17
–
65
–
–
–
–
–
–
46
17
–
542
322
302
63
1,166
–
–
–
–
–
–
206
60
20
26
65
52
–
–
–
–
–
–
–
–
–
–
265
138
126
529
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Aggregate emoluments
1,462
1,435
68
70
65
63
1,595
529
–
–
–
–
–
–
–
–
–
–
542
322
302
792
455
422
1,166
1,669
206
202
60
20
26
65
59
59
–
57
52
51
1,595 2,097
Notes:
The figures in the single figure table above are derived from the following:
a.
b.
c.
d.
e.
Base salary and fees: the actual salary and fees received during the period.
Benefits (excluding pensions): the gross value of all taxable benefits received in the period, including for example car or car allowance and private medical and permanent health insurance.
Bonus: A description of the performance measures that applied for the year FY23 is provided on page 118.
PSP: no PSP awards have vested for current Executive Directors since appointment.
See page 123 for further details of pension arrangements.
Base salary and fees, Benefits (excluding pension) and Pensions are fixed pay elements. Bonus and Long term incentives (PSP) (vested) are variable pay elements.
Changes in Executive Directors during the year
There were no changes in the Executive Directors during FY23. The Chief Financial Officer, Rob Harding, resigned on 31 January
2023 and will leave employment and the Board in July 2023. For more information, please see page 106.
De La Rue plc Annual Report 2023
117
Strategic reportGovernance reportFinancial statements
Section 5: Remuneration continued
Annual Report on remuneration continued
Individual elements of remuneration
Base salary and fees (audited)
Base salaries for Executive Directors are normally reviewed annually by the Remuneration Committee and are set with reference
to individual performance, experience and responsibilities, Group performance, affordability and market competitiveness.
The Directors’ remuneration policy approved by shareholders at the 2020 AGM sets out an expectation that increases in salary
for Executive Directors will not normally exceed the range of increases awarded to other employees in the Group except in the
specific circumstances listed in the remuneration policy.
Executive Directors, Clive Vacher and Ruth Euling were both awarded a 2.5% increase in line with the wider workforce in July
2022. The Committee has determined that Clive Vacher and Ruth Euling will not receive a pay rise in 2023.
Clive Vacher
Rob Harding
Ruth Euling
Base
salary level
July 2022
£’000
Base
salary level
October 2021
£’000
480
293
267
468
286
260
Increase
%
2.5
2.5
2.5
The remuneration policy for Non-executive Directors, other than the Chairman, is determined by the Board. The Remuneration
Committee determines the Chairman’s fee. Fees reflect the responsibilities and duties of Non-executive Directors while also
having regard to the marketplace. The Non-executive Directors do not participate in any of the Group’s share incentive plans nor
do they receive any benefits or pension contributions. It is the intention that consistent with the policy for Executive Directors,
increases for Non-executive Directors would not normally exceed the range of increases awarded to the wider workforce.
Both the fees for the Non-executive Directors and the Chairman increased by 1.5% effective in July 2022 aligned with the timing
of a review of salary levels for the wider workforce. The Committee have determined that no further increase will be made in
during FY24.
The fees for 2022 are as follows:
Non-executive Director fees
Basic fee
Additional fee for chairmanship of Audit and Remuneration Committees and Senior Independent Director
July 2022
£’000
October 2021
£’000
51.7
8
51
8
External directorships of Executive Directors
The Board considers whether it is appropriate for an Executive Director to serve as a non-executive director of another
company. Clive Vacher and Ruth Euling hold no remunerated external directorship appointments.
Pension contributions (audited)
During FY23 Clive Vacher’s pension contributions remained in line with those available to the workforce; he will receive a pension
contribution of 10% on the basis of a 6% individual contribution. All other Executive Directors also received a pension contribution
in line with levels available to the workforce no greater than 10% employer contribution.
Variable remuneration (audited)
Annual bonus for FY23
The Annual Bonus Plan for FY23 was issued with the following financial structure and targets:
Measure
Group adjusted revenue
Group adjusted operating profit
Average net debt
118
De La Rue plc Annual Report 2023
Threshold
Target
Maximum
Actual
£370.0m £378.8m £395.0m £349.7m
£34.0m
£92.7m
£36.5m
£87.7m
£41.7m
£82.7m
£27.8m
£94.2m
% of
maximum
achieved
0%
0%
0%
Under the Group adjusted revenue metric, the target award under the plan was based on the budget with Maximum award at
stretch aligned with market consensus.
Operating profit and average net debt metrics were equally based on target at budget and maximum award being achieved at
market consensus. Financial targets under the ABP for FY23 were not met and as such no award will be made under the plan.
Eighty per cent of award is linked of the achievement of the financial metrics and ten per cent of the Executive Directors’ bonus
is based on achievement of personal objectives. Personal strategic objectives were aligned to the delivery of the Turnaround
Plan and comprised of both tactical and transformational targets focused on the achievement of core strategic priorities. The
detail of the objectives, for all Executive Directors, which were consistently aligned, are outlined below:
Summary of personal strategic objectives
Summary of performance
Currency Market Leadership
– Deliver profitable growth for the Currency Division
through a focus on operational improvements and
efficiencies. Securing targeted Polymer and features
volume growth and delivering targeted FY23 revenue
and divisional adjusted operating profit.
Partially achieved
– Divisional OP and Revenue not achieved to plan and
delayed polymer growth plan
– Strong cash management and cost reduction
delivered ensuring the business remained profitable
in a subdued market.
– New Polymer launches completed
Authentication Growth
– Achieve sustained growth in Authentication through
targeted GRS expansion, delivering Brand revenues and
margins in line with the planned targets and maximising
delivery of key contracts. Deliver targeted FY23 revenue
and divisional adjusted operating profit.
Partially achieved
– Revenue and operating profit were not achieved in line
with plan although overall increase in revenue versus
FY22. Recent wins in brand and ID growth achieved
in year.
– Controllable cashflow target achieved
Value Stream Excellence
– Focus on improving efficiencies in ways of working and
Achieved in full
– ESG Strategy published, and significant progress
associated cost reduction.
– Continuing to address targeted legacy issues
– Publishing a targeted ESG strategy with a focus on
environmental and sustainability targets
made as outlined in the Responsible Business Section
of this report
– Key footprint progress completed
– HSE training and other key metrics met in full and DEI
– Maintaining high standards of HSE and improved
reporting in line with plan
organisational diversity.
ESG
– Reduction in solid waste per good output tonne
Not achieved
– Due to lower production volumes
Component 20% of maximum award
Award achieved 0%
In reaching its decision on ABP outcome, the Committee considered the formulaic outcome of the targets as well as the
Company’s underlying financial, operational and strategic progress during the year, as set out in the Committee Chair’s letter on
pages 102 to 106 and also took into account wider stakeholder perspectives. Despite progress being made during the year the
Committee considered that the formulaic outcomes for Executive Directors were reflective of the underlying business
performance, as a result Executive Directors will not receive an award under the plan.
Long term incentive – Performance Share Plan (PSP)
During FY23 the PSP plan as outlined in our current remuneration policy was applied. This is a share settled long term incentive
aligned closely with business strategy and the interests of shareholders through the performance measures chosen and the link
to share price. The PSP is designed to provide Executive Directors and selected senior managers with a long term incentive that
promotes sustainable and long term performance and reinforces alignment between participants and shareholders.
De La Rue plc Annual Report 2023
119
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Annual Report on remuneration continued
Performance measures applying to PSP awards
As noted in last year’s report the awards made under the PSP 2016-2019 were subject to a combination of average annual
cumulative growth in adjusted basic EPS and cumulative growth in ROCE, in each case measured over three financial years. In
2020 the PSP measures were revised and RTSR (Total Shareholder Return relative to FTSE 250 companies, measured over three
years) was used instead of ROCE alongside the previous EPS metric, which the Committee believes will ensure that appropriate
focus is placed on the key business imperative of restoring value to shareholders.
The performance condition target targets for awards made from 2021-2022 were are aligned to the challenging growth objectives
of the Turnaround Plan reflecting the changing market conditions during that period and associated market consensus.
All awards are made as conditional shares based on a percentage of salary and the value is divided by the average share price
over a period before the date of grant, in accordance with the rules of the PSP. In addition, the Remuneration Committee must
be satisfied that the vesting reflects the underlying performance of the Group and retains the flexibility to adjust the vesting
amount to ensure it remains appropriate.
Any adjustments will depend on the nature, timing and materiality of any contributory factors.
PSP award vesting in FY23
PSP grants made in 2020 outlined below have not met performance criteria and therefore no awards vested under the PSP in
FY23 for any Executive Director.
PSP awards made in August 2022 (audited)
The Committee granted awards under the PSP on 31 August 2022 to participants including the three Executive Directors. In line
with the commitment made in this report a year ago, to take into account recent shareholder experience of a fall in the share
price and to avoid the potential for windfall gains if the share price recovers over the vesting period, the Committee reduced the
size of each award by 20% from the policy award that would otherwise have been made.
Performance targets applicable to the 2022 awards took into account both internal business plans and market expectations
over the three-year performance period, recognising the FY22 performance outturn and ongoing challenges in market
conditions that the business anticipated facing in future years. To take into account shareholder experience of a fall in the
share price and to avoid the potential for windfall gains if the share price recovers over the vesting period, the Remuneration
Committee determined that the face value of awards will be scaled back compared to 2021 award levels. The measures and
targets were confirmed at the time of grant via a Regulatory News Service announcement.
A summary of the performance levels and award vesting levels that apply to awards under the 2021-2022 PSP are shown in the
table below
Year of award
Measure
Vesting % of element at
threshold
Vesting % of element at
maximum
EPS growth %
required for threshold
EPS growth %
required for maximum
2022
2021
2020
EPS¹
RTSR
EPS¹
RTSR
EPS¹
RTSR
25
25
25
25
25
25
100
100
100
100
100
100
13.9
Median
8.5
Median
11
21.9
Upper Quartile
16.7
Upper Quartile
19.2
Median
Upper Quartile
Note:
1.
Underlying earnings per share. Based on average annual cumulative growth during the performance period.
Executive Directors received PSP awards during FY23 in line with the existing Directors’ remuneration policy as follows:
Year of award
Clive Vacher
Rob Harding
Ruth Euling
Number of
shares
awarded
454,059
277,480
252,158
Date of award
31 August 2022
31 August 2022
31 August 2022
%
of salary
Face value
£’000
80
80
80
390
239
217
Vesting at
threshold
(as a % of
maximum)
25
25
25
Performance period
end date
July 2025
July 2025
July 2025
120
De La Rue plc Annual Report 2023
All awards were granted as nil-cost options, with the number of shares based on a percentage of salary and the average share
price over a five-day period prior to the date of grant, being 84.55p. Face value is the maximum number of shares that could
vest multiplied by the closing share price of 86p on the date of grant. The Remuneration Committee may add dividend shares
that would have accrued during the performance period and extended vesting period on that part of the award that may
ultimately vest.
Implementation of the remuneration policy in FY24
The remuneration arrangements in FY24 will operate in line our proposed remuneration policy.
Salary and benefits
The Committee have determined that no Executive Director will be awarded a salary increase in FY24
The Committee remain aware of the need for salary levels to continue to be competitive and commensurate with performance.
ABP FY24
The Remuneration Committee has carefully considered bonus performance measures for FY24, and concluded that the current
measures set out in the table on page 106 remain highly relevant.
Adjusted revenue, profit and net debt targets ensure focus remains on maintaining profitable growth and strong cash
management. Cost competitiveness, improved efficiency also remain a key priority, alongside targeted increase in order intake
supporting growth in both Currency and Authentication. Financial targets will remain in line with the adjusted market expectation
to ensure that executives remain incentivised and rewarded for delivering in line or better than the plans as set out. As outlined
in the policy and applied in prior years a 20% weighting on non-financial strategic targets has been applied ensuring that Executive
Directors are incentivised on both the delivery of clear financial metrics and good management of the underlying business.
The current maximum entitlement of the Chief Executive Officer under the ABP remains 135% of salary and the Chief Financial
Officer and the other Executive Directors remains at 115% of salary. In FY23 an additional metric for ESG was added accounting
for 10% of the strategic personal objective to ensure focus continues in this important area. We propose to continue with this
approach for the FY24 plan. The structure and weightings will be as follows:
Structure & weighting
Adjusted revenue
Adjusted operating profit
Average net debt1
Group strategic ESG
Group strategic personal objectives
Note:
1.
Average of the 12 month end net debt positions over the course of the year.
Weighting
20%
30%
30%
10%
10%
No payment will be made on any element of bonus (including the personal element) if a minimum adjusted operating profit is
not achieved.
Personal strategic objectives for the Chief Executive Officer and other Executive Directors are focused again on strategic
priorities aligned to the business strategy and plan:
– Grow repeatable and profitable business delivering an improved orderbook across all targeted markets and securing key
contract extensions
– Drive efficient operations and continue to remove legacy challenges
– Invest for the future, delivering key product development
The Committee will assess the achievement of these objectives on a quantifiable and objective basis and to clear retrospective
disclosure in the Directors’ remuneration report.
The Committee will rigorously review incentive outturns and will consider the overall performance of the business, not just the
outcome of each measure.
The specific performance targets are not disclosed while still commercially sensitive but will be disclosed the following year.
De La Rue plc Annual Report 2023
121
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Annual Report on remuneration continued
Performance measures applying to LTIP awards to be made in 2023
As outlined in our proposed Remuneration policy on page 105 to 115, The Remuneration Committee has given detailed
consideration to the most appropriate Long Term Incentive arrangements that provide a strong link between business
performance and executive reward.
For awards to be made in FY24 we propose preparing on basis of the proposed policy and the share plans rules we anticipate
being approved at the 2023 AGM as outlined below.
PSP
Market Value Share
Options
Performance Measure
EPS
Free cashflow
Weighting
20%
20%
RTSR Underpin Median performance
vs FTSE 250 (3 year performance).
Calculated based on a starting
net return index (NRI) averaged over a
30 day period ending on the day before
the start of the performance period.
Equivalent to 60% of award on a
relative face value calculation
Entry
pay-out
Target
pay-out
Stretch
pay-out
0%
0%
50%
50%
100%
100%
100% awarded if underpin met
Further work is underway to calibrate performance targets. Full details of these will be disclosed via an RNS announcement at
the time of award. Should the share price remain subdued we would anticipate the Investor Return Plan is set a premium price
ensuring that Executives are awarded for share price growth reflecting appropriate Shareholder return.
The award will vest on the third anniversary of award, subject to meeting performance criteria, but any shares which vest will be
subject to a further two year holding period and only become capable of exercise on the fifth anniversary of the grant of the award.
Shareholding requirements
Executive Directors are required to build up a shareholding equivalent to 200% of salary over a five year period. It is intended
that this is met by Executive Directors retaining 100% of vested post-tax Deferred Bonus shares, restricted shares and
performance shares until the requirement is met in full.
The policy has a post-employment shareholding requirement of 200% of salary (or the actual shareholding if lower) for the first
year following exit and 50% of this guideline level for the second year following exit.
Executive Directors’ service contracts
The table below summarises the notice periods contained in the service contracts for Executive Directors in office as at
26 March 2022.
Year of award
Clive Vacher
Rob Harding
Ruth Euling
Date of contract
Date of appointment
Notice from Company
Notice from Director
6 October 2019
1 October 2020
1 April 2021
7 October 2019
1 October 2020
1 April 2021
6 months
6 months
6 months
6 months
6 months
6 months
Non-executive Directors’ letters of appointment
The Chairman and Non-executive Directors have letters of appointment rather than service contracts.
Non-executive Director
Catherine Ashton
Nick Bray
Kevin Loosemore
Margaret Rice-Jones
Clive Whiley
Dean Moore
Mark Hoad
Date of appointment
22 September 2020
21 July 2016
1 October 2019
Current letter of
appointment end date
n/a
20 July 2022
n/a
22 September 2020
22 September 2023
18 May 2023
26 June 2023
18 May 2026
26 June 2026
13 September 2022
29 September 2025
Subsequent to the year end, Kevin Loosemore resigned as the Chairman and as a Director on 1 May 2023. Clive Whiley was
appointed as a Director and as Chairman on 18 May 2023. Catherine Ashton resigned as a Director on 12 June 2023. Margaret
Rice-Jones has confirmed that she will not be standing for re-election at the AGM.
122
De La Rue plc Annual Report 2023
Total pension entitlements (audited)
The Group’s UK pension schemes are funded, HMRC registered and approved schemes. They include both defined contribution
and defined benefit pension schemes, with the DB plans being closed to new entrants and to future accrual.
None of the Executive Directors in the period were a member of the legacy defined benefit schemes. All the Executive Directors
have opted out of the defined contribution plan and receive a cash allowance in lieu of a pension contribution. Clive Vacher
received a pension contribution of 10% of salary on the basis of a 6% individual contribution, in line with levels available to
UK-based employees.
Rob Harding received a pension contribution of 9% of salary on the basis of 6% individual contribution in line with levels available
to newly appointed UK-based employees. Any new Executive Director will likewise receive pension contributions in line with
levels available to the workforce.
Ruth Euling received a pension contribution of 10% of salary based on 6% individual contribution, in line with levels available
to the wider UK based employees.
Payments for loss of office (audited)
There were no payments for loss of office during the period.
Directors’ interests in shares (audited)
The Directors and their connected persons had the following interests in the ordinary shares of the Company at 25 March 2023:
Variable
Subject to
performance
conditions
Not subject to
performance conditions
Current
shareholding
ordinary
shares (held
outright)
Current
shareholding
as % of salary
Performance
Share Plan
Performance
Share Plan
Deferred
Bonus Plan
SAYE
Vested shares
Vested
shares
unexercised
during the
period
Vested
shares
exercised
during the
period
233,904
26 1,033,607
8,879
49,217
947,840
–
26,375
–
–
2
10
631,648
569,177
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
–
–
–
–
198,330
87,302
89,357
–
–
–
–
–
29,925
11,393
–
–
–
–
–
–
–
–
21,154
–
–
–
–
–
–
–
–
–
–
–
–
–
Executive Directors
Clive Vacher
Rob Harding
Ruth Euling
Non-executive Chairman
Kevin Loosemore¹
Non-executive Directors
Catherine Ashton²
Nick Bray
Mark Hoad³
Margaret Rice-Jones
Notes:
1.
2.
3.
Subsequent to the year end, resigned on 1 May 2023.
Subsequent to the year end, resigned on 12 June 2023.
Appointed on 28 September 2022.
There have been no changes in Directors’ interests in ordinary shares in the period from 26 March 2023 to 28 June 2023.
All interests of the Directors and their families are beneficial.
The current shareholdings as a percentage of salary during the period are calculated using the closing De La Rue plc share price
of 53.1p on 24 March 2023, being the last working day before the end of FY23.
De La Rue plc Annual Report 2023
123
Strategic reportGovernance reportFinancial statements
Section 5: Remuneration continued
Annual Report on remuneration continued
Directors’ interests in vested and unvested share awards (unaudited)
The awards over De La Rue plc shares held by Executive Directors under the DBP and PSP and Sharesave scheme during the
period are detailed below:
Total
award as at
26 March
2022
Date of
award
Awarded
during the
year
Exercised
during the
year
Lapsed/
cancelled
during the
year
Awards
held at
25 March
2023
Awards
vested
(unexercised)
during the
year
Market price
per share at
exercise
date
(pence)
Strike
price
(pence)
Date of
vesting
Expiry
date
Clive Vacher
Deferred Bonus Plan1
Performance
Share Plan
Total
Sharesave options1
Rob Harding
Deferred Bonus Plan1
Performance
Share Plan
Total
Sharesave options¹
Ruth Euling
Deferred Bonus Plan¹
Performance
Share Plan
Jul 21
Jul 21
Jul 22
63,700
63,700
–
Jul 22
–
Jan 20 356,649
Jul 20
340,187
–
–
67,315
67,315
–
–
63,700
–
–
–
–
–
–
–
– 356,649
–
63,700
67,315
67,315
–
–
–
340,187
–
–
–
239,361
– 454,059
63,700 356,649 1,231,937
1,458
–
–
Jun 21
Aug 22
Jan 20
Jan 21
Jan 22
Feb 23
Jul 21
Jul 21
Jul 22
239,361
–
– 454,059
588,689
1,063,597
1,458
8,704
2,689
–
–
–
–
29,925
17,218
17,217
–
Jul 22
–
Jul 20 207,892
Jun 21
146,276
–
–
35,042
35,043
–
–
–
–
–
–
Jul 21
Jul 21
Jul 22
Jul 22
Dec 13¹
Jun 15
Jun 15
Jun 16
Jun 16
Jun 17
Jun 17
Jul 20
Jun 21
25,669
25,668
–
–
31,845
31,844
11,023
2,531
1,799
2,655
1,858
773
515
181,433
135,586
–
–
–
–
–
–
–
–
–
Aug 22
–
277,480
388,603
347,565
17,218
Jan 21
Jan 22
8,704
2,689
–
–
–
17,218
–
–
–
–
–
–
–
–
25,669
–
–
–
–
–
–
–
–
–
–
–
–
–
25,669
–
8,704
2,689
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29,925
–
17,217
35,042
35,043
207,892
146,276
277,480
718,950
8,704
2,689
–
25,668
31,845
31,844
11,023
2,531
1,799
2,655
1,858
773
515
181,433
135,586
252,158
679,688
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
186.163
186.163
78.873
78.873
131.802
132.283
191.763
84.553
118.674
131.104
112.434
60.155
186.163
186.163
78.873
78.873
132.283
191.763
84.553
131.104
112.434
186.163
186.163
78.873
78.873
11,023
892.903
2,531
1,799
2,655
1,858
773
515
–
–
–
–
541.003
541.003
520.853
520.853
680.103
680.103
132.283
191.763
84.553
–
80.20
–
–
–
–
–
–
–
Jul 22
Jul 23
Jul 23
Jul 24
Jan 25
Jul 25
Jun 26
Aug 27
– Mar 23
– Mar 24
– Mar 25
–
–
–
–
–
–
–
–
Apr 26
Jul 22
Jul 23
Jul 23
Jul 24
Jul 25
Jun 26
Aug 27
Jul 22
Jul 23
Jul 23
Jul 24
Jan 30
Jul 30
Jun 31
Aug 32
Aug 23
Aug 24
Aug 25
Sep 26
Jul 22
Jul 23
Jul 23
Jul 24
Jul 30
Jun 31
Aug 32
Mar 24
– Mar 25
Aug 24
Aug 25
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Jul 22
Jul 23
Jul 23
Jul 24
Jul 22
Jul 23
Jul 23
Jul 24
Dec 16
Dec 23
Jun 18
Jun 19
Jun 19
Jun 20
Jun 20
Jun 21
Jul 25
Jun 26
Aug 27
Jun 25
Jun 25
Jun 26
Jun 26
Jun 27
Jun 27
Jul 30
Jun 31
Aug 32
–
–
Total
Aug 22
–
389,510
Sharesave options
–
–
252,158
315,847
–
These awards do not have any performance conditions attached.
Notes:
1.
2. Mid-market share value of a De La Rue plc ordinary share as at 6 January 2020.
3. Mid-market share value of a De La Rue plc ordinary share averaged over the five dealing days immediately preceding award date.
4.
For Sharesave options the share price shown is the exercise price which was 80% of mid-market value of an ordinary share averaged over the three dealing days immediately preceding
award date.
For Sharesave options the share price shown is the exercise price which was 90% of mid-market value of an ordinary share averaged over the three dealing days immediately preceding
award date.
5.
124
De La Rue plc Annual Report 2023
Chief Executive Officer pay, Total Shareholder Return (TSR) and all employee pay
This section of the report enables our remuneration arrangements to be seen in context by providing:
– De La Rue’s TSR performance for the 10 years to 25 March 2023
– A history of De La Rue’s Chief Executive Officer’s remuneration for the current and previous nine years
– A comparison of the year on year change in De La Rue’s Chief Executive Officer’s remuneration with the change in the average
remuneration across the Group
– A year on year comparison of the total amount spent on pay across the Group with profit before tax and dividends paid
Chief Executive Officer’s Pay
Period ended March
2013
2014
2015
2016
2017
2018
2019
2020
Tim
Cobbold
Tim
Cobbold
Martin
Sutherland
Martin
Sutherland
Martin
Sutherland
Martin
Sutherland
Martin
Sutherland
Martin
Sutherland
2020
Clive
Vacher³
2021
Clive
Vacher
2022
Clive
Vacher
2023
Clive
Vacher
Chief Executive Officer
Single figure of total
remuneration £’000
Annual bonus
payout as a %
of maximum
opportunity
LTIP vesting
against maximum
opportunity (%)
634
1,071
1,107
998
899
783
954
340
249
1,106
792
542
Nil
Nil
Nil
60
14
Nil
57
Nil
40
Nil
Nil
25
29
25
Nil
Nil
Nil
97.6
42
Nil
Nil
Nil
Nil
Nil
Notes:
1.
2.
3.
Appointed Chief Executive Officer on 1 January 2011 and resigned on 29 March 2014. Includes award to the value of £450,000 at the date of award under the Recruitment Share Award
(which vested on 31 January 2014).
Appointed 13 October 2014, resigned on 7 October 2019.
Appointed 7 October 2019.
TSR performance
This graph shows the value, by 25 March 2023, of £100 invested in De La Rue plc on 25 March 2013, compared with the value
of £100 invested in the FTSE 250 Index (excluding Investment Trusts) on the same date, assuming that all dividends paid are
reinvested and on the other normal principles for assessing Total Shareholder Return (TSR). The other points plotted are the
values at intervening financial year ends. De La Rue was a constituent of the FTSE 250 Index for the majority of the period
under review.
Total shareholder return
Total shareholder return
Source: FactSet
Source: FactSet
250
200
150
R
S
T
100
50
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
De La Rue plc
FTSE 250 (excluding Investment Trusts)
De La Rue plc Annual Report 2023
125
Strategic reportGovernance reportFinancial statements Section 5: Remuneration continued
Annual Report on remuneration continued
Chief Executive Officer pay ratio
The table below sets out the CEO pay ratios from the FY23 comparing the single total figure of the remuneration with the
equivalent figures for lower quartile, median and upper quartile UK employees. UK employees were chosen as a comparator
group to avoid the impact of exchange rate movements over the year. UK employees make up approximately 43% of the total
employee population.
As the quartile individuals are representative of the Companies pay distribution the ratios presented are consistent with the pay,
reward and progression policies for the UK employees. A significant portion of the CEO remuneration is delivered through
variable incentives where awards are linked to business performance over a longer term. This means that ratios may fluctuate
year to year.
Year
2022/2023
2021/2022
2020/2021
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option A
Option A
Option A
14:1
21:1
30:1
12:1
16:1
24:1
9:1
13:1
18:1
Total pay and benefits amounts used to calculate ratio.
Year
2022/2023
2021/2022
2020/2021
25th percentile ratio
50th percentile ratio
75th percentile ratio
Method
Total pay
and benefits
Total
salary
Total pay
and benefits
Total salary
Total pay
and benefits
Total
salary
Option A
£37,556.46
£33,904.94
£46,886.44
£42,659.39
£61,407.42
£56,377.26
Option A £36,996.54
£28,375.97
£49,614.40
£44,232.96
£62,553.96 £54,285.00
Option A
£37,017.34
£32,584.92
£45,423.49
£41,795.49
£62,770.89
£53,918.64
Percentage change in Directors’ remuneration
The table below compares the percentage change in the Directors’ salary, bonus and benefits to the average change in salary,
bonus and benefits for all UK employees between FY22 and FY23. ABP and Sales Incentive Plans were not paid in FY23. The table
shows the UK employee average percentage salary change which is comprised of collective and individual awards throughout
the financial year.
Clive Vacher
Rob Harding
Ruth Euling
Kevin Loosemore
Mark Hoad
Nick Bray
Margaret Rice-Jones
Catherine Ashton
UK employee average
2022/23
2021/22
Salary/fees
Benefits
Annual bonus
Salary/fees
Benefits
Annual bonus
2.5%
2.5%
2.5%
1.5%
-
1%
14.6%1
1.5%
4.8%
0%
0%
2.4%
–
–
–
–
–
0%
-
-
–
–
–
–
–
–
-
2%
2%
–
2%
-
2%
18.3%
2.0%
1.5%
0%
148.6%
-55%
–14%
–
–
–
–
–
–
–
–
–
–
–
–
0%
–146%
Note:
1. Margaret Rice-Jones base increase was 1.5%. The remainder was for becoming SID and Remuneration Committee Chair.
Relative spend on pay
The following table sets out the percentage change in payments to shareholders and the overall expenditure on pay across
the Group.
Dividends (note 10 to the financial statements)
Overall expenditure on pay (note 4 to the financial statements)
2021/22
£m
–
97.6
2020/21
£m
–
107.7
Change
%
N/A
-9.4
126
De La Rue plc Annual Report 2023
Statement of shareholder voting
The Directors’ remuneration report was approved by shareholders at our AGM on 27 July 2022. Details of the poll voting result
on the relevant resolutions are shown below:
Approval of remuneration report
147,547,543
127,958,215
86.72
19,589,328
13.28
190,432
Total votes cast
For¹
(%)
Against
(%)
Votes withheld²
Notes:
1.
2.
The votes ‘For’ include votes given at the Chairman’s discretion.
A vote withheld is not legally a vote cast and, as such, is not counted in the calculation of the proportion of votes ‘For’ and ‘Against’.
De La Rue carefully monitors shareholder voting on the remuneration policy and implementation and the Company recognises
the importance of ensuring that shareholders continue to support the remuneration arrangements. All voting at the AGM is
undertaken by poll.
Remuneration advice
The Remuneration Committee consults with the Chief Executive Officer on the remuneration of executives directly reporting to
him and other senior executives and seeks to ensure a consistent approach across the Group taking account of seniority and
market practice and the key remuneration policies outlined in this report. During FY23, the Committee also received advice from
Willis Towers Watson who have no other connection with the Company or individual Directors. Willis Towers Watson has been
formally appointed by the Remuneration Committee and advised on the structure, measures and target setting for incentive
plans, executive remuneration levels and trends, corporate governance developments and Directors’ remuneration report
preparation. The Remuneration Committee requests Willis Towers Watson to attend meetings periodically during the year.
Willis Towers Watson is a member of the Remuneration Consultants’ Group and has signed up to the code of conduct relating
to the provision of executive remuneration advice in the UK. In light of this, and the level and nature of the service received, the
Committee remains satisfied that the advice has been objective and independent.
Total fees for advice provided to the Remuneration Committee during the year by Willis Towers Watson were £31,529.
Dilution limits
The share incentives operated by the Company comply with the institutional investors’ share dilution guidelines. The Directors’
remuneration report was approved by the Board on 28 June 2023 and signed on its behalf.
Margaret Rice-Jones
Chair of the Remuneration Committee
29 June 2023
De La Rue plc Annual Report 2023
127
Strategic reportGovernance reportFinancial statements Directors’ report
The Directors present their annual report
on the affairs of the Group for the period
ended 25 March 2023.
Introduction
De La Rue plc is a public limited
company, registered in England and
Wales as company number 3834125 and
has its registered office at De La Rue
House, Jays Close, Viables, Basingstoke,
Hampshire RG22 4BS. As such, it is
subject to the reporting requirements
set out in the Companies Act 2006. In
addition, the Company is listed in the UK
and is therefore subject to the additional
reporting requirements of the Financial
Conduct Authority’s Listing Rules (LR)
and Disclosure Guidance and
Transparency Rules (DTR).
Our reporting to shareholders
The Strategic report and this Directors’
report, when read together with the rest
of this annual report, taken as a whole
form the management report required
for the purposes of DTR 4.1.5 R.
The Strategic report provides an
overview of the development and
performance of the Group’s business for
the period ended 25 March 2023 and
likely future developments in the Group.
The various sections of that report,
from page 1 to 67 of this annual report,
together provide information which the
Directors consider to be of strategic
importance to the Group.
The following disclosures are hereby
incorporated by reference into, and form
part of, this Directors’ Report:
– The reporting on corporate
governance on pages 70 to 101 and
page 133;
– Data on greenhouse gas emissions
and other climate change-related
disclosures from page 28 onwards.
This information was included in the
Strategic report as the Directors
consider those matters to be of
strategic importance to the Group;
– Details of Directors’ interests in the
shares of the Company, within the
Directors’ remuneration report on
pages 123 and 124;
– Information relating to financial
instruments and financial risk
management, as provided in note 14
to the financial statements; and
– Related party transactions as set out
in note 28 to the financial statements.
128
De La Rue plc Annual Report 2023
Dividends
In November 2019, the Board decided
to suspend future dividend payments.
In the Turnaround Plan, first announced
in February 2020 and subsequently
expanded upon in the prospectus
published in June 2020, the Board
explained that the resumption of
dividends would only occur when
restrictions agreed with our lending
banks fell away and the Company was
generating sustainable positive free cash
flow. No interim dividend was paid or
final dividend recommended in respect
of FY22. The Directors did not declare
an interim dividend and do not
recommend a final dividend to be
paid in respect of FY23.
Directors
The names and biographical details of
the Directors of the Company at the
date of this report, and the names and
dates of service of others who served as
Directors during the period. are provided
on pages 72 and 73.
Subject to the Company’s articles of
association, the Companies Act 2006
and any directions given by the Company
in general meeting by a special resolution,
the business of the Company is managed
by the Board who may exercise all the
powers of the Company, whether relating
to the management of the business of
the Company or not. The powers of the
Board are described in the Corporate
Governance report on pages 70 to 101.
The Directors recognise their duty to
have regard to the Company’s business
relationships with suppliers, customers
and others and to consider the long
term, environmental and reputational
impacts of their decisions. Details of how
these considerations were factored into
the principal decisions taken during the
period can be found in the section 172
statement on pages 21 to 23.
The rules governing the appointment and
removal of Directors are set out in the
Company’s articles of association.
Each of the Directors in office at the date
of this report will, save for Rob Harding
who leaves the Company’s employment
in July 2023 and Margaret Rice-Jones
who has decided not to seek re-election
due to the time demands of her other
business commitments, retire at the
AGM on 7 September 2023 and, being
eligible, offers himself or herself for
re-election.
Details of the Company’s contracts of
service with its Executive Directors can
be found on pages 112-113 and 122 and
details of the Company’s letters of
appointment for the Non-executive
Directors are on pages 114 and 122.
Details of Directors’ remuneration are
provided in the Directors’ remuneration
report on pages 102 to 127. The interests
of the Directors and their families in the
share capital of the Company are shown
in the Directors’ remuneration report on
page 123.
At the date of this report, the Company
has agreed, to the extent permitted by
the law and the Company’s articles of
association, to indemnify its Directors
and officers in respect of all costs,
charges, losses, damages and expenses
arising out of claims made against them
in the course of the execution of their
duties as a Director or officer of the
Company or any associated company.
The Company may advance defence
costs in civil or regulatory proceedings
on such terms as the Board may
reasonably determine, but any advance
must be refunded if the Director or officer
is subsequently convicted or found
against. The indemnity will not provide
cover where the Director or officer has
acted fraudulently or dishonestly.
The Group also maintains Directors’ and
officers’ liability insurance cover for the
Directors and officers of the Company
and of all Group subsidiary companies.
Shares and major shareholdings
Structure of the Company’s
share capital
As at 25 March 2023, the share capital
of the Company comprised 195,437,227
ordinary shares of 44 152⁄175p each and
111,673,300 deferred shares of 1p nominal
value, all of which are credited as fully
paid. The ordinary shares therefore
comprise approximately 99%, and the
deferred shares approximately 1%, of the
issued share capital.
The ordinary shares are listed in the UK
and admitted to trading on the London
Stock Exchange. The rights attaching to
these shares are described in the next
section of this report.
The deferred shares carry no voting or
other participation rights and extremely
limited economic rights. They are not
listed or admitted to trading on any
market and are not transferable except
in accordance with the articles of
association. Any or all of the deferred
shares can be repurchased at any time
by the Company without notice for a
total consideration of one penny,
following which they may be cancelled.
Rights of holders of ordinary shares
and restrictions on transfer
The rights and obligations attaching to
the Company’s ordinary shares, in
addition to those conferred on their
holders by law, are set out in the
Company’s articles of association, a copy
of which is available on the Company’s
website www.delarue.com.
The key rights are summarised below:
– Voting – on a show of hands at a
general meeting of the Company, each
holder of ordinary shares present in
person or by proxy and entitled to vote
shall have one vote and, on a poll, shall
have one vote for every ordinary share
held. Electronic and paper proxy
appointments and voting instructions
must be received by the Company’s
registrar no later than 48 hours before
a general meeting.
– Dividends and distributions to
shareholders on winding up – holders
of ordinary shares may receive interim
dividends approved by Directors and
dividends declared in general meetings.
On a liquidation and subject to a
special resolution of the Company
the liquidator may divide among
members in specie the whole or any
part of the assets of the Company
and may, for such purpose, value any
assets and may determine how such
division shall be carried out.
– Transfer of shares – the Company’s
articles of association place no
restrictions on the transfer of ordinary
shares or on the exercise of voting
rights attached to them except in very
limited circumstances. Certain
restrictions, however, may from time to
time be imposed by law or regulation.
The articles of association may only be
amended by special resolution of the
holders of the Company’s ordinary shares.
Special rights attaching to shares
There are no shares issued by the
Company which confer any special
voting or other rights regarding the
control of the Company.
Persons notifying
Schroders plc
Brandes Investment Partners, L.P.
Crystal Amber Fund Limited
Odey Asset Management Limited
The Wellcome Trust Limited
Aberforth Partners LLP
JPMorgan Chase & Co.
Royal London Asset Management Limited
Shareholder agreements and
consent requirements
There are no known arrangements under
which financial rights conferred by any
of the shares in the Company are held
by a person other than the holders of
those shares.
The Company is not aware of any
agreements between shareholders that
may result in any restriction on the transfer
of shares or exercise of voting rights.
Rights attaching to shares under
employee share schemes
Options and awards held by relevant
participants under the Company’s
various share plans carry no voting rights
until the shares are issued. The trustee of
the De La Rue Employee Share
Ownership Trust does not seek to
exercise voting rights on existing shares
held in the employee trust. No shares are
currently held in trust.
Major shareholdings
As at 25 March 2023, the Company had
received formal notification of the
following holdings in its shares under DTR
5. It should be noted that these holdings,
or the percentage of the issued share
capital they represent, may have changed
since the Company was notified, but
notification of any change is not required
until the next notifiable threshold is crossed:
Date of last
notification
Nature
of interest
% of issued
ordinary share
capital held at
notification date
10/03/2022
27/01/2021
14/10/2021
23/03/2023
21/11/2022
09/04/2018
22/03/2023
22/08/2019
Indirect
Indirect
Direct
Indirect
Direct
Indirect
Indirect
Direct
15.03
9.97
9.95
6.89
5.22
5.11
5.06
4.98
The following changes have been notified between the end of FY23 and 28 June 2023:
– JPMorgan Chase & Co advised on 30 March 2023 that the nature of their interest had changed and
amounted to 5.05% and further advised on 23 May 2023 that they no longer held a notifiable interest.
– Odey Asset Management Ltd advised on 21 June 2023 that their interest had reduced to 2.93% and was
no longer notifiable.
