Source - LSE Regulatory
RNS Number : 4316C
De La Rue PLC
18 June 2021
 

De La Rue plc

 

Annual Financial Report & Notice of Annual General Meeting

 

 

Further to the announcement of its 2020/21 full year results on 26 May 2021 (the "Results Announcement"), De La Rue plc (the "Company") announces that it has today posted to shareholders and has submitted to the National Storage Mechanism, copies of the following documents:

 

·    Annual Report and Accounts 2021 (the "Annual Report and Accounts")

·    Circular relating to the Annual General Meeting to be held on 29 July 2021

·    Forms of Proxy for shareholders to vote at the Annual General Meeting

 

As required by LR 9.6.1 R, these documents will shortly be available for inspection on the National Storage Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

As required by DTR 6.3.5 R (3), the Company confirms that the Annual Report and Accounts and the Circular relating to the Annual General Meeting are now available to view or download in pdf format from the Company's corporate website, www.delarue.com/ investors/agm-information-2021.

 

The appendix to this announcement contains the following additional information which has been extracted from the Annual Report and Accounts for the purposes of compliance with DTR 6.3.5 R and should be read together with the Results Announcement, which can also be downloaded from the Company's corporate website:

 

·    A statement on the principal risk and uncertainties

·    A statement on related party transactions

 

Together these constitute the information required by DTR 6.3.5 R which is required to be communicated to the media in unedited full text through a Regulatory Information Service.

 

Physical attendance and Voting at the Annual General Meeting

 

In light of the evolving guidance from the UK Government in relation to the COVID-19 pandemic and specifically the potential for restrictions on travel and large gatherings to be imposed at short notice, we are asking our shareholders not to attend the Annual General Meeting in person this year and to submit their proxy form in advance, appointing the Chairman of the meeting as their proxy rather than a named person.  Instructions on how to vote can be found on the Proxy Form enclosed with the Notice of AGM.

 

However, we value our engagement with all our shareholders and will therefore be providing an audio webcast of the meeting so that shareholders can follow the Annual General Meeting online.  Full details of how the webcast will work are available on the Company's website, www.delarue.com.  

 

 

 

Jane Hyde

Company Secretary

01256 605212

 

18 June 2021

 

De La Rue plc's LEI code is 213800DH741LZWIJXP78

 

 

Appendix

 

 

Principal risk and uncertainties

 

Certain of the principal risks and uncertainties which were set out in the 2020 annual report no longer appear on our principal risk register. These include: reliance on a small number of large orders, banking, failure to convert modernisation into value, loss of material contract, pension fund liability and failure in health, safety and environment controls. Due to the changing nature of the Group's risk profile, in particular taking account of the progress of the Turnaround Plan and the Group's business transformation, the Board believes these matters no longer represent principal risks and, to the extent relevant, are now monitored as operational risks.

 

Key for strategic focus

 

 

 

 

 

 

1 Value stream excellence

 

2 Currency market leadership

 

3 Continued strong growth in Authentication

 

 

 

 

 

 

                     

 

Exposure

Impact

Mitigation

Impact

Outlook

Bribery and corruption

It is possible that our employees or overseas representatives, either individually or in collusion with others, could act in contravention of our stringent requirements in relation to bribery and corruption, anti-competitive behaviours and management of third-party partners (TPPs). On 23 July 2019, the Company announced that the Serious Fraud Office had opened an investigation into the Group and its associated persons in relation to suspected corruption in the conduct of business in South Sudan. As announced by the Company on 16 June 2020, the SFO subsequently informed the Company of its decision to discontinue such investigation.

Major reputational and financial damage.

A successful prosecution under anti-bribery legislation could see the Company barred from participating in major tenders.

We have Level 1 accreditation to the Banknote Ethics Initiative (last recertification in 2020 following external audit), which provides governments and central banks with assurance regarding our ethical standards and business practices.

Our commitment to ethical standards is articulated in the Code of Business Principles. This is supported by underlying policies which are reviewed regularly and enforced robustly. There is zero tolerance to non-compliance, and it is dealt with through disciplinary procedures.

We have a focus on raising awareness through local Ethics Champions as well as training on anti-bribery and corruption, and competition law. Our policies and processes are independently audited.

Our rigorous process for the appointment, management and remuneration of TPPs operates independently of the sales function. The behaviours of TPPs are strictly monitored and the TPP process is overseen by the General Counsel and Company Secretary, who reports directly to the Board on these matters. This is further enhanced by external due diligence checks.

Our whistleblowing policy and associated procedures are integral aspects of the compliance framework, which is complemented by a whistleblowing hotline.

1 ,2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

Quality management and delivery failure

Each of our contracts has a unique specification on product quality and delivery. Given the nature of the Group's business and the fact that each product the Group makes and each service the Group provides is bespoke at some level, many of these contracts demand a high degree