– Spreadex Ltd advised on 23 June 2023 that they had an interest in 3.89% of the Company’s issued share
capital and further advised on 27 June 2023 that their interest had increased to 4.30% and on 28 June
2023 that their interest had increased to 5.25%.
– Richard Griffiths advised on 27 June 2023 that he had an interest (via CFDs) in 4.26% of the Company’s
issued share capital and further advised on 28 June 2023 that his interest had increased to 5.21%.
De La Rue plc Annual Report 2023
129
Strategic reportGovernance reportFinancial statements Directors’ report continued
Directors’ authorities in relation
to share capital
Power to issue and allot
At the AGM held on 27 July 2022 the
Directors were generally and
unconditionally authorised to allot shares
in the Company up to an aggregate
nominal value of £29,213,815 (being
approximately one third of the
Company’s then issued share capital) or
up to an aggregate nominal value of
£58,427,630 (being approximately two
thirds of the Company’s then issued
share capital) in respect of a strictly
pro-rata rights issue.
At the 2022 AGM the Directors were also
granted additional powers to allot ordinary
shares for cash (i) up to a nominal value
of £4,382,070 (being approximately 5%
of the Company’s then issued share
capital) and (ii) up to a further nominal
value of £4,382,070, in each case without
regard to the pre-emption provisions of
the Companies Act 2006, provided that
the authority under (ii) can only be used
in connection with an acquisition or
specified capital investment. These
authorities are valid until the conclusion
of the next following AGM.
The Pre-emption Group updated its
Statement of Principles in November
2022. Companies are now permitted to
seek a general disapplication of pre-
emption rights to issue, for cash, equity
securities representing no more than 10%
of the issued ordinary share capital plus
an additional 10% in connection with an
acquisition or specified capital investment.
We are seeking authorities in line with
the revised Principles at the 2023 AGM,
to create flexibility. We are not, however,
seeking the additional authority permitted
under the Principles for the additional 2%
pre-emption disapplication permitted in
each case for a ‘follow-on’ offer.
The Directors have no current intention
of exercising these authorities, if granted,
other than to satisfy the exercise of
options or vesting of awards under the
Company’s employee share schemes.
130
De La Rue plc Annual Report 2023
Our employees and workforce
generally
Employment of disabled persons
The Group gives full and fair
consideration to applications for
employment from disabled persons,
where the requirements of the job can
be adequately fulfilled by that person.
Where existing employees become
disabled it is the Group’s policy, wherever
practicable, to provide continuing
employment under normal terms and
conditions and to provide training, career
development and promotion to disabled
employees wherever appropriate.
Employee communications
and engagement
The Group provides its entire workforce
(including employees) with information
on matters that could be of concern to
them as our workforce. This includes
building common awareness of the
financial and economic factors affecting
the Group’s performance through
newsletters, all-employee emails and
conference calls with the CEO on the
day that our results are announced to
the market or there is a material
development in the Group’s business.
Where appropriate, we consult members
of our workforce or their representatives
on a regular basis so that their views can
be taken into account in making decisions
which are likely to affect their interests.
We encourage involvement in the
Company’s performance by our
employees and workforce and offer
awards under our discretionary share
schemes to those more senior employees
who are best placed to influence that
performance, and through options
granted under our Sharesave scheme
to all eligible employees in the UK.
The views of our employees and
contractors are important. To make sure
that these views are heard and are taken
into account, the Board has designated
an independent Non-executive Director
to oversee its engagement with the
workforce. For further details of how that
duty was fulfilled this role and how it
informed the Board’s discussions during
the year, please see page 79.
279,875 shares were issued for cash
during the period to satisfy the vesting of
awards or the exercise of options under
the Company’s employee share schemes.
Details of shares issued during the year
and outstanding options and awards are
given in notes 20 and 21 to the financial
statements, and those notes are
incorporated by reference into this
report. Details of our employee share
schemes are provided in the Directors’
remuneration report on pages 102 to 127.
Authority to purchase own shares
At the 2022 AGM, shareholders gave the
Company authority to make market
purchases of up to 19,532,925 of its own
ordinary shares (being approximately
10% of the Company’s then issued
ordinary share capital). Any shares
purchased in this way could either be
cancelled or held in treasury (or a
combination of these). No purchases
have been made under this authority.
The Directors propose to seek an
equivalent authority at the 2023 AGM,
but have no current intention of using
this authority, if granted.
Change of control
Contracts
There are a number of contracts which
allow the counterparties to alter or
terminate those arrangements in the
event of a change of control of the
Company. These arrangements are
commercially sensitive and confidential
and their disclosure could be seriously
prejudicial to the Group.
Banking facilities
The credit facility between the Company
and its key relationship banks contains
a provision such that, in the event of
a change of control, unless agreement
is reached to the contrary, the facility
will be immediately cancelled and shall
cease to be available for any further
utilisation and all outstanding loans,
together with accrued interest and
certain other charges, will become
immediately due and payable.
Employees
In the event of a change of control,
vesting of awards would occur in
accordance with the relevant scheme
or plan rules. There are no agreements in
force that would provide any Directors or
employees with compensation for any
loss of office or employment that occurs
because of a change of control.
Other statutory disclosures
Branches
De La Rue is a global business and our
activities and interests are operated
through subsidiaries, branches of
subsidiaries and associates which are
subject to the laws and regulations of
many different jurisdictions. Our
subsidiaries and associates are listed in
note 29 to the financial statements.
There were no branches of the Company
in existence during the period ended
25 March 2023.
Essential contracts or other
arrangements
The Group has a number of suppliers
of key goods and services, the loss of
any of which could disrupt the Group’s
ability to deliver on time, in full or at all.
For further details, please refer to the
discussion of this risk on pages 58 to 63.
Financial risk management
Please refer to the disclosures in note 14
to the financial statements.
Political donations
The Group’s policy is not to make any
political donations and none were
made during the period. However, the
definitions of political donations and
expenditure in the Companies Act 2006
are very widely drawn, and it is possible
that certain routine activities may
unintentionally fall within the scope
of the law. The Company is therefore
seeking shareholders’ renewal of the
authority to make political donations at
the 2023 AGM, in line with that sought
and granted in all recent years.
Research and development
The Group’s business is underpinned
by a significant amount of intellectual
property. The Group holds over 140
families of patents which support its
business. There are around 1,200 patents
and patent applications, of which over
850 have been granted and circa 350
applications are pending. During the year
the Group had 29 patents granted in
Europe, UK and the US.
The Group’s key activity in the field of
research and development is discussed
in the CEO review on page 10, the business
model and strategy summaries on pages
16 to 19 and in other parts of the
Strategic report.
Listing Rules compliance
In relation to the disclosures required by LR 9.8.4 R:
(1)
(2)
Interest capitalised and any related tax relief
Publication of unaudited financial information or a profit forecast or estimate
(4) Details of any long term incentive schemes
(5) Details of any waiver of emoluments by a Director
(6) Any waiver of future emoluments by a Director
(7) Non pre-emptive issues of equity securities for cash
(8) Non pre-emptive issues of equity securities for cash by major subsidiary undertakings
(9)
Parent company participation in a placing
(10) Any contract of significance in which a Director or controlling shareholder is interested
(11) Any contract for the provision of services by a controlling shareholder
(12) Any waiver of dividends
(13) Any waiver of future dividends and details of current dividends waived
(14) Agreements with controlling shareholders
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
As required by LR 9.8.6(8) R, this annual report includes climate-related financial disclosures consistent with the TCFD
Recommendations and Recommended Disclosures, which can be found on pages 30 and 31.
De La Rue plc Annual Report 2023
131
Strategic reportGovernance reportFinancial statements This Directors’ report was approved by
the Board on 29 June 2023.
By order of the Board
Jon Messent
Company Secretary
29 June 2023
Directors’ report continued
Annual General Meeting
The AGM will be held at 10:00am on
Thursday 7 September 2023 at the
Company’s offices, De La Rue House,
Jays Close, Viables, Basingstoke,
Hampshire, RG22 4BS.
We value our engagement with all our
shareholders and shareholders will once
again be able to ask questions relating
to the business of the meeting via our
website, www.delarue.com, in advance of
the AGM. Full details of how to use the
Q&A facility are set out in the AGM
Circular issued with this annual report.
Auditor
Ernst & Young LLP have expressed their
willingness to be re-appointed as auditor
of the Company. A resolution to re-
appoint Ernst & Young LLP as the
Company’s auditor will be proposed at
the forthcoming AGM.
This confirmation is given, and should be
interpreted, in accordance with the
provisions of section 418 of the
Companies Act 2006.
Disclosure of information to the
external auditor
Each of the persons who is a Director
at the date of approval of this report
confirms that:
– So far as the Director is aware, there
is no relevant audit information of
which the Company’s auditor is
unaware; and
– The Director has taken all the steps
that he or she ought to have taken as
a Director in order to make himself or
herself aware of any relevant audit
information and to establish that
the Company’s auditor is aware of
that information.
Going concern
As described on pages 64 to 67, the
Directors continue to adopt the going
concern basis of accounting (in
accordance with the Guidance on Risk
Management, Internal Control and
Related Financial and Business Reporting
published by the FRC in September
2014) in preparing the consolidated
financial statements.
Post-balance sheet events
On 29 June 2023 the Company entered
into a number of documents which had
the effect of amending and restating the
terms of the revolving facility agreement
with its lending banks and their agents.
These documents are an amendment
and restatement agreement with the
various lenders and the banks’ agent
and security agent, a debenture between
the Company, certain other Group
companies and the banks’ security
agent and an inter-creditor agreement
between the creditors. As a result of
these changes, the facilities are now
secured against material assets and
shares within the Group.
On the 28 June 2023 the Company
entered into an agreement with the
trustees of the De La Rue Pension
Scheme in relation to the deferral of
certain deficit reduction payments that
were otherwise due to be paid by the
Company and other Group companies
to that scheme. In order to preserve and
support the position of the scheme, with
the support of the lenders, the scheme
will be provided with security on a pari
passu basis together with the lenders,
as well as an enhanced information
sharing protocol to ensure ongoing
communication between the Group and
the trustee remains comprehensive.
132
De La Rue plc Annual Report 2023
Directors’ responsibility
statement
– In respect of the Group financial
statements, state whether UK-
adopted international accounting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
– In respect of the Parent Company
financial statements, state whether
FRS 102 has been followed, subject to
any material departures disclosed and
explained in those financial
statements; and
– Prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the Parent Company will
continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company and Group’s transactions and
disclose with reasonable accuracy at any
time the financial position of the
Company and the Group and enable
them to ensure that those financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Group
and Parent Company and Group and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic report, Directors’ report,
Directors’ remuneration report and
Corporate Governance statement that
comply with that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Group’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Fair, balanced and
understandable
The Directors believe that the annual
report and accounts, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
financial position, performance, business
model and strategy.
For details of the process that was
followed to enable the Board to make
this statement, please refer to the Audit
Committee report on pages 89 to 96.
Responsibility statement
Each of the Directors at the date of
approval of this statement confirms that,
to the best of his or her knowledge:
– The Group financial statements,
prepared in accordance with UK-
adopted international accounting
standards, give a true and fair view of
the assets, liabilities, financial position
and profit of the Company and the
undertakings included in the
consolidation taken as a whole; and
– The annual report, including the
Strategic report on pages 1 to 67 and
the Directors’ report on pages 128 to
132, includes a fair review of the
development and performance of the
business and the position of the
Company and the undertakings
included in the consolidation taken as
a whole, together with a description of
the principal risks and uncertainties
that they face.
By order of the Board
Jon Messent
Company Secretary
29 June 2023
Directors’ responsibilities in
respect of the annual report
and the financial statements
The Directors are responsible for
preparing the annual report and the
Group and Parent Company financial
statements in accordance with
applicable UK law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the
Directors have elected to prepare the
Group financial statements in accordance
with UK-adopted international accounting
standards (IFRSs) and have elected to
prepare the Parent Company financial
statements in accordance with UK
Generally Accepted Accounting Practice
(UK Accounting Standards, including FRS
102 The Financial Reporting Standard
applicable in the UK and Republic of
Ireland (“FRS 102”)), and applicable law.
Under company law the Directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs of
the Group and the Company and of their
profit or loss for the period.
In preparing each of the Group and
Parent Company financial statements,
the Directors are required to:
– Select suitable accounting policies
in accordance with IAS 8 Accounting
Policies, Changes in Accounting
Estimates and Errors (and, in respect
of the Parent Company financial
statements, Section 10 of FRS 102)
and then apply them consistently;
– Make judgements and estimates that
are reasonable and prudent;
– Present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
– Provide additional disclosures when
compliance with the specific
requirements in IFRSs (and, in respect
of the Parent Company financial
statements, FRS 102) is insufficient to
enable users to understand the
impact of particular transactions,
other events and conditions on the
Group and Company financial
position and financial performance;
De La Rue plc Annual Report 2023
133
Strategic reportGovernance reportFinancial statements Financial statements
We worked hard to
mitigate cost inflation
and minimise the
impact of low currency
demand in FY23
134
De La Rue plc Annual Report 2023
Consolidated income statement
Page 145
Five-year record
Page 214
Independent Auditor’s Report
136
145 Consolidated income statement
146
Consolidated statement of
comprehensive income
147 Consolidated balance sheet
148
Consolidated statement of
changes in equity
149 Consolidated cash flow
statement
151 Accounting policies
161 Notes to the accounts
205 Company balance sheet
206 Company statement of changes
in equity
Accounting policies – Company
207
209 Notes to the accounts –
Company
211 Non-IFRS measures
214 Five-year record
215 Shareholder information
De La Rue plc Annual Report 2023
135
Strategic reportGovernance reportFinancial statements Independent Auditor’s Report
Independent Auditor’s
Report to the members of
De La Rue plc
Opinion
In our opinion:
– De La Rue plc’s group financial
statements and parent company
financial statements (the “financial
statements”) give a true and fair view of
the state of the group’s and of the
parent company’s affairs as at 25 March
2023 and of the group’s loss for the
period then ended as defined within
the Group’s accounting policies;
– the Group financial statements have
been properly prepared in accordance
with UK adopted international
accounting standards;
– the parent company financial
statements have been properly
prepared in accordance with United
Kingdom Generally Accepted
Accounting Practice; and
– the financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006.
The financial reporting framework that
has been applied in the preparation of the
group financial statements is applicable
law and UK adopted international
accounting standards. The financial
reporting framework that has been
applied in the preparation of the parent
company financial statements is
applicable law and United Kingdom
Accounting Standards, including FRS 102
“The Financial Reporting Standard
applicable in the UK and Republic of
Ireland” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law.
Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of
the financial statements section of our
report. We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
We have audited the financial statements of De La Rue plc (the ‘parent company’) and
its subsidiaries (the ‘group’) for the period ended 25 March 2023 which comprise:
Group
Parent company
Consolidated balance sheet as at
25 March 2023
Company Balance sheet as at 25 March 2023
Consolidated income statement for the
period ended 25 March 2023
Company Statement of changes in equity for
the period ended 25 March 2023
Consolidated statement of comprehensive
income for the period ended 25 March 2023
Related notes 1 to 8a to the financial
statements including a summary of significant
accounting policies
Consolidated statement of changes in equity
for the period ended 25 March 2023
Consolidated cash flow statement for the
period ended 25 March 2023
Related notes 1 to 31 to the financial
statements, including a summary of significant
accounting policies
136
De La Rue plc Annual Report 2023
Independence
We are independent of the group and
parent in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the UK,
including the FRC’s Ethical Standard as
applied to listed public interest entities,
and we have fulfilled our other ethical
responsibilities in accordance with
these requirements.
The non-audit services prohibited by the
FRC’s Ethical Standard were not provided to
the group or the parent company and we
remain independent of the group and the
parent company in conducting the audit.
Conclusions relating to
going concern
In auditing the financial statements, we
have concluded that the directors use
of the going concern basis of accounting
in the preparation of the financial
statements is appropriate. Our evaluation
of the directors’ assessment of the group
and parent company’s ability to continue
to adopt the going concern basis of
accounting included:
– We confirmed our understanding of
management’s going concern
assessment process as well as the
review controls in place over the
preparation of the group’s going
concern model and the memoranda on
going concern presented to the board
of directors. We also performed
procedures in conjunction with internal
specialists to test the appropriateness
of management’s underlying modelling.
– We assessed the appropriateness of
the duration of the going concern
assessment period to 29 June 2024
(“the going concern period”) and
considered the existence of any
significant events or conditions beyond
this period based on our enquiries and
knowledge arising from other areas of
the audit.
– We obtained the final signed
– We challenged each of the available
amendment to the Revolving Credit
Facility dated 29 June 2023 and
assessed the implications of the revised
terms in the context of management’s
assessment, including covenant and
liquidity compliance in the going
concern period. We considered the
changes to the underlying financial
covenants, as well as the inclusion of
monthly liquidity testing and non-
financial requirements, including the
need for the company to assess the
future options available to them.
– We obtained the signed agreement with
the Pension Trustee to defer previously
agreed contributions until June 2024.
We confirmed that such effects had
been appropriately modelled in the
forecast cashflow assumptions.
– We obtained the cash flow, covenant
forecasts and sensitivities for the going
concern period prepared by
management and tested for arithmetical
accuracy of the models as well as
checking the net debt position at the
period-end date which is the starting
point for the model. Further to this, we
reviewed actual post period-end trading
against the forecast and considered all
relevant factors from the period-end
date to the approval date of the
financial statements. We assessed the
reasonableness of the cashflow forecast
by analysing management’s historical
forecasting accuracy. We also assessed
the reasonableness of the forecasts
with reference to the level of secured
orders, the prospect of securing the
pipeline and assumptions including
both fixed and variable costs as well as
assessing whether all key factors have
been considered by management.
– We evaluated the key assumptions
underpinning the Group’s assessment
by challenging the measurement and
completeness of downside scenarios
modelled by management and how
these compare with principal risks and
uncertainties of the Group. The key
sensitivity in management’s
assessment is the group’s ability to
continue operating within all of its bank
covenants and liquidity requirements
during the going concern period. We
reviewed management’s reverse stress
testing scenarios which quantified the
downside required to breach the
covenants (by modelling both
decreased earnings and increased net
debt) or exhaust liquidity and evaluated
whether the downside in cash flows,
earnings and net debt required for such
a scenario to materialise was plausible
during the going concern period
considering the analysis of fixed versus
variable costs, the proportion of
revenue secured through orderbook
coverage, and recent forecast accuracy.
mitigating actions (e.g. reduced capital
expenditure and reductions in
discretionary spend) and obtained
analysis to determine if these were in
the control of management and
evaluated the expected impact of the
mitigation in the light of our
understanding of the business and its
cost structures.
– We note that management has
performed an assessment to consider
whether any events outside of the
going concern period beyond 29 June
2024 need to be considered in the
context of management’s conclusion.
Management have identified the
successful re-financing of the
company’s Revolving Credit Facility
which expires on 1 January 2025 and
continued covenant compliance until
then to be such events. We have
performed procedures to assess
whether management’s conclusions in
this regard are reasonable, including
review of forecasts in this period and
discussions with the company’s
advisors and the lenders in conjunction
with internal debt specialists to
determine whether the Group has
realistic prospects of covenant
compliance and a refinancing of the
Revolving Credit Facility.
– We considered the extent to which
emerging climate-related risks may
affect the Group’s assessment and the
assumptions around the costs
anticipated in meeting the Group’s
target to become carbon neutral for its
own operations by 2030. This includes
the capital expenditure required to
enable the Group to reduce its carbon
footprint, energy usage, waste, and
reliance on plastics. Additionally, we
considered other macroeconomic
factors such as the rising cost of
materials, energy and labour which are
critical parts of the Group’s operations.
– We considered whether the Group’s
forecasts in the going concern
assessment were consistent with other
forecasts used by the Group in its
accounting estimates, including
non-current asset impairment and
deferred tax asset recognition.
– We held discussions with the Audit
Committee and full board of Directors
to corroborate the forecasts and their
basis as prepared by management.
Further to this we held discussions
with the Company’s advisors as
well as the lenders to corroborate
other key assumptions in
management’s assessment.
– We considered whether management’s
disclosures in the financial statements
sufficiently and appropriately reflect
the going concern assessment, key
judgements made and outcomes.
The audit procedures performed in
evaluating the director’s assessment
were performed by the Group audit
team, however we also considered the
financial and non-financial information
communicated to us from our component
teams of overseas locations as sources
of potential contrary indicators which
may cast doubt over the going concern
assessment. We determined going
concern to be a key audit matter.
Our key observations
We note the following key observations in
relation to management’s assessment
and the procedures we have performed
as stated above:
– On 29 June 2023 the Company signed
an amended agreement with the
Lenders on its Revolving Credit Facility
which includes updated covenants, a
new liquidity requirement and other
non-financial milestones to be actioned
including the need for the company to
assess the future options available to
them. On 28 June 2023, the Company
signed an agreement with the Pension
Trustee on the deferral of previously
agreed payments into the scheme.
Conclusion
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the group
and parent company’s ability to continue
as a going concern over the period
through to 29 June 2024, a period of
12 months from when the financial
statements are authorised for issue.
In relation to the group and parent
company’s reporting on how they have
applied the UK Corporate Governance
Code, we have nothing material to add or
draw attention to in relation to the
directors’ statement in the financial
statements about whether the directors
considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report. However, because
not all future events or conditions can
be predicted, this statement is not a
guarantee as to the Group’s ability to
continue as a going concern.
De La Rue plc Annual Report 2023
137
Strategic reportGovernance reportFinancial statements Independent Auditor’s Report continued
Overview of our audit approach
Audit scope
– We performed an audit of the complete financial information of 3
components, an audit of specific balances of 3 components and
performed specified procedures for a further 7 components.
– The components where we performed full audit procedures
accounted for 99.1% of adjusted EBITDA (being adjusted for
exceptional items), 89.7% of Revenue and 64% of Total assets. The
components where we performed full, specific or specified audit
procedures in relation to revenue accounted for 100% of Revenue.
Key audit
matters
– Revenue recognition
– Post-retirement benefit obligations- liabilities & assets
Materiality
– Overall Group materiality of £0.9m which represents 2% of adjusted
EBITDA. Adjusted EBITDA represents earnings from continuing
operations before the deduction of interest, tax, depreciation,
amortisation and exceptional items.
An overview of the scope of
the parent company and
group audits
Tailoring the scope
Our assessment of audit risk, our
evaluation of materiality and our allocation
of performance materiality determine
our audit scope for each company within
the Group. Taken together, this enables us
to form an opinion on the consolidated
financial statements. We take into
account size, risk profile, the organisation
of the group and effectiveness of
group-wide controls, changes in the
business when assessing the level of
work to be performed at each entity.
Full Scope
Specific Scope
Specified Procedures
Full and specified procedures coverage
Remaining components
Total reporting components
In assessing the risk of material
misstatement to the Group financial
statements, and to ensure we had
adequate quantitative coverage of
significant accounts in the financial
statements, of the 50 reporting
components of the Group, we selected
six components as full or specific scope
covering entities within United Kingdom,
Malta, Sri Lanka, Kenya and Group
consolidation adjustments, represents
the principal business units within the
Group. We selected a further seven
components as specified procedures
components, for which we performed
certain audit procedures on specific
accounts within that component which
we considered had the potential for the
greatest impact on the significant
accounts in the financial statements,
either because of the size of the accounts
or their risk profile.
The table below sets out the coverage
obtained from the work performed by our
audit teams.
Number of
locations
Adjusted
EBITDA
(%)
3
3
7
13
37
50
99.1
–*
–*
99.1
0.9*
100.0
Revenue
(%)
89.7
2.1
8.2
100.0
0.0
100.0
Total
Assets
(%)
64.1
20.0
13.8
97.9
2.1
100.0
*
The contribution of specified procedure components to Group Adjusted EBITDA is included within ‘remaining
components’ as audit procedures were performed on certain, but not all, significant accounts of the specified procedures
components contributing to Group Adjusted EBITDA.
Of the 13 components selected, we
performed an audit of the complete
financial information of 3 components
(“full scope components”) which were
selected based on their size or risk
characteristics.
For 3 components (“specific scope
components”), we performed audit
procedures on specific accounts within
that component that we considered had
the potential for the greatest impact on
the significant accounts in the financial
statements either because of the size of
these accounts or their risk profile.
For the remaining seven components
(representing -8.3% of adjusted EBITDA)
we performed specified procedures
performed through centralised testing by
the group team. These locations typically
represent other small revenue generating
entities, overseas cost centres, or holding
companies and not the principal business
units of the Group. We extend our scope
to these entities in order to add an
element of unpredictability into our audit
procedures Specifically, we performed
specified procedures on certain aspects
of revenue; other operating expenses;
interest income and expense, provisions,
intangible assets and amortisation, in
response to our risk assessment for these
individual financial statement line items.
The audit scope of the components in
specific scope or specified procedures
does not include testing of all significant
accounts of the component, but will have
contributed to the metrics provided
above for the Group.
Of the remaining 37 components that
together represent (14.2%) of the Group’s
adjusted EBITDA, we performed other
procedures, including cash and
borrowings verification testing on all
material balances, analytical review,
testing of consolidation journals and
intercompany eliminations and foreign
currency translation recalculations to
respond to any potential risks of material
misstatement to the Group financial
statements. In addition, we have also
performed other procedures on a random
selection of additional immaterial
balances in order to achieve an element
of unpredictability in our audit procedures
as well as detailed analytical procedures
on certain cost centres.
138
De La Rue plc Annual Report 2023
Climate change
Stakeholders are increasingly interested
in how climate change will impact Group.
The Group has determined that the most
significant future impacts from climate
change on its operations will be from:
emerging regulation changes and the
Group’s ability to react to such changes
(for example, the ban on the single use
plastic in Kenya); the risk of flooding of
key sites as a result of rising water levels
and precipitations patterns; and the risk
of being unable to execute the transition
of operations required to effectively
reduce its footprint, energy usage, waste
and reliance on plastics in its operations.
These are explained on pages 26 to 36
in the Task Force for Climate related
Financial Disclosures and on page 60 in
the principal risks and uncertainties.
They have also explained their climate
commitments on page 35. All of these
disclosures form part of the “Other
information,” rather than the audited
financial statements. Our procedures on
these unaudited disclosures therefore
consisted solely of evaluating whether
they are materially inconsistent with the
financial statements or our knowledge
obtained in the course of the audit or
otherwise appear to be materially
misstated, in line with our responsibilities
on “Other information”.
In planning and performing our audit we
assessed the potential impacts of climate
change on the Group’s business and any
consequential material impact on its
financial statements.
The Group has explained in the strategic
report how they have reflected the
impact of climate change in their
financial statements.
Our audit effort in considering the impact
of climate change on the financial
statements was focused on evaluating
management’s assessment of the impact
of climate risk, physical and transition,
their climate commitments, the effects of
material climate risks disclosed on pages
26 to 36 and the significant judgements
and estimates disclosed on pages 157 to
160 and whether these have been
appropriately reflected in the going
concern and viability considerations of
the Group, and other key assessments
where values are determined through
modelling future cash flows including
assumptions around the costs anticipated
in meeting the Group’s target to become
carbon neutral for its own operations by
2030. Where required by the relevant
accounting standard, this includes the
capital expenditure required to enable
the Group to reduce its carbon footprint,
energy usage, waste and reliance on
plastics. As part of this evaluation, we
performed our own risk assessment
supported by our climate change internal
specialists, to determine the risks of
material misstatement in the financial
statements from climate change which
needed to be considered in our audit.
Whilst the Group have stated their
sustainability commitments in becoming
carbon natural from its own operations
by 2030 and to align with the aspirations
of the Paris Agreement to achieve net
zero emissions by 2050, the Group are
currently unable to determine the full
future economic impact on their business
model, operational plans and customers
to achieve this and therefore the potential
impacts are not fully incorporated in
these financial statements.
Changes from the prior year
There have been no significant changes in
the scoping of our Group audit.
Involvement with
component teams
In establishing our overall approach to the
Group audit, we determined the type of
work that needed to be undertaken at
each of the components by us, as the
primary audit engagement team, or by
component auditors from other EY global
network firms operating under our
instruction. The audit procedures on the
three full scope components (all of which
comprise parts of the UK operating
business) were performed directly by the
primary audit team. For the three specific
scope components, where the work was
performed by component auditors, we
determined the appropriate level of
involvement to enable us to determine
that sufficient audit evidence had been
obtained as a basis for our opinion on
the Group as a whole.
During the year the Group audit team
determined not to undertake any planned
visits to the specific scope overseas
locations. This decision was taken based
on the relative contribution of the full
scope UK locations to the overall Group
(99.1% of the Group’s adjusted EBITDA,
89.7% of the Group’s Revenue and 64.1%
of the Group’s Total assets) Furthermore
the significant risks identified relate to the
Group and full scope components which
are based in the UK and audited by the
primary audit team. Detailed instructions
were sent to all specific scope overseas
locations which covered the significant
areas that should be addressed by the
component team auditors and the
information which should be reported to
the Group audit team. The primary team
interacted regularly with the component
teams during various stages of the audit
including attending planning, update and
closing meetings via conference calls.
The primary team reviewed certain key
working papers and were responsible for
the scope and direction of the audit
process. This, together with the additional
procedures performed at Group level, gave
us appropriate evidence for our opinion
on the Group financial statements.
De La Rue plc Annual Report 2023
139
Strategic reportGovernance reportFinancial statements Independent Auditor’s Report continued
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Key observations communicated to the Audit Committee
Based on our audit procedures we have
concluded that revenue is appropriately
recognised in the period and appropriately
accrued or deferred at 25 March 2023.
Revenue recognition – £349.7m
(FY22 – £375.1m)
Refer to the Audit Committee Report (page
89); Accounting policies (page 151); and Note
2 of the Consolidated Financial Statements
(page 163)
Risk on revenue cut-off
We have identified that there is a risk that
revenue is manipulated at or near to the
period end to meet income statement targets
through management override of controls.
This cut-off risk manifests itself in different
ways based on the terms of the contract and
the associated accounting policy under IFRS
15. For contracts where revenue is recognised
‘over time’ the risk relates to the judgements
made in relation to appropriate evidence; the
existence of an enforceable right to payment
as per the contract; and completion of
inventory or costs incurred compared to
total estimated cost to complete.
Risk on bill & hold arrangements
For contracts where revenue is recognised at
a ‘point in time’ the risk relates to evidencing
that control has passed to the customer. In
particular, certain contracts include specific
terms, for example, complex acceptance
criteria or “bill and hold” criteria which adds to
the risk that revenue may be recorded in the
incorrect reporting period. Misstatements that
occur in relation to this risk would impact the
revenue recognised in the income statement
as well as any revenue related balance sheet
account such as trade debtors, deferred
income and accrued income.
140
De La Rue plc Annual Report 2023
We have performed testing using the lowest
end of the performance materiality range
applicable for addressing the occurrence
assertion impacted by a significant risk. At
each full, and specific scope component with
significant revenue streams (6 components)
including (where relevant) consolidation
adjustments, we performed audit procedures
which covered 91.8% of the Group’s Revenue.
We also performed specified procedures on
material revenue amounts earned in the
remainder of the group, including amounts in
the USA and De La Rue Buck Press Limited.
The primary audit team and specific scope
component teams performed the audit
procedures over the Group’s revenue. Our
procedures included, among others, obtaining
an understanding of the revenue recognition
process and evaluating the design of internal
controls over revenue recognised. We also
evaluated the appropriateness of the Group’s
revenue recognition policy.
Risk on revenue cut-off
To address the risk of inappropriate cut-off,
we selected a sample of revenue transactions
around the period end date and for our
sample selected, we tested to corroborate
that there was appropriate evidence to
support that control has passed to the
customer and that revenue was recognised
in the appropriate period. This included
checking to third party evidence of delivery,
where applicable.
For over time revenue contracts, we
performed a review of all new material
underlying agreements to determine that
over time revenue recognition is appropriate,
including an assessment of performance
obligations and any judgements made
by management in concluding that the
company has an enforceable right to
payment, enquiring with external legal
counsel where relevant.
The group uses the input method to record
revenue over time. For all material contracts,
we have tested actual costs incurred to
underlying supporting documents and
challenged the appropriateness of the
estimated cost to complete the performance
obligation. We have also tested the
appropriateness of the margin applied by
agreeing the calculations through to
contractual terms (e.g. unit prices and total
contract value). We have also checked that
the correct percentage of completion (POC)
has been applied in determining the amount
of revenue to be recognised.
Risk on bill & hold arrangements
To address the risk on ‘bill and hold’, we
ensured that the ‘bill and hold’ arrangement
was stipulated in the contractual terms, that
the related goods had been manufactured at
the period-end date, including physically
verifying a sample of these items, and that
control had passed to the customer.
Risk
Our response to the risk
Key observations communicated to the Audit Committee
Based on our audit procedures, we have
concluded that the actuarial assumptions
applied within the valuation of post-retirement
benefits at period-end are appropriate.
We have also concluded that the pension
scheme assets are stated at fair market value.
Post-retirement benefit obligations –
(£54.7m), (FY22 – £29.8m)
Refer to the Audit Committee Report (page
89); Accounting policies (page 151); and Note
24 of the Consolidated Financial Statements
(page 197).
Post-retirement benefit Liabilities – £731.3m
(FY22 – £957.1m)
The valuation of the pension liabilities requires
significant levels of judgement and technical
expertise in choosing appropriate
assumptions. A number of the key
assumptions (including salary increases,
inflation, discount rates and mortality) can
have a material impact on the calculation of
the liability.
Post-retirement benefit Assets – £678.2m
(FY22 – £988.7m)
The pension assets include significant pension
asset investments, the fair value measurement
of which includes significant judgement.
Management uses an off-cycle period-end
date of 25 March 2023 which means that
valuations provided by fund managers are not
provided in line with the balance sheet date,
but rather at the 31 March calendar month-
end date.
There is a further risk in this valuation process
as a number of the pension assets are “hard
to value”, which do not have a readily
observable market price.
Misstatements that occur in relation to this
risk would affect the retirement benefit
obligations account in the balance sheet
as well as related accounts in the income
statement and statement of other
comprehensive income.
Response to the risk on post-retirement
benefit liabilities
We utilised EY pension specialists to assist us
in testing the valuation of post-retirement
benefit liabilities. We gained an understanding
of the valuation process through discussion
with the pension scheme actuaries. This
included challenging the basis and methodology
for setting key assumptions, including, salary
increases and mortality rates by comparing
them to national and industry averages.
We independently checked the discount and
inflation rates used in the valuation of the
pension liability against our internally
developed benchmarks.
We assessed the competency of
management’s expert used in determining
the actuarial valuation.
Response to the risk on post-retirement
benefit assets:
We assessed the competency of
management’s expert used in determining
the asset valuation.
We have confirmed the existence of scheme
assets with the schemes’ fund managers and
independently confirmed the valuation of
scheme assets by performing detailed testing
on a sample of assets, taking into account the
relative complexity of the underlying asset class.
For the hard to value assets, we have obtained
a confirmation directly from the fund
managers on the number of units and period
end price by investment product. We have
also involved our EY valuation specialists in
determining the valuation of certain hard to
value assets eg interest rate swaps, inflation
swaps and cross currency swaps.
We tested management’s assessment of the
valuation difference between the period end
date and calendar month end date, by
performing sample testing of assets re-valued
by third parties and performing a recalculation
of the volatility adjustment using market data.
We assessed the appropriateness of
Management’s retirement benefit obligation
disclosure by reference to the requirements
of applicable accounting standards.
De La Rue plc Annual Report 2023
141
Strategic reportGovernance reportFinancial statements Independent Auditor’s Report continued
Our application of
materiality
We apply the concept of materiality in
planning and performing the audit, in
evaluating the effect of identified
misstatements on the audit and in
forming our audit opinion.
Materiality
The magnitude of an omission or
misstatement that, individually or in the
aggregate, could reasonably be expected
to influence the economic decisions of
the users of the financial statements.
Materiality provides a basis for
determining the nature and extent
of our audit procedures.
We determined materiality for the Group
to be £0.9m (2022: £1.1m), which is 2%
(2022: 2%) of adjusted EBITDA. Given the
focus on the Group’s ability to continue
operating as a going concern in recent
periods, we believe that there remains
a pivotal focus on the banking covenants
applicable to the Company which are
based on adjusted EBITDA. As such, we
believe that adjusted EBITDA provides us
with a reasonable basis for determining
materiality and is the most relevant
performance measure to the stakeholders
of the entity.
We determined materiality for the Parent
Company to be £1.5 million (2022: £5.3
million), which is 2% (2022: 2%) of equity.
Our materiality is based on the Group’s
EBITDA adjusted for exceptional items in
order to exclude items which are non-
recurring in nature. We have determined
the final materiality amount applied in our
audit procedures below:
Starting basis
– Group EBITDA loss (£1.3m)
Adjustments
– Add back net exceptional
items of £47.1m as
disclosed on the Group
Income statement
Materiality
– Totals £45.8m
– Materiality of £0.9m
(2% of adjusted EBITDA)
Performance materiality
The application of materiality at the
individual account or balance level.
It is set at an amount to reduce to an
appropriately low level the probability
that the aggregate of uncorrected
and undetected misstatements
exceeds materiality.
On the basis of our risk assessments,
together with our assessment of the
Group’s overall control environment,
our judgement was that performance
materiality was 50% (2022: 50%) of our
planning materiality, namely £0.45m
(2022: £0.5m). We have set performance
materiality at this percentage due to
an expectation of possible audit
misstatements in the current period
driven by the volume and quantum of
audit misstatements identified in the
prior period.
Audit work at component locations for
the purpose of obtaining audit coverage
over significant financial statement
accounts is undertaken based on a
percentage of total performance
materiality. The performance materiality
set for each component is based on the
relative scale and risk of the component
to the Group as a whole and our
assessment of the risk of misstatement
at that component. In the current period,
the range of performance materiality
allocated to components was £0.1m to
£0.4m (2022: £0.1m to £0.5m).
Reporting threshold
An amount below which identified
misstatements are considered as being
clearly trivial.
We agreed with the Audit Committee that
we would report to them all uncorrected
audit differences in excess of £45,000
(2022: £54,000), which is set at 5% of
planning materiality, as well as differences
below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected
misstatements against both the
quantitative measures of materiality
discussed above and in light of other
relevant qualitative considerations in
forming our opinion.
Other information
The other information comprises the
information included in the annual report
set out on pages 1 to 133, other than the
financial statements and our auditor’s
report thereon. The directors are
responsible for the other information
contained within the annual report.
Our opinion on the financial statements
does not cover the other information and,
except to the extent otherwise explicitly
stated in this report, we do not express any
form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the course of the audit or otherwise
appears to be materially misstated. If we
identify such material inconsistencies or
apparent material misstatements, we are
required to determine whether there is
a material misstatement in the financial
statements themselves. If, based on the
work we have performed, we conclude
that there is a material misstatement of
the other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
– the information given in the strategic
report and the directors’ report for the
financial period for which the financial
statements are prepared is consistent
with the financial statements; and
– the strategic report and the directors’
report have been prepared in
accordance with applicable legal
requirements.
142
De La Rue plc Annual Report 2023
Matters on which we
are required to report
by exception
In the light of the knowledge and
understanding of the group and the
parent company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect of
the following matters in relation to which
the Companies Act 2006 requires us to
report to you if, in our opinion:
– adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received from branches not
visited by us; or
– the parent company financial
statements and the part of the
Directors’ Remuneration Report to be
audited are not in agreement with the
accounting records and returns; or
– certain disclosures of directors’
remuneration specified by law are not
made; or
– we have not received all the information
and explanations we require for our audit
Corporate Governance
Statement
The Listing Rules require us to review the
directors’ statement in relation to going
concern, longer-term viability and that
part of the Corporate Governance
Statement relating to the group and
company’s compliance with the provisions
of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part
of our audit, we have concluded that
each of the following elements of the
Corporate Governance Statement is
materially consistent with the financial
statements or our knowledge obtained
during the audit:
– Directors’ statement with regards to the
appropriateness of adopting the going
concern basis of accounting and any
material uncertainties identified set out
on pages 64 to 67;
– Directors’ explanation as to its
assessment of the company’s
prospects, the period this assessment
covers and why the period is
appropriate set out on pages 64 to 67;
– Directors’ statement on fair, balanced
and understandable set out on
page 133;
– Board’s confirmation that it has carried
out a robust assessment of the
emerging and principal risks set out on
page 133;
– The section of the annual report that
describes the review of effectiveness of
risk management and internal control
systems set out on page 56; and;
– The section describing the work of the
audit committee set out on page 89.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page
133, the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements, the
directors are responsible for assessing
the group and parent company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the group or the
parent company or to cease operations,
or have no realistic alternative but to
do so.
Auditor’s responsibilities for
the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in
the aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis
of these financial statements.
Explanation as to what extent
the audit was considered
capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above,
to detect irregularities, including fraud.
The risk of not detecting a material
misstatement due to fraud is higher than
the risk of not detecting one resulting
from error, as fraud may involve deliberate
concealment by, for example, forgery or
intentional misrepresentations, or through
collusion. The extent to which our
procedures are capable of detecting
irregularities, including fraud is detailed
below. However, the primary responsibility
for the prevention and detection of
fraud rests with both those charged
with governance of the company
and management.
– We obtained an understanding of the
legal and regulatory frameworks that
are applicable to the group and
determined that the most significant
are those that relate to the reporting
framework (IFRS standards for the
group financial statements and FRS 102
for the parent company stand alone
accounts, in addition to abiding by the
Companies Act 2006) and the relevant
direct and indirect tax regulations in
the United Kingdom. In addition, the
Company has to comply with laws and
regulations relating to its operations,
including exports of product and
service regulations, offset terms on
foreign contracts, UK Anti-bribery act,
procurement regulations, Proceeds of
Crime Act 2002 and The Money
Laundering (Amendment) Regulations
2012, Health and Safety and GDPR.
Furthermore, the company must comply
with Listing Rules (LR requirements,
Disclosure & Transparency Rules (DTR)
requirements and ESMA Guidelines on
Alternative Performance measures,
UK Corporate Governance Code
(2018 Code)
De La Rue plc Annual Report 2023
143
Strategic reportGovernance reportFinancial statements Use of our report
This report is made solely to the
company’s members, as a body, in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work
has been undertaken so that we might
state to the company’s members those
matters we are required to state to them
in an auditor’s report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
company and the company’s members as
a body, for our audit work, for this report,
or for the opinions we have formed.
San Gunapala
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
Reading
29 June 2023
Independent Auditor’s Report continued
– We understood how De La Rue plc is
complying with those frameworks by
making enquiries of management
including internal legal counsel to
understand how the Company
maintains and communicates its
policies and procedures in these areas
and corroborated this by reviewing
supporting documentation. Specifically,
we inspected the code of conduct and
employee handbook issued to each
employee, we also verified that specific
training on the above frameworks were
offered to employees throughout the
period; obtaining and inspecting the
training compliance report held by the
company. Where relevant we liaised
with external legal counsel to
understand the potential impact of
claims brought against the company.
We also reviewed correspondence with
relevant authorities, including HMRC.
– We assessed the susceptibility of the
company’s financial statements to
material misstatement, including how
fraud might occur by considering the
risk of management override and
through assessing revenue as a fraud
risk through recognising revenue in the
incorrect period. Our procedures to
address this involved:
– Understanding the revenue
recognition process, policy and how it
is applied, including relevant controls.
– Selecting a sample of key contracts
to test based on various risk criteria.
For the same contracts we
performed detailed contract reviews,
including challenging management
assumptions on the revenue
recognition process.
– For those contracts where revenue
has been recognised over time or at
a point-in-time, our procedures and
conclusions are documented in the
key audit matters’ table above.
– We incorporated data analytics into
our testing of manual journals,
including segregation of duties, and
in respect of our testing of revenue
recognition, investigated journals
posted to revenue, with focus on
manual transactions recorded at
or close to the year-end date.
– Based on this understanding we
designed our audit procedures to
identify non-compliance with such laws
and regulations. Our procedures had a
focus on compliance with the reporting
framework set out above through our
walkthrough testing.
– Where we identified potential non-
compliance with laws and regulations,
we developed an appropriate audit
response and communicated directly
with components impacted. Our
procedures involved: understanding
the process and controls to identify
non-compliance, reading the
correspondence between the Group
and their regulators, review of
whistleblowing logs and understanding
management’s response, inquiring of
internal and external legal counsel and
reading their reports, understanding the
fact patterns in each case and
documenting the positions taken by
management, and using EY specialists
(including Forensics) to support us in
concluding on the matters identified.
– If any instance of non-compliance with
laws and regulations were identified,
these were communicated to the
relevant local EY teams who performed
sufficient and appropriate audit
procedures supplemented by audit
procedures performed at the
group level.
Other matters we are
required to address
Following the recommendation from the
Audit Committee we were appointed by
the company on 21 September 2017 to
audit the financial statements for the
period ending 31 March 2018 and
subsequent financial periods. We signed
an updated engagement letter on 24 May
2021. The period of total uninterrupted
engagement including previous renewals
and reappointments is four years,
covering the periods ending 31 March
2018 to 25 March 2023.
– The non-audit services prohibited by
the FRC’s Ethical Standard were not
provided to the group or the parent
company and we remain independent
of the group and the parent company
in conducting the audit.
– The audit opinion is consistent with the
additional report to the Audit Committee.
144
De La Rue plc Annual Report 2023
Consolidated income statement
Consolidated income statement
for the period ended 25 March 2023
Revenue from customer contracts
Cost of sales
Gross Profit
Adjusted operating expenses
Adjusted operating profit
Adjusted Items¹:
— Amortisation of acquired intangibles
— Net exceptional items – expected credit loss
— Net exceptional items – other
— Net exceptional items – Total
Operating (loss)/profit
Interest income
Interest expense
Net retirement benefit obligation finance income/(expense)
Net finance expense
(Loss)/Profit before taxation from continuing operations
Taxation
(Loss)/Profit for the year from continuing operations
Profit from discontinued operations
(Loss)/Profit for the year
Attributable to:
— Owners of the parent
— Non-controlling interests
(Loss)/Profit for the year
Earnings per ordinary share
Basic
Basic EPS continuing operations
Basic EPS discontinued operations
Total Basic EPS
Diluted
Diluted EPS continuing operations
Diluted EPS discontinued operations
Total Diluted EPS
Notes
2
4
2023
£m
349.7
(257.6)
92.1
(64.3)
27.8
10
(1.0)
(8.5)
(38.6)
(47.1)
2022
£m
375.1
(277.5)
97.6
(61.2)
36.4
(1.0)
(3.1)
(2.6)
(5.7)
5
5
5
6
6
6, 24
7
3
8
8
(20.3)
29.7
1.2
(11.6)
1.1
(9.3)
(29.6)
(27.6)
(57.2)
–
(57.2)
(55.9)
(1.3)
(57.2)
0.9
(6.2)
(0.2)
(5.5)
24.2
(1.3)
22.9
0.8
23.7
21.5
2.2
23.7
(28.6)p
–
(28.6)p
(28.6)p
–
(28.6)p
10.6p
0.4p
11.0p
10.5p
0.4p
10.9p
Note:
1.
For adjusting Items, the cash flow Impact of exceptional Items can be found in note 5 and there was no cash flow impact for the amortisation of acquired Intangible assets.
De La Rue plc Annual Report 2023
145
Strategic reportGovernance reportFinancial statements
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
for the period ended 25 March 2023
(Loss)/Profit for the year
Other comprehensive income
Items that are not reclassified subsequently to profit or loss:
Remeasurement (loss)/gain on retirement benefit obligations
Tax related to remeasurement of net defined benefit liability
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences for foreign operations
Foreign currency translation differences for foreign operations – non-controlling interests
Change in fair value of cash flow hedges
Change in fair value of cash flow hedges transferred to profit or loss
Tax related to cash flow hedge movements
Tax related to components of other comprehensive income
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year
Comprehensive income for the year attributable to:
Equity shareholders of the Company
Non-controlling interests
Notes
2023
£m
(57.2)
2022
£m
23.7
24
7
(100.3)
24.2
5.0
–
(1.0)
1.7
(0.1)
(0.1)
(70.6)
14(a)
14(a)
7
7
35.7
(8.8)
(1.5)
0.1
(0.6)
0.8
0.1
0.2
26.0
(127.8)
49.7
(126.5)
(1.3)
(127.8)
47.4
2.3
49.7
146
De La Rue plc Annual Report 2023
Consolidated balance sheet
Consolidated balance sheet
at 25 March 2023
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Long-term pension assets
Other financial assets
Deferred tax assets
Derivative financial assets
Current assets
Inventories
Trade and other receivables
Contract assets
Current tax assets
Derivative financial assets
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Derivative financial liabilities
Lease liabilities
Provisions for liabilities and charges
Non-current liabilities
Borrowings
Retirement benefit obligations
Deferred tax liabilities
Lease liabilities
Other non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium account
Capital redemption reserve
Hedge reserve
Cumulative translation adjustment
Other reserve
Retained earnings
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity
Approved by the Board on 29 June 2023
Clive Vacher
Chief Executive Officer
Registered number: 3834125
Rob Harding
Chief Financial Officer
Notes
2023
£m
2022
£m
9
10
23
24
11
16
14a
12
13
2
14a
15
17
14a
23
19
18
24
16
23
20
97.1
39.3
12.1
–
–
18.3
–
166.8
49.3
70.7
18.9
0.2
2.4
40.3
181.8
348.6
(92.1)
(23.2)
(1.9)
(3.0)
(6.0)
(126.2)
(118.4)
(54.7)
(2.8)
(10.3)
(1.2)
(187.4)
(313.6)
35.0
88.8
42.2
5.9
0.1
9.2
(83.9)
(43.3)
19.1
15.9
35.0
102.7
37.5
12.9
31.6
7.4
11.2
0.1
203.4
50.1
89.0
8.0
0.4
3.3
24.3
175.1
378.5
(80.0)
(13.9)
(4.8)
(2.7)
(5.9)
(107.3)
(92.6)
(1.8)
(2.4)
(11.5)
(1.1)
(109.4)
(216.7)
161.8
88.8
42.2
5.9
(0.5)
4.2
(31.9)
35.1
143.8
18.0
161.8
De La Rue plc Annual Report 2023
147
Strategic reportGovernance reportFinancial statements
Consolidated statement of changes in equity
Consolidated statement of changes in equity
for the period ended 25 March 2023
Attributable to
equity shareholders
Non-
controlling
Interests
Total
equity
Balance at 27 March 2021
88.8
42.2
5.9
(0.8)
5.7
(31.9)
(14.9)
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Hedge
reserve
£m
Cumulative
translation
adjustment
£m
Other
reserve
£m
Retained
earnings
£m
Profit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners of the Company
recognised directly in equity:
Share capital issued
Employee share scheme:
— value of services provided
Tax on income and expenses recognised directly
in equity
Dividends paid
Balance at 26 March 2022
Loss for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Reclassification between reserves
Transactions with Owners of the Company
recognised directly in equity
Share Capital issued
Employee share Scheme
— value of service provided
Tax on income and expenses recognised directly
in equity
Dividends paid
Other – unclaimed dividends
Balance at 25 March 2023
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
0.3
–
–
–
–
–
(1.5)
(1.5)
–
–
–
–
–
–
–
–
–
–
–
88.8
42.2
5.9
(0.5)
4.2
(31.9)
21.5
27.1
48.6
–
1.7
(0.3)
–
35.1
£m
16.4
2.2
0.1
2.3
0.2
–
–
(0.9)
18.0
£m
111.4
23.7
26.0
49.7
0.2
1.7
(0.3)
(0.9)
161.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
0.6
–
–
–
–
–
–
–
5.0
5.0
–
–
–
–
–
–
–
–
–
(55.9)
(1.3)
(57.2)
(76.2)
(132.1)
–
(1.3)
(70.6)
(127.8)
(51.9)
51.9
–
–
–
–
–
–
1.9
(0.5)
–
0.4
–
–
–
–
(0.8)
–
15.9
–
–
1.9
(0.5)
(0.8)
0.4
35.0
88.8
42.2
5.9
0.1
9.2
(83.8)
(43.3)
Notes:
Share premium account – This reserve arises from the issuance of shares for consideration in excess of their nominal value.
Capital redemption reserve – This reserve represents the nominal value of shares redeemed by the Company.
Hedge reserve – This reserve records the portion of any gain or loss on hedging instruments that are determined to be effective cash flow hedges. When the hedged transaction occurs,
the gain or loss on the hedging instrument is transferred out of equity to the income statement. If a forecast transaction is no longer expected to occur, the gain or loss on the related hedging
instrument previously recognised in equity is transferred to the income statement.
Cumulative translation adjustment (CTA) – This reserve records cumulative exchange differences arising from the translation of the financial statements of foreign entities since transition to
IFRS. Upon disposal of foreign operations, the related accumulated exchange differences are recycled to the income statement. This reserve also records the effect of hedging net investments
in foreign operations.
Other reserves – On 1 February 2000, the Company issued and credited as fully paid 191,646,873 ordinary shares of 25p each and paid cash of £103.7m to acquire the issued share capital of
De La Rue plc (now De La Rue Holdings Limited), following the approval of a High Court Scheme of Arrangement. In exchange for every 20 ordinary shares in De La Rue plc, shareholders received
17 ordinary shares plus 920p in cash. The other reserve of £83.8m arose as a result of this transaction and is a permanent adjustment to the consolidated financial statements. On 17 June 2020
the Group announced that it would issue new ordinary shares via a “cash box” structure to raise gross proceeds of £100m, in order to provide the Company and its management with operational
and financial flexibility to implement De La Rue’s turnaround plan, which was first announced by the Company earlier in the year. The cashbox completed on 7 July 2020 and consisted of a firm
placing, placing and open offer. The Group issued 90.9m new ordinary shares each with a nominal value of 44 152⁄175p, at a price of 110p per share (giving gross proceeds of £100m). A “cash box”
structure was used in such a way that merger relief was available under Companies Act 2006, section 612 and thus no share premium needed to be recorded and instead an ‘other reserve’ of
£51.9m was recorded, increasing other reserves from a deficit of £83.8m to a deficit of £31.9m. This section applies to shares which are issued to acquire non-equity shares (such as the
Preference Shares) issued as part of the same arrangement. The Group recorded share capital equal to the aggregate nominal value of the ordinary shares issued (£40.8m) and merger reserve
equal to the difference between the total proceeds net of costs and share capital. As the cash proceeds received by De La Rue plc where loaned via intercompany account to a subsidiary
company to enable a substantial repayment of the RCF, the increase to other reserves of £51.9m was treated as an unrealised profit. In the current year the Group recorded an impairment of the
intercompany loan. As a matter of generally accepted accounting practice, a profit previously regarded as unrealised becomes realised when there is a loss recognised on the write-down for
depreciation, amortisation, diminution in value or impairment of the related asset. Therefore, on the basis, the £51.9m previously treated as unrealised within Other Reserves is now treated as
a realised amount and has therefore been reclassified from “Other Reserves” to “Retained earnings” as at 25 March 2023.
148
De La Rue plc Annual Report 2023
Consolidated cash flow statement
Consolidated cash flow statement
for the period ended 25 March 2023
Cash flows from operating activities
(Loss)/profit before tax – continuing operations
Profit before tax – discontinued operations
Adjustments for:
Finance income and expense
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Gain on sale of property plant and equipment
Impairment/(impairment reversal) of property, plant and equipment included within exceptional items
Impairment of intangible assets included within exceptional items
Share based payment expense
Pension Recovery Plan and administration cost payments1
Increase/(decrease) in provisions
Non-cash credit loss provision – other financial assets
Non-cash credit loss provision – other
Other non-cash movements
Cash generated from operations before working capital
Changes in working capital:
Decrease in inventory
Decrease in trade and other receivables and contract assets
Increase/(Decrease) in trade and other payables and contract liabilities
Notes
2023
£m
2022
£m
6
9
23
10
9
9
10
21
19
5,11
(29.6)
–
(29.6)
9.3
12.5
2.2
5.3
(0.1)
5.4
4.3
1.9
(16.5)
0.1
8.5
(0.3)
3.5
6.5
0.5
6.0
11.8
18.3
24.2
0.9
25.1
5.5
12.0
2.3
4.3
(0.5)
(0.1)
–
1.8
(16.4)
(3.7)
3.1
(0.2)
2.3
35.5
3.4
22.6
(43.2)
(17.2)
Cash generated from operating activities
24.8
18.3
Note:
1.
The £16.5m (FY22: £16.4m) of pension payments includes £15.0m (FY23: £15.0m) payable under the Recovery Plan, agreed in May 2020, and a further £1.5m (FY22: £1.4m) relating to
payments made by the Group towards the administration costs of running the scheme.
De La Rue plc Annual Report 2023
149
Strategic reportGovernance reportFinancial statements Consolidated cash flow statement continued
Consolidated cash flow statement
for the period ended 25 March 2023
continued
Cash generated from operating activities
Net tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of loan notes
Purchases of property, plant and equipment – gross
Purchases of property, plant and equipment – grants received
Purchases of property, plant and equipment – net 1
Notes
2023
£m
24.8
(1.0)
23.8
2022
£m
18.3
(1.8)
16.5
11
–
(0.9)
(15.2)
4.2
(11.0)
(19.6)
1.5
(18.1)
Purchase of software intangibles and development assets capitalised
10
(10.4)
(8.8)
Proceeds from sale of property, plant and equipment
Receipt of research and development tax credit
Interest received
Net cash flows from investing activities
Net cash flows before financing activities
Cash flows from financing activities
Net draw down of borrowings
Payment of debt issue costs
Lease liability payments
Interest paid
Dividends paid to non-controlling interests
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents in the year
Cash and cash equivalents at the beginning of the year
Exchange rate effects
Cash and cash equivalents at the end of the year
Cash and cash equivalents consist of:
Cash at bank and in hand
Short term deposits
0.4
–
0.2
(20.8)
3.0
27.0
(0.9)
(2.4)
(10.3)
(0.8)
12.6
15.6
24.3
0.4
40.3
26.5
13.8
40.3
1.9
0.1
–
(25.8)
(9.3)
17.0
–
(2.2)
(6.2)
(0.9)
7.7
(1.6)
25.7
0.2
24.3
20.3
4.0
24.3
14(f)
14(f)
23
30
15
15
15,22
Note:
1.
Additions to property, plant and equipment in the year were £11.2m (FY22: £16.5m) (note 9). Purchases of property, plant and equipment includes down payments and capex creditors
of capital expenditure creditors of £0.5m (FY22: £1.6m) and excludes £0.7m (FY22: £nil) of grants not yet received.
150
De La Rue plc Annual Report 2023
Accounting policies
General information
De La Rue plc (the Company) is a public
limited company incorporated and
domiciled in the United Kingdom, whose
shares are publicly traded on the London
Stock Exchange. The registered office is
located at De La Rue House, Jays Close,
Viables, Basingstoke, Hampshire,
RG22 4BS.
De La Rue plc and its subsidiaries
(together “Group”) has two principal
segments Currency and Authentication;
– In Currency, we design, manufacture
and deliver bank notes, polymer
substrate and security features around
the world.
– In Authentication, we supply products
and services to governments and
Brands to assure tax revenues and
authenticate goods as genuine.
In addition, there is a third segment,
Identity Solutions, which includes minimal
non-core activities.
The financial statements have been
prepared as at 25 March 2023, being the
last Saturday in March. The comparatives
for the FY22 financial period are for the
period ended 26 March 2022.
The consolidated financial statements
of the Company for the period ended
25 March 2023 were authorised for
issuance by the board of Directors on
28 June 2023.
Company financial statements
The Company has elected to prepare
its entity only financial statements in
accordance with FRS 102 Financial
Reporting Standard applicable in the
UK and Republic of Ireland. These are set
out on pages 205 to 210 and the
accounting policies in respect of the
Company financial statements are set
out on pages 207 and 208.
Significant accounting
policies
I
Basis of preparation
The consolidated financial statements
of the Company for the period ended
25 March 2023 have been prepared in
accordance with UK-adopted International
Accounting Standards (‘IFRS’) in
accordance with the requirements of
the Companies Act 2006. IFRS includes
standards issued by the International
Accounting Standards Board (‘IASB’)
that are endorsed for use in the UK.
The consolidated financial statements are
prepared on a going concern basis under
the historical cost convention with the
exception of certain items which are
measured at fair value as disclosed in the
accounting policies below.
The preparation of financial statements in
accordance with IFRS requires the use of
certain critical accounting estimates. It
also requires management to exercise its
judgement in the process of applying the
Group’s accounting policies. The areas
involving a higher degree of judgement or
complexity, or key areas of estimation
uncertainty where assumptions and
estimates are significant in preparing to
the consolidated financial statements are
disclosed below in V ‘Critical accounting
estimates, assumptions and judgements’.
The Directors have considered the impact
of the war in Ukraine on the results of the
Group and other than the global
economic conditions, concluded this to
be immaterial (note 13).
The principal accounting policies adopted
in the preparation of these consolidated
financial statements are set out below or
have been incorporated with the relevant
notes to the accounts where appropriate.
These policies have been consistently
applied to all the periods presented,
unless otherwise stated.
Climate change
In preparing the Consolidated Financial
Statements management has considered
the impact of climate change and the
actions that the Group will take in order to
fulfil its sustainability strategy and satisfy
its commitment to become carbon
neutral from its own operations by 2030.
This includes the estimates around
future cash flows used in impairment
assessments of the carrying value of
goodwill and intangible assets in De La Rue
Authentication Inc, recoverability of
deferred tax assets and the useful
economic life of plant and equipment,
especially assets which are power-
intensive and expected to be replaced.
This is within the context of the
disclosures included in Strategic Report,
including those made in accordance with
the recommendation of the Taskforce on
Climate-related Financial Disclosures this
year. These considerations did not have a
material impact on the financial reporting
judgements and estimates.
Going concern
Background and relevant facts
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out on pages 1 to 10 of the Strategic
Report. In addition, pages 56 to 63 include
the Group’s objectives, policies and
processes for financial risk management,
details of its financial instruments and
hedging activities and its exposure to
credit risk, liquidity risk and commodity
pricing risk. The financial position of the
Group, its cash flows, liquidity position
and borrowing facilities are described on
page 53 of the Strategic Report.
Following the interim results for the period
ended 24 September 2022 there has
been a difficult period of trading and
rising market interest rates, meaning the
Group forecast that they would breach
financial covenants in their going concern
period to 29 June 2024. As a result, they
entered into extensive negotiations with
the pension trustee and the Group’s
banking syndicate. A deferral letter from
the trustee was signed on 28 June 2023
agreeing to deferral of deficit repair
contributions as set out in the paragraph
below and an amended facility agreement
for the Group’s financing facilities was
signed on 28 June 2023, which includes a
relaxation of the financial covenant ratios
along with the introduction of a new
minimum liquidity requirement.
Deferral of deficit repair contributions
The Group has successfully concluded
negotiations with the Trustee of the
De La Rue Pension Fund to defer £17.5m of
the £18.75m of deficit repair contributions
that was targeted in the Group’s April
trading update.
The Trustee has agreed to defer the
Group’s deficit repair contributions of
£3.75m per quarter from that due on
5 April 2023 up to and including that
payment that was due on 5 April 2024.
From July 2024, deficit repair
contributions will recommence at the
previously agreed £3.75m per quarter.
‘Catch up’ payments for the £18.75m of
deferred payments will start from FY26
and will continue through to FY29.
This deferral significantly eases the
short term cashflow burden on the
business and has been incorporated
into all modelling.
De La Rue plc Annual Report 2023
151
Strategic reportGovernance reportFinancial statements Accounting policies continued
Amended Facility Agreement
Under the amended facility agreement,
which was executed by all parties on the
29 June 2023, the Group continues to
have access to a revolving credit facility
(‘RCF’) of £250m that expires on 1st
January 2025, which allows the drawing
down of cash up to the level of £175m and
the use of bonds and guarantees up to
the level of £75m. The amendment to the
debt agreement reduces the available
facility by £25m from £275m to £250m,
with the cash draw-down component
remaining unchanged and the use of the
bonding and guarantee lines reduced to
£75m from the prior £100m level.
The continued access to these borrowing
facilities is subject to quarterly covenant
tests which look back over a rolling
12-month period. In each covenant test
in FY23 the Group has met its covenant
ratios on the historical covenant quarterly
levels. At 25 March 2023, EBIT/net interest
payable was 3.0 times and Net debt/
EBITDA was 2.2 times with net debt of
£83.1m and bonding and guarantees in
place totalling £52m. The Group is
additionally in compliance with all
covenant requirements at 29 June 2023.
The quarterly covenant levels (which will
continue to be tested on a 12-month
rolling basis) have been revised from the
first testing period at 1 July 2023 (Q1
FY24). These are now subject to monthly
minimum liquidity testing and quarterly
covenant tests from this date. The terms
include consideration of future options for
the group, provision of further non-
financial deliverables and milestones that
the banks will monitor, and these are fully
within management’s control.
From 1 July 2023, the revised financial
covenants and spread levels were
as follows:
– EBIT/net interest payable more than or
equal to 1.0 times, (3.0 times previously)
– Net debt/EBITDA less than or equal to
4.0 times until the Q4 2024 testing
point, reducing to less than or equal to
3.6 times from Q1 FY25 through to the
end of the current agreement to 1
January 2025 (3.0 times previously).
– Minimum Liquidity testing monthly,
testing at each weekend point on a
4-week historical basis and 13 week
forward looking basis. The minimum
liquidity is defined as “available cash
and undrawn RCF greater than or equal
to £25m”, although reduces to £20m if
£5m or more of cash collateral is in
place to fulfil guarantee or bonding
requirements (new test)
– Increases in spread rates on the
leverage ratio as a result of the
relaxation of levels:
152
De La Rue plc Annual Report 2023
Leverage
(consolidated net debt to EBITDA)
Margin (% per
annum)
Greater than 3.5:1
Greater than 3.0:1 and less than or
equal to 3.5:1
Greater than 2.5:1 and less than or
equal to 3.0:1
4.35
4.15
3.95
In order to determine the appropriate
basis of preparation for the financial
statements for the year ended 25 March
2023, the Directors must consider
whether the Group can continue in
operational existence for the foreseeable
future, being at least 12 months from the
approval date of these financial
statements, being 29 June 2024 taking
into account the above liquidity and
covenant requirements.
Testing assumptions and headroom level
The Group has prepared and reviewed
profit and cashflow forecasts which cover
a period up to 29 June 2024 (Q1 FY25),
the going concern period, and this includes
the following quarters: Q1, Q2, Q3, Q4 FY24
& Q1 FY25 as well as monthly liquidity
testing points throughout this period.
Management’s assessment is that a
period of 12 months to 29 June 2024 is an
appropriate going concern period for the
following reasons:
– A 12-month period is consistent with
De La Rue modelling and approach over
a number of years, which in prior
periods has also included a facility
termination shortly after the going
concern period (such as in FY22).
– The Directors have considered events
after the end of this period, including
the re-financing requirement for the
RCF which is at 1 January 2025, which
is considered further below.
Base case assumptions and headroom
The base case forecasts over the going
concern period have been built taking
into consideration the uncertainty around
the timing of the Currency market
recovery. Revenue growth in Authentication
to over £100m is expected to be driven
from the annualization of contracts
already won in prior periods. The base
financials over the going concern period
reflect further restructuring and
refinancing costs that have already been
initiated. This will help to right size the
business for the current demand with any
ramp up required over the going concern
period to be carefully managed in line
with pipeline capacity requirements and
orders to avoid significant negative
fluctuations vs base plans.
The Group entered FY24 with the
Currency total order book at £136.8m
(26 March 2022: £170.8m) and the
12-month order book at £131.7m
(26 March 2022: £163.5m). The win rate
of over 70% since 2020 on Currency bids
remains high. By 16 June 2023, over 80%
of the Currency business plans revenues
for FY24 are secured, with key wins in Asia
providing a solid foundation for
expectations for the year.
The Group’s base case modelling shows
headroom on all covenant thresholds and
the minimum liquidity requirement across
the period.
Severe yet plausible downsides
and headroom
The downside modelling produced has
factored in the Directors’ assessment of
events that could occur in a “severe yet
plausible downside” scenario. The risks
modelled are directly linked to the Risk
Committee “principal risks” described on
page 56 of the annual report. The most
significant material risks modelled were
as follows;
Risk 3 Macroeconomic and
geo-political risk
– Authentication new wins and
implementations are not achieved in
the timescales modelled in the base
case. In the severe yet plausible
downside scenario 100% of revenues
with new customers have been
excluded.
Risk 10 Banking Facilities
– Following the recent interest rate rises,
the Group will be paying an interest rate
on its facilities of approximately 8.5%
based on the current SONIA rate of 5%
and the applicable margin. Based on
the base case numbers in FY24, the
combined rate would need to reach
c16% before a breach in the interest
covenant would be triggered, with an
implied SONIA rate of 9.2%. Whilst
management had used 5.3% as their
interest rate in a severe but plausible
scenario, based on the stress testing
procedures described above, they have
assessed the risk of a breach triggered
by rising interest rates as remote given
the current SONIA rate applicable is 5%,
the sensitivity, and that these sensitised
rates would need to apply for the entire
FY24 period.
Risk 11 Kenya taxation and exit strategy
– Cash outflow assumed over and
above the base case, which includes
acceleration of outflows for site exit
and legal settlements.
Risk 13 Currency pipeline:
– Volumes and budget margins not
achieved as forecasted in the going
concern period. For currency pipeline
downside risks modelled, margins have
been determined using the average
production cost as opposed to using
the facilities with the lowest production
costs where there is modelled capacity.
As at 25 March 2023, Currency total
order book at £136.8m (25 March 2022:
£170.8m) and the 12-month order book
at £131.7m (25 March 2022: £163.5m).
By 16 June 2023, over 80% of the
Currency business plan revenues for
FY24 are secured, with key wins in Asia
providing a foundation for expectations
for the year.
– As a result of the new liquidity testing
requirement, the Directors also
considered historical monthly working
capital swings over the last three years
as well as weekly cash outflow averages
to ensure that adequate considerations
have been made to capture “in month”
working capital swings that the Group
can see given the volatility of working
capital in the Currency business in
particular. A £20m working capital
outflow was demonstrated to be
suitable for a plausible severe downside
to apply monthly to liquidity testing,
assuming no mitigation at all on liquidity
at any given testing period.
If all of these modelled downside risks were
to materialise in the Going Concern period,
the Group would still meet its required
covenant ratios and liquidity requirements.
There remains headroom against all
covenant thresholds in a “severe yet
plausible” downside scenario across
the going concern period.
Minimum Liquidity testing monthly
Company modelling of the severe but
plausible downside (including taking into
account working capital swings and
potential cash collateral requirements)
also shows headroom to the liquidity
requirement throughout the period, with
further controllable mitigations such as
reduction in discretionary capex that
could be applied.
The level of reduction that would be
required to breach the liquidity covenant
is considered to be remote by management
on the basis that in the tightest observable
period of the severe but plausible
downside scenario in £27m and £17m
if taking into account working capital
swings and potential cash collateral
requirements. This assessment excludes
the potential further mitigations available.
Stress-Testing
Under the base case modelling, EBIT
and EBITDA would need to drop by £10m
(46)% and £11m (27%) respectively, or
liquidity would need to drop £30m from
the lowest point, for any breach to occur.
In the severe but plausible scenario
modelling, EBIT and EBITDA would need
to drop by £6m (32%) and £6m (15%)
respectively, or liquidity would need to
drop £27m from the lowest point (£17m
including a negative working capital swing
of £20m and cash collateralisation
savings of £10m), for any breach to occur.
Management concluded that a breach is
remote given that:
– Trading to the end of P2 indicates the
Group is on-track to deliver the FY24
budget from an EBIT and EBITDA
perspective. The Group has
experienced working capital drag which
has led to Net Debt levels being worse
than those forecast in the base case
scenario. The working capital drags are
in line with those modelled in the severe
but plausible downside scenario and the
Group has seen positive movements to
recover working capital in P3.
– Liquidity stress testing excluded
controllable mitigating actions (as
described above) that management
could employ and still showed headroom.
– Management are comfortable that any
non-financial conditions and reporting
requirements can be achieved. The
Directors have assumed that the
current revolving credit facility remains
in place with the same covenant
requirements through to its current
expiry date (1 January 2025), which is
beyond the end of the period reviewed
for Going Concern purposes. The
Directors have concluded that the
Group will either renew the facility
thereafter or have sufficient time to
agree an alternative source of finance
from 1 January 2025 onwards.
Other Requirements
As referred to earlier, there are a number
of additional requirements under the
recently amended facility agreement and
pensions Trustee arrangements that
include conventional enhanced monitoring
measures and progress on the development
of future options. Progress has already
been made on ensuring that the right
processes are in place to be able to meet
the non-financial conditions and terms
agreed with the lenders, and the Directors
are confident that all of these additional
conditions and terms will be met in the
timeframe required.
Reasonable prospects beyond the going
concern period
The Directors have also considered the
pension trustee’s and the lenders’
on-going support for the business given
that further refinancing discussions are
likely to occur over the going concern
period with the current facility due to
terminate on 1 January 2025. Specifically,
an extension by November 2023 is
necessary to have adequate facility
duration for going concern purposes
at FY24 Half Year.
Management has concluded that there
are realistic prospects for refinancing
to occur ahead of facility termination as
a result of:
– Lenders have continued to support the
Group through an amended facility
agreement. This was signed on 29 June
2023, and the covenants (financial and
non-financial) were set to levels that
allows the Group to continue to meet
its covenant in a severe but plausible
downside scenario. The Directors see
no reason that the lender’s support will
not continue given the level of relaxation
of covenants that has been agreed.
– As stated above, prior to the 30
September 2023 Half-Year
announcement in November 2023, the
Group will have to agree an extension
with its existing lenders for the facility
that comes to end on 1 January 2025.
Discussions will commence over the
coming months with the banks on the
future options open to the Group, and
subject to the Group achieving specific
financial and non-financial milestones
that the Directors are confident in
achieving. To maximise stakeholder
value for all parties, the lenders would
need to provide the business with
continued support through the Currency
market recovery and continued growth
in the Authentication division. It is the
Directors’ judgement that based on the
current support of the lenders the
extension will be achieved.
– In the event the current lenders were
not supportive of an extension to the
facility at FY24 Half Year, the Group
would consider and implement
alternative financing options at that
time. The directors continue to assess
these alternative financing options,
including but not limited to: alternative
lenders; alternative finance vehicles;
equity injections; and/or the sale of
trade and assets. However, the
Directors are confident this scenario
won’t manifest given its confidence in
refinancing and extending the facility
at FY24 Half Year.
De La Rue plc Annual Report 2023
153
Strategic reportGovernance reportFinancial statements – Amendments to IFRS 9 “Financial
Instruments” – Fees in the ’10 per
cent’ test for derecognition of
financial liabilities. The amendment
clarifies the fees that an entity includes
when assessing whether the terms of
a new or modified financial liability are
substantially different from the terms of
the original financial liability. These fees
include only those paid or received
between the borrower and the lender,
including fees paid or received by
either the borrower or lender on the
other’s behalf.
Effective for periods commencing after
1 January 2023:
– Amendments to IAS 8 “Accounting
policies, changes in accounting
estimates and errors” – Definition of
Accounting Estimates – The
amendments clarify the distinction
between changes in accounting
estimates and changes in accounting
policies and the correction of errors.
Also, they clarify how entities use
measurement techniques and inputs to
develop accounting estimates.
– Amendments to IAS 1 “Presentation of
financial statements” – Disclosure of
Accounting Policies – Amendments
to IAS 1 and IFRS Practice Statement 2
– The amendments aim to help entities
provide accounting policy disclosures
that are more useful by: replacing the
requirement for entities to disclose
their ‘significant’ accounting policies
with a requirement to disclose their
‘material’ accounting policies and
adding guidance on how entities
apply the concept of materiality in
making decisions about accounting
policy disclosures.
– Amendments to IAS 12 “Income
Taxes” – Deferred Tax related to
Assets and Liabilities arising from a
Single Transaction – The amendment
narrows the scope of the initial
recognition exception under IAS 12 so
that it no longer applies to transactions
that give rise to equal taxable and
deductible temporary differences.
During the period, the following new and
amended IFRS became effective for the
Group. The Group has not early adopted
any standard, interpretation or
amendment that has been issued but is
not yet effective. The impacts of applying
these policies are not considered material.
Several amendments apply for the first
time in FY23, but do not have an impact
on these consolidated financial
statements of the Group.
Effective for periods commencing after
1 January 2022:
– Amendments to IFRS 3 “Business
Combinations” – Reference to the
Conceptual Framework. The
amendments are intended to update a
reference to the Conceptual Framework
without significantly changing the
requirements of IFRS 3. The
amendments will promote consistency
in financial reporting and avoid potential
confusion from having more than one
version of the Conceptual Framework.
– Amendments to IAS 16 “Property,
plant and equipment” – Proceeds
before intended use. The amendment
prohibits entities from deducting from
the cost of an item of property and
equipment any proceeds of the sale of
items produced while bringing that
asset to the location and condition
necessary for it to be capable of
operating in the manner intended by
management. Instead, an entity
recognises the proceeds from selling
such items, and the costs of producing
those items, in profit or loss.
– Amendments to IAS 37 “Provisions,
Contingent assets and liabilities” –
Onerous Contracts – Costs of
Fulfilling a Contract. These
amendments specify which costs an
entity needs to include when assessing
whether a contract is onerous or
loss-making. The amendments apply
a ‘directly related cost approach’. The
costs that relate directly to a contract
to provide goods or services include
both incremental costs (e.g., the costs
of direct labour and materials) and an
allocation of costs directly related to
contract activities (e.g., depreciation of
equipment used to fulfil the contract as
well as costs of contract management
and supervision). General and
administrative costs do not relate
directly to a contract and are excluded
unless they are explicitly chargeable to
the counterparty under the contract.
Accounting policies continued
The Directors have therefore assessed
that the Group will either renew the
facility or have sufficient time to agree an
alternative source of finance. The costs of
refinancing are included in the base case.
Conclusion
The base and severe but plausible
forecasts show headroom above the
covenant levels agreed with the lenders
and support the position that the Group
will be able to operate within its available
banking facilities and covenants
throughout the going concern period
to 29 June 2024.
Accordingly, the Directors are satisfied
that the Group is able to manage its
business risks and to continue in
operational existence for the going
concern period. Accordingly, the Directors
continue to adopt the going concern
basis in preparing the Consolidated
Financial Statements.
A copy of the 2022 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.
Covid-19
The Annual Report for the period ended
27 March 2021 included an assessment of
the potential impact of COVID-19 on the
financial position of the Group as at
27 March 2021. The Group put in place
plans and measures in order to enable the
business to maintain normal operations,
to the extent possible, against the
backdrop of the evolving situation. The
Group implemented actions to mitigate
the impact of COVID-19, including steps
to protect our employees in line with
guidance from governments. The Board
believed that the Group’s operations
would continue to experience only limited
disruption due to the impact of the
COVID-19 pandemic. The directors still
consider this assessment to be appropriate
for the 25 March 2023 financial
statements based on the current position.
II
New Standards, interpretations
and amendments adopted by
the Group
Other than as described below, the
accounting policies adopted in the
preparation of these consolidated financial
statements are consistent with those
applied by the Group in its consolidated
financial statements as at, and for the
period ended, 26 March 2022, apart
from standards, amendments to or
interpretations of published standards
adopted during the year.
154
De La Rue plc Annual Report 2023
Foreign currency non-monetary items
measured in terms of historical cost are
translated at the rate of exchange at
the date of the transaction. Exchange
differences on non-monetary items
measured at fair value are recognised in
line with whether the gain or loss on the
non-monetary item itself is recognised
in the income statement or other
comprehensive income.
In order to hedge its exposure to certain
foreign exchange risks, the Group enters
into forward contracts. Refer to note 14
for details of the Group’s accounting
policies in respect of such derivative
financial instruments.
2. Translation of foreign operations
on consolidation
Assets and liabilities of foreign operations,
including goodwill and intangible assets,
are translated into GBP (the presentational
currency of the Group) at the exchange
rate prevailing at the balance sheet date.
Income and expenses are translated
at average exchange rates (which
approximate to actual rates). Exchange
differences arising on re-translation are
recognised in other comprehensive
income within the Group’s currency
translation reserve, which is a component
of equity. When a foreign operation is
sold, exchange differences that were
recorded in equity are recognised in the
income statement as part of the gain or
loss on sale.
B Revenue recognition
The Group accounts for revenue under
IFRS 15. IFRS 15 provides a single, five-step
principles-based model to be applied
to all contracts with customers which
requires identification of the contract
for accounting purposes, the separate
performance obligations within the
contract, the transaction price for the
contract, allocation of the transaction
price and recognition of revenue on
satisfaction of performance obligation.
The following table provides information
about the nature and timing of the
satisfaction of performance obligations
in contracts with customers, including
significant payment terms, and the
related revenue recognition policies.
Effective for periods commencing
after 1 January 2024, all subject to
UK endorsement:
– Amendments to IFRS 16 “Leases”
– Lease liabilities in a sale and
leaseback – This amendment to
IFRS 16 specifies the requirements that
a seller-lessee uses in measuring the
lease liability arising in a sale and
leaseback transaction, to ensure the
seller-lessee does not recognise any
amount of the gain or loss that relates
to the right of use it retains.
– Amendments to IAS 1 “Presentation of
financial statements” – Classification
of Liabilities as Current or Non-
current. The amendments clarify: what
is meant by a right to defer settlement;
that a right to defer must exist at the
end of the reporting period; that
classification is unaffected by the
likelihood that an entity will exercise
its deferral right and that only if an
embedded derivative in a convertible
liability is itself an equity instrument,
would the terms of a liability not impact
its classification.
Other amendments in IFRS 1(“First time
adoption”), IAS 41 (“Agriculture”) and IFRS
17 (“Insurance contracts”) are not
applicable to the Group. IFRS 17
(“Insurance contracts”) is under review by
management and the impact, if any, is still
to be quantified.
The impact of the amendments and
interpretations listed above are not
expected to a have a material impact on
the Consolidated Financial Statements.
III
Basis of consolidation
The consolidated financial statements
comprise the financial statements of the
Company and entities controlled by the
Company and its subsidiaries prepared
at the consolidated statement of financial
position date (25 March 2023).
Subsidiaries
Subsidiaries are entities controlled by the
Group. The Group is considered to control
an entity when it is exposed to, or has
rights to, variable returns from its
involvement with an entity and has the
ability to affect those returns through
exerting control over the entity.
The results of subsidiaries acquired or
disposed of during the period are
included in the consolidated financial
statements from the date that control
commences or until the date that control
ceases. Intra-group balances and
transactions are eliminated on
consolidation. The majority of the
subsidiaries prepare their financial
statements up to 25 March 2023.
The results of subsidiaries where the
financial statements are not prepared to
25 March are still included in the
consolidation as at 25 March with the
income statement and other financial
information being also prepared for the
year ended 25 March 2023.
For partly owned subsidiaries, the
allocation of net assets and net earnings
to outside shareholders is shown in the
line “Attributable to Non-controlling
interests” on the face of the consolidated
statement of comprehensive income
and the consolidated statement of
financial position.
Business combinations
Acquisitions of subsidiaries and
businesses are accounted for using the
acquisition method of accounting.
The consideration transferred in the
acquisition is measured at fair value as
are the identifiable assets and liabilities
acquired. The excess of the fair value of
consideration transferred and the amount
of non-controlling interests (as applicable)
over the fair value of net assets acquired
is accounted for as goodwill. Any goodwill
that arises is tested annually for
impairment. Transaction costs are
expensed as incurred and are presented
within exceptional items in accordance
with the Group’s policy.
IV
Significant accounting policies
The significant accounting policies
adopted in the preparation of these
consolidated financial statements have
been incorporated into the relevant notes
where possible. General accounting
policies which are not specific to an
accounting are set out below.
A Foreign currency
1. Foreign currency transactions
These financial statements are presented
in sterling, which is the functional and
presentational currency of the Company.
The functional currency of Group entities
is principally determined by the primary
economic environment in which the
respective entity operates.
Transactions in foreign currencies entered
into by Group entities are translated into
the functional currencies of those entities
at the rates of exchange at the date of
the transaction.
Monetary assets and liabilities
denominated in foreign currencies at
the balance sheet date are translated
at the rate of exchange ruling at that date.
Foreign exchange differences arising
on translation are recognised in the
income statement.
De La Rue plc Annual Report 2023
155
Strategic reportGovernance reportFinancial statements Accounting policies continued
Type of product/
service/segment
Authentication
segment
Currency segment:
Supply of banknotes
Nature and timing of satisfaction
of performance obligations
Revenue recognition
under IFRS 15
The Group has certain contracts which operate in
the form of an umbrella agreement with the local
government which awards the Group to be the provider
of an end-to-end authentication track and trace
system. The umbrella agreement specifies the nature
of services and products to be provided. However,
these agreements do not include any purchase
commitments from local governments and do not give
the Group an enforceable right to payment. Instead, the
umbrella agreement allows for the Group to enter into
individual agreements with individual manufacturers
and provides it with the right to sell physical
authentication products (such as tax stamps) thus
giving the Group an enforceable right to payment from
each individual manufacturer for physical products sold.
The Group has therefore determined that these umbrella
contracts do not meet the definition of a contract for
IFRS 15 accounting purposes. Instead, the relevant
contract for IFRS 15 purposes is the contract with the
individual manufacturers in the country. It is the
manufacturers which represent the customers from
an IFRS 15 perspective.
Consequently, as the Group only has one performance
obligation in the revenue contract with the manufacturer
(such as delivery of tax stamps) and only has a right to
payment for this performance obligation, no revenue
is allocated and recognised on delivery of any other
deliverables (such as the software to track tax stamps)
under the umbrella agreement.
Authentication also enters into contracts with
performance obligations that include access to
systems which incorporates system configuration
and integration and the provision of authentication
products such as tax stamp, all of which are provided
together. For Authentication contracts entered into
with a single party and where multiple performance
obligations are included, the transaction price for the
contract is allocated to each performance obligation
separately identified.
The Group has determined that for certain
authentication contracts (given the highly bespoke
nature of the products) with enforceable right to
payment, the customer controls all of the work in
progress as the products are being manufactured.
This is because under those contracts, authentication
products are made to a customer’s specification and if
a contract is terminated by the customer, then the
Group is entitled to reimbursement of the costs
incurred to date, plus a reasonable profit margin.
The Group has determined that for certain banknote
contracts (given the highly bespoke nature of the
products) with enforceable right to payment, the
customer controls all of the work in progress as the
products are being manufactured.
This is because under those contracts, currency
products are made to a customer’s specification and
if a contract is terminated by the customer, then the
Group is entitled to reimbursement of the costs
incurred to date, plus a reasonable margin.
For other banknote contracts, where customers do not
take control of the goods until they are completed or
delivered, revenue is recognised at the point in time
when control transfers to the customer.
If the Group has recognised revenue, but not issued
an invoice, then the entitlement to consideration is
recognised as a contract asset. The contract asset is
transferred to receivables when the entitlement to
payment becomes unconditional.
Revenue on the sale of authenticity products, including
tax stamps, is recognised when control passes to the
customer based on the standalone selling price of the
product. Stand-alone selling prices are typically
calculated using the “expected cost-plus margin”
approach. Control generally passes on delivery of the
physical product to the customer or the issuance of a
digital security key. Revenue in relation to system access
is recognised on a straight-line basis over the life of the
contract as the customer receives the benefit.
Revenue for certain Authentication contracts with
enforceable right to payment will be recognised over
time for physical product produced to date and ahead
of delivery to the customer. Revenue is recognised
progressively based on the input method based on
the cost incurred relative to the expected total cost.
Revenue for certain banknote contracts with enforceable
right to payment will be recognised over time for
banknotes produced to date and ahead of delivery
to the customer.
Revenue is recognised progressively based on the input
method based on the cost incurred relative to the
expected total cost.
Revenue for other banknote contracts, where customers
do not take control of the goods until they are completed
is recognised based on contractual terms which will
determine when control has passed to the customer.
This might include recognition of revenue on inventory
placed into storage for the customer, so long as it is
demonstrated that control of the product has passed
to the customer.
Currency segment:
Supply of banknotes
along with other
services
In addition to the supply of banknotes, which is a
separate performance obligation (see above), additional
and separate performance obligations such as design
and storage services have been identified.
IDS segment:
For IDS, as customers do not take control of the goods
until they are completed or delivered, revenue is
recognised at the point in time when control transfers
to the customer.
The value attributable to the additional performance
obligations is deemed to be immaterial. Accordingly, no
separate value will be attributed to these performance
obligations; instead, the consideration in the contract will
be entirely allocated to the single performance obligation
of supplying currency.
Where customers do not take control of the goods until
they are completed is recognised on formal acceptance
by the customer.
156
De La Rue plc Annual Report 2023
C Costs to obtain contracts
1. Sales commissions
Management expects that incremental
commission fees paid to intermediaries
and employees as a result of obtaining
long term sales contracts are recoverable.
The Group therefore capitalises them as
contract costs where the contract signed
with the customer creates enforceable
rights and obligations. If a sales contract
takes the form of an over-arching
umbrella agreement which does not
create such enforceable rights and
obligations (i.e. committed sales volumes
and values from the customer) then sales
commission payments are not capitalised.
2. Capitalised commission fees are
amortised when the related revenues
are recognised
The Group applies the practical expedient
in paragraph 94 of IFRS 15 and recognises
the incremental costs of obtaining
contracts as an expense when incurred,
if the amortisation period of the assets
that the Group otherwise would have
recognised is one year or less.
3. Bid costs
Bid costs are capitalised only when they
relate directly to a contract and are
incremental to securing the contract and
would not have been incurred had the
contract not been won. There were no
capitalised bid costs in FY23 (FY22: £nil)
as no costs met this requirement.
4. Deferred costs
The Group incurs costs on certain (mainly
Authentication division) contracts in
advance of recording revenue. On these
contracts costs are capitalised on the
balance sheet and recognised in the
income statement over the period when
revenue is recognised if the following
criteria are met:
– the costs relate directly to a contract
or to an anticipated contract that the
entity can specifically identify;
– the costs generate or enhance
resources of the entity will be used in
satisfying (or continuing to satisfy)
performance obligations in the
future; and
– costs are expected to be recovered.
D Other revenue recognition matters
1. Bill and hold revenue
Certain customers require the Group to
store completed inventory for them
ahead of them taking delivery once they
require it. Revenue is recognised on a bill
and hold basis when:
1) It can first be demonstrated that
control of the product has passed to
the customer – principally because the
customer has taken the risk and/or title
for the product transferred to them
and the Group has an enforceable right
to payment; and
2) It can be demonstrated that the
arrangement is substantive, for
example, that the customer has
requested it.
2. Variable consideration on contracts
The Group has a small number of
contracts where the terms with the
customers place a limit on the profit
margin that can be earned under these.
As these profit margin impacts the
amount of revenue that the Group can bill
the customers, detailed reconciliations of
the profit margins earned on these
contracts at each reporting period end
are completed to ensure that amount of
revenue recorded in the year is not
overstated (i.e. to ensure the transaction
price is “constrained” in accordance with
IFRS 15). Any adjustment required is
recorded as a reduction to revenue based
on the most likely amount.
The Group also has other potential forms
of variable consideration in the form of
prices concessions and discounts which
may be offered to customers and
penalties or fines which might be incurred
if the Group did not fully perform against
contract deliverables. If a discount or
price concession is offered to a customer
this is taken into account in the estimated
transaction price for the contract to
ensure it is “constrained” in accordance
with IFRS 15. If the Group anticipates a
penalty or a fine to be incurred this is
estimated and accounted for as a
reduction from the transaction price
again to ensure it is “constrained” in
accordance with IFRS 15.
3. Warranties
All warranties are considered to be of a
standard nature (assurance type) and as
such are accounted for under IAS 37
rather than IFRS 15.
V
Critical accounting estimates,
assumptions and judgements
Management has discussed with the
Audit Committee the development,
selection and disclosure of the Group’s
critical accounting policies and estimates
and the application of these policies and
estimates. Management is required to
exercise significant judgement in the
application of these policies. Estimates
are made in many areas and the outcome
may differ from that calculated.
The key assumptions concerning the
future and other key sources of
estimation uncertainty at the balance
sheet date that have a significant risk of
causing a material adjustment to the
carrying amounts of assets and liabilities
within the next financial year are set out in
“B. Critical accounting estimates” below.
Other accounting estimates that are not
considered to have a significant risk of
causing a material adjustment with the
next financial year but which the Group
would like to draw attention to due to
judgements or longer-term estimates are
set out in “C. Other areas of accounting
estimates” below.
A Critical accounting judgements
1. Determination of lease term
Management has made certain
judgements on lease terms based on the
Group’s current expectations of whether
break or renewal options will be taken.
In arriving at these judgements,
management has considered its current
business plans including the locations in
which it wants to operate in addition to
the impact of any cost-out programmes
it is considering.
2. Revenue recognition and cut-off
Customer contracts will often include
specific terms that impact the timing of
revenue recognition. The timing of the
transfer of control varies depending on the
individual terms of the sales agreement.
For sales of products the transfer usually
occurs on loading the goods onto the
relevant carrier, however the point at
which control passes may be later if the
contract includes customer acceptance
clauses or control passes on arrival at the
customer location. Control will also pass
if the customer requests that goods are
held in storage until required. Specific
consideration is needed at year end to
ensure revenue is recorded within the
appropriate financial year.
De La Rue plc Annual Report 2023
157
Strategic reportGovernance reportFinancial statements All exceptional items are included in the
appropriate income statement category
to which they relate. Refer to note 5 for
further details.
5. Replacement of Savings Related
Option Scheme granted
During the year the Group granted a Save
As You Earn share option grant (“SAYE”),
management judged the new grant as a
replacement award for two SAYE grants
which are due to vest in FY24 and FY25
that were cancelled by employees at the
time of the new grant and applied
modification accounting rather than
cancellation accounting.
To account for the replacement grant on
modification basis, the following factors
were considered by the management:
a. The new share options are with the
same participants as the cancelled
options.
The modification basis of accounting was
used, where a given participant applied
for options under the 2022 invitation and
that same person issued an instruction to
Equiniti (the administrators of De La Rue’s
Sharesave plan) to cancel one or more of
their existing savings contracts in the
period between (1) the date on which the
invitation was launched to participants
and (2) the date on which the options
were granted. Any cancellation
instructions given by a 2022 applicant
outside of this time window is not treated
as linked to the cancelled award. Similarly,
any cancellation of options by an
employee who does not apply for 2022
options is not treated under the
modification basis.
b. The transactions to issue and cancel
the options are part of the same
arrangement.
As explained in point a above, the
management are able to point to a
decision taken by the participant during
a short time window in relation to
demonstrate the linkage between their
application for new 2022 options and
their instructions to Equiniti to terminate
the savings contracts entered into in the
2020 and/or 2021 invitations.
c. The cancellation of the options would
not have occurred unless the new
options were issued.
The management has carefully
considered the correlation of
cancellations and new subscriptions and
the close proximity in time between
cancelling and applying for options in the
2022 invitation and made judgement that
there is a strong indication of a connection.
d. Management identified the FY23
SAYE grant
The Remuneration Committee set no limit
(subject to HMRC limit of £500) on the
monthly saving for the FY23 grant. In
comparison the previous grants in FY21
and FY22 had a maximum limit set by
the Company. On management’s
recommendation, the Remuneration
Committee agreed to approach the 2022
invitation as a replacement for the 2020
and 2021 options. On this basis, the
Committee decided not to apply any
arbitrary caps to monthly savings
amounts or shares under option (both of
which have been done in recent years)
or to invoke a rule which counts any
cancelled awards by employees towards
their monthly limit of £500. The latter is
included in the plan rules specifically as
a tool to mitigate cancellations of options,
where the company does not want this
to occur.
The scheme documents and the internal
newsflash were substantially amended
from previous years, to make employees
aware of the difference in the option
prices from 2020 and 2021 to 2022/23,
and that they are able to cancel their
previous savings contracts/options and
apply for new options in the 2022/23
invitation.
Applying modification accounting results
in £0.3m lower share-based payment
expense compared with cancellation
accounting in FY23. The impact on future
periods assuming a forfeiture rate of 10%
is shown below:
Accounting type applied
Modified accounting
Cancellation accounting
Additional expense versus modified accounting
FY23
£’000
1,147.3
1,420.9
273.6
FY23
£’000
566.7
421.4
(145.3)
FY25
£’000
325.5
282.4
(43.1)
FY26
£’000
167.4
173.3
5.9
Accounting policies continued
This judgement is particularly important in
the Currency division due to the material
nature of certain contracts which may
ship near to a reporting period end.
Management has carefully reviewed
material customer contracts with
particular focus on those shipping in the
last quarter of the financial period to
ensure revenue has been recorded in
the correct year.
3. Revenue recognition and determination
of whether an enforceable right to
payment exists
For certain customer contracts, revenue is
recognised over time in accordance with
IFRS 15, as the Group has an enforceable
right to payment.
Determination of whether the Group
had an enforceable right to payment
requires careful analysis of the legal
terms and conditions included within the
customer contract and consideration of
applicable laws and customary legal
practice in the territory under which
contract is enforceable.
External legal advice is obtained if
considered necessary to allow
management to make this assessment.
Management has carefully reviewed
material contracts relating to revenue
recognised in the period to determine
if an enforceable right to payment exists
which results in revenue being recorded
‘over-time’ rather than ‘point in time’.
In FY23 the Group has had customer
contracts where revenue is recognised
‘over-time’ in the Currency and
Authentication divisions.
4. Classification of exceptional items
The Directors consider items of income
and expenditure which are material by size
and/or by nature and not representative
of normal business activities should be
disclosed separately in the financial
statements so as to help provide an
indication of the Group’s underlying
business performance. The Directors label
these items collectively as ‘exceptional
items’. Determining which transactions
are to be considered exceptional in nature
is often a subjective matter.
However, circumstances that the
Directors believe would give rise to
exceptional items for separate disclosure
would include: gains or losses on the
disposal of businesses, curtailments on
defined benefit pension arrangements
or changes to the pension scheme
liability which are considered to be of
a permanent nature 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.
158
De La Rue plc Annual Report 2023
Management has carefully assessed the
recoverability of the other financial assets
on the balance sheet as at 25 March 2023
based on information available to them
and performed probability weighted
modelling against three scenarios
determining that an expected credit loss
provision of £8.5m (see note 5 exceptional
items for further details) is required which
will fully impair these other financial assets.
Management has considered the following
factors in making this determination::
1) The public announcements from the
Portals group relating to the wind down
of the Overton paper mill and its sale
of assets.
2) The latest available financial position
of Portals International Limited group
as presented in its 2022 consolidated
financial statements including
significant losses for the period and
a net liabilities position.
3) The announcement of the sale of the
Fedrigoni business to IN Groupe in
May 2023.
This provision accounts for the risk that
the full amounts due will not be recovered
rather than the instruments being credit
impaired. Management notes that if
factors change again in the future, this
may alter the judgements made resulting
in a revision to the value of expected
credit loss provision to be recognised.
2. Recoverability assessment and
impairment charges related to plant and
machinery and capitalised product
development costs
In January 2023, the Group announced
that owing to current market demand, and
no expectation of new bank note orders
from the Central Bank of Kenya for at least
the next 12 months, De La Rue Kenya (a
joint venture with the Government of
Kenya) has suspended banknote printing
operations in the country. In addition,
operations in our Authentication division
are also in the process of winding down.
As a result of the review of the business in
Kenya an exceptional charge of £12.6m
(FY22: £nil) was made in the year including
redundancy charges of £5.5m, property,
plant and equipment asset impairments
of £4.9m, inventory impairments of £2.0m
and other costs of £0.2m (note 5). There
is not expected to be any recoverable
value relating to these assets.
6. Accounting for the extension of the
factory site in Malta
On 9 September 2021 the Group signed
an Agreement with Malta Enterprise
(“ME”) where ME finances the
construction, civil works and M&E
installations to be carried out at the
premises located in Malta. The premises
included land, the demolition of an
existing building and a rebuild to the
Group’s specifications. On 14 September
2021 the Company signed a lease for the
premises for an initial term of 20 years.
The Group is managing the construction
of the new buildings for the lessor to the
pre-agreed specifications.
Management have made a judgement as
to whether the Company has control of
the site during the construction period.
If the Group has the right to control the
use of the identified asset for only a
portion of the term of the contract, the
contract contains a lease for that portion
of the term. In order to control the asset,
the lessee must have the right to obtain
substantially all of the economic benefits
from the use of the asset and the right to
direct the use of the asset. It was
determined that control exists only after
the build is completed and site becomes
available for use. Management considers
that given the building was under
construction at the year-end date and
therefore there were no economic
benefits as the asset was not ready for
use at that time.
As per the agreement, there are three
separate units with different start-up
dates. Therefore, the lease will be
recognised as these units become
available for use. The lease costs will be
allocated to the division to which they
relate to based on area. However, if the
cost relates to the total site, then it is
divided based on the percentage split
of the area, with 27% of the total sqm
occupied by Authentication and 73% by
Currency. The first block is currently
scheduled to be completed in H2 FY24.
Therefore, management have concluded
that no lease should be recognised in
FY23. The lease will be recognised when
the building becomes available for use.
Please refer to note 26 for the related
future capital commitments.
B Critical accounting estimates
1. Recoverability of other financial assets
Other financial assets comprise securities
interests held in companies in the Portals
International Limited group following the
Portals paper business disposal in 2018.
In addition, a further amount of £0.9m of
loan notes were subscribed for pursuant
to a pre-emptive offer in November 2021
to enable Portals to undertake a business
combination. The Group also purchased
cotton banknote paper under the RA, until
its termination in July 2022.
In addition, an impairment charge of
£2.9m (FY22: £nil) was made in the
year in relation to capitalised product
development costs. A review was carried
out as part of the Authentication business
right-sizing programme of ongoing
development projects and their suitability
for further divisional growth and the product
portfolio. As a result, two programs were
terminated and associated capitalised
costs were impaired.
In FY22 the Group ceased banknote
printing at its Gateshead site and as
a result the Group had a material value
of plant and machinery for which an
impairment was required. Management
has, in FY23, made a judgement on what
its future plans are for the expansion in
certain other locations based on future
business needs and concluded that for
the remaining assets in Gateshead not
impaired in the prior period, their value
could be supported based on their
anticipated relocation to another site
for usage there.
3. Post-retirement benefit obligations
Pension costs within the income
statement and the pension obligations/
assets as stated in the balance sheet are
both dependent upon a number of
assumptions chosen by management
with advice from professional actuaries.
These include the rate used to discount
future liabilities, the expected longevity
for current and future pensioners and
estimates of future rates of inflation.
The discount rate is the interest rate that
should be used to determine the present
value of estimated future cash outflows
expected to be required to settle the
pension obligations.
The Group engages the services of
professional actuaries to assist with
calculating the pension liability (note 24).
4. Determination of the incremental
Valuation date of certain fund assets in
the UK defined benefit pension scheme
The UK defined benefit pension scheme
assets are made up of a number of
separate funds. For the majority of these
funds valuations have been available as at
the Group’s year end of 25 March 2023.
However, the Multi Asset Credit and
Secured Finance funds held by the UK
Pension Scheme are valued on a monthly
basis only at calendar month ends.
It was agreed to determine the IAS 19
position as at 25 March 2023 for these
funds that they would be calculated
by rolling forward the fund value at
28 February 2023, using suitable
market indices.
De La Rue plc Annual Report 2023
159
Strategic reportGovernance reportFinancial statements Accounting policies continued
The UK Multi Asset Credit and secured
Finance funds account for approximately
£61m and £139m of the pension assets
respectively (FY22: £63m and £143m
respectively). During the period from
28 February to 25 March, based on the
movement in relevant market indices,
we have estimated that the value of the
funds has decreased by £4.4m. The total
UK pension scheme assets value is
£678.2m. This £4.4m decrease includes
£3.9m relates to the updated third-party
valuation data as at the year end date and
the remaining £0.5m is based on day-to-
day market volatility of high yield market
indices. A 0.1% change in these market
indices would result in a £0.6m increase
in the pension scheme assets.
The potential impact has been estimated
by observing what were considered to be
the most relevant comparable indices to
establish the level of day-to-day volatility
in the market.
The Multi Asset Credit funds are largely
composed of sub-investment grade
corporate debt and the most relevant
indices were determined to be those
which measure the return on high yield
corporate bonds. The Secured Finance
fund is composed of a wide range of
corporate debt. Management has
therefore made the judgement that
valuing the pension assets using the
28 February 2023 valuation for these funds
and rolling forward to 25 March 2023 is
reasonable given there is no practical way
of obtaining a better estimate.
5. Tax
The Group is subject to income taxes in
numerous jurisdictions and significant
judgement is required in determining the
worldwide provision for those taxes.
The level of current and deferred tax
recognised is dependent on subjective
judgements as to the outcome of decisions
to be made by the tax authorities in the
various tax jurisdictions around the world
in which the Group operates.
It is necessary to consider which deferred
tax assets should be recognised based on
an assessment of the extent to which
they are regarded as recoverable, which
involves assessment of the future trading
prospects of individual statutory entities,
the nature and level of any deferred tax
liabilities from other items in the accounts
such as pension positions, and overseas
tax credits that are carried forward for
utilisation in future periods, including
some that have been allocated to
Governmental authorities as part of
investment projects.
160
De La Rue plc Annual Report 2023
The actual outcome may vary from that
anticipated. Where the final tax outcomes
differ from the amounts initially recorded,
there will be impacts upon income tax
and deferred tax provisions and on the
income statement in the period in which
such determination is made.
The Group has current tax provisions
recorded within Current tax liabilities,
in respect of uncertain tax positions. In
accordance with IFRIC 23, tax provisions
are recognised for uncertain tax positions
where it is considered probable that the
position in the filed tax return will not be
sustained and there will be a future
outflow of funds to a taxing authority.
Tax provisions are measured either based
on the most likely amount (the single
most likely amount in a range of possible
outcomes) or the expected value (the
sum of the probability-weighted amounts
in a range of possible outcomes)
depending on management’s judgement
on how the uncertainty may be resolved.
The Group is disputing tax assessments
received in certain countries in which the
Group operates. These tax assessments
have been subject to court ruling both in
favour of the Group and also against the
Group. The rulings are subject to ongoing
appeal processes. The Group has
increased the relevant tax provisions and
is fully provided where necessary as
required by the relevant accounting
standards. The disputed tax assessments
are subject to ongoing dialogue with the
relevant tax authorities to reach a
settlement without the requirement to
continue in a protracted legal process.
Please refer to notes 7 and 16 for
further information.
C Other areas of accounting estimates
1. Impairment test of Goodwill and
acquired intangibles
These assets were recognised following
the acquisition of De La Rue Authentication
Inc in January 2017. Management has
considered the Group’s short-term and
the long-term profitability for this
business and determined that the
goodwill and acquired intangible asset
values are recoverable at 25 March 2023.
In making this determination, management
has prepared discounted cashflows using
its forecasts for the business which
include budgeted financial performance
for a 5-year period with a growth rate
assumption applied which extrapolates
the business into perpetuity which are
aligned to the Group’s longer-term
expectations the Authentication division.
In order to obtain further assurance as to
the recoverability of the goodwill and
intangible assets, management has
prepared a range of sensitivities to model
what adverse changes would need to
occur before an impairment was required.
Management modelled the following
sensitivities and concluded that:
– Sensitivity 1 (discount rate): The
discount rate used for the impairment
calculation (assuming the same
cashflows as in the base impairment
test) would need to increase to 19.0%
before an impairment occurred;
– Sensitivity 2 (revenue growth):
Forecasts used in the base impairment
calculation include strong revenue
growth in FY24 to FY25 before the
growth rate reduces to 3% per year
from FY26, management has modelled
a scenario of no revenue growth from
FY26 and concluded that at this point
no impairment would be required;
– Sensitivity 3 (loss of material customer):
Management has modelled the impact
of the loss of revenue of a significant
customer from FY24, orders from which
were not yet secured at the end of FY23.
Management noted that in this scenario,
no impairment was needed; and
– Sensitivity 4 (profit margin reduction):
The base calculation includes 19.7%
margin in FY24 which growth to
constant 24.7% from FY25.
Management has modelled the impact
of margin reduction to 20.0% from
FY26. Management noted that in this
scenario, no impairment was required.
Based on the base impairment forecast
prepared and the additional sensitivities
referred to above, management is
confident that no impairment of the
goodwill and intangible asset balances is
required as at 25 March 2023 and
therefore no impairment is recognised.
There are no reasonable possible changes
in the key assumptions (e.g. discount rate,
growth rate or profit margin) that would
cause the recoverable amount to fall
below the carrying amount of the cash
generating unit.
2. Onerous contract provisions
The financial statements also included
a small number of onerous contract
provisions for loss making contracts.
Management has assessed these and
applied judgement in determining the
required level of provisioning including
how, in accordance with IAS 37, the lowest
unavoidable costs of exiting or fulfilling
the contract have been calculated.
3. Estimation of provisions
The Group holds a number of provisions
relating to warranties for defective
products and contract penalties.
Management has assessed these and
applied judgement in determining the
value of provisions required.
Notes to the accounts
1 Segmental analysis
The continuing operations of the Group have three main operating units: Currency, Authentication and Identity Solutions.
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 Banknote print, Polymer and Security features;
– Authentication – provides the physical and digital solutions to authenticate products through the supply chain and to provide
tracking of excisable goods to support compliance with government regulators. Working across the commercial and government
sectors the division addresses consumer and Brand owner demand for protection against counterfeit goods; and
– Identity Solutions – includes minimal non-core activity in the year. FY22 also included to sales under a service arrangement with
HID Corporation Limited following the sale of the International Identity Solutions business in October 2019.
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 other areas of this Annual Report and Accounts. The commentary elsewhere in this Annual Report
and Accounts relating to the future strategy only refers to the Currency and Authentication divisions. Inter-segmental transactions
are eliminated upon consolidation.
FY23
Total revenue from contracts with customers
Less: inter-segment revenue
Revenue from contracts with customers
Cost of sales
Gross profit
Adjusted operating expenses
Adjusted operating profit
Adjusted items:
– Amortisation of acquired intangible assets
– Net exceptionals
Operating (loss)/profit
Interest income
Interest expense
Net retirement benefit obligation finance Income
Net finance expense
(Loss)/Profit/(loss) before taxation
Capital expenditure on property, plant and equipment (excluding grants received)
Capital expenditure on intangible assets (note 10)
Impairment of property, plant and equipment (note 9)
Impairment of intangible assets (note 10)
Depreciation of property, plant and equipment and right-of-use-assets
(note 9/23)
Amortisation of intangible assets (note 10)
Currency
£m
Authentication
£m
Identity
Solutions
£m
Unallocated
£m
Total of
Continuing
operations
£m
254.6
–
254.6
(196.4)
58.2
(44.6)
13.6
–
(38.4)
(24.8)
1.0
(0.9)
–
0.1
(24.7)
(7.9)
(2.9)
(3.9)
(1.4)
(11.1)
(1.3)
91.7
–
91.7
(57.7)
34.0
(19.7)
14.3
(1.0)
(7.9)
5.4
–
(0.1)
–
(0.1)
5.3
(7.1)
(7.4)
(1.5)
(2.9)
(2.6)
(3.4)
3.4
–
3.4
(3.5)
(0.1)
–
(0.1)
–
(0.1)
(0.2)
0.1
–
–
0.1
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.7)
(0.7)
0.1
(10.6)
1.1
(9.4)
(10.1)
(0.2)
(0.1)
–
–
(1.0)
(0.6)
349.7
–
349.7
(257.6)
92.1
(64.3)
27.8
(1.0)
(47.1)
(20.3)
1.2
(11.6)
1.1
(9.3)
(29.6)
(15.2)
(10.4)
(5.4)
(4.3)
(14.7)
(5.3)
De La Rue plc Annual Report 2023
161
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
1 Segmental analysis continued
FY22
Total revenue from contracts with customers
Less: inter-segment revenue
Revenue from contracts with customers
Cost of sales
Gross profit
Adjusted operating expenses
Adjusted operating profit
Adjusted items:
– Amortisation of acquired intangible assets
– Net exceptionals
Operating profit/(loss)
Interest income
Interest expense
Net retirement benefit obligation finance expense
Net finance expense
Profit/(loss) before taxation
Capital expenditure on property, plant and equipment (excluding grants received)
Capital expenditure on intangible assets (note 10)
Impairment of property, plant and equipment on intangible assets (note 10)
Depreciation of property, plant and equipment and right-of-use-assets
(note 9/23)
Amortisation of intangible assets (note 10)
FY23
Segmental assets
Segmental liabilities
FY22
Segmental assets
Segmental liabilities
Currency
£m
Authentication
£m
Identity
Solutions
£m
Unallocated
£m
Total of
Continuing
operations
£m
280.9
–
280.9
(217.7)
63.2
(43.7)
19.5
–
(4.5)
15.0
0.9
(0.8)
(0.1)
–
15.0
(15.7)
(1.0)
0.1
(10.7)
(1.3)
90.3
–
90.3
(55.8)
34.5
(18.2)
16.3
(1.0)
(0.2)
15.1
–
–
–
–
15.1
(2.0)
(7.7)
–
(2.5)
(2.3)
3.9
–
3.9
(4.0)
(0.1)
0.7
0.6
–
–
0.6
–
–
–
–
0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.0)
(1.0)
–
(5.4)
(0.1)
(5.5)
(6.5)
(0.4)
(0.1)
–
(1.1)
(0.7)
375.1
–
375.1
(277.5)
97.6
(61.2)
36.4
(1.0)
(5.7)
29.7
0.9
(6.2)
(0.2)
(5.5)
24.2
(18.1)
(8.8)
0.1
(14.3)
(4.3)
Currency
£m
Authentication
£m
Identity
Solutions
£m
Unallocated
£m
Total of
Continuing
operations
£m
169.9
(70.4)
203.1
(53.0)
68.5
(14.0)
65.7
(13.4)
15.8
(4.5)
13.3
(3.1)
94.4
(224.7)
348.6
(313.6)
96.4
(147.2)
378.5
(216.7)
Unallocated assets principally comprise long-term pension assets of £nil (FY22: £31.6m) deferred tax assets of £18.3m (FY22:
£11.2m), cash and cash equivalents of £40.3m (FY22: £24.3m) and derivative financial instrument assets of £2.4m (FY22: £3.4m)
as well as current tax assets, associates and centrally managed property, plant and equipment.
Unallocated liabilities principally comprise retirement benefit obligations of £54.7m (FY22: £1.8m), borrowings of £118.4m (FY22:
£92.6m), current tax liabilities of £23.2 (FY22: £13.9m) and derivative financial instrument liabilities of £1.9m (FY22: £4.8m) as well
as deferred tax liabilities and centrally held accruals and provisions.
Geographic analysis of non-current assets
UK
Malta
USA
Sri Lanka
Other countries
2023
£m
97.7
27.5
15.1
7.7
0.5
148.5
2022
£m
91.2
22.9
15.4
9.4
14.2
153.1
Note:
1.
Other financial assets, retirement benefit obligations, deferred tax assets and derivative financial instruments are excluded from the analysis shown above.
Major customers
The Group had one (FY22: none) major customers from which it derived total revenues in excess of 10% of Group revenue.
162
De La Rue plc Annual Report 2023
2 Revenue from contracts with customers
Information regarding the Group’s major customers, and a segmental analysis of revenue is provided in note 1.
Timing of revenue recognition across the Group’s revenue from contracts with customers is as follows:
FY23
Timing of revenue recognition:
Point in time
Over time
Total revenue from contracts with customers
FY22
Timing of revenue recognition:
Point in time
Over time
Total revenue from contracts with customers
Geographic analysis of revenue by destination
Middle East and Africa
Asia
UK
The Americas
Rest of Europe
Rest of world
Contract balances
The contract balances arising from contracts with customers are as follows:
Trade receivables
Provision for impairment
Net trade receivables
Contract assets
Contract liabilities
Payments received on account
Currency
£m
Authentication
£m
Identity
Solutions
£m
Total of
Continuing
operations
£m
217.6
37.0
254.6
78.3
13.4
91.7
3.4
–
3.4
299.3
50.4
349.7
Currency
£m
Authentication
£m
Identity
Solutions
£m
Total of
Continuing
operations
£m
257.2
23.7
280.9
76.0
14.3
90.3
Note
13
13
13
17
17
3.9
–
3.9
2023
£m
145.4
39.3
55.7
24.8
71.2
13.3
349.7
2023
£m
42.3
(0.6)
41.7
18.9
(0.3)
(22.7)
337.1
38.0
375.1
2022
£m
196.4
44.3
65.4
28.8
37.3
2.9
375.1
2022
£m
64.8
(0.8)
64.0
8.0
(0.3)
(14.3)
Trade receivables have decreased to £42.3m in FY23 (FY22: £64.8m) reflecting timing of payments on certain material
customer contracts.
Contract assets have increased to £18.9m in FY23 (FY22: £8.0m) reflecting the timing of revenue recognition under IFRS 15.
Payments on account in FY23 have increased to £22.7m (FY22: £14.3m) reflecting significant additions in the year of £21.7m
(FY22: £4.6m) and revenue recognised from payments on account at the end of FY22 of £13.3m (FY22: utilisation of £28.3m).
Amounts included in contract liabilities at the beginning of the year
Performance obligations satisfied in previous years
2023
£m
–
–
2022
£m
1.3
–
De La Rue plc Annual Report 2023
163
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
2 Revenue from contracts with customers continued
Performance obligations
Information about the Group’s performance obligations is summarised in the Accounting Policies section on page 151.
The following table shows the transaction price allocated to remaining performance obligations for contracts with original expected
duration of more than one year. The Group has decided to take the practical expedient provided in IFRS15.121 not to disclose the
amount of the remaining performance obligations for contracts with original expected duration of less than one year.
Within 1 year
Between 2 – 5 years
5 years and beyond
2023
£m
12.4
15.5
–
27.9
2022
£m
31.3
25.8
–
57.1
3 Discontinued operations
In FY23 there were no amounts related to discontinued operations (FY22: gain of £0.8m, after tax of £0.1m).
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 gain on discontinued operations
in FY22 of £0.8m (net of associated tax of £0.1m) included £0.3m related to the winding down and finalising of remaining activity
related to the CPS contract, which has now ended and £0.5m foreign exchange gains in the period from a foreign subsidiary in
Brazil, where operations have been discontinued.
4 Adjusted operating expenses by nature
Depreciation of property, plant and equipment
Amortisation of intangibles
Impairment of inventories
Depreciation of right-of-use assets
Cost of sales relating to inventory
Expenses related to short-term and low-value leases
Research and non-capitalised development expense*
Employee costs (including Directors’ emoluments)
Foreign exchange loss
Amounts payable to EY and its associates:
– Audit of these consolidated financial statements
– Audit of the financial statements of subsidiaries pursuant to legislation
– Non-Audit Services
– Taxation services
Note
9
10
12
23
23
25
2023
£m
12.5
5.3
1.0
2.2
249.2
0.6
5.1
95.0
1.6
0.6
0.4
0.1
–
2022
£m
12.0
4.3
0.9
2.3
265.1
0.5
6.3
97.6
2.2
0.4
0.4
0.1
–
Note:
*
Includes £0.7m income in FY23 for RDEC claims (FY22: £0.8m). The Group policy is to net RDEC relating to research and development against the expense.
164
De La Rue plc Annual Report 2023
5 Exceptional items
Accounting policies
Exceptional items are disclosed separately in the financial statements to provide readers with an increased insight into the
underlying performance of the Group.
Termination of Relationship Agreement with Portals Paper Limited
Site relocations and restructuring costs
Pension underpin costs
Foreign exchange loss on devaluation of Sri Lankan rupee
Recognition of expected credit loss provision on other financial assets (note 11)
Total exceptional items
Tax charge/(credit) on exceptional items
Net exceptionals
2023
£m
17.0
21.1
0.5
–
38.6
8.5
47.1
5.1
52.2
Cash
£m
9.3
7.6
0.5
–
17.4
–
17.4
Non-
cash
£m
7.7
13.5
–
–
21.2
8.5
29.7
Non-
cash
£m
–
(0.3)
–
0.4
0.1
3.1
3.2
2022
£m
Cash
£m
–
2.1
0.4
–
2.5
–
2.5
–
1.8
0.4
0.4
2.6
3.1
5.7
(1.8)
3.9
Termination of Relationship Agreement with Portals Paper Limited
On the 26 July 2022, the Group reached a settlement to terminate its long-term supply agreement with Portals Paper Limited
(“Portals”), related to the supply of banknote, proofing and security paper (the “Relationship Agreement” or “RA”). As a result of this
termination, £17.0m (FY22: £nil) was recorded as an exceptional item in the period, being the agreed settlement together with
associated legal costs. This is further described below.
Background
In March 2018, De La Rue sold the Portals paper-making business to a private equity backed management buyout and entered into
the RA for a period of 10 years. Under this agreement, De La Rue has purchased banknote, proofing and security paper from Portals,
subject to a minimum annual volume guarantee, and Portals has purchased security features from De La Rue, with no guarantee
of volume.
Settlement arrangements
Under the settlement terms, De La Rue is released from all obligations under the RA is free to purchase banknote and security
paper from any supplier worldwide. De La Rue agreed to pay Portals the amounts due under the normal RA arrangements in
respect of confirmed orders placed up to the end of July 2022, and a total of £16.7m in cash to terminate the RA.
The £16.7m and the associated legal costs are classed as an exceptional charge in the period, and payments were made according
to the following schedule: £1.7m on or before 31 October 2022, £7.5m on or before 31 December 2022 and £7.5m on or before
7 April 2023. The final payment was made in FY24.
With the termination of the RA, De La Rue is not liable to pay any more volume-related shortfall payments. These payments have
averaged £3.3m annually for each of the past two financial years and totalled £3.0m in FY23, up to the termination of the RA.
De La Rue retains its existing equity and loan note interests in the Portals group of companies and its rights in respect of those
interests remain unaffected by this settlement.
Following the termination of the RA, De La Rue will be able to sell all banknote security features freely to customers, through any
other paper supplier. This includes the advanced features developed in collaboration with Portals. Strategically, this settlement
supports De La Rue’s goal to convert more of its print customers to polymer banknotes, as, in doing so, there will no longer be
volume shortfall payments.
Site relocations and restructuring costs
Site relocations and restructuring costs in FY23 of £21.1m (FY22: £1.8m) included:
– in January 2023, the Group announced that owing to current market demand, and no expectation of new bank note orders from
the Central Bank of Kenya for at least the next 12 months, De La Rue Kenya (a subsidiary with a material non-controlling interest
held by joint venture with the Government of Kenya) has suspended banknote printing operations in the country. In addition,
operations in our Authentication division are also in the process of winding down. As a result of the review of the business in
Kenya an exceptional charge of £12.6m (FY22: £nil) was made in the year including redundancy charges of £5.5m, property, plant
and equipment asset impairments of £4.9m, inventory impairments of £2.0m and other costs of £0.2m. Further costs, as yet
undetermined, are expected in relation to this as the operations continue to be wound down in FY24.
– a £2.5m (FY22: £nil) charge for redundancy and legal fees was made in relation to restructuring initiatives in both the Currency
(£1.2m) and Authentication (£1.3m) divisions in order to right-size the divisions for future operations. No further costs are
expected in relation to these projects in FY24.
– an impairment charge of £4.3m (FY22: £nil) was made in the year in relation to capitalised product development costs and
software assets. A review was carried out as part of the Authentication business right-sizing programme of ongoing development
projects. With the resulting restructuring initiatives, the Group no longer had the technical and financial ability to complete two
programs. As a result, work on the two programs was terminated and the technology mothballed with the associated capitalised
costs impaired (£2.9m). A further £1.4m of software assets relating to the Currency business were impaired as future revenue
relating to these assets are minimal. No further costs are expected in relation to this in FY24.
De La Rue plc Annual Report 2023
165
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
5 Exceptional items continued
– the recognition of £1.1m (FY22: £0.9m) of restructuring charges related to the cessation of banknote production at our Gateshead
facility primarily relating to the costs, net of grant income received of £0.1m, of relocating assets to different Group manufacturing
locations and further plant and equipment impairments of £0.5m. Since this program commenced, £9.9m of costs have been
incurred in relation to this. As the Group continues its expansion of the manufacturing facilities in Malta, into FY25, a cost of
approximately £2.1m net of any grants received, is expected; and
– a further £0.6m (FY22: £1.3m) of charges relating to other cost out initiatives including the initial Turnaround Plan restructuring of
our central enabling functions, selling and commercial functions. Since this program commenced, £3.4m of costs have been
incurred in relation to this. No further costs are expected.
FY22 was offset by a reversal of £0.4m of asset impairments no longer required related to cessation of banknote production at our
Gateshead facility.
Pension underpin costs
Pension underpin costs of £0.5m (FY22: £0.4m) relate to legal fees, net of amounts recovered, incurred in the rectification of certain
discrepancies identified in the Scheme’s rules. The Directors do not consider this to have an impact on the UK defined benefit
pension liability at the current time, but they continue to assess this.
Recognition of expected credit loss provision on other financial assets
Other financial assets comprise securities interests held in the Portals International Limited group which were received as part of
the consideration for the paper disposal in 2018. The amount presented on the balance sheet within other financial assets as at
25 March 2023 includes the original principal received and accrued interest amounts.
In accordance with IFRS 9, management has assessed the recoverability of the carrying value on the balance sheet and recorded
an expected credit loss provision of £8.5m (FY22: £3.1m) in relation to the original principal value of £7.9m (FY22: £2.3m) and
interest receivable of £0.6m (FY22: £0.8m) which has been recorded in exceptional items consistent with the original recognition
as part of the loss on disposal.
Further details can be found in “V Critical accounting estimates, assumptions and judgements”.
Foreign exchange loss on devaluation of Sri Lankan rupee
Significant devaluation of Sri Lanka Rupee versus the British Pound which occurred in March 2022 where the Rupee/GBP rate
moved from 265/£ on 8 March 2022 to 342/£ on 15 March 2022, following the decision on 9 March 2022 by the Sri Lanka
Government to free float the exchange rate. This period of significant devaluation is deemed an exceptional item as it is considered
to be non-trading in nature resulting from of an external event being the impact of the exchange rate change triggered by the
free-float of the exchange rate. An amount of £0.4m has been included in exceptional items in FY22.
Taxation relating to exceptional items
The overall tax charge relating to continuing exceptional items arising in the period was £5.1m (FY22: tax credit £1.8m).
Included in the exceptional tax items is a deferred tax charge of £4.0m (FY22: £1.5m credit) relating to the derecognition of a
deferred tax asset in relation to restricted UK tax interest amounts that under IAS12 had to be recognised in prior years even though
the amounts are not expected to be fully utilised for the foreseeable future. The asset was originally recognised because the defined
benefit pension was in a surplus position which led to a deferred tax liability relating to pensions in the UK, and under IAS any
potential deferred tax assets must be recognised against this deferred tax liability.
During FY23 the pension moved from a surplus to a deficit position, which meant that the deferred tax asset on the UK restricted
UK tax interest amounts is no longer required to be recognised. As the majority of the deferred tax in relation to the pension
movements is recognised directly in the Statement of Comprehensive Income, to recognise movements in the recognition and
derecognition of this asset as an operating item would distort the Operating Effective Tax Rate and therefore considered to be
unhelpful for users of the accounts. This movement and any future creation or unwind of this asset is therefore considered to be
an Exceptional item for financial reporting purposes where possible.
Exceptional items also includes a tax charge in respect of additional expected utilisation of tax credits in Malta of £6.1m, as they are
expected to be surrendered for capital grants against future capital expenditure in Malta.
The balance of £5.0m credit within exceptional tax items relates to the tax impact on the exceptional costs before tax.
166
De La Rue plc Annual Report 2023
6 Interest income and expense
Accounting policies
Interest income/expense is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset/
liability to the net carrying amount of that asset/liability.
Recognised in the income statement
Interest income:
– Other interest
– Interest on loan notes and preference shares (note 11)
Total interest income
Interest expense:
– Bank loans
– Other, including amortisation of finance arrangement fees
– Net loss on debt modification
– Amortisation of debt modification loss
– Interest on lease liabilities (note 23)
Total interest expense
Retirement benefit obligation finance income/(expense) (note 24)
Net finance expense
2023
£m
2022
£m
0.1
1.1
1.2
(7.2)
(3.2)
(0.9)
0.2
(0.5)
(11.6)
0.1
0.8
0.9
(3.1)
(2.5)
–
–
(0.6)
(6.2)
1.1
(0.2)
(9.3)
(5.5)
All finance income and expense arise in respect of assets and liabilities not restated to fair value through the income statement.
Interest due on the loan notes and preference shares relates to interests held in the Portals International Limited group (formerly
Mooreco Limited) (obtained as part of the considered for the Portals paper disposal). The loan notes and preference shares are
included in the balance sheet as Other Financial Assets. In accordance with the terms of the instruments, the interest has not been
paid in the year but accrued and added to the value of the Other Financial Asset. In the period £1.1m of interest was accrued
(FY22: £0.8m) and an expected credit loss of £1.1m (FY22: £0.8m) was recorded within exceptional items (notes 5 and 11).
The gain/(loss) to the income statement in respect of the ineffective portion of derivative financial instruments was £nil (FY22: £nil).
On the 18 November 2022 the Group’s exiting banking facilities were extended until 1 January 2025 with a 25-basis point increase
in margin (note 14b), which is treated as a non-substantial modification under IFRS 9 Financial Instruments, as the refinancing did
not result in an extinguishment of debt. The difference between the amortised cost carrying amount of the old facility and the
present value of the new facility, discounted using the original effective interest rate, resulted in a modification loss, which is
amortised over the life of the new revolving credit facility. The net loss on debt modification was £0.9m together with the
subsequent associated amortisation of £0.2m (FY22: £nil).
The retirement benefit obligation finance income/expense is calculated under IAS 19 and represents the difference between the
interest on pension liabilities and assets. The credit in FY23 of £1.1m (FY22: loss £0.2m) was due to the opening pension valuation on
an IAS 19 basis as at 26 March 2022 being a surplus of £29.8m.
7 Taxation
Accounting policies
The tax expense included in the income statement comprises current and deferred tax. Current tax is the expected tax payable on
the taxable income for the year, including adjustments in respect of prior periods, using tax rates enacted or substantively enacted
by the balance sheet date. Tax is recognised in the income statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Deferred tax is provided on temporary differences arising between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is measured using tax rates that have been
enacted or substantively enacted by the balance sheet date and that are expected to apply when the asset is realised, or the
liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from goodwill not deductible for tax purposes or result
from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
De La Rue plc Annual Report 2023
167
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
7 Taxation continued
Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except
where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and deferred tax liabilities are only offset to the extent that there is a legally enforceable right to offset current
tax assets and current tax liabilities, they relate to taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis or to realise an asset and settle a liability simultaneously.
De La Rue has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation matters from which, in the ordinary course of business, uncertainty over the tax treatment can arise. De La Rue assesses
whether it is probable or not the tax authority will accept the tax treatment; if probable that the treatment will be accepted then
the potential tax effect of the uncertainty is a tax-related contingency. If it is not probable of being accepted, the most likely
amount or the expected value is recognised. There are some tax assessments where a provision has been made on the basis of
a combination of advice received and management judgement. The amount provided may be less than the headline figures on
assessments received from a tax authority and reflect an estimate of a more likely outcome on the basis of current communications
with the tax authority. In the possible event that there was an adverse outcome to any dispute this could result in a material outflow.
Current tax
UK corporation tax:
– Current tax
– Adjustment in respect of prior years
Overseas tax charges:
– Current year
– Adjustment in respect of prior years
Total current income tax charge
Deferred tax:
– Origination and reversal of temporary differences, UK
– Origination and reversal of temporary differences, overseas
Total deferred tax credit
Total income tax charge in the consolidated income statement
Included in:
Income tax expense reported in the consolidated income statement in respect of continuing operations
Income tax expense/(credit) in respect of discontinued operations (note 3)
Total income tax charge in the consolidated income statement
Tax on continuing operations attributable to:
– Ordinary activities
– Amortisation of acquired intangible assets
– Exceptional items (note 5)
Consolidated statement of comprehensive income:
– On remeasurement of net defined benefit liability
– On cash flow hedges
– On foreign exchange on quasi-equity balances
Income tax (credit)/charge reported within other comprehensive income
Consolidated statement of changes in equity:
– On share options
Income tax charge reported within equity
168
De La Rue plc Annual Report 2023
2023
£m
2022
£m
11.9
0.1
12.0
2.1
(0.3)
1.8
13.8
7.4
6.4
13.8
27.6
27.6
–
27.6
22.8
(0.3)
5.1
27.6
2023
£m
(24.2)
0.1
0.1
(24.0)
0.5
0.5
3.3
0.2
3.5
1.7
0.2
1.9
5.4
(4.1)
0.1
(4.0)
1.4
1.3
0.1
1.4
3.4
(0.3)
(1.8)
1.3
2022
£m
8.8
(0.1)
(0.2)
8.5
0.3
0.3
The tax on the Group’s consolidated (loss)/profit before tax differs from the UK tax rate of 19% as follows:
2023
2022
Before
exceptional
items
£m
Movement on
acquired
intangibles
£m
Exceptional
items
£m
Before
exceptional
items
£m
Movement on
acquired
intangibles
£m
Exceptional
items
£m
Total
£m
(Loss)/profit before tax
18.5
(1.0)
(47.1)
(29.6)
30.9
(1.0)
(5.7)
Tax calculated at UK tax rate of 19%
(FY22: 19.0%)
Effects of overseas taxation
Charges/(credits) not allowable/taxable for
tax purposes
Changes in uncertain tax provisions
Tax attributes not previously recognised for
deferred tax
Utilisation of tax credits upon which no
deferred tax was previously recognised
Adjustments in respect of prior years
Impact of UK tax rate change on deferred tax
balances
Tax charge/(credit)
3.5
1.1
0.5
8.5
7.9
–
(0.5)
1.8
22.8
(0.2)
(8.9)
(5.6)
(0.1)
–
–
–
–
–
–
(0.3)
1.2
1.7
–
4.0
6.1
–
1.0
5.1
2.2
2.2
8.5
11.9
6.1
(0.5)
2.8
27.6
5.8
0.4
(1.0)
–
(0.1)
–
0.8
(2.5)
3.4
(0.1)
–
–
–
–
–
–
(0.3)
(0.2)
(1.1)
Total
£m
24.2
4.5
0.3
(0.9)
–
–
0.1
–
(0.7)
(0.8)
–
0.2
(0.3)
(1.8)
–
1.0
(2.8)
1.3
The underlying effective tax rate excluding exceptional items was 123.2% (FY22: 11.0%). This includes the impact of provisions against
deferred tax balances, changes in uncertain tax provisions and the impact of tax rate changes in Sri Lanka: the underlying effective
tax rate excluding these items was 24.9% (FY22: 19.4%).
The Group is subject to income taxes in numerous jurisdictions and significant judgement is required in determining the worldwide
provision for those taxes. The level of current and deferred tax recognised is dependent on subjective judgements as to the
outcome of decisions to be made by the tax authorities in the various tax jurisdictions around the world in which the Group
operates. It is necessary to consider which deferred tax assets should be recognised based on an assessment of the extent to
which they are regarded as recoverable, which involves assessment of the future trading prospects of individual statutory entities.
The actual outcome may vary from that anticipated. Where the final tax outcomes differ from the amounts initially recorded, there
will be impacts upon income tax and deferred tax provisions and on the income statement in the period in which such
determination is made.
The Group has current tax provisions recorded within Current tax liabilities, in respect of uncertain tax positions. In accordance with
IFRIC 23, tax provisions are recognised for uncertain tax positions where it is considered probable that the position in the filed tax
return will not be sustained and there will be a future outflow of funds to a taxing authority. Tax provisions are measured either
based on the most likely amount (the single most likely amount in a range of possible outcomes) or the expected value (the sum
of the probability weighted amounts in a range of possible outcomes) depending on management’s judgement on how the
uncertainty may be resolved.
The Group is disputing tax assessments received in certain countries in which the Group operates. These tax assessments have
been subject to court ruling both in favour of the Group and also against the Group. The rulings are subject to ongoing appeal
processes. The Group has increased the relevant tax provisions and is fully provided where necessary as required by the relevant
accounting standards. The disputed tax assessments are subject to ongoing dialogue with the relevant tax authorities to reach
a settlement without the requirement to continue in a protracted legal process.
De La Rue plc Annual Report 2023
169
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
8 Earnings per share
Accounting policies
Basic earnings per share (“EPS”) is calculated by dividing the profit attributable to equity shareholders by the weighted average
number of ordinary shares outstanding during the year, excluding those held in the employee share trust which are treated as
treasury shares.
For diluted EPS, the weighted average number of ordinary shares in issue is adjusted for the impact of the dilutive effect of
share options.
The Directors are of the opinion that the publication of the adjusted EPS, before exceptional items, is useful to readers of the
accounts as it gives an indication of underlying business performance.
Earnings per share
Basic EPS – continuing operations
Basic EPS – discontinued operations
Basic EPS – total
Diluted EPS – continuing operations1
Diluted EPS – discontinued operations
Diluted EPS – total
Adjusted EPS
Basic EPS – continuing operations
Diluted EPS – continuing operations
Number of shares (m)
Weighted average number of shares
Dilutive effect of shares
2023
pence
per share
2022
pence
per share
(28.6)
–
(28.6)
(28.6)
–
(28.6)
(1.5)
(1.5)
10.6
0.4
11.0
10.5
0.4
10.9
13.0
12.8
195.4
0.5
195.9
195.2
2.6
197.8
Note:
1.
The Group reported a loss from continuing operations attributable to the ordinary equity shareholders of the Company for FY23. The Diluted EPS is reported as equal to Basic EPS,
no account can be taken of the effect of dilutive securities under IAS 33.
Reconciliations of the earnings used in the calculations are set out below:
(Loss)/Earnings for basic EPS – Total
Add: Earnings for basic EPS – discontinued operations
(Loss)/Earnings for basic EPS – continuing operations
Add: amortisation of acquired intangibles
Less: tax on amortisation of acquired intangibles
Add: exceptional items (excluding non-controlling interests)
Less: tax on exceptional items
Earnings for adjusted EPS
Note
10
7
5
7
2023
£m
(55.9)
–
(55.9)
1.0
(0.3)
47.1
5.1
(3.0)
2022
£m
21.5
(0.8)
20.7
1.0
(0.3)
5.7
(1.8)
25.3
170
De La Rue plc Annual Report 2023
9 Property, plant and equipment
Accounting policies
Property, plant and equipment are stated at cost, less accumulated depreciation and any accumulated provision for impairment
in value. Assets in the course of construction are included in property, plant and equipment on the basis of expenditure incurred at
the balance sheet date.
Costs of major maintenance activities are capitalised and depreciated over the estimated useful life for the asset.
Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions
will be complied with. The grant reduces the carrying amount of the asset and then is recognised in profit or loss over the useful life
of the depreciable asset by way of a reduced depreciation charge.
No depreciation is provided on freehold land. Building improvements are depreciated over their estimated useful economic lives
of 50 years. Other leasehold interests are depreciated over the lease term.
Plant and machinery are depreciated over their estimated useful lives which typically range from 10 to 20 years. Fixtures and fittings
and motor vehicles are depreciated over their estimated useful lives which typically range from two to 15 years. No depreciation
is provided for assets in the course of construction until they are ready for use.
Depreciation methods, residual values and useful lives are reviewed at least at each financial year end, taking into account
commercial and technical obsolescence as well as normal wear and tear, provision being made where the carrying value exceeds
the recoverable amount.
Cost
At 27 March 2021
Exchange differences
Additions
Reclassifications
Disposals
At 26 March 2022
Exchange differences
Additions1
Reclassifications
Disposals
At 25 March 2023
Accumulated depreciation
At 27 March 2021
Exchange differences
Depreciation charge for the year
Disposals
Impairments reversal
At 26 March 2022
Exchange differences
Depreciation charge for the year
Disposals
Impairments2
At 25 March 2023
Net book value at 25 March 2023
Net book value at 26 March 2022
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings and
Motor
Vehicles
£m
In course of
construction
£m
53.3
(0.2)
–
0.2
–
233.0
(1.4)
1.0
2.1
(7.5)
53.3
227.2
0.2
1.7
1.0
(4.0)
52.2
3.8
(2.9)
12.6
(14.1)
226.6
29.1
–
0.5
0.8
(1.7)
28.7
0.3
0.5
3.5
(0.9)
32.1
30.7
177.2
20.2
–
1.0
–
–
31.7
0.1
1.0
(4.0)
0.5
29.3
22.9
21.6
(1.3)
8.9
(7.5)
–
177.3
3.0
9.3
(13.9)
4.9
180.6
46.0
49.9
(0.1)
2.1
(1.7)
–
20.5
0.3
2.2
(0.8)
–
22.2
9.9
8.2
15.6
(0.4)
15.0
(3.1)
(4.1)
23.0
0.5
11.9
(17.1)
–
18.3
2.9
–
–
(2.8)
(0.1)
–
–
–
–
–
–
18.3
23.0
Total
£m
331.0
(2.0)
16.5
–
(13.3)
332.2
4.8
11.2
–
(19.0)
329.2
231.0
(1.4)
12.0
(12.0)
(0.1)
229.5
3.4
12.5
(18.7)
5.4
232.1
97.1
102.7
Notes:
1.
During the year £3.5m (FY22: £1.5m) of government grants were received by the Group in cash for the purchase of certain items of property, plant and equipment, which is offset against
the plant and machinery additions of £0.6m (FY22: £2.5m). A further £0.7m of government grants were received in cash relating to FY22. The following conditions are attached to these grants:
– Malta Phase 1 – to retain an average employment level of 250 workers for a period of 8 years and retain qualifying investment project for a minimum of 8 years. The investment project
began on 1 September 2015, therefore at the year end 0.5 years was left to satisfy the minimum period.
- Malta Phase 2 – A further investment project commenced on 9 September 2021 linked to adding a further 100 employees within 4 years of 1 December 2020 and covering a further
8 years of funding.
2.
Impairments in the year of £5.4m included £4.9m relating to the wind down of operations in Kenya (£0.5m in Land and buildings and £4.4m in Plant and machinery) and £0.5m for
impairments in Gateshead, relating to cessation of manufacturing at Gateshead facility (all in Plant and machinery) (note 5).
De La Rue plc Annual Report 2023
171
Strategic reportGovernance reportFinancial statements
Notes to the accounts continued
10 Intangible assets
Accounting policies
Impairment of intangible assets
Intangible assets that are subject to amortisation are reviewed for impairment whenever events or circumstances indicate that the
carrying value may not be recoverable. In addition, goodwill is tested at least annually for impairment. Impairment tests are performed
for all Cash Generating Units (CGUs) to which goodwill has been allocated at the balance sheet date or whenever there is indication
of impairment. For the sensitivity information in impairment of goodwill, refer to Accounting policies – “C Other long-term
estimation uncertainties”.
An impairment loss is recognised immediately in the income statement for the amount by which the asset’s carrying value exceeds
its recoverable amount, the latter being the higher of the asset’s fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
In testing intangible assets for impairment, a number of assumptions must be made when calculating future cash flows. These
assumptions include growth in customer numbers, market size and sales prices and volumes, all of which will determine the future
cash flows.
Other information
Intangible assets purchased separately, such as software licences that do not form an integral part of related hardware, are
capitalised at cost less accumulated amortisation and impairment losses. Software intangibles are amortised on a straight-line
basis over the shorter of their useful economic life or their licence period at rates which vary between three and five years.
Expenditure incurred in the development of products or enhancements to existing product ranges is capitalised as an intangible
asset if the recognition criteria in IAS 38 ‘Intangible Assets’ have been met. Development costs not meeting these criteria are
expensed in the income statement as incurred. Capitalised development costs are amortised on a straight-line basis over their
estimated useful economic lives, which vary between five and ten years, once the product or enhancement is available for use.
Product research costs are written off as incurred.
Intangible assets purchased through a business combination are recognised separately from goodwill and are initially recognised at
their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial acquisition, intangible assets acquired
through a business combination are reported at cost less accumulated amortisation and impairment losses.
Intellectual property recorded on the balance sheet relates to the acquisition of De La Rue Authentication Solutions Inc. and is
amortised over its expected life of 10 years. Customer relationships, relating to those acquired in the acquisition of De La Rue
Authentication Solutions Inc. are amortised over their expected lives of 10 to 15 years. Trade names relating to the acquisition of
De La Rue Authentication Solutions Inc. are amortised over their expected lives of 15 years.
Assets in course of construction relates to internally generated software which is not yet completed.
Goodwill relates to the acquisition in FY17 of De La Rue Authentication Inc. (previously DuPont Authentication Inc). The goodwill has
been tested for impairment during the year as IAS 36 requires annual testing for assets with an indefinite life. For the purposes of
impairment testing the Cash Generating Unit (CGU) for the Goodwill has been determined as the De La Rue Authentication entity
as a whole. This is consistent with the fact that the entity is not fully integrated into the Group and the integrated nature of the
Intellectual Property and other assets which collectively generate cash flows.
Discount rate, derived from the company’s weighed average cost of capital have been used in discounting the projected cash
flows. These rates are reviewed annually with external advisers and are adjusted for risks specific to the market in which the
business operate.
The annual impairment test is performed at each year end, based initially on five-year cash flow forecasts approved by the senior
management. Short term revenue growth rates used in five-year plan are based on internal data regarding our current contracted
position, the pipeline of opportunities and forecast market growth. This growth rate considered to be consistent with publicly
available growth rates for the markets in which the business operates.
Short term profitability and cash conversion is based on our historic experiences and a level of judgement is applied to expected
changes in both.
The calculations include a terminal value based on the projections for the fifth year of the short-term plan, with a growth rate
assumption applied which extrapolates the business into perpetuity. The terminal growth rates are based on long term inflation
rates of the geographic market for the business and does not exceed the average long term growth rates forecast.
The key sensitivities in the impairment test are discount rate, future growth in revenue and the level of profit margin generated by
De La Rue Authentication. For FY23 a discount rate of 13.8% (FY22: 11.5%), revenue growth rate of 3% (FY22: 2%) and long-term
growth rate of 3% (FY22: 2%) have been used in the impairment test calculations. A discount rate of over 19.0% (FY22: 19.9%) would
be required for an impairment to be realised. Based on the impairment test performed no impairment of the goodwill is considered
necessary. There are no reasonable possible changes in the key assumptions (e.g. discount rate, growth rate or profit margin) that
would cause the recoverable amount to fall below the carrying amount of the cash generating unit.
172
De La Rue plc Annual Report 2023
Cost
At 27 March 2021
Exchange differences
Additions
Disposals
Reclassification
At 26 March 2022
Exchange differences
Additions
Disposals
Reclassifications
At 25 March 2023
Accumulated amortisation
At 30 March 2021
Exchange differences
Amortisation for the year1
Disposals
At 27 March 2022
Exchange differences
Amortisation for the year1
Impairment1
Disposals
At 25 March 2023
Net book value at 25 March 2023
Carrying value at 26 March 2022
Goodwill
£m
Development
costs
£m
Software
assets
£m
Intellectual
property
£m
Customer
relationships
£m
Trade
names
£m
In course of
construction
£m
8.1
0.4
–
–
–
8.5
0.7
–
–
–
9.2
–
–
–
–
–
–
–
–
–
–
9.2
8.5
22.4
0.2
–
(1.1)
5.6
27.1
–
–
(0.2)
0.7
27.6
15.4
0.1
1.9
(1.1)
16.3
(0.1)
2.1
–
(0.1)
18.2
9.4
10.8
15.5
(0.1)
–
(3.7)
0.2
11.9
0.1
1.4
–
5.3
18.7
10.7
(0.1)
1.4
(3.7)
8.3
(0.1)
2.2
1.4
–
11.8
6.9
3.6
3.4
0.2
–
–
–
3.6
0.3
–
–
–
3.9
1.4
–
0.6
–
2.0
0.3
0.6
–
–
2.9
1.0
1.6
4.1
0.2
–
–
–
4.3
0.3
–
–
–
4.6
1.7
0.1
0.4
–
2.2
0.2
0.4
–
–
2.8
1.8
2.1
0.2
–
–
–
–
0.2
–
–
–
–
0.2
0.1
–
–
–
0.1
–
–
–
–
0.1
0.1
0.1
7.9
(0.1)
8.8
–
(5.8)
10.8
–
9.0
(2.9)
(6.0)
10.9
–
–
–
–
–
–
–
2.9
(2.9)
–
10.9
10.8
Total
£m
61.6
0.8
8.8
(4.8)
–
66.4
1.4
10.4
(3.1)
–
75.1
29.3
0.1
4.3
(4.8)
28.9
0.3
5.3
4.3
(3.0)
35.8
39.3
37.5
Notes:
1.
2.
Amortisation of acquired intangibles of £1.0m (FY22: £1.0m) relates to Intellectual property of £0.6m (FY22: £0.6m) and Customer relationships of £0.4m (FY22: £0.4m).
Impairments in the year of £4.3m included £2.9m relating to product development costs and £1.4m of software licenses with limited future revenue generating expectations (note 5).
11 Other financial assets
Accounting policies
As part of the consideration received for the disposal of the Portals De La Rue paper business, the Group received loan notes,
preference shares and ordinary shares in the Portals International Limited group (formerly Mooreco Limited), a parent company
of the purchaser. The instruments relating to the loan notes and preference shares are being held solely to collect principal and
interest payments on specified dates (SPPI) and they meet the business test model to be held at amortised cost. Amortised cost
approximated fair value at the date these instruments were received, as they were obtained in an arms-length transaction with a
third party and priced accordingly as part of the sales negotiation process. The Group has not chosen to fair value these through
the income statement, they are accounted for on an amortised cost basis. The ordinary shares are accounted for as fair value
through profit and loss (FVPL) and the value of these represents £0.2m of the amounts shown below.
De La Rue plc Annual Report 2023
173
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
11 Other financial assets continued
Opening balance
Interest accrued in the period
Additional investment in loan notes in the Portals International Limited group
Expected credit loss (reported in exceptionals)
Closing balance
Analysed as:
Fixed rate unsecured loan notes in Portals Finance 1 Limited
Preference shares in Portals International Group Limited
Fixed rate unsecured loan notes in Portals International Group Limited
B ordinary shares in Portals International Group Limited
Cumulative accrued interest
Cumulative expected credit loss
Note
6
5
2023
£m
7.4
1.1
–
(8.5)
–
3.8
2.6
0.9
0.2
4.1
(11.6)
–
2022
£m
8.8
0.8
0.9
(3.1)
7.4
3.8
2.6
0.9
0.2
3.0
(3.1)
7.4
Fixed rate unsecured loan notes in Portals Finance 1 Limited are repayable in December 2028, bear interest at 10% per annum and
compounds annually if the interest is not paid. These are listed on the International Stock Exchange in Guernsey.
2,563,095 cumulative redeemable preference shares of £0.000001 each were issued at £1.00 per share, have a cumulative
dividend of 10% per annum and are redeemable at any time at the discretion of the issuer or will be redeemed in full by
31 December 2028.
Fixed rate unsecured loan notes in Portals International Group Limited are repayable in December 2029 and interest accrues at
a rate of 15% per annum and compounds annually if the interest is not paid. These are listed on the International Stock Exchange
in Guernsey.
In accordance with the terms of the instruments, the interest has not been paid in the year but accrued and added to the value
of the Other Financial Asset. In FY22 an additional £0.9m was invested in loan notes in the Portals International Limited group.
Management has assessed the recoverability of the other financial assets on the balance sheet as at 25 March 2023 and as a
result an expected credit loss was recorded in the period of £8.5m. Further details on the impairment can be found in “B Critical
accounting estimates – 1. Recoverability of other financial assets, assumptions and judgements” within Accounting Policies.
12 Inventories
Accounting policies
Inventories and work in progress are valued at the lower of cost and net realisable value. Cost is determined on a weighted average
cost basis and comprises directly attributable purchase and conversion costs, including direct labour and an allocation of production
overheads based on normal operating capacity that have been incurred in bringing those inventories to their present location and
condition. Net realisable value is the estimated selling price less estimated costs of completion and selling costs.
Valuation of inventory
At any point in time, the Group has significant levels of inventory, including work in progress. Manufacturing is a complex process
and the final product is required to be made to exacting specifications and tolerance levels. In valuing the work in progress at the
balance sheet date, assessments are made over the normal levels of waste contained within the product based on the production
performance to date and past experience. Any abnormal levels of waste is expensed as incurred.
In assessing the recoverability of finished stock, assessments are made to validate that inventory is correctly stated at the lower
of cost and net realisable value and that obsolete inventory, including inventory in excess of requirements, is provided against.
Raw materials
Work in progress
Finished goods
2023
£m
19.6
9.6
20.1
49.3
2022
£m
25.7
12.3
12.1
50.1
The replacement cost of inventories is not materially different from original cost. Income statement charges in FY23 with respect
of the recognition of inventory provisions of £1.0m (FY22: £0.9m) was recognised in operating expenses – ordinary.
174
De La Rue plc Annual Report 2023
13 Trade and other receivables
Accounting policies
Trade receivables that do not contain a significant financing component are recognised at the transaction price and other
receivables are measured at amortised cost. Trade and other receivables are recognised net of allowance for ECL. The Group
calculates an allowance for potentially uncollectable accounts receivable balances using the ECL model and follows the simplified
approach. The Group has calculated the ECL by segmenting its accounts receivable balances into different segments representing
the risk levels applying to those customer groupings and thus allowing for the calculation of the ECL by applying the expected loss
rate relevant to each segment. The loss rates applied to each segment are based on the Group historical experience of credit
losses in addition to available knowledge of potential future credit risk based on available data such as country credit ratings. The
Group reviews the account receivable ledger to identify if there are any collectability issues which might require the recognition of
an expected credit loss allowance (i.e. a specific bad debt provision) in addition to the expected credit loss allowance calculated
based on historical experience. The Group’s policy for managing credit risk is set out in note 14.
Trade receivables
Provision for impairment
Net trade receivables
Other receivables1
Prepayments
2023
£m
42.3
(0.6)
41.7
25.4
3.6
70.7
2022
£m
64.8
(0.8)
64.0
22.1
2.9
89.0
Note:
1.
Other receivables of £25.4m (FY22: £22.1m) included, VAT recoverable of £6.2m (FY22: £5.1m), project work-in-progress costs of £3.3m (FY22: £3.2m), RDEC of £2.5m (FY22: £2.7m),
and deposits for assets under construction of £2.2m (FY22: £2.2m).
The Group has considered the impact of the war in Ukraine on the recoverability of amounts due from customers in Ukraine,
Belarus and Russia. At 25 March 2023 there was £0.1m (FY22: £0.3m) of current balances due relating to Ukraine covered by
existing pledges to settle (of which £0.1m has been settled post year-end), a £nil (FY22: £14k Russia, £nil Belarus) balance relating
to Russia and Belarus. The Group continued to monitor activities in these areas.
The ageing of trade and other receivables (excluding prepayments and provisions for impairment) at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due more than 120 days
Gross
2023
£m
61.3
4.4
1.5
0.5
67.7
ECL
allowance
2023
£m
(0.2)
(0.1)
–
(0.3)
(0.6)
Gross
2022
£m
75.2
6.3
4.9
0.5
86.9
ECL
allowance
2022
£m
(0.2)
–
(0.1)
(0.5)
(0.8)
The provision for impairment in respect of trade receivables is used to record losses unless the Group is satisfied that no recovery
of the amount owing is possible, at that point the amounts considered irrecoverable are written off against the financial asset directly.
The following expected credit loss rates were applied in the year:
2023
2022
Government departments
and National banks
(for Moody’s sovereign rating
graded as ‘speculative’ only)
Private or
publicly
traded
organisations
Government departments
and National banks
(for Moody’s sovereign rating
graded as ‘speculative’ only)
Private or
publicly
traded
organisations
Current not yet due
<6 months overdue
<1 year overdue
<2 years overdue
>2 years overdue
0.25%
1%
5%
25%
100%
1%
2%
50%
100%
100%
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at beginning of year
Impairment losses recognised
Utilised
Impairment losses reversed
Balance at end of year
0.25%
1%
5%
25%
100%
2023
£m
(0.8)
(0.2)
–
0.4
(0.6)
1%
2%
50%
100%
100%
2022
£m
(1.5)
(0.1)
0.5
0.3
(0.8)
De La Rue plc Annual Report 2023
175
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
14 Financial risk
Financial risk management
The Group’s activities expose it to a variety of financial risks, the most significant of which are liquidity risk, market risk and
credit risk.
The Group’s financial risk management policies are established and reviewed regularly to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The use of financial derivatives is
governed by the Group’s risk management policies approved by the Board of Directors, which provide written principles on the use
of financial derivatives consistent with the Group’s risk management strategy. The Group’s treasury department is responsible for
the management of these financial risks faced by the Group.
Group treasury identifies, evaluates and in certain cases hedges financial risks in close cooperation with the Group’s operating
units. Group treasury provides written principles for overall financial risk management as well as policies covering specific areas,
such as foreign exchange risk, interest rate risk, use of derivative financial instruments and the investment of excess liquidity.
14(a) Financial instruments
As permitted by IFRS 9, the Group has continued to apply the requirements of IAS 39 only in relation to hedge accounting at the
current time. Derivative financial instruments are recognised at fair value at the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each balance sheet date. The gain or loss on subsequent fair value measurement is
recognised in the income statement unless the derivative qualifies for hedge accounting when recognition of any resultant gain or
loss depends on the nature of the item being hedged.
Cash flow hedges
Changes in the fair value of derivative financial instruments that are designated and are effective as hedges of future cash
flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. Amounts
accumulated in equity are recycled to the income statement in the period in which the hedged item also affects the income
statement. However, if the hedged item results in the recognition of a non-financial asset or liability, the amounts accumulated
in equity on the hedging instrument are transferred from equity and included in the initial measurement of the cost of the asset
or liability. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer
qualifies for hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument
recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected
to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement. Changes in the fair value of
derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.
Fair value hedges
For an effective hedge of an exposure to changes in fair value of a recognised asset or liability or an unrecognised firm
commitment, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding
entry in net income. Gains or losses from remeasuring the derivative or, for non-derivatives, the foreign currency component of its
carrying value, are recognised in net income.
Embedded derivatives
Derivatives embedded in other financial liability instruments or other non-financial host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not
carried at fair value. Any unrealised gains or losses on such separated derivatives are reported in the income statement within
revenue or operating expenses, in line with the host contract.
176
De La Rue plc Annual Report 2023
Fair values
The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Financial assets
Trade and other receivables1
Contract assets
Other financial assets2
Cash and cash equivalents
Derivative financial instruments:
– Forward exchange contracts designated as cash flow hedges
– Foreign exchange fair value hedges – other economic hedges
– Embedded derivatives
Total financial assets
Financial liabilities
Unsecured bank loans and overdrafts3
Trade and other payables4
Derivative financial instruments:
Note
Fair value
hierarchy
Total fair
value
2023
£m
Carrying
amount
2023
£m
Total fair
value*
2022
£m
Carrying
amount*
2022
£m
13
2
11
15
Level 3
Level 3
Level 3
Level 1
Level 2
Level 2
Level 2
58.4
18.9
–
40.3
1.2
1.1
0.1
58.4
18.9
–
40.3
1.2
1.1
0.1
120.0
120.0
78.3
8.0
7.2
24.3
1.3
0.9
1.2
121.2
78.3
8.0
7.2
24.3
1.3
0.9
1.2
121.2
18
17
Level 2
Level 3
(123.4)
(66.1)
(123.4)
(66.1)
(95.7)
(62.9)
(95.7)
(62.9)
– Forward exchange contracts designated as cash flow hedges
– Short duration swap contracts designated as fair value hedges
– Foreign exchange fair value hedges – other economic hedges
– Embedded derivatives
Total financial liabilities
Level 2
Level 2
Level 2
Level 2
(1.0)
(0.1)
(0.4)
(0.4)
(1.0)
(0.1)
(0.4)
(0.4)
(1.8)
–
(2.9)
(0.1)
(1.8)
–
(2.9)
(0.1)
(191.4)
(191.4)
(163.4)
(163.4)
Notes:
1.
2.
3.
4.
Excludes prepayments of £3.6m (FY22: 2.9m), RDEC of £2.5m (FY22: £2.7m) and VAT recoverable of £6.2m (FY22: £5.1m).
FY22 excludes ordinary shares of £0.2m which are accounted for as fair value through profit and loss.
Excludes unamortised pre-paid loan arrangement fees of £5.0m (FY22: £3.1m).
Excludes social security and other taxation amounts of £3.0m (FY22: £2.6m), contract liabilities of £0.3m (FY22: £0.3m) and payments on account of £22.7m (FY22: £14.3m).
*
The prior year comparatives have been restated to correct a prior year error by removing a VAT receivable of £5.1m from the Trade and other receivables line item in accordance with
the requirements of IFRS 9. The restatement only affects the line item mentioned and has no other impact on the consolidated financial statements.
Trade receivables decreased to £42.3m compared to £64.8m at FY22 reflecting timing of payments on certain material
customer contracts.
Contract assets have increased by £10.9m from £8.0m at FY22 to £18.9m at FY23. This relates to an increase in Currency contracts
of £12.7m (FY22: £4.9m) and Authentication contracts of £6.2m (FY22: £3.1m).
Fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.
– Level 1 valuations are derived from unadjusted quoted prices for identical assets or liabilities in active markets
– Level 2 valuations use observable inputs for the assets or liabilities other than quoted prices
– Level 3 valuations are not based on observable market data and are subject to management estimates
There has been no movement between levels during the current or prior periods.
Fair value measurement basis for derivative financial instruments
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of
interest at the reporting date. The valuation bases are classified according to the degree of estimation required in arriving at the fair
values. See fair value hierarchy above.
Forward exchange contracts used for hedging
The fair value of forward exchange contracts has been determined using quoted forward exchange rates at the balance sheet date.
Embedded derivatives
The fair value of embedded derivatives is calculated based on the present value of forecast future exposures on relevant sales and
purchase contracts and using quoted forward foreign exchange rates at the balance sheet date.
De La Rue plc Annual Report 2023
177
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
14(a) Financial instruments continued
Determination of fair values of non-derivative financial assets and liabilities
Non-derivative financial assets at fair value through profit or loss are measured at fair value and changes therein, including any
interest, are recognised in profit or loss. Directly attributable transaction costs are recognised in profit or loss as incurred.
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent
to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
Hedge reserves
The hedge reserve balance on 25 March 2023 was a gain of £0.1m (FY22: loss £0.5m). Net movements in the hedge reserve are
shown in the Group statement of changes in equity.
Comprehensive income after tax was £0.6m (FY22: £0.3m) includes a loss of £1.0m (FY22: loss £0.6m) of fair value movements
on new and continuing cash flow hedges and a gain of £1.7m (FY22: gain £0.8m) on maturing cash flow hedges.
Deferred tax on the gain of £0.7m (FY22: gain £0.2m) amounted to £0.1m credit (FY22: £0.1m charge).
Hedge reserve movements in the income statement were as follows:
25 March 2023
Maturing cash flow hedges
Ineffectiveness on de-recognition of cash flow hedges
26 March 2022
Maturing cash flow hedges
Ineffectiveness on de-recognition of cash flow hedges
Revenue
£m
Operating
expense
£m
Exceptional
items
£m
(3.2)
–
(3.2)
0.7
–
0.7
1.7
–
1.7
(1.5)
–
(1.5)
–
(0.2)
(0.2)
–
–
–
Total
£m
(1.5)
(0.2)
(1.7)
(0.8)
–
(0.8)
The ineffective portion of fair value hedges that was recognised in the income statement amounted to £nil (FY22: £nil).
The ineffective portion of cash flow hedges that was recognised in the income statement within operating expenses was a £nil
(FY22: £nil) and within exceptional items was a £0.2m loss, relating to the close out of hedges relating to Portals relationship
agreement termination (note 5) (FY22: £nil).
14(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities where due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages this risk by ensuring that it maintains sufficient levels of committed borrowing facilities and cash and cash
equivalents. The level of headroom needed is reviewed annually as part of the Group’s planning process.
A maturity analysis of the carrying amount of the Group’s borrowings is shown below in the reporting of financial risk section
together with associated fair values.
The following are the contractual undiscounted cash flow maturities of financial liabilities, including contractual interest payments
and excluding the impact of netting agreements.
Note
18
17
23
25 March 2023
Non-derivative financial liabilities
Unsecured bank loans and overdrafts
Trade and other payables1
Obligations under leases
Derivative financial liabilities
Gross amount payable from currency
derivatives:
– Forward exchange contracts designated as
cash flow hedges*
– Short duration swap contracts designated as
fair value hedges*
Fair value hedges – other economic hedges*
178
De La Rue plc Annual Report 2023
Due
within
1 year
£m
Due
between 1
and 2 years
£m
Due
between 2
and 5 years
£m
After
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
discounting
and netting
£m
Carrying
amount
£m
9.7
66.1
4.0
129.4
–
2.7
91.3
27.3
35.2
233.6
2.3
–
0.7
135.1
0.7
–
6.5
–
–
–
7.2
–
–
23.1
139.8
66.1
36.3
(16.4)
–
(23.0)
123.4
66.1
13.3
–
–
–
93.6
(92.6)
27.3
35.9
(27.2)
(35.5)
(194.7)
1.0
0.1
0.4
204.3
23.1
399.0
Note
18
17
23
26 March 2022
Non-derivative financial liabilities
Unsecured bank loans and overdrafts2
Trade and other payables1
Obligations under leases
Derivative financial liabilities
Gross amount payable from currency
derivatives:
– Forward exchange contracts designated as
cash flow hedges
– Short duration swap contracts designated as
fair value hedges
Fair value hedges – other economic hedges
Due
within
1 year
£m
Due
between 1
and 2 years
£m
Due
between 2
and 5 years
£m
After
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
discounting
and netting
£m
Carrying
amount
£m
–
62.9
2.6
108.4
11.4
115.8
301.1
95.0
–
2.6
0.1
–
0.6
98.3
0.7
–
5.7
–
–
–
6.4
–
–
24.9
95.7
62.9
35.8
–
–
(21.6)
95.7
62.9
14.2
–
108.5
(106.7)
1.8
–
–
24.9
11.4
116.4
430.7
(11.4)
(113.5)
(253.2)
–
2.9
177.5
Notes:
*
1.
2.
Excludes embedded derivatives.
Excludes social security and other taxation amounts of £3.0m (FY22: £2.6m), contract liabilities of £0.3m (FY22: £0.3m) and payments on account of £22.7m (FY22: £14.3m).
The undiscounted value of the unsecured bank loans and overdrafts as at 26 March 2022 was £106.9m. The impact of discounting was £5.9m.
The following are the contractual undiscounted cash flow maturities of financial assets, including contractual interest receipts and
excluding the impact of netting agreements.
Note
15
13
2
11
Note
15
13
2
11
25 March 2023
Non-derivative financial assets
Cash and cash equivalents
Trade and other receivables1*
Contract assets
Other financial assets2
Derivative financial assets
Gross amount receivable from currency
derivatives:
– Forward exchange contracts designated as
cash flow hedges*
– Short duration swap contracts designated as
fair value hedges*
– Fair value hedges – other economic hedges*
26 March 2022
Non-derivative financial assets
Cash and cash equivalents
Trade and other receivables1
Contract assets
Other financial assets2
Derivative financial assets
Gross amount receivable from currency
derivatives:
– Forward exchange contracts designated as
cash flow hedges*
– Short duration swap contracts designated as
fair value hedges*
– Fair value hedges – other economic hedges*
Due
within
1 year
£m
Due
between 1
and 2 years
£m
Due
between 2
and 5 years
£m
Due
after
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
discounting
and netting
£m
Carrying
amount
£m
40.3
58.4
18.9
–
71.3
1.0
88.8
278.7
–
–
–
–
0.3
–
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40.3
58.4
18.9
–
–
–
–
–
40.3
58.4
18.9
–
71.6
(70.4)
1.2
1.0
88.8
279.0
(1.0)
(87.7)
(159.1)
–
1.1
119.9
Due
within
1 year
£m
Due
between 1
and 2 years
£m
Due
between 2
and 5 years
£m
Due
after
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
discounting
and netting
£m
Carrying
amount
£m
24.3
78.3
8.0
–
60.7
8.1
56.9
236.3
–
–
–
–
0.7
–
2.0
2.7
–
–
–
–
–
–
–
–
–
–
–
7.2
–
–
–
7.2
24.3
78.3
8.0
7.2
–
–
–
–
24.3
78.3
8.0
7.2
61.4
(60.1)
1.3
8.1
58.9
246.2
(8.1)
(58.0)
(126.2)
–
0.9
120.0
Notes:
*
1.
2.
Excludes embedded derivatives.
Excludes prepayments of £3.6m (FY22: 2.9m), RDEC of £2.5m (FY22: £2.7m) and VAT recoverable of £6.2m (FY22: £5.1m).
FY22 excludes ordinary shares of £0.2m which are accounted for as fair value through profit and loss.
*
The prior year comparatives have been restated to correct a prior year error by removing a VAT receivable of £5.1m from the Trade and other receivables line item in accordance with the
requirements of IFRS 9. The restatement only affects the line item mentioned and has no other impact on the consolidated financial statements.
De La Rue plc Annual Report 2023
179
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
14(b) Liquidity risk continued
The fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged
instrument is more than 12 months and as a current asset or liability if the maturity of the hedged instrument is less than 12 months.
Cash and cash equivalents, trade and other current receivables, contract assets, bank loans and overdrafts, trade payables and
other current liabilities have fair values that approximate to their carrying amounts due to their short-term nature.
The Group has Bank facilities of £275.0m (FY22: £275.0m) including an RCF cash drawdown component of up to £175.0m (FY22:
£150.0m) and bond and guarantee facilities of a minimum of £100.0m (FY22: £125.0m), which were previously due to mature in
December 2023.
On 18 November 2022. the existing banking facilities were extended until 1 January 2025 with 25-basis point increase in margin.
The terms of the extended facilities are as follows:
– Maturity date of 1 January 2025;
– An up-front arrangement fee of 25 basis points payable in November 2022;
– An increase in Margin of 25 basis points;
– Further arrangement fees payable between June and December 2023 of 95 basis points on the commitments under this facility
on the dates those fees would be due; and
– No change in covenant tests.
This debt refinancing has been accounted for as a debt modification with extinguishment under IFRS 9 Financial Instruments as the
terms of the debt remain substantially the same. A debt modification loss has been recognised within Interest expense in the
Consolidated income statement. Refer to note 6 for further details.
The Group can convert (in blocks of £25.0m) up to £50.0m 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 £25.0m) in order to draw in cash if the bond and
guarantee component has not been sufficiently utilised. During FY23 the Group has reallocated £25.0m of the bond and guarantee
component to the cash component, such that at present £175.0m in total is available on the RCF component.
As at 25 March 2023, the Group, as part of the £175.0m RCF cash component, has a total of undrawn committed borrowing
facilities, all maturing in more than one year, of £53.0m (26 March 2022: £55.0m in more than one year).
The amount of loans drawn on the £175.0m RCF facility is £122.0m (26 March 2022: £95.0m). Guarantees of £52.1m (26 March
2022: £55.6m) have been drawn using the £100.0m guarantee facility. The accrued interest in relation to cash drawdowns
outstanding as at 25 March 2023 is £0.3m (26 March 2022: £0.1m).
Facilities:
Cash
Bonds and guarantees
Actual as at
26 March
2023
£m
Minimum
Facility
£m
Maximum
Facility
£m
122.0
52.1
172.1
125.0
150.0
275.0
175.0
100.0
275.0
The financial covenants require that the ratio of EBIT to net interest payable will not be less than 3.0 times and the net debt to
EBITDA ratio will not exceed three times. At the period end the specific covenant tests were as follows: EBIT/net interest payable of
3.03 times (FY22: 7.4 times), net debt/EBITDA of 2.21 times. (FY22: 1.46 times) The covenant tests use earlier accounting standards
and exclude adjustments including IFRS 16.
Forward foreign exchange contracts
The net principal amounts of the outstanding forward foreign exchange contracts as at 25 March 2023 are US dollar 108.1m,
Euro 49.1m, Swiss franc 7.6m, Saudi Arabian riyal 11.6m, Swedish krona 64.9m, Hong Kong dollar 2.8m and United Arab Emirates
dirham 1.1m.
The net principal amounts outstanding under forward contracts with maturities greater than 12 months are Euro 0.8m,
US dollar 2.8m and Saudi Arabian riyal 1.2m.
These forward contracts are designated as cash flow hedges or fair value hedges as appropriate.
Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts at 25 March 2023 will be
released to the income statement at various dates between one month and 14 months from the balance sheet date. For this
financial year the tables below include all net foreign exchange forward contracts over £500k.
180
De La Rue plc Annual Report 2023
Hedges versus GB Pounds only
As at 25 March 2023
Forward exchange forward contracts
USD
EUR
CHF
SAR
SEK
As at 26 March 2022
Forward exchange forward contracts
USD
EUR
CHF
SAR
HKD
Note:
Forward sales shown as positive, and purchases shown as negative.
Hedges versus other currencies
As at 25 March 2023
Forward exchange forward contracts
EUR/CHF
EUR/USD
26 March 2022
Forward exchange forward contracts
EUR/CHF
EUR/USD
Notional
amount in
currency
Notional
amount in
£m
Maturity
Average
forward
rate
110.2
(57.5)
(1.3)
(11.6)
64.9
127.2
(25.4)
(9.4)
(14.3)
5.7
(91.1)
50.9
1.2
2.6
(5.1)
(94.0)
22.0
7.6
2.9
(0.5)
2024
2024
2024
2024
2023
2023
2023
2023
2023
2023
1.2099
1.1313
1.1247
4.4951
12.6468
1.3533
1.1534
1.2378
4.9962
10.5843
Notional
amount
currency 1 in
m
Notional
amount
currency 2 in
m
Maturity
Average
forward rate
6.4
2.0
6.2
1.1
(6.3)
(2.1)
2024
2024
0.9789
1.0639
(6.5)
(1.3)
2023
2023
1.0608
1.1780
Notes:
Forward sales are shown as positive and purchases are shown as negative.
Notional amount in currency 1 refers to Euro and notional amounts in currency 2 refer to CHF or USD as indicated.
Notional amounts are shown in the currency as stated and not in GBP.
Short duration swap contracts
(i) Cash management swaps
The Group uses short duration currency swaps to manage the level of borrowings in foreign currencies. The fair value of cash
management currency swaps at 25 March 2023 was £nil (26 March 2022: £nil). Gains and losses on cash management swaps are
included in the consolidated income statement.
The principal amounts outstanding under cash management currency swaps at 25 March 2023 are, Euro 6.9m, United Arab
Emirates dirham 1.7m and Saudi Arabian riyal 3.8m.
(ii) Balance sheet swaps
The Group uses short duration currency swaps to manage the translational exposure of monetary assets and liabilities
denominated in foreign currencies. The fair value of balance sheet swaps as at 25 March 2023 was a £0.1m liability (26 March 2022:
£nil). Gains and losses on balance sheet swaps are included in the consolidated income statement.
The principal amounts outstanding under balance sheet swaps at 25 March 2023 are US dollar 10.7m (FY22: 13.5m), Euro 12.7m
(FY22: 6.6m) and Swiss franc 1.1m (FY22: 1.2m).
Embedded derivatives
Embedded derivatives relate to sales and purchase contracts denominated in currencies other than the functional currency of
the customer/supplier, or a currency that is not deemed to be a commonly used currency of the country in which the customer/
supplier is based. The net fair value of embedded derivatives at 25 March 2023 was a £0.3m liability (26 March 2022: £1.1m).
Gains and losses on fair value hedges
The gains and losses recognised in the year on the Group’s fair value hedges were a loss of £0.1m relating to balance sheet hedges
(FY22: gain £0.1m), loss £6.5m relating to other fair value hedges (FY22: gain £1.9m), and £nil relating to cash management hedges
(FY22: £nil).
De La Rue plc Annual Report 2023
181
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
14(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s
income or the value of its holdings of financial instruments. The Group uses a range of derivative instruments, including forward
contracts and swaps to hedge its risk to changes in foreign exchange rates and interest rates with the objective of controlling
market risk exposures within acceptable parameters, while optimising the return. Derivative financial instruments are only used
for hedging purposes.
Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and
liabilities, unrecognised firm commitments and investments in foreign operations.
To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities
in the Group use forward contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial
transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.
Group treasury is responsible for managing the net position in each currency via foreign exchange contracts transacted with
financial institutions.
The Group’s risk management policy aims to hedge firm commitments in full, and between 60% and 100% of forecast exposures
in each major currency for the subsequent 12 months to the extent that forecast transactions are highly probable.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The
Group’s policy is to manage the currency exposure arising from the net assets of the Group’s foreign operations primarily through
borrowings denominated in the relevant foreign currencies.
Exposure to currency risk
The following significant exchange rates applied during the year:
US dollar
Euro
Average rate
Reporting date spot rate
2023
1.22
1.16
2022
1.37
1.18
2023
1.22
1.14
2022
1.32
1.20
Sensitivity analysis
A 10 per cent strengthening of Sterling against the following currencies at 25 March 2023 and 26 March 2022 would have
increased/(decreased) profit or loss by the amounts shown below based on the Group’s external monetary assets and liabilities.
XAF
EURO
LKR
CHF
2023
£m
(0.4)
0.4
(0.8)
(0.1)
A 10 per cent weakening of Sterling against the above currencies at 25 March 2023 and 26 March 2022 would have had the
following effect
XAF
EURO
LKR
CHF
2023
£m
0.5
(0.4)
0.9
0.1
2022
£m
(0.3)
0.3
(0.2)
(0.1)
2022
£m
0.3
(0.3)
0.2
(0.1)
The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same
basis for FY22.
Interest rate risk
All material financial assets and liabilities are initially contracted at floating rates of interest. Where the Group has forecast average
levels of net debt above £50.0m on a continuing basis, the policy is to use floating to fixed interest rate swaps to fix the interest
rate on a minimum of 50% of the Group’s forecast average levels of net debt for a period of at least 12 months, if sufficient capacity
is available in the market to do so. This remains the policy in the medium term however the Group was unable to apply this policy
during FY23 due to market conditions and this remains the policy in the medium-term and will be reviewed periodically.
182
De La Rue plc Annual Report 2023
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Variable rate instruments:
Financial assets (note 15)
Financial liabilities (note 18)
Carrying amount
2023
£m
2022
£m
40.3
(123.4)
(83.1)
24.3
(95.7)
(71.4)
At the year ending 25 March 2023 the Group had no floating to fixed interest rate swaps with financial institutions in place.
Excluded from the above analysis is £13.3m (FY22: £14.2m) of amounts payable under leases, which are subject to fixed rates
of interest (note 23).
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit and loss by
the amounts shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Variable rate instruments cash flow sensitivity (net)
25 March 2023
26 March 2022
Profit and loss
Equity
100bp
increase
£m
100bp
decrease
£m
100bp
increase
£m
100bp
decrease
£m
(0.9)
(0.6)
0.9
0.6
–
–
–
–
14(d) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s receivables from customers and investment securities.
The Group’s exposure to credit risk is influenced by various factors, largely pertaining to the profile of the customer as
acknowledged in our IFRS 9 Receivables segmentation, in particular the customer’s status as a Government or Banking institution
as compared to that of a private or publicly owned entity. Due to the large make up of Government or central banks at around 80%
of the Group’s revenues, measuring credit risk is largely driven by factors including the country’s sovereign rating, historic knowledge,
local market insights, and political factors in country. Industry credit risk is not an influencing factor. The Group’s long standing
historic trade with Government and central bank institutions guides strongly towards the lower credit or doubtful debt risk that
these customers represent. Where private or publicly owned Business Trade applies, the Business adopts a conventional and
in-depth trading entity credit review. Where appropriate, letters of credit are used to reduce the credit risk for the Business and
where possible advanced payments are also requested.
All credit assignment risk is mitigated through a threshold-based sign-off matrix, where larger value credit exposures require
multiple and more senior Business sign-off. The Group has processes in place to ensure appropriate credit limits are set for
customers and for ensuring appropriate approval is given for the release of products to customers where any perceived risk has
been highlighted.
Exposure to credit risk
The carrying amount of financial assets represents the credit exposure at the reporting date. The exposure to credit risk at the
reporting date was:
Trade and other receivables1
Contract assets
Other financial assets2
Cash and cash equivalents
Forward exchange contracts used for hedging
Embedded derivatives
Notes:
1.
2.
Excludes prepayments of £3.6m (FY22: 2.9m), RDEC of £2.5m (FY22: £2.7m) and VAT recoverable of £6.2m (FY22: £5.1m).
FY22 excludes ordinary shares of £0.2m which are accounted for as fair value through profit and loss.
Carrying amount
Notes
13
2
11
15
14(a)
14(a)
2023
£m
58.4
18.9
–
40.3
2.3
0.1
120.0
2022
£m
78.3
8.0
7.2
24.3
2.2
1.2
121.2
De La Rue plc Annual Report 2023
183
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
14(d) Credit risk continued
The maximum exposure to credit risk for trade and other receivables (excluding prepayments, RDEC and VAT recoverable)
by geographic region was:
UK
Rest of Europe
Africa
Rest of world
Carrying amount
2023
£m
12.6
16.0
12.7
17.1
58.4
2022
£m
17.6
11.5
17.6
31.6
78.3
The maximum exposure to credit risk for trade and other receivables (excluding prepayments, RDEC and VAT recoverable) by type
of customer was:
Banks and financial institutions
Government institutions
Other
Carrying amount
2023
£m
17.2
6.5
34.7
58.4
2022
£m
36.0
6.9
35.4
78.3
Fair value adjustment to credit risk on derivative contracts
The impact of credit related adjustments being made to the carrying amount of derivatives measured at fair value and used for
hedging currency and interest rate risk has been assessed and considered to be immaterial. These derivatives are transacted with
investment grade financial institutions. Similarly, the impact of the credit risk of the Group on the valuation of its financial liabilities
has been assessed and considered to be immaterial.
14(e) Capital management
The Board’s policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain
future development of the business. The Group finances its operations through a mixture of equity funding and debt financing,
which represent the Group’s definition of capital for this purpose.
Total equity attributable to shareholders of the Company
Add back/(deduct)/add back long-term pension deficit/(surplus)
Adjusted equity attributable to shareholders of the Company
Net debt
Group capital
Notes
24
22
2023
£m
19.1
54.7
73.8
83.1
156.9
2022
£m
143.8
(29.8)
114.0
71.4
185.4
The long-term pension (deficit)/surplus has been removed as a separate agreement is in place regarding the funding for this deficit
which is paid out of cash flows from continuing operations. The Group’s debt financing is also analysed in notes 18 ‘Borrowings’ and
22 ‘Analysis of Net Debt’.
Included within the Group’s net debt are certain cash and cash equivalent balances that are not readily available for use by the Group.
These balances are not significant and are not readily available due to restrictions within some of the countries in which we operate.
Earnings per share and dividend payments are the two measures which, in the Board’s view, summarise best whether the Group’s
objectives regarding equity management are being met. The Group’s earnings and dividends per share and relative rates of growth
illustrate the extent to which equity attributable to shareholders has changed. Both measures are disclosed and discussed within
the Strategic Report. Earnings per share is disclosed in note 8.
The Group’s objective is to maximise sustainable long-term growth of the earnings per share.
De La Rue’s dividend policy is to provide shareholders with a competitive return on their investment over time, while ensuring
sufficient reinvestment of profits to enable the Group to achieve its strategy. During the period, the Group invested in ongoing
research and development expenditure and capital expenditure. There is no proposed dividend to De La Rue plc shareholders for
the year. Dividends can be paid pro-rata to all shareholders (including external parties) in respect of companies treated as consolidated
subsidiaries that have non-controlling interests.
The decision to pay dividends, and the amount of the dividends, will depend on, among other things, the earnings, financial position,
capital requirements, general business conditions, cash flows, net debt levels and share buyback plans.
There were no changes to the Group’s approach to capital management during the year but in the short-term some restrictions
apply following the refinancing.
184
De La Rue plc Annual Report 2023
14(f) Changes in liabilities arising from financing activities
The analysis below provides a reconciliation between the opening and closing positions in the balance sheet for liabilities arising
from financing activities excluding movements in cash and cash equivalents.
Borrowings (gross)
Prepaid loan arrangement fees
Borrowings
Lease liabilities1
Liabilities arising from financing activities
Borrowings (gross)
Prepaid loan arrangement fees
Borrowings
Lease liabilities1
Liabilities arising from financing activities
Note
18
18
23
Note
18
18
23
At 27
March
2022
£m
(95.7)
3.1
(92.6)
(14.2)
(106.8)
At 28
March
2021
£m
(78.0)
3.8
(74.2)
(15.7)
(89.9)
Cash
flow
£m
(27.0)
1.4
(25.6)
2.9
(22.7)
Cash
flow
£m
(17.0)
–
(17.0)
2.8
(14.2)
Exchange
differences
and other
£m
New
leases and
modifications
£m
Non-cash
movements
£m
–
–
–
(0.1)
(0.1)
–
–
–
(1.4)
(1.4)
(0.7)
0.5
(0.2)
(0.5)
(0.7)
Exchange
differences
and other
£m
New
leases and
modifications
£m
Non-cash
movements
£m
(0.7)
–
(0.7)
(0.2)
(0.9)
–
–
–
(0.5)
(0.5)
–
(0.7)
(0.7)
(0.6)
(1.3)
As at 26
March
2023
£m
(123.4)
5.0
(118.4)
(13.3)
(131.7)
At 26
March
2022
£m
(95.7)
3.1
(92.6)
(14.2)
(106.8)
Note:
1.
Lease liability payments include principal of £2.4m (FY22: £2.2m) and interest of £0.5m (FY22: £0.6m) (note 6).
15 Cash and cash equivalents
Accounting policies
Cash and cash equivalents comprise bank balances and cash held by the Group and short-term deposits with an original maturity
of three months or less. Bank overdrafts that are repayable on demand and form part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the cash flow statement.
Cash at bank and in hand
Short term bank deposits
2023
£m
26.5
13.8
40.3
2022
£m
20.3
4.0
24.3
An analysis of cash, cash equivalents and bank overdrafts is shown in the Group cash flow statement. Certain cash and deposits
are of a floating rate nature and are recoverable within three months.
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 14.
De La Rue plc Annual Report 2023
185
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
16 Deferred taxation
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Deferred tax assets
Deferred tax liabilities
The gross movement on the deferred income tax account is as follows:
Beginning of the year
Exchange differences
Tax credit/(charge) to income statement
Tax credit/(charge) to OCI
Tax credit/(charge) to equity
End of the year
The movement in deferred tax assets and liabilities during the period is as follows:
2023
£m
18.3
(2.8)
15.5
2023
£m
8.8
0.2
(13.8)
20.9
(0.6)
15.5
Deferred Tax Liabilities
At 27 March 2021
Recognised in the income statement
Recognised in OCI
Exchange differences
Subtotal
Jurisdictional offset
At 26 March 2022
At 26 March 2022
Recognised in the income statement
Recognised in OCI
Exchange differences
Subtotal
Jurisdictional offset
At 25 March 2023
Property,
plant and
equipment
£m
Fair value
gains
£m
Development
costs
Retirement
benefits
£m
–
–
–
–
–
–
(1.8)
–
(0.1)
(1.9)
(1.1)
0.3
–
(0.2)
(1.0)
(1.0)
0.3
–
(0.1)
(0.8)
(2.0)
(0.3)
–
–
(2.3)
(2.3)
(1.0)
–
–
(3.3)
–
–
(7.4)
–
(7.4)
(7.4)
–
7.4
–
–
2022
£m
11.2
(2.4)
8.8
2022
£m
17.1
(0.2)
4.0
(11.8)
(0.3)
8.8
Total
£m
(3.1)
–
(7.4)
(0.2)
(10.7)
8.3
(2.4)
(10.7)
(2.5)
7.4
(0.2)
(6.0)
3.2
(2.8)
186
De La Rue plc Annual Report 2023
Deferred Tax Assets
At 27 March 2021
Recognised in the income statement
Recognised in OCI
Recognised in equity
Exchange differences
Subtotal
Jurisdictional offset
At 26 March 2022
At 26 March 2022
Recognised in the income statement
Recognised in OCI
Recognised in equity
Exchange differences
Subtotal
Jurisdictional offset
At 25 March 2023
Property,
plant and
equipment
£m
Retirement
benefits
£m
Tax
losses
£m
1.6
(1.1)
–
–
0.1
0.6
0.6
(0.6)
–
–
–
–
4.1
0.3
(4.4)
–
–
–
–
0.1
13.7
–
0.1
13.9
4.3
1.9
–
–
–
6.2
6.2
0.1
–
–
–
6.3
Other
£m
10.2
2.9
–
(0.3)
(0.1)
12.7
12.7
(10.9)
(0.2)
(0.6)
0.3
1.3
Total
£m
20.2
4.0
(4.4)
(0.3)
–
19.5
(8.3)
11.2
19.5
(11.3)
13.5
(0.6)
0.4
21.5
(3.2)
18.3
Other deferred assets and liabilities include tax associated with provisions of £0.5m (FY22: £0.4m), restricted interest carried
forward of £nil (FY22: £3.9m) and in respect of overseas tax credits of £1.0m (FY22: £7.0m).
Gross deferred tax assets are recognised for tax losses available (FY23: £6.3m; FY22: £6.2m) and temporary deductible differences
on retirement obligations (FY23: £13.9m; FY22: £nil) to carry forward to the extent that the realisation of the related tax benefit
through future taxable profits is probable. Tax losses carried forward do not have an expiry date.
Future taxable profits have been forecast based on the expected profitability of the group over a 5-year period based on
management’s forecasts for FY24 and FY25 applying no growth in the final 3 years and taking into account historic performance
against budgets. The forecasts for FY24 and FY25 were also used in the group’s going concern and viability assessments.
Recent group tax losses have mostly arisen as a consequence of non-recurring exceptional costs. Future exceptional costs are
expected to be significantly lower, with the company forecast to be profitable on this basis, allowing the company to recover the
amounts noted above before the end of FY28.
The Directors have assessed that:
– if the forecast taxable profits are lower by 5% over the 5-year period, then this would reduce the deferred tax assets recognised
by approximately £0.3m;
– if the forecast taxable profits are higher by 5% over the 5-year period, then this would increase the deferred tax assets
recognised by approximately £0.8m.
The Group has not recognised deferred tax assets of £14.3m (FY22: £6.4m) in respect of losses amounting to £54.6m (FY22:
£27.9m) that can be carried forward against future taxable income or deferred tax assets of £3.8m related to property, plant, and
equipment timing differences (FY22: £nil). Similarly, the Group has not recognised certain deferred tax assets of £26.2m (FY22:
£19.2m) in respect of overseas tax credits that are carried forward for utilisation in future periods, including some that have been
allocated for providing to Governmental authorities as part of investment projects.
Unremitted foreign earnings totalled £198.8m at 25 March 2023 (FY22: £200.6m). Deferred tax liabilities have not been recognised
for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries where the timing
of the reversal can be controlled and it was considered unlikely that dividends would be paid from those subsidiaries.
UK capital losses of £317.2m are carried forward at 25 March 2023 (FY22: £317.2m). No deferred tax asset has been recognised in
respect of these losses.
UK tax rate
The UK deferred tax assets and liabilities at 25 March 2023 have been calculated based on the rate of 25%, being the substantively
enacted rate at the balance sheet date.
De La Rue plc Annual Report 2023
187
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
17 Trade and other payables
Accounting policies
Trade and other payables are measured at carrying value which approximates to fair value.
Payments received on account relate to monies received from customers under contract, as per individual contract agreements,
prior to commencement of production of goods or delivery of services. Once the obligation has been fulfilled the revenue is
recognised in accordance with IFRS 15.
Contract liability is recognised when a payment from customer is due or already received, before a related performance obligation
is satisfied for the contract agreements that have started production of goods or delivery of services.
Current liabilities
Payments received on account
Contract liabilities
Trade payables
Social security and other taxation
Accrued expenses1
Other payables2
2023
£m
22.7
0.3
39.2
3.0
21.3
5.6
92.1
2022
£m
14.3
0.3
31.0
2.6
25.6
6.2
80.0
Notes:
1.
2.
Accrued expenses include commissions £0.4m (FY22: £1.8m), rebate accruals of £2.7m (FY22: £2.7m), employee related accruals of £1.9m (FY22: £5.6m), and freight accruals £2.1m (FY22:
£2.5m), and commission and TTP Accruals of £1.24m (FY22: £2.4m) and bank financing fee accruals of £2.6m (FY22: £nil).
Other payables include capex creditors £0.8m (FY22: £1.2m) and interest payable £1.6m (FY22: £1.4m).
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 14.
18 Borrowings
Accounting policies
Borrowings are recognised at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency
and liquidity risk (note 14).
Non-current liabilities
Unsecured bank loans and overdrafts
Unsecured bank loans and overdrafts
Total interest-bearing liabilities
Currency
Nominal
interest
rate
Year of
maturity
Face value
2023
£m
Carrying
amount
2023
£m
Face value
2022
£m
Carrying
amount
2022
£m
EUR
GBP
4.83%
7.72%
2028
2025
0.7
122.7
123.4
0.7
122.7
123.4
0.7
95.0
95.7
0.7
95.0
95.7
The total interest-bearing liabilities above is presented excluding unamortised pre-paid borrowing fees of £5.0m (FY22: £3.1m).
Under the Group’s banking arrangements there is no right of offset and no accounts were in an overdraft position as at
25 March 2023.
As at 25 March 2023, the Group has a committed revolving facility, all maturing in more than one year, of £275m which depending
on the value of guarantees utilised a maximum of £175m can be used as way of cash draw downs.
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 FY23.
On 18 November 2022, the existing banking facilities were extended until 1 January 2025 with a 25-basis point increase in margin.
The terms of the extended facilities are as follows:
– Maturity date of 1 January 2025;
– An up-front arrangement fee of 25 basis points payable in November 2022;
– An increase in Margin of 25 basis points;
– Further arrangement fees payable between June and December 2023 of 95 basis points on the commitments under this facility
on the dates those fees would be due; and
– No change in covenant tests.
This debt refinancing has been accounted for as a debt modification with extinguishment under IFRS 9 Financial Instruments as
the terms of the debt remain substantially the same. A debt modification loss has been recognised within Interest expense in the
Consolidated income statement. Refer to note 6 for further details.
188
De La Rue plc Annual Report 2023
19 Provisions for liabilities and charges
Accounting policies
Provisions are recognised when the Group has a present obligation in respect of a past event, it is probable that an outflow of
resources will be required to settle the obligation, and where the amount can be reliably estimated. Provisions are measured at the
management’s best estimate of the amount required to settle the obligation at the balance sheet date and are discounted where
the time value of money is considered material.
At 27 March 2021
Charge for the year
Utilised in the year
Released in the year
At 26 March 2022
Charge for the year
Utilised in year
Released in year
At 25 March 2023
Restructuring
£m
Warranty
£m
Other
£m
0.7
0.3
(0.6)
–
0.4
1.8
(0.2)
(0.2)
1.8
3.2
0.6
(0.8)
(1.6)
1.4
0.7
–
(1.2)
0.9
5.7
1.0
(1.2)
(1.4)
4.1
2.8
(2.2)
(1.4)
3.3
Total
£m
9.6
1.9
(2.6)
(3.0)
5.9
5.3
(2.4)
(2.8)
6.0
Expected to be utilised within 1 year
1.8
0.9
3.3
6.0
Restructuring provisions
Restructuring provisions as at 26 March 2022 of £1.8m (FY22: £0.4m) primarily relate to redundancy and other employee
termination costs as a result of the wind down of operations in Kenya and other restructuring programmes within the Currency
and Authentication divisions. The remaining provision as at 25 March 2023 is expected to be utilised in FY24.
Warranty provisions
Warranty provisions relate to present obligations for defective products. The provisions are management judgements based
on information currently available, past history and experience of the products sold. However, it is inherent in the nature of the
business that the actual liabilities may differ from the provisions. The precise timing of the utilisation of these provisions is
uncertain but is generally expected to fall within one year.
The Group measures warranty provisions at the Directors’ best estimate of the amount required to settle the obligation at the
balance sheet date, discounted where the time value of money is considered material. These estimates take account of available
information, historical experience and the likelihood of different possible outcomes. Both the amount and the maturity of these
liabilities could be different from those estimated.
Other provisions
Other provisions comprise a number of liabilities with varying expected utilisation rates. The liabilities include a small number of
onerous contract provisions (£1.2m), employee related liabilities (£0.6m), IBNR insurance claim provisions (£0.5m) and other liabilities
(£1.0m) arising through the Group’s normal operations. The £1.4m released in the year related primarily to onerous contract
provisions no longer required.
Onerous contract provisions arise where the unavoidable costs under a contract exceed the economic benefits expected to be
received under it. Unavoidable costs represent the least net cost of exiting the contract, which is the lower of the cost of fulfilling
it and any compensation or penalties arising from failure to fulfil it. Costs to fulfil a contract include those that directly relate to the
contract, including incremental costs and allocation of production overheads. The precise timing of the utilisation of these
provisions is uncertain but is generally expected to fall within one year.
De La Rue plc Annual Report 2023
189
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
20 Share capital
Issued and fully paid
195,437,227 ordinary shares of 44152⁄175p each (FY22: 195,157,352 ordinary shares of 44152⁄175p each)
111,673,300 deferred shares of 1p each (FY22: 111,673,300 deferred shares of 1p each)
Allotments during the year
Shares in issue at 26 March 2022/27 March 2021
Issued under Savings Related Share Option Scheme
Issued under Annual Bonus Plan
Issued under Performance Share Plan
Shares in issue at 25 March 2023/26 March 2022
2023
£m
2022
£m
87.7
1.1
88.8
87.7
1.1
88.8
2023
2022
Ordinary
shares
’000
Deferred
shares
’000
Ordinary
shares
’000
Deferred
shares
’000
195,157
111,673
195,064
111,673
–
279
1
–
–
–
46
24
23
–
–
–
195,437
111,673
195,157
111,673
The deferred shares carry limited economic rights (and no right to receive a dividend) and no voting rights. They are unlisted and
are not transferable except in accordance with the articles.
21 Share based payments
Accounting policies
The Group operates various equity settled and cash settled option schemes.
For equity settled share options, the services received from employees are measured by reference to the fair value of the share
options. The fair value is calculated at grant date and recognised in the consolidated income statement, together with a
corresponding increase in shareholders’ equity, on a straight-line basis over the vesting period, based on the numbers of shares
that are actually expected to vest, taking into account non-market vesting conditions (including service conditions). Vesting
conditions, other than non-market-based conditions and non-vesting conditions (requirement to save) are taken into account
when estimating the fair value.
On the performance related awards, until 2020 performance measure was based on ROCE and EPS. From 2020 ROCE was
replaced by TSR, a market-based condition.
For cash settled share options, the services received from employees are measured at the fair value of the liability for options
outstanding and recognised in the consolidated income statement on a straight-line basis over the vesting period. The fair value
of the liability is remeasured at each reporting date and at the date of settlement with changes in fair value recognised in the
consolidated income statement.
At 25 March 2023, the Group has a number of share-based payment plans, which are described below. The compensation cost
and related liability that have been recognised for the Group’s share-based plans are set out in the table below:
Annual Bonus Plan
Performance Share Plan
Savings Related Share Option Scheme
Expense recognised
for the year
2023
£m
0.2
0.4
1.3
1.9
2022
£m
0.9
0.4
0.5
1.8
Note:
The FY23 Performance Share Plan above includes cash settled share-based payments of £nil (FY22: £nil).
Reconciliations of option movements over the period to 25 March 2023 for each class of share awards are shown below:
190
De La Rue plc Annual Report 2023
Annual Bonus Plan
For details of the Annual Bonus Plan, refer to the Directors’ remuneration report on pages 102 to 127.
Share awards outstanding at start of year
Granted
Forfeited
Vested
Outstanding at end of year
2023
Number of
awards
’000
2022
Number of
awards
’000
453
484
(102)
(278)
557
23
462
(9)
(23)
453
During the period the weighted average share price on share awards exercised in the period was 84.65p (FY22: 174.4p).
Performance Share Plan
For details of the Performance Share Plan, refer to the Directors’ remuneration report on pages 102 to 127.
Performance Share Options (the “Options”) were granted to Executive Director’s and other employees on 31 August 2022.
The Options were granted with an exercise price of nil. The Awards will vest, subject to achievement of the performance conditions
on 31 August 2025. The “Performance Period” for the Awards is the three years ending 31 July 2025. Awards granted to
Executive Directors are subject to a post-vesting holding period which ends two years after the vest date, being 31 August 2027.
The fair value of share options is estimated at the date of grant using Monte Carlo model to value the awards subject to the
TSR performance condition. The Options subject to non-market performance conditions have been valued using a Black-Scholes
model. The significant assumptions used in the valuation models are disclosed below:
FY23 Arrangements
Performance Share Plan
Performance Share Plan
Dates of current year grants
Participant
Performance conditions
Award type
Fair value (per option granted)1
Fair value (% of share price at grant date)
Number of options granted
Inputs
Share price at grant
Exercise price
Dividend yield
Expected term
Risk free rate
Share price volatility of the Company
Median share price volatility of the
Comparator Group
Median correlation
TSR performance of the Company at date
of grant
Median TSR performance of the Comparator
Group at the date of grant
Discount for post vesting restrictions
31 August 2022
31 August 2022
Executive Directors
Non-market (50%) –
EPS growth
Options
69p
80.2%
828,188
TSR (50%)
Options
50p
58.1%
828,187
Non-market (50%) –
EPS growth
Options
86p
100.0%
676,948
TSR (50%)
Options
63p
73.3%
676,948
86p
Nil
0.0%
3 years
2.84%
50.0%
n/a
n/a
n/a
n/a
44.1%
16.6%
10.1%
(0.4)%
n/a
n/a
n/a
n/a
44.1%
16.6%
10.1%
(0.4)%
20.0%
n/a
Note:
1.
The fair value of Awards granted to Executive Directors is shown after deducting a discount in relation to the post-vesting holding period which is applicable to Executive Directors Awards.
To value the Awards, a continuously compounded risk-free rate of 2.84% has been used. The risk-free rate is based on the implied
yield available on zero-coupon UK government issues at the date of grant with a term in line with expected term of the Awards
(sourced from Thomson DataStream).
De La Rue plc Annual Report 2023
191
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
21 Share based payments continued
During the year ended 26 March 2022 the fair value of share options were estimated at the date of grant using a lattice-based
option valuation model. The significant assumptions used in the valuation model are disclosed below:
FY22 Arrangements
Dates of current year grants
Performance conditions
Number of options granted
Exercise price
Contractual life (years)
Settlement
Vesting period (years)
TSR correlation with comparator index
TSR/Share price volatility
Share price at grant (pence)
Fair value per option at grant date
Reconciliation of option movements:
Share awards outstanding at start of year
Granted
Forfeited
Vested
Outstanding at end of year
Performance Share Plan
30 June 2021
EPS
702,184
n/a
10
Share
3
n/a
90% pa
186.2
191.76
TSR
702,183
n/a
10
Share
3
35% pa
90% pa
186.2
144.40
2023
Number of
awards
’000
2022
Number of
awards
’000
3,485
3,010
(1,946)
(1)
2,560
1,404
(466)
(13)
4,548
3,485
During the period the weighted average share price on share awards exercised in the period was 61.05p (FY22: 157.07p).
Savings Related Share Option Scheme
The scheme is open to all UK employees. Options are granted at the prevailing market price at the time of the grant (with a
discretionary discount to the market price) to employees who agree to save between £5 and the maximum savings amount
offered per month over a period of three or five years.
During the year ended 25 March 2023, the Company granted a new SAYE grant as a replacement for the two grants that due to
vest in FY24 and FY25 with option prices significantly higher than the average share price for the year. The new grant has a vesting
period of 3 years and is subject to service conditions only. Employees were invited to invest into a new grant with the option to
cancel their contributions to 2020 and 2021 grants, with option price of 131.1p and 112.4p respectively, to maximise their investment
at an option price of the replacement grant of 60.2p. Options cancelled and reinvested into the replacement grant during the
investment window and up to the grant date, were accounted for on modification basis and shares cancelled but not replaced,
were treated as cancellations. An explanation on why the FY23 grant is treated as a replacement grant is included in the “V Critical
accounting estimates, assumptions and judgements”.
The following number of awards were identified for each type of award and the fair values calculated:
Plan type
SAYE
SAYE
SAYE
SAYE
SAYE
SAYE
Note:
1.
For modified awards fair value represents incremental fair value.
Award type
Award year
Number of
awards
Fair value (at
the date of
grant)
Modified awards1
Modified awards1
New grant
Cancelled/forfeited awards
Cancelled/forfeited awards
Cancelled/forfeited awards
2020
2021
354,955
201,576
2022
2,963,125
2019
2020
2021
252,200
710,040
367,740
£0.19
£0.14
£0.22
£0.48
£1.04
£1.01
192
De La Rue plc Annual Report 2023
The fair value of the modified transactions was determined using the Black-Scholes option pricing model, with the
following assumptions:
Year Granted
Fair value per Option
Assumptions:
Share price at grant
Exercise price
Dividend yield
Expected term
Risk free rate
Volatility
Discount for non-vesting conditions
A summary of the incremental fair values is set out in the following table:
Award
SAYE 2020
SAYE 2021
2020
2021
2022
£0.026
£0.083
£0.219
£0.638
£0.638
£1.311
0.0%
£1.124
0.0%
£0.638
£0.602
0.0%
1.25 years 2.25 years 3.25 years
4.12%
50.0%
5.0%
3.86%
50.0%
10.0%
3.44%
50.0%
15.0%
Option fair
value
2022 Option
fair value
Incremental
fair value
£0.026
£0.083
£0.219
£0.219
£0.193
£0.136
For the Savings Related Share Option Scheme (SAYE) an expected volatility rate of 50% (FY22: 95%) has been used for grants in the
period. This rate is based on historical volatility over the last 3.25 years to 22 February 2023. For the 2022 grant, it was noted that
the 3.25 year historical share price volatility includes the significant impact of Covid-19 on the Company’s share price. In accordance
with IFRS 2 it is appropriate to adjust historical volatility for one-off events and given the Company’s volatility has reduced to
a more stable level over the past two years, it was considered appropriate to use a lower adjusted volatility for the 2022 grant.
The expected life is the average expected period to exercise. The risk-free rate of return is based on the implied yield available on
zero-coupon government issues at the date of grant with a life equal to the expected term of the Options. The rate applied during
the year was 3.44% per annum for a period of 3.25 years (FY22: 0.82%).
During the year ended 26 March 2022 the fair value of share options were estimated at the date of grant using a lattice-based
option valuation model. The significant assumptions used in the valuation model are disclosed below:
FY22 Arrangement
Dates of current year grants
Number of options granted
Exercise price
Contractual life (years)
Settlement
Vesting period (years)
Dividend yield
Risk free interest rate
Share price volatility
Share price at grant (pence)
Fair vale per option at grant date
Savings Related Share Option
Scheme
5 January 2022
991,157
112.43
3
Share
3
Nil to 31 March 2023
and 10p per share pa
thereafter
0.82% pa
90%pa
158.2
101.0
There are no performance conditions attaching to the options. After the three or five-year term has expired, employees normally
have six months in which to decide whether or not to exercise their options. A pre-vesting forfeiture/cancellation rate of 15%,
reflecting leavers and withdrawals, has been assumed on new options granted in the year based on historic experience.
De La Rue plc Annual Report 2023
193
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
21 Share based payments continued
Reconciliation of option movements:
Options outstanding at start of year
Granted
Forfeited/Cancelled
Exercised
Expired
Outstanding at end of year
2023
2022
Weighted
average
exercise
price pence
per share
130.91
60.15
155.71
111.38
409.64
130.91
Number of
options
’000
3,173
3,520
(1,942)
–
(139)
4,612
Weighted
average
exercise
price pence
per share
Number of
options
’000
151.29
149.31
155.71
111.38
409.64
130.91
2,803
991
(475)
(46)
(100)
3,173
The range of exercise prices for the share options outstanding at the end of the year is between 60.15p and 131.10p (FY22: between
108.55p and 403.46p).
The weighted average remaining contractual life of the outstanding share options is 2.20 years (FY22: 1.99 years).
During the period the weighted average share price on options exercised in the period was nil (FY22: 174.17p).
Market share purchase of shares by Trustee De La Rue Employee Share Ownership Trust
The De La Rue Employee Share Ownership Trust (Trust) is a separately administered trust established to administer shares granted
to Executive Directors and senior employees under the various discretionary share option plans established by the Company.
Liabilities of the Trust are guaranteed by the Company and the assets of the Trust mainly comprise shares in the Company. Equiom
(Guernsey) Limited is the Trustee. The own shares held by the Trust are shown as a reduction in shareholders’ funds. The shares will
be held at historical rates until such time as they are disposed of. Any profit or loss on the disposal of own shares is treated as a
movement in reserves rather than as an income statement item.
The Trustee held nil shares at 25 March 2023 (26 March 2022: nil).
22 Analysis of net debt
The analysis below provides a reconciliation between the opening and closing of the Group’s net debt position (being the net of
borrowings and cash and cash equivalents).
Borrowings
Cash and cash equivalents
Net debt
Borrowings
Cash and cash equivalents
Net debt
At 26 March
2022
£m
Cash flow
£m
Foreign
exchange and
other
£m
At 25 March
2023
£m
(95.7)
24.3
(71.4)
(27.0)
15.6
(11.4)
(0.7)
0.4
(0.3)
(123.4)
40.3
(83.1)
At 27 March
2021
£m
Cash flow
£m
Foreign
exchange and
other
£m
At 26 March
2022
£m
(78.0)
25.7
(52.3)
(17.0)
(1.6)
(18.6)
(0.7)
0.2
(0.5)
(95.7)
24.3
(71.4)
Note
18
15
Note
18
15
Net debt is presented excluding unamortised pre-paid borrowing fees of £5.0m (FY22: £3.1m) and £13.3m (FY22: £14.2m) of
lease liabilities.
The Group has Bank facilities of £275.0m including an RCF cash drawdown component of up to £175.0m and bond and guarantee
facilities of a minimum of £100.0m, which currently are due to mature in January 2025. The Group can convert (in blocks of
£25.0m) up to £50.0m 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 £25.0m) 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.
In the second half of FY23, the Group reallocated £25.0m of the bond and guarantee component to the cash component such that at
present, £175.0m in total is available on the RCF component, of which £122.0m was drawn as at 25 March 2023. A separate borrowing
facility for financing equipment under construction is in place and at 25 March 2023 the amount outstanding on this facility is £0.7m.
As at 25 March 2023, the Group had a total of undrawn committed borrowing facilities, all maturing in more than one year,
of £53.0m (26 March 2022: £55.0m, all maturing in more than one year).
194
De La Rue plc Annual Report 2023
23 Leases
Accounting policies
At the inception of a contract, the Group assesses whether a contract is or contains a lease. A contract is or contains a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group
accounts for identified leases in accordance with IFRS 16 (‘Leases’).
Management has made certain judgements on lease terms based on the Group’s current expectations of whether break or renewal
options will be taken. Judgements have also been made in estimating the incremental borrowing rates to use when discounting
lease payments.
Leases are recognised on the balance sheet (unless they are low value or for a term of less than 12 months) with a right to use asset
and corresponding lease liability being recorded at the date the lease asset is available for use.
The right to use asset is depreciated over the shorter of, the assets useful economic life and the lease term. Each lease payment is
allocated between repayment of the lease liability and finance cost.
The finance cost is charged to the income statement over the lease term to produce a constant periodic rate of interest on the
remaining lease liability.
At commencement date of the lease, a lease liability is initially recognised on the balance sheet at the present value of future lease
payments (including fixed payments and variable lease payments that depend upon an index) and any lease penalties payable on
the early exit of a lease if management anticipates taking these, discounted using the incremental borrowing rate appropriate for
that lease, absent of the interest rate implicit in the lease being available.
The right to use asset is initially measured at cost, being the initial value of the lease liability, any lease payments made (net of any
incentives received from the lessor) before the commencement of the lease and any initial direct costs and any restoration costs.
Payments in respect of short-term leases (duration of less than 12 months) or low value leases continue to be charged to the
income statement on a straight-line basis over the lease term. Right-of-use assets are tested for impairment when indicators of
impairment exist.
The Group has lease contracts for various properties and ground leases in addition to other equipment used in its operations.
Leases for property and ground leases range from 2 years to in excess of 100 years in certain cases. Leases for other equipment
used in operations are typically for periods of 2 to 5 years. There are several lease contracts which include extensions and
termination options and these are discussed below.
The Group also has certain leases that have terms of less than 12 months or lease or where equipment is of a low value. The Group
applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions.
Right-of-use assets
Set out below are the carrying amounts of right-to-use assets recognised and the movement during the period:
At 27 March 2021
Additions – change in lease assessment
Depreciation expense
At 26 March 2022
Additions – change in lease assessment
Depreciation expense
At 25 March 2023
Land and
buildings
£m
Plant and
equipment
£m
14.1
0.6
(2.2)
12.5
1.0
(2.1)
11.4
0.5
–
(0.1)
0.4
0.4
(0.1)
0.7
Total
£m
14.6
0.6
(2.3)
12.9
1.4
(2.2)
12.1
De La Rue plc Annual Report 2023
195
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
23 Leases continued
Lease liabilities
Set out below are the carrying amounts of lease liabilities and the movement during the period:
At 27 March 2021
Additions – change in lease assessment
Accretion of interest (note 6)
Lease payments1
Exchange differences
At 26 March 2022
Additions – change in lease assessment
Accretion of interest (note 6)
Lease payments1
Exchange differences
At 25 March 2023
Included within:
Current liabilities
Non-current liabilities
Note:
1.
Lease payments include principal of £2.4m (FY22: £2.2m) and interest of £0.5m (FY22: £0.6m).
The following amounts have been recognised in the income statement:
Depreciation of right-of-use assets
Interest expense on lease liabilities (note 6)
Expense relating to short-term leases
Expenses relating to leases of low-value assets
Land and
buildings
£m
Plant and
equipment
£m
(15.2)
(0.5)
(0.6)
2.7
(0.2)
(13.8)
(1.0)
(0.5)
2.8
(0.1)
(12.6)
(0.5)
–
–
0.1
–
(0.4)
(0.4)
–
0.1
–
(0.7)
2023
£m
(3.0)
(10.3)
(13.3)
2023
£m
(2.2)
(0.5)
(0.3)
(0.3)
Total
£m
(15.7)
(0.5)
(0.6)
2.8
(0.2)
(14.2)
(1.4)
(0.5)
2.9
(0.1)
(13.3)
2022
£m
(2.7)
(11.5)
(14.2)
2022
£m
(2.3)
(0.6)
(0.3)
(0.2)
The Group had total cash outflows for leases of £3.5m in FY23 (FY22: £3.3m), including amounts relating to principal payment
£2.4m (FY22: £2.2m), interest payments of £0.5m (FY22: £0.6m) and short and low values assets £0.6m (FY22: £0.5m).
The Group also had non-cash additions to right-of-use assets £1.4m (FY22: £0.6m) and liabilities of £1.4m (FY22: £0.6m).
At 25 March 2023, there are no leases entered into which have not yet commenced.
The Group has certain leases that include extension or termination options. Management exercises judgement in determining
whether these extensions and termination options are reasonably certain to be exercised.
Set out below are the undiscounted potential future rental payment relating to the period following the exercise date of extension
and termination options that are not included in the lease term:
Extension options expected not to be exercised
Termination options expected to be exercised
Within
five years
£m
More than
five years
£m
0.8
0.3
0.5
–
Total
£m
1.3
0.3
196
De La Rue plc Annual Report 2023
24 Retirement benefit obligations
Accounting policies
The Group operates retirement benefit schemes, devised in accordance with local conditions and practices in the country
concerned, covering the majority of employees. The assets of the Group’s schemes are generally held in separately administered
trusts or are insured. The major schemes are defined benefit pension schemes with assets held separately from the Group. The
cost of providing benefits under each scheme is determined using the projected unit credit actuarial valuation method. The major
defined benefit pension scheme is based in the UK and is now closed to future accrual. The current service cost and gains and
losses on settlements and curtailments are included in operating costs in the Group income statement. The interest income on the
plan assets of funded defined benefit pension schemes and the imputed interest on pension scheme liabilities are disclosed as
retirement benefit obligation net finance expense/income respectively in the income statement.
Return on plan assets excluding assumed interest income on the assets, changes in the retirement benefit obligation due to
experience and changes in actuarial assumptions are included in the statement of comprehensive income in full in the period in
which they arise.
The net liability/surplus recognised in respect of defined benefit pension schemes is the present value of the defined benefit
obligation less the fair value of the scheme assets, as determined by actuarial valuations carried out at the balance sheet date.
Any net pension surplus is recognised at the lower of the net surplus in the defined benefit pension valuation under IAS 19 and
the asset ceiling.
The Group’s contributions to defined contribution plans are charged to the income statement in the period to which the
contributions relate. A trustee board has been appointed to operate the UK defined benefit scheme in accordance with its
governing documents and pensions law. The scheme meets the legal requirement for member nominated trustee representation
on the trustee board and a professional independent trustee has been appointed as chair of the Board. The trustee board
undertakes regular training to ensure they are able to fulfil their function as a trustee and have appointed professional advisers
to give them specialist expertise where required.
The Group has calculated the value of the minimum funding commitments to its schemes and determined that no additional
liability under IFRIC 14 is required at 25 March 2023 as the Group has an unconditional right to any surplus. No significant
judgements were involved in making this determination. The Group has recorded a net deficit on an IAS 19 basis within non-current
liabilities on the balance sheet as at 25 March 2023. A deferred tax asset has been recognised on the pension deficit and was
included within deferred tax assets as at 25 March 2023 (see note 18).
On 2 March 2022, 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 last actuarial valuation of the UK Pension
Scheme was at 5 April 2021, which was based on intentionally prudent assumptions, revealed a funding shortfall (technical
provisions minus the value of the assets) of £119.5m.
The £119.5m deficit is addressed by payments of £15m per annum (payable quarterly in arrears) under the Recovery Plan payable
from the year ending 5 April 2022 until 31 March 2029. 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 FY23, up to a maximum of £4m in the
financial year and/or
(ii) the Company or any of its subsidiaries take any action which will cause material detriment (defined in section 38 Pensions Act
2004) to the UK Pension Scheme of £8m (£8m in FY23) over the period up to March 2023.
On 24 May 2022, the Trustees of the Main Scheme entered into a partial pensioner buy-in contract (qualifying insurance policy)
for a proportion of pension members. In return for a premium paid from the Scheme’s assets, from the date of the buy-in,
payments will be made to the Scheme that match the benefit payments to those Scheme members covered under the buy-in
contract. The buy-in is considered to be a qualifying insurance policy. The premium paid to the insurer was £319.0m. As at 25
March 2023, the value of the buy-in contract was £220.6m. The impact of the partial pensioner buy-in has been recognised as
a loss on the scheme assets.
In addition, during FY23, legal fees of £0.5m have been incurred in the rectification of certain discrepancies identified in the
Scheme’s rules (FY22: £0.4m) (note 5). This has no impact on the UK defined benefit pension liability.
De La Rue plc Annual Report 2023
197
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
24 Retirement benefit obligations continued
(a) Defined benefit pension schemes
Amounts recognised in the consolidated balance sheet:
UK retirement benefit (deficit)/surplus
Overseas retirement liability
Retirement benefit (deficit)/surplus
Reported in:
Non-current assets
Non-current liabilities
Equities
Bonds
Secured/fixed income
Liability Driven Investment Fund
Multi Asset Credit
Qualifying insurance policy
Other
Fair value of scheme assets
Present value of funded obligations
Funded defined benefit pension schemes
Present value of unfunded obligations
Net (deficit)/surplus
Amounts recognised in the consolidated income statement:
2023
UK
£m
3.2
88.7
133.0
163.6
60.2
220.6
8.9
678.2
(727.5)
(49.3)
(3.8)
(53.1)
2023
Overseas
£m
–
–
–
–
–
–
–
–
–
–
(1.6)
(1.6)
2023
UK
£m
2023
Overseas
£m
Included in employee benefits expense:
— Current service cost
— Administrative expenses and taxes
Included in interest on retirement benefit obligation net finance
expense:
— Interest income on scheme assets
— Interest cost on liabilities
Retirement benefit obligation net finance expense (note 6)
Total recognised in the consolidated income statement
Return on scheme assets excluding assumed interest income
Remeasurement gains/(losses) on defined benefit pension obligations
Amounts recognised in other comprehensive income
–
(1.6)
27.6
(26.5)
(1.1)
(0.5)
(301.1)
200.4
(100.7)
198
De La Rue plc Annual Report 2023
2023
£m
(53.1)
(1.6)
(54.7)
–
(54.7)
(54.7)
2022
UK
£m
2022
Overseas
£m
56.3
154.9
456.2
248.1
62.8
–
10.4
988.7
(952.8)
35.9
(4.3)
31.6
–
–
–
–
–
–
–
–
–
–
(1.8)
(1.8)
2022
UK
£m
2022
Overseas
£m
–
(1.8)
2023
Total
£m
3.2
88.7
133.0
163.6
60.2
220.6
8.9
678.2
(727.5)
(49.3)
(5.4)
(54.7)
2023
Total
£m
–
(1.6)
–
–
–
–
–
–
27.56
(26.5)
(1.1)
20.2
(20.4)
(0.2)
(0.5)
(2.0)
0.4
–
0.4
(300.7)
200.4
(100.3)
(51.2)
86.9
35.7
–
–
–
–
–
–
–
–
–
–
2022
£m
31.6
(1.8)
29.8
31.6
(1.8)
29.8
2022
Total
£m
56.3
154.9
456.2
248.1
62.8
–
10.4
988.7
(952.8)
35.9
(6.1)
29.8
2022
Total
£m
–
(1.8)
20.2
(20.4)
(0.2)
(2.0)
(51.2)
86.9
35.7
Major categories of scheme assets as a percentage of total scheme assets:
Equities
Bonds
Secured/fixed income
Liability Driven Investment Fund
Multi Asset Credit
Qualifying insurance policy
Other
2023
UK
%
2023
Overseas
%
1
13
20
24
9
32
1
100
–
–
–
–
–
–
–
–
2023
Total
%
1
13
20
24
9
32
1
2022
UK
%
2022
Overseas
%
6
16
46
25
6
–
1
–
–
–
–
–
–
–
–
2022
Total
%
6
16
46
25
6
–
1
100
100
100
The Liability Driven Investment (“LDI”) fund consists of fixed interest and inflation linked bond holdings and interest, inflation, credit
default and other swaps. Derivatives have been valued on a “mark to market basis”.
The Multi Asset Credit Fund invests in a variety of debt instruments. Multi Asset Credit, Diversified Growth Funds, Secured income
and LDI asset categories include certain assets which are not quoted in an active market and are stated at fair value estimates
provided by the manager of the investment fund.
Debt securities (bonds) have quotes prices in active markets and equity instruments consist of private indices with underlying
equities with quoted prices in active markets. Multi Asset Credit and LDI asset categories include certain assets which are not
quoted in an active market and are stated at fair value estimates provided by the manager of the investment fund.
Other UK assets comprise of cash, interest rate swaps and floating rate notes.
Principal actuarial assumptions:
Discount rate
CPI inflation rate
RPI inflation rate
2023
UK
%
2023
Overseas
%
2022
UK
%
2022
Overseas
%
4.70%
2.50%
3.00%
–
–
–
2.85%
3.10%
3.50%
–
–
–
The financial assumptions adopted as at 25 March 2023 reflect the duration of the scheme liabilities which has been estimated
to be broadly 14 years (FY22: broadly 15 years).
At 25 March 2023 mortality assumptions were based on tables issued by Club Vita, with future improvements in line with the CMI
model, CMI_2021 (FY22: CMI_2021) with a smoothing parameter of 7.5 and a long-term future improvement trend of 1.25% per
annum (FY22: long-term rate of 1.25% per annum) and w2020 parameter of 20% (FY22: 5%). The resulting life expectancies within
retirement are as follows:
Aged 65 retiring immediately (current pensioner)
Aged 50 retiring in 15 years (future pensioner)
Male
Female
Male
Female
2023
21.8
23.9
22.4
25.3
2022
22.0
24.0
22.5
25.4
The defined benefit pension schemes expose the Group to the following main risks:
Mortality risk – An increase in the life expectancy of members will increase the liabilities of the schemes. The mortality
assumptions are reviewed regularly and are considered appropriate.
Interest rate risk – A decrease in bond yields will increase the liabilities of the scheme. Liability driven investment strategies are
used to hedge part of this risk.
Investment risk – The value of pension scheme assets vary with changes in interest rates, inflation expectations, credit spreads,
exchange rates, and equity and property prices. There is a risk that asset returns are volatile and that the value of pension scheme
assets may not move in line with changes in pension scheme liabilities. To mitigate against investment risk the pension scheme
invests in derivatives which aim to hedge a proportion of the movements in assets and liabilities. The pension scheme invests in a
wide range of assets to provide diversification in order to reduce the risk that a single investment or type of asset class could have
a materially adverse impact on total scheme assets. The investment strategy and performance of investment funds are reviewed
regularly to ensure the asset strategy of the pension schemes continues to be appropriate.
De La Rue plc Annual Report 2023
199
Strategic reportGovernance reportFinancial statements
Notes to the accounts continued
24 Retirement benefit obligations continued
Inflation risk – The liabilities of the scheme are linked to inflation. An increase in inflation will result in an increase in liabilities.
There are caps in place for UK scheme benefits to mitigate the risk of extreme increases in inflation. Liability driven investment
strategies are used to hedge part of this risk. Any increase in the retirement benefit obligation could lead to additional funding
obligations in future years.
The table below provides the sensitivity of the liability in the scheme to changes in various assumptions:
Assumption change
0.50% decrease in discount rate
0.50% increase in discount rate
0.25% increase in expected RPI and CPI inflation rate
0.25% increase in expected CPI inflation rate
Increasing life expectancy by one year
Approximate impact on liability
Increase in liability of c.£46m
Decrease on liability by c£42m
Increase in liability of c.£9m
Increase in liability of £8m
Increase in liability of c.£27m
The liability sensitivities have been derived using the duration of the scheme based on the membership profile as at 5 April 2021
and assumptions chosen for the FY23 year end. The sensitivity analysis does not allow for changes in scheme membership since
the 2021 actuarial valuation or the impact of the Scheme or Group’s risk management activities in respect of interest rate and
inflation risk on the valuation of the Scheme assets.
The largest defined benefit pension scheme operated by the Group is in the UK. Changes in the fair value of UK scheme assets:
UK Scheme assets
At 26 March 2022/27 March 2021
Assumed interest income on scheme assets
Scheme administration expenses
Return on scheme assets less interest income1
Employer contributions and other income
Benefits paid (including transfers)
At 25 March 2023/26 March 2022
2023
£m
2022
£m
988.7
1,053.3
27.6
(1.6)
(301.1)
16.5
(51.9)
678.2
20.2
(1.8)
(51.2)
16.4
(48.2)
988.7
Note:
1.
The £16.5m of pension payments includes £15.0m payable under the Recovery Plan, agreed in May 2020, and a further £1.5m relating to payments made by the Group towards the
administration costs of running the scheme, which were £1.6m in FY23.
Changes in the fair value of UK defined benefit pension obligations:
UK defined benefit pension obligations
At 27 March 2022/27 March 2020
Interest cost on liabilities
Effect of changes in financial assumptions
Effect of changes in demographic assumptions
Effect of experience items on liabilities
Benefits paid (including transfers)
At 25 March 2023/26 March 2022
2023
£m
(957.1)
(26.5)
225.3
3.0
(27.9)
51.9
(731.3)
2022
£m
(1,071.8)
(20.4)
101.0
(2.1)
(12.0)
48.2
(957.1)
(b) Defined contribution pension plans
The Group operates a number of defined contribution plans for which the charge in the consolidated income statement for the
year was £4.1m (FY22: £4.1m).
200
De La Rue plc Annual Report 2023
25 Employee information
Average number of employees
United Kingdom and Ireland
Rest of Europe
The Americas
Rest of World
Employee costs (including Directors’ emoluments)
Wages and salaries
Social security costs
Pension costs
Share incentive schemes
Sharesave schemes
2023
number
2022
number
935
557
65
485
985
558
63
630
2042
2,236
2023
£m
80.8
7.7
4.6
93.1
0.6
1.3
95.0
2022
£m
83.5
7.8
4.5
95.8
1.3
0.5
97.6
More detailed information regarding the Directors’ remuneration, shareholdings, pension entitlement, share options and other long
term incentive plans is shown in the Directors’ remuneration report on pages 102 to 127.
26 Capital and other commitments
Capital and other expenditure contracted but not provided:
Property, plant and equipment
Lease commitments
Other commitments
2023
£m
16.4
13.9
–
30.3
2022
£m
10.6
–
364.2
374.8
Lease commitments relate to the factory site extension in Malta where the Company has signed a lease for the premises for an
initial term of 20 years. The lease will be recognised when the building becomes available for use.
Other commitments in the table above in FY22 were amounts 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 supplied 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 other commitments of approximately £626.9m over 10 years from the date of sale. Management assessed that such supply
arrangement all associated commitments form a single agreement for accounting purposes. The termination of the Relationship
Agreement with Portals in the year resulted in these commitments being extinguished (note 5).
27 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 disputed the termination and commenced a commercial lawsuit in the Dominican Republic for a claimed amount of
approximately US$8m (plus monthly interest) which was dismissed by the Court in December 2020. Pastoriza appealed the
decision, but the Court of Appeal dismissed the appeal in May 2021. Pastoriza then appealed to the Supreme Court, which also
dismissed the appeal in July 2022. We have now had confirmation from the Court that Pastoriza has not lodged an appeal with
the Constitutional Court (which would have been the final possible forum for this litigation) and it is now too late to do so, therefore
the litigation is now at an end.
De la Rue has been made aware that the Central Bureau of Investigation in India (CBI-I) has launched an investigation into the
conduct of Arvind Mayaram, the former Indian Finance Secretary, in which the historical activities of De La Rue in India prior to 2016
have been implicated. The Company has not received any official direct communication of this investigation from the CBI-I but has
learned about it from publicly available sources. De La Rue has not served the Government of India or the Central Bank of India in
any capacity since 2016. The Company believes that there is no merit to the allegations that relate to De La Rue and is seeking legal
advice in this regard.
The Group also provides guarantees and performance bonds which are issued in the ordinary course of business. In the event that
a guarantee or performance bond is called, a provision may be required subject to the particular circumstances including an
assessment of its recoverability.
De La Rue plc Annual Report 2023
201
Strategic reportGovernance reportFinancial statements
Notes to the accounts continued
28 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 £22.2m (FY22: £20.3m) for the purchase of ink and other consumables on an arm’s
length basis. At the balance sheet date there was £1.7m (FY22: £4.6m) owing to this company.
The value of the Group’s investment in associate is not material and hence not disclosed on the face of the balance sheet.
Intra-group transactions between the Parent and the fully consolidated subsidiaries or between fully consolidated subsidiaries are
eliminated on consolidation.
Directors and Key management compensation
Directors
Aggregate emoluments
Aggregate gains made on the exercise of share options
Directors and Key management
Salaries and other short term employee benefits
Retirement benefits – Defined contribution
Termination benefits
Share-based payments
2023
£’000
2022
£’000
1,595
2,097
–
1,595
–
2,097
2023
£m
2.1
0.1
0.2
0.1
2.5
2022
£m
2.7
0.1
–
0.8
3.6
Key management comprises members of the Board (including the fees of Non-executive Directors) and the Executive Leadership
Team. Termination benefits include compensation for loss of office, ex gratia payments, redundancy payments, enhanced
retirement benefits and any related benefits in kind connected with a person leaving office or employment.
29 Subsidiaries and associated companies as at 25 March 2023
A full list of subsidiary and associated undertakings is below. Unless otherwise stated all Group owned shares are ordinary.
Country of incorporation
Name and Registered Office address and operation
Activities
De La Rue
interest %
Europe
United Kingdom
DLR (No.1) Limited
DLR (No.2) Limited1
De La Rue Holdings Limited
De La Rue International Limited
De La Rue Overseas Limited
De La Rue Finance Limited
De La Rue Investments Limited
Portals Group Limited2
De La Rue Consulting Services Limited
De La Rue Healthcare Trustee Limited
De La Rue Pension Trustee Limited
De La Rue Scandinavia Limited
Harrison & Sons Limited
Portals Holdings Limited
Portals Property Limited
Guernsey
Ireland
Malta
Netherlands
De La Rue House, Jays Close, Viables, Basingstoke, Hampshire RG22 4BS,
United Kingdom
The Burnhill Insurance Company
Limited Level 5, Mill Court, La Charroterie, St Peter Port, GY1 1EJ, Guernsey
De La Rue (Guernsey) Limited
PO Box 142, Suite 2, Block C, Hirzel Court, St Peter Port, GY1 3HT, Guernsey
Thomas De La Rue and Company (Ireland) Limited
Floor 3, Block 3, Miesian Plaza, Dublin 2, D02 Y754, Ireland
De La Rue Currency and Security Print
Limited B40/43 Industrial Estate, Bulebel, Zejtun, Malta
De La Rue BV
Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands
202
De La Rue plc Annual Report 2023
Holding company
Holding company
Holding and general
commercial activities
Trading
Holding company
Internal financing
Holding company
Holding company
Trading
Dormant
Dormant
Holding company
Non-trading
Dormant
Trading
Insurance
Non-trading
Dormant
Trading
Non-trading
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Country of incorporation
Name and Registered Office address and operation
De La Rue (Sverige) AB
Box 6343, 102 35 Stockholm, Sweden
Thomas De La Rue A.G.
Rue de Morat 11, 1700 Fribourg, Switzerland
De La Rue North America Holdings Inc.3
De La Rue Authentication Solutions Inc.
1750 North 800 West, Logan, Utah 84321, USA
De La Rue Canada One Limited
1400-340 Albert Street, Ottawa, ON K1R 0A5, Canada
De La Rue Cash Systems Industrias Limitada4
Rua Boa Vista, 254, 13th Floor, Suite 40, Centro, Sao Paulo, State of Sao Paulo,
01014-907, Brazil
De La Rue Cash Systems Limitada4
Rua Boa Vista, 254, 13th Floor, Suite 41, Centro, Sao Paulo, State of Sao Paulo,
01014-907, Brazil
De La Rue Currency and Security Print Limited
De La Rue Kenya EPZ Limited
ABC Towers, 6th Floor, ABC Place, Waiyaki Way, Nairobi, Kenya
De La Rue Commercial Services Limited
7th Floor, Marble House, 1 Kingsway Road, Ikoyi, Lagos, Nigeria
De La Rue West Africa SARL
Ouakam, derrière l’hôpital, Lot No 43, Dakar, Senegal
Activities
Non-trading
Holding company
Holding company
Trading
Trading
Non-trading
Trading
Trading
Trading
Trading
Trading
Sweden
Switzerland
North America
USA
Canada
South America
Brazil
Africa
Kenya
Nigeria
Senegal
South Africa
Ghana
De La Rue Global Services (SA) (Pty) Limited
Wanderers Office Park, 52 Corlett Drive, Illovo, Johannesburg, 2196, South Africa
De La Rue Buck Press LTD
Buck Press Building, Accra-Nsawam Hwy, Accra, Ga West, Greater Accra, P.O. Box
AN 12321, Accra GA/R, Ghana
Non-trading
Trading
Australia and Oceania
Australia
Far East and Asia
China
Hong Kong
Sri Lanka
India
Malaysia
Qatar
Singapore
De La Rue Australia Pty Limited
Level 7, 151 Clarence Street, Sydney NSW 2000, Australia
De La Rue Security Technology (Beijing) Co. Ltd
Room 1-053, Building No.1, Yard 4, East Beitucheng Road, Chaoyang District, Beijing,
PR, China
Thomas De La Rue (Hong Kong) Limited
Suite 1106-8, 11/F Tai Yau Building, No 181 Johnson Road, Wanchai, Hong Kong
De La Rue Lanka Currency and Security Print (Private) Limited
Export Processing Zone, Biyagama, Malwana, Sri Lanka
De La Rue India Private Limited
312 Vardaan House, 7/28 Ansari Road, Darya Gank, Central Delhi, Delhi, 110002, India
De La Rue Asia Sdn. Bhd.
No. 256B, Jalan Bandar 12, Taman Melawati, 53100 Kuala Lampur, Wilayah
Persekutuan, Malaysia
De La Rue Doha LLC
Desk BL24, 22nd Floor, Tornado Tower, Westbay, Doha, Qatar
De La Rue Currency and Security Print Pte Ltd
80 Raffles Place, #32-01, UOB Plaza, 048624, Singapore
United Arab Emirates
De La Rue FZCO
Dubai Airport Free Zone Authority, Building 6 West Wing A, Office #820, PO Box
371683, Dubai
Trading
Trading
Trading
Trading
Trading
Non-Trading
Trading
Non-trading
Trading
Saudi Arabia
Associates
Switzerland
De La Rue Communication and Information Technology Co LLC
Akaria Plaza, Gate “D”, Level 6, Olaya Main St, Riyadh, 1148, Kingdom of Saudi Arabia
Trading
Fidink S.A.
Trading
Ordinary shares held directly by De La Rue plc.
Notes:
1.
2. Ordinary shares, cumulative preference shares and deferred shares.
3. Common stock.
4. Quotas.
De La Rue
interest %
100
100
100
100
100
100
100
100
60
100
100
100
49
100
100
100
60
100
100
100
100
100
100
33
De La Rue plc Annual Report 2023
203
Strategic reportGovernance reportFinancial statements Notes to the accounts continued
30 Non-controlling interest
The Group has three subsidiaries with material non-controlling interests:
– De La Rue Buck Press Limited, whose country of incorporation is Ghana;
– De La Rue Lanka Currency and Security Print (Private) Limited, whose country of incorporation is Sri Lanka; and
– De La Rue Kenya EPZ Limited, whose country of incorporation and operation is Kenya.
The accumulated non-controlling interest of the subsidiary at the end of the reporting period is shown in the Group balance sheet.
The following table summarises the key information relating to these subsidiaries, before intra-group eliminations.
Ghana
Sri Lanka
Kenya1
Ghana
Sri Lanka
Non-controlling interest percentage
51%
40%
40%
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets (100%)
Revenue
Profit/(loss)for the year
Profit/(loss) allocated to non-controlling interest
Dividends declared by non-controlling interest
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
2023
£m
–
8.9
–
(5.7)
3.2
2023
£m
13.8
2.2
1.1
–
2.9
–
–
2.9
2023
£m
7.7
30.5
(0.4)
(10.6)
27.2
2023
£m
35.0
1.2
0.5
0.8
8.9
(0.2)
(1.9)
6.8
2023
£m
0.2
22.8
–
(13.7)
9.3
2023
£m
16.8
(7.3)
(2.9)
–
0.8
(0.3)
(0.1)
0.4
51%
2022
£m
–
5.8
–
(5.1)
0.7
2022
£m
14.3
0.3
0.2
–
(0.6)
–
0.3
(0.3)
40%
2022
£m
9.4
22.6
(0.3)
(3.8)
27.9
2022
£m
34.4
3.0
1.1
0.7
(0.6)
0.2
(1.8)
(2.2)
Kenya
40%
2022
£m
5.8
25.1
(0.1)
(14.2)
16.6
2022
£m
30.5
2.2
0.9
0.2
0.9
(0.3)
(0.5)
0.1
Notes:
1.
In January 2023, the Group announced that it has suspended banknote printing operations Kenya. In addition, operations in Authentication division are also in the process of winding down
(note 5).
31 Post balance sheet events
On 29 June 2023 the Company entered into a number of documents which had the effect of amending and restating the terms
of the revolving facility agreement with its lending banks and their agents.
These documents are an amendment and restatement agreement with the various lenders and the banks’ agent and security
agent, a debenture between the Company, certain other Group companies and the banks’ security agent and an inter-creditor
agreement between the creditors. As a result of these changes, the facilities are now secured against material assets and shares
within the Group.
On the 28 June 2023 the Company entered into an agreement with the trustees of the De La Rue Pension Scheme in relation to
the deferral of certain deficit reduction payments that were otherwise due to be paid by the Company and other Group companies
to that scheme. In order to preserve and support the position of the scheme, with the support of the lenders, the scheme will be
provided with security on a pari passu basis together with the lenders, as well as an enhanced information sharing protocol to
ensure ongoing communication between the Group and the trustee remains comprehensive.
204
De La Rue plc Annual Report 2023
Company balance sheet
Company balance sheet
at 25 March 2023
Fixed assets
Investments in subsidiaries
Current assets
Debtors: receivable within one year
Cash at bank and in hand
Creditors:
Amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Other reserve
Profit and loss account
Total shareholders’ funds
The loss for the year of the Company was £197.1m (FY22: profit £1.3m).
Approved by the Board on 29 June 2023.
Clive Vacher
Chief Executive Officer
Rob Harding
Chief Financial Officer
Notes
2023
£m
2022
£m
3a
4a
5a
6a
71.8
71.8
–
1.0
1.0
(0.2)
(0.2)
0.8
72.6
72.6
88.8
42.2
5.9
–
(64.3)
72.6
155.8
155.8
111.3
0.9
112.2
(0.6)
(0.6)
111.6
267.4
267.4
88.8
42.2
5.9
51.9
78.6
267.4
De La Rue plc Annual Report 2023
205
Strategic reportGovernance reportFinancial statements
Company statement of changes in equity
Company statement of changes in equity
for the period ended 25 March 2023
Balance at 27 March 2021
Profit for the financial year
Employee share scheme:
– value of services provided
Balance at 26 March 2022
Loss for the financial year
Reclassification between reserves
Employee share scheme:
– value of services provided
Other – unclaimed dividends
Balance at 25 March 2023
Share
premium
account
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Profit and
loss account
£m
Share
capital
£m
88.8
–
–
42.2
–
–
88.8
42.2
–
–
–
–
–
–
–
–
5.9
–
–
5.9
–
–
–
–
51.9
–
–
51.9
–
(51.9)
–
–
–
75.6
1.3
1.7
78.6
(197.1)
51.9
1.9
0.4
(64.3)
Total
equity
£m
264.4
1.3
1.7
267.4
(197.1)
–
1.9
0.4
72.6
88.8
42.2
5.9
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.
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
£103.7m to acquire the issued share capital of De La Rue plc (now De La Rue Holdings Limited), following the approval of a High
Court Scheme of Arrangement. In exchange for every 20 ordinary shares in De La Rue plc, shareholders received 17 ordinary shares
plus 920p in cash. The other reserve of £83.8m arose as a result of this transaction and is a permanent adjustment to the
consolidated financial statements.
On 17 June 2020 the Group announced that it would issue new ordinary shares via a “cash box” structure to raise gross proceeds
of £100m, in order to provide the Company and its management with operational and financial flexibility to implement De La Rue’s
turnaround plan, which was first announced by the Company earlier in the year. The cashbox completed on 7 July 2020 and
consisted of a firm placing and open offer. The Group issued 90.9m new ordinary shares each with a nominal value of 44 152⁄175p, at
a price of 110p per share (giving gross proceeds of £100m). A “cash box” structure was used in such a way that merger relief was
available under Companies Act 2006, section 612 and thus no share premium needed to be recorded and instead an ‘other reserve’
of £51.9m was recorded. This section applies to shares which are issued to acquire non-equity shares (such as the Preference
Shares) issued as part of the same arrangement.
The Group recorded share capital equal to the aggregate nominal value of the ordinary shares issued (£40.8m) and merger reserve
equal to the difference between the total proceeds net of costs and share capital. As the cash proceeds received by De La Rue plc
where loaned via intercompany account to a subsidiary company to enable a substantial repayment of the RCF, the increase to
other reserves of £51.9m was treated as an unrealised profit. In the current year the Group recorded an impairment of the intercompany
loan. As a matter of generally accepted accounting practice, a profit previously regarded as unrealised becomes realised when
there is a loss recognised on the write-down for depreciation, amortisation, diminution in value or impairment of the related asset.
Therefore, on the basis, the £51.9m previously treated as unrealised within Other Reserves is now treated as a realised amount and
has therefore been reclassified from “Other Reserves” to “Profit and Loss Account” as at 25 March 2023.
206
De La Rue plc Annual Report 2023
Accounting policies – Company
Basis of preparation
The financial statements of De La Rue plc
(the Company) have been prepared in
accordance with the revised Financial
Reporting Standard 102. The presentation
and functional currency of these financial
statements is GBP.
Critical accounting
estimates and judgement
Impairment of subsidiary
During the period, the Company booked
an impairment in its subsidiary of £85.6m
based on an equity valuation of £71.6m.
Under section s408 of the Companies
Act 2006 the Company is exempt from
the requirement to present its own profit
and loss account.
In accordance with FRS 102, the Company
meets the definition of a qualifying entity
and has therefore taken advantage of the
exemptions from the following disclosure
requirements listed below:
– Disclosures in respect of transactions
with wholly owned subsidiaries
– Cash Flow Statement and related notes
– Key Management Personnel
compensation
As the consolidated financial statements
of the Company include the equivalent
disclosures, the Company has also taken
the exemptions under FRS 102 available in
respect of the following disclosures:
– Share based payment – share based
payment expense charged to profit or
loss, reconciliation of opening and
closing number and weighted average
exercise price of share options, how the
fair value of options granted was
measured, measurement and carrying
amount of liabilities for cash settled
share-based payments, explanation
of modifications to arrangements;
– The disclosures required by FRS 102.11
Basic Financial Instruments and FRS
102.12 Other Financial Instrument Issues
in respect of financial instruments not
falling within the fair value accounting
rules of Paragraph 36(4) of Schedule 1;
and
– The Company proposes to continue
to adopt FRS 102 with the above
disclosure exemptions in its next
financial statements.
Judgements made by the Directors, in the
application of these accounting policies
that have significant effect on the
financial statements and estimates with
a significant risk of material adjustment
in the next year are discussed below.
Management considers this appropriate
given the significant reduction in the
market capitalisation of the group to
approximately £71m at 27 June 2023
versus approximate £214m market
capitalisation as at 26 March 2022 given
the resetting of market expectations on
FY24 and revised outlook guidance.
Management has used the same valuation
methodology as used in the prior period
and prepared an updated impairment
assessment based on Group’s latest
approved budgets and longer-term
cashflows as used in its Viability
Statement and Going Concern modelling.
Management has also used an updated
post-tax discount rate of 12.3% (which
was applied to the post-tax cashflow)
which management considers to be
appropriate. Management determined
that the impact of using pre-tax
cashflows as a pre-tax discount rate,
would not be material.
The Directors consider the 3% terminal
growth rate reasonable, as encouraging
signs of recovery are being seen in
Currency. In addition, continued growth in
Authentication is expected at a rate that
supports a terminal growth rate of 3%.
The Directors also consider that a 3%
terminal growth rate can be supported by
the ability to maintain operating margins
in later years. The combination of these
factors led the Directors to be comfortable
with a 3% terminal growth rate.
Management applied the following
sensitivities, based on reasonably
possible change in assumptions:
The Directors noted that a reduction in
the discount rate by 1% (from 12.3%) would
have increased the equity valuation to
£99.5m, increasing the headroom vs the
revised investment carrying value of
£71.6m by £27.8m.
The Directors noted that decreasing the
terminal rate from 3% to 2% would have
reduced the equity valuation to £46.8m,
reducing the headroom versus the
revised investment carrying value of
£71.6m by £24.9m.
The accounts have been prepared as at
25 March 2023, being the last Saturday in
March. The comparatives for the 2020/21
financial period are for the period ended
26 March 2022.
Other than as described below, the
following accounting policies have been
applied consistently to all periods
presented in these financial statements
as at, and for the period ended, 26 March
2022, apart from standards, amendments
to or interpretations of published
standards adopted during the year.
Measurement convention
The financial statements are prepared
on the historical cost basis.
Foreign currencies
Amounts receivable from overseas
subsidiaries which are denominated in
foreign currencies are translated into
sterling at the appropriate period end
rates of exchange. Exchange gains and
losses on translating foreign currency
amounts are included within the interest
section of the profit and loss account
except for exchange gains and losses
associated with hedging loans that are
taken to reserves.
Transactions in foreign currencies are
translated into the functional currency
at the rates of exchange prevailing at
the dates of the individual transactions.
Monetary assets and liabilities denominated
in foreign currencies are subsequently
retranslated at the rate of exchange ruling
at the balance sheet date. Such exchange
differences are taken to the profit and
loss account.
De La Rue plc Annual Report 2023
207
Strategic reportGovernance reportFinancial statements Accounting policies – Company continued
Dividends
Under FRS 102, final ordinary dividends
payable to the shareholders of the
Company are recognised in the period
that they are approved by the shareholders.
Interim ordinary dividends are recognised
in the period that they are paid.
Taxation
The charge for taxation is based on
the result for the year and takes into
account taxation deferred because of
timing differences between the treatment
of certain items for taxation and
accounting purposes.
Deferred tax is recognised, without
discounting, in respect of all timing
differences between the treatment of
certain items for taxation and accounting
purposes which have arisen but not
reversed by the balance sheet date,
except as otherwise required by FRS 102.
Financial guarantee
contracts
Where the Company enters into financial
guarantee contracts to guarantee the
indebtedness of other companies within
the Group, the Company considers these
to be insurance arrangements and
accounts for them as such. In this respect,
the Company treats the guarantee
contract as a contingent liability until such
time as it becomes probable that the
Company will be required to make a
payment under the guarantee.
Investments in subsidiaries
These are separate financial statements
of the Company. In the transition to
FRS 102 the Company took the first-time
adoption exemption for separate financial
instruments and as such the carrying
amount of the Company’s cost of
investment in subsidiaries is its deemed
cost at transition date, 30 March 2014.
Employee benefits
Defined benefit plans
The pension rights of the Company’s
employees are dealt with through a
self-administered scheme, the assets
of which are held independently of the
Group’s finances. The scheme is a defined
benefit scheme and is largely closed to
future accrual. The Group agrees deficit
funding with the scheme Trustees and
Pension Regulator. The Company is a
participating employer but the Group has
adopted a policy whereby the scheme
funding and deficit are recorded in the
main UK trading subsidiary of the
Company, De La Rue International Limited,
which pays all contributions to the
scheme and hence these are not shown
in the Company accounts. Full details of
the scheme can be found in note 24 to
the consolidated financial statements.
Share-based payment
transactions
Full details of the share-based payments
Schemes operated by the Group are
found in note 21 to the consolidated
financial statements.
208
De La Rue plc Annual Report 2023
Notes to the accounts – Company
1a Employee costs and numbers
Employee costs are borne by De La Rue Holdings Limited. For details of Directors’ remuneration, refer to disclosures in the
Directors’ remuneration report on pages 102 to 127.
Average employee numbers
2023
number
2022
number
3
3
2a Auditor’s remuneration
Auditor’s remuneration is borne by De La Rue Holdings Limited. For details of auditor’s remuneration, see note 4 to the consolidated
financial statements.
3a Investments
Investments are stated at deemed cost in the balance sheet, less provision for impairment.
Investments comprise:
Investments in subsidiaries
Cost at 27 March 2022 and 26 March 2021
Additions
Impairment
Cost at 25 March 2023 and 26 March 2022
2023
£m
2022
£m
71.8
155.8
155.8
1.6
(85.6)
71.8
154.5
1.3
–
155.8
Where the Company grants share options over its own shares to the employees of its subsidiary undertakings these awards are
accounted for by the Company, as an additional investment in its subsidiary. The costs are determined in accordance with FRS 102.
Any payments made by the subsidiary undertaking in respect of these arrangements are treated as a return of this investment.
For further details on the impairment, see the ‘Critical accounting estimates and judgements’ section on page 207 of
Accounting Policies.
For details of investments in Group companies, refer to the list of subsidiary and associated undertakings on pages 202 to 203.
4a Debtors
Other receivables are measured at amortised cost, which approximates to fair value. Trade and other receivables are discounted
when the time value of money is considered material. The amounts owed by Group undertakings are repayable on demand but are
not expected to be realised within 12 months.
Amounts due within one year
Amounts owed by Group undertakings
2023
£m
2022
£m
–
111.3
During the year an impairment charge of £113.9m (FY22: £nil) was recorded against amounts owed to Group undertakings.
5a Other creditors
Amounts falling due within one year
Accruals and deferred income
Other creditors
2023
£m
0.2
0.2
2022
£m
0.6
0.6
De La Rue plc Annual Report 2023
209
Strategic reportGovernance reportFinancial statements Notes to the accounts – Company continued
6a Share capital
For details of share capital, see note 20 to the consolidated financial statements.
7a Share based payments
The Company operates various equity and cash settled option schemes although the majority of plans are settled by the issue
of shares. The services received from employees are measured by reference to the fair value of the share options. The fair value
is calculated at grant date and recognised in the profit and loss account, together with a corresponding increase in shareholders’
funds, on a straight line basis over the vesting period, based on an estimate of the number of shares that will eventually vest.
Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. FRS 102 has been
applied to share settled share options granted after 7 November 2002.
Where the Company grants options over its own shares to the employees of its subsidiary undertakings these awards are
accounted for by the Company, as an additional investment in its subsidiary. The costs are determined in accordance with FRS 102.
Any payments made by the subsidiary undertaking in respect of these arrangements are treated as a return of this investment.
For details of share-based payments, see note 21 to the consolidated financial statements and the Directors’ remuneration report
on pages 102 to 127.
8a Related party transactions
The Company has no transactions with or amounts due to or from subsidiary undertakings that are not 100% owned either
directly by the Company or by its subsidiaries. For details of key management compensation, see note 28 to the consolidated
financial statements.
210
De La Rue plc Annual Report 2023
Non-IFRS measures
De La Rue plc publishes certain additional information in a non-statutory format in order to provide readers with an increased
insight into the underlying performance of the business. These non-statutory measures are prepared on a basis excluding the
impact of exceptional items and amortisation of intangibles acquired through business combinations, as they are not considered
to be representative of underlying business performance. The measures the Group uses along with appropriate reconciliations to
the equivalent IFRS measures where applicable are shown in the following tables.
The Group’s policy on classification of exceptional items is also set out below:
The Directors consider items of income and expenditure which are material by size and/or by nature and not representative of
normal business activities should be disclosed separately in the financial statements so as to help provide an indication of the
Group’s underlying business performance. The Directors label these items collectively as ‘exceptional items’. Determining which
transactions are to be considered exceptional in nature is often a subjective matter. However, circumstances that the Directors
believe would give rise to exceptional items for separate disclosure would include: gains or losses on the disposal of businesses,
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.
A Adjusted revenue
Adjusted revenue excluded “pass-through” revenue relating to non-novated contracts following the paper and international
identity solutions business sales. There has been no “pass-through” revenue in FY23 or FY22 and therefore this non-IFRS is no
longer used by the Group.
B Adjusted operating profit
Adjusted operating profit represents earnings from continuing operations adjusted to exclude exceptional items and amortisation
of acquired intangible assets.
Operating (loss)/profit from continuing operations on an IFRS basis
Amortisation of acquired intangible assets
Exceptional items
Adjusted operating profit from continuing operations
2023
£m
(20.3)
1.0
47.1
27.8
2022
£m
29.7
1.0
5.7
36.4
C Adjusted basic earnings per share
Adjusted earnings per share are the earnings attributable to equity shareholders, excluding exceptional items and amortisation of
acquired intangible assets and discontinued operations divided by the weighted average basic number of ordinary shares in issue.
It has been calculated by dividing the De La Rue plc’s adjusted operating profit from continuing operations for the period by the
weighted average basic number of ordinary shares in issue excluding shares held in the employee share trust.
(Loss)/Profit attributable to equity shareholders of the Company
Exclude: discontinued operations
(Loss)/Profit attributable to equity shareholders of the Company from continuing operations on an
IFRS basis
Amortisation of acquired intangible assets
Exceptional items
Tax on amortisation of acquired intangible assets
Tax on exceptional items
Adjusted (loss)/profit attributable to equity shareholders of the Company from continuing operations
Weighted average number of ordinary shares for basic earnings
Continuing operations
Basic earnings per ordinary share on an IFRS basis
Basic adjusted earnings per ordinary share
2023
£m
(55.9)
–
2022
£m
21.5
(0.8)
(55.9)
20.7
1.0
47.1
(0.3)
5.1
(3.0)
1.0
5.7
(0.3)
(1.8)
25.3
195.4
195.2
2023
pence per
share
2022
pence per
share
(28.6)
(1.5)
10.6
13.0
De La Rue plc Annual Report 2023
211
Strategic reportGovernance reportFinancial statements Non-IFRS measures continued
D Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA represents earnings from continuing operations before the deduction of interest, tax, depreciation, amortisation
and exceptional items.
The EBITDA margin percentage takes the applicable EBITDA figure and divides this by the continuing revenue in the period of
£349.7m (FY22: £375.1m). The covenant test (note 14(b)) uses earlier accounting standards and excludes adjustments for IFRS 16
and takes into account lease payments made.
(Loss)/Profit for the year
Add back:
Profit on discontinued operations
Taxation
Net finance expenses
(Loss)/Profit before interest and taxation from continuing operations
Add back:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
EBITDA
Exceptional items
Adjusted EBITDA
Revenue £m
EBITDA margin
Adjusted EBITDA margin
The adjusted EBITDA split by division was as follows:
FY23
Operating (loss)/profit on IFRS basis
Add back:
Net exceptional items
Depreciation of property, plant and equipment and right-of-use assets
Amortisation of intangible assets
Adjusted EBITDA
FY22
Operating (loss)/profit on IFRS basis
Add back:
Net exceptional items
Depreciation of property, plant and equipment and right-of-use assets
Amortisation of intangible assets
Adjusted EBITDA
2023
£m
(57.2)
–
27.6
9.3
(20.3)
12.5
2.2
5.3
(0.3)
47.1
46.8
349.7
(0.1)%
13.4%
2022
£m
23.7
(0.8)
1.3
5.5
29.7
12.0
2.3
4.3
48.3
5.7
54.0
375.1
12.9%
14.4%
Currency
£m
Authentication
£m
Identity
Solutions
£m
Central
£m
Total of
continuing
operations
£m
(24.8)
5.4
(0.2)
(0.7)
(20.3)
38.4
11.1
1.3
26.0
7.9
2.5
3.4
19.2
0.1
0.1
–
–
0.7
1.0
(0.6)
1.6
47.1
14.7
5.3
46.8
Currency
£m
Authentication
£m
Identity
Solutions
£m
Central
£m
Total of
continuing
operations
£m
15.0
4.5
10.7
1.3
31.5
15.1
0.2
2.5
2.3
20.1
0.6
–
–
–
0.6
(1.0)
29.7
1.0
1.1
0.7
1.8
5.7
14.3
4.3
46.8
212
De La Rue plc Annual Report 2023
E Adjusted controllable operating profit by division
Adjusted controllable operating profit represents earnings from continuing operations of the on-going divisions adjusted to
exclude exceptional items and amortisation of acquired intangible assets and costs relating to the enabling functions such as
Finance, IT and Legal that are deemed to be attributable only to the on-going two divisional structure model. Key reporting metrics
for monitoring the divisional performance is linked to gross profit and controllable profit (being adjusted operating profit before the
allocation of enabling function overheads), with the enabling functional cost base being managed as part of the overall business key
Turnaround Plan objectives.
FY23
Operating (loss)/profit on IFRS basis
Amortisation of acquired intangibles
Net exceptional items
Adjusted operating profit (note 1)
Enabling function overheads
Adjusted controllable operating profit/(loss)
FY22
Operating profit/(loss) on IFRS basis
Amortisation of acquired intangibles
Net exceptional items
Adjusted operating profit (note 1)
Enabling function overheads
Adjusted controllable operating profit/(loss)
Currency
£m
Authentication
£m
Identity
Solutions
£m
Central
£m
Total of
continuing
operations
£m
(24.8)
–
38.4
13.6
24.0
37.6
5.4
1.0
7.9
14.3
8.7
23.0
(0.2)
–
0.1
(0.1)
–
(0.1)
Currency
£m
Authentication
£m
Identity
Solutions
£m
15.0
–
4.5
19.5
23.0
42.5
15.1
1.0
0.2
16.3
7.4
23.7
0.6
–
–
0.6
–
0.6
(0.7)
(20.3)
–
0.7
–
(32.7)
(32.7)
Central
£m
(1.0)
–
1.0
–
(30.4)
(30.4)
1.0
47.1
27.8
–
27.8
Total of
continuing
operations
£m
29.7
1.0
5.7
36.4
–
36.4
F Return on capital employed (“ROCE”)
ROCE is the ratio of the adjusted operating profit (operating profit before amortisation of acquired intangible assets and net
exceptional items) over the average capital employed for the current and prior year.
In 2020 the Performance share plan measures were revised and TSR (Total Shareholder Return relative to FTSE 250 companies,
measured over three calendar years) was used in replacement of ROCE, to align to planned growth over the three-year period of
the Turnaround Plan, so that appropriate focus is placed on the key business imperative of restoring value to shareholders.
The ROCE measure was still applicable to PSP share awards which vested between 2021 and 2022, with the last vesting date was
in July 2022. This non-IFRS measure is no longer used by the Group.
Property, plant and equipment
Intangible assets
Right-of-use assets
Other financial assets
Inventories
Trade and other receivables
Contract assets
Derivative financial assets
Trade and other payables
Derivative financial liabilities
Capital Employed
ROCE = Adjusted operating profit/Average Capital Employed
Adjusted operating profit
Capital Employed – current year
Capital Employed – prior year
Average Capital Employed
ROCE
2022
£m
102.7
37.5
12.9
7.4
50.1
89.0
8.0
3.4
(80.0)
(4.8)
226.2
36.4
226.2
202.5
214.3
17.0%
De La Rue plc Annual Report 2023
213
Strategic reportGovernance reportFinancial statements 2019
£m
564.8
60.1
(0.7)
(27.9)
31.5
0.6
(4.5)
(2.1)
25.5
(4.8)
20.7
(2.4)
18.3
(1.3)
17.0
25.7
25.0p
18.8
(2.3)
18.8
(2.3)
42.9
2019
£m
174.2
(13.0)
(107.5)
(82.9)
(9.9)
(39.1)
2020
£m
472.1
23.7
(0.9)
20.0
42.8
1.0
(6.1)
(1.6)
36.1
–
36.1
(0.3)
35.8
(1.7)
34.1
–
n/a
30.3
(0.3)
30.2
(0.3)
11.1
2020
£m
233.2
(19.2)
(102.8)
(22.8)
(15.5)
72.9
2021
£m
397.4
38.1
(1.0)
(22.6)
14.5
0.8
(7.1)
1.7
9.9
(1.4)
8.5
(0.4)
8.1
(2.2)
5.9
–
n/a
3.7
(0.3)
3.7
(0.3)
14.7
2021
£m
175.5
21.3
(52.3)
(33.1)
(16.4)
95.0
2022
£m
375.1
36.4
(1.0)
(5.7)
29.7
0.9
(6.2)
(0.2)
24.2
(1.3)
22.9
0.8
23.7
(2.2)
21.5
–
n/a
10.6
0.4
10.5
0.4
13.0
2022
£m
203.4
43.5
(71.4)
(13.7)
(18.0)
143.8
2023
£m
349.7
27.8
(1.0)
(47.1)
(20.3)
1.2
(11.6)
1.1
(29.6)
(27.6)
(57.2)
–
(57.2)
1.3
(55.9)
–
n/a
(28.6)
–
(28.6)
–
(1.5)
2023
£m
166.8
15.3
(83.1)
(64.0)
(15.9)
19.1
Five-year record
Income Statement
Revenue
Adjusted operating profit
– Amortisation of acquired intangible assets
– Net exceptional items
Operating profit/(loss)
Interest income
Interest expense
Retirement benefit obligation net finance expense/income
Profit/(loss) before taxation from continuing operations
Taxation
Profit/(loss) after taxation from continuing operations
(Loss)/profit from discontinued operations
Profit/(loss) for the year
Equity non-controlling interests
Profit for the year attributable to equity shareholders
Dividends
Dividends per ordinary share
Earnings per share (‘EPS’)
Basic EPS – continuing operations
Basic EPS – discontinued operations
Diluted EPS – continuing operations
Diluted EPS – discontinued operations
Adjusted basic EPS – continuing operations
Balance sheet
Non-current assets
Net current (liabilities)/assets1
Net debt
Non-current liabilities1
Equity non-controlling interests
Total equity attributable to shareholders of the Company
Note:
1.
Excludes amounts included in net debt (note 22).
214
De La Rue plc Annual Report 2023
Shareholder information
Warning to shareholders – investment fraud
We are aware that some of our
shareholders have received unsolicited
telephone calls or correspondence
offering to buy or sell their shares on
very favourable terms. The callers can
be very persuasive and extremely
persistent and often have professional-
looking websites and telephone
numbers to support their activities.
These callers will sometimes imply a
connection to De La Rue and provide
incorrect or misleading information.
This type of call should be treated
as an investment scam – the safest
thing to do is hang up and ignore any
written communications.
You should always check that any firm
calling you about potential investment
opportunities is properly authorised
and regulated by the FCA. If you deal
with an unauthorised firm, you will not
be eligible for compensation under
the Financial Services Compensation
Scheme. You can find out more about
protecting yourself from investment
scams by visiting the FCA’s website
www.fca.org.uk/consumers, or by calling
the FCA’s helpline on 0800 111 6768.
If you have already paid money to
share fraudsters contact Action Fraud
immediately on 0300 123 2040 or
through their website,
www.actionfraud.police.uk.
Registered Office and
Company Secretary
De La Rue House,
Jays Close, Viables,
Basingstoke,
Hampshire RG22 4BS
Telephone: +44 (0)1256 605000
Fax: +44 (0)1256 605336
De La Rue plc is registered in
England & Wales with company
number: 3834125
Company Secretary: Jon Messent
E-mail: companysecretarial@delarue.com
Website
There is a wide range of information
on the Group and its business available
on the Company’s website
www.delarue.com, including:
– Information on our businesses –
Authentication and Currency
– Our priorities and activities in the areas
of Responsible Business, including
Environmental, Social and Governance
(ESG) matters
– Share price information
– Shareholder services information
– Financial information – annual
and interim reports, financial news
and presentations
– Regulatory news and press releases,
including an archive
– A Q&A facility for the 2023 AGM
Registrar
Computershare Investor Services PLC,
The Pavilions,
Bridgwater Road,
Bristol BS99 6ZZ
Telephone: +44 (0)370 703 6375
Shareholder enquiries
Enquiries regarding shareholdings or
dividends should, in the first instance, be
addressed to Computershare. Details of
your shareholding(s) and how to make
amendments to personal details can be
viewed online at www.investorcentre.co.uk
Shareholder helpline telephone:
+44 (0)370 703 6375
Electronic shareholder
communications
Shareholders can register online at
www.investorcentre.co.uk/ecomms to
receive statutory communications
electronically rather than through the
post. Shareholders who choose this
option will receive an email notification
each time the Group publishes new
shareholder documents on its website.
Shareholders will need to have their
shareholder reference number (SRN)
available when they first log in. This 11
character number (which starts with the
letter C or G) can be found on share
certificates and dividend tax confirmations.
Shareholders who subscribe for electronic
communications can revert to postal
communications or request a paper copy
of any shareholder document at any time
in the future.
Consolidation of shares
Where registered shareholdings are
represented by several individual share
certificates, shareholders may wish to
have these replaced by one consolidated
certificate.
The Company will meet the cost for this
service. Share certificates should be sent
to the Company’s registrar together with
a letter of instruction.
Annual General Meeting
The AGM will be held at 10:00am on
7 September 2023 at De La Rue House,
Jays Close, Viables, Basingstoke,
Hampshire RG22 4BS.
Further information is also available on the
Group’s website, www.delarue.com, where
there is a page containing a range of
materials relating to the 2023 AGM.
Electronic voting
All shareholders can submit proxies for
the AGM electronically by logging onto
Computershare’s website at
www.investorcentre.co.uk/eproxy
Share dealing facilities
Computershare, the Company’s registrar,
provides a simple way to sell or purchase
De La Rue plc shares. For further
information please visit their website,
www.computershare.com/dealingUK or
telephone +44 (0)370 703 0084 between
08:00 and 16:30 (UK time) on Monday to
Friday, excluding UK bank holidays.
Services include online, postal and
telephone dealing, on either a
certificated or uncertificated basis.
Fees apply and are explained on
Computershare’s share dealing website,
www.computershare.com/dealingUK.
Capital gains tax
March 1982 valuation
The price per share on 31 March 1982
was 617.5p.
Shareholders are advised to refer to
their brokers/financial advisers for
detailed advice on individual capital
gains tax calculations.
De La Rue plc Annual Report 2023
215
Strategic reportGovernance reportFinancial statements Shareholder information continued
Past performance cannot be relied upon
as a guide to future performance and
should not be taken as a representation
or assurance that trends or activities
underlying past performance will
continue in the future. Accordingly,
readers of this documents are cautioned
not to place undue reliance on these
forward-looking statements.
Other than as required by English law,
none of the Company, its Directors,
officers, advisers or any other person
gives any representation, assurance or
guarantee that the occurrence of the
events expressed or implied in any
forward-looking statements in this
document will actually occur, in part or
in whole. Additionally, statements of the
intentions of the Board and/or Directors
reflect the present intentions of the Board
and/or Directors, respectively, as at the
date of this document, and may be
subject to change as the composition
of the Company’s Board of Directors
alters, or as circumstances require.
The forward-looking statements
contained in this document speak only
as at the date of this document. Except
as required by the UK’s Financial Conduct
Authority, the London Stock Exchange or
applicable law (including as may be
required by the UK Listing Rules and/or
the Disclosure Guidance and Transparency
Rules), De La Rue expressly disclaims any
obligation or undertaking to release
publicly any updates or revisions to any
forward-looking statements contained
in this document to reflect any change
in the Group’s expectations with regard
thereto or any change in events, conditions
or circumstances on which any such
statement is based.
Cautionary note regarding
forward-looking statements
Certain statements contained in this
document relate to the future and
constitute ‘forward-looking statements’.
These forward-looking statements
include all matters that are not historical
facts. In some case, these forward-looking
statements can be identified by the use
of forward-looking terminology, including
the terms “believes”, “estimates”,
“anticipates”, “expects”, “intends”, “plans”,
“may”, “will”, “could”, “shall”, “risk”, “aims”,
“predicts”, “continues”, “assumes”,
“positioned” or “should” or, in each case,
their negative or other variations or
comparable terminology. They appear
in a number of places throughout this
document and include statements
regarding the intentions, beliefs or current
expectations of the Directors, De La Rue
or the Group concerning, amongst other
things, the results of operations, financial
condition, liquidity, prospects, growth,
strategies and dividend policy of
De La Rue and the industry in which
it operates.
By their nature, forward-looking
statements are not guarantees or
predictions of future performance
and involve known and unknown risks,
uncertainties, assumptions and other
factors, many of which are beyond the
Group’s control, and which may cause
the Group’s actual results of operations,
financial condition, liquidity, dividend
policy and the development of the
industry and business sectors in which
the Group operates to differ materially
from those suggested by the forward-
looking statements contained in this
document. In addition, even if the Group’s
actual results of operations, financial
condition and the development of the
business sectors in which it operates are
consistent with the forward-looking
statements contained in this document,
those results or developments may not
be indicative of results or developments
in subsequent periods.
216
De La Rue plc Annual Report 2023
De La Rue is a registered trademark of
De La Rue Holdings Limited.
Designed and produced by Gather
www.gather.london
DLR Certify™ is an unregistered trademark of
De La Rue International Limited.
SAFEGUARD® is a registered trademark of
De La Rue International Limited.
Traceology® is a registered trademark of
De La Rue Authentication Solutions Inc.
Printed by Pureprint Group, ISO 14001
Certified, FSC® Certified and a
CarbonNeutral® company. The printing
inks used are all vegetable oil based.
This report is printed on Forest Stewardship
Council® (FSC®) certified Amadeus Silk
paper and board, from well managed
forests and other controlled sources. The
manufacturing mill hold EMAS and ISO14001
environmental certification.
De La Rue plc
De La Rue House
Jays Close
Viables
Basingstoke
Hampshire
RG22 4BS
T +44 (0)1256 605000
www.delarue.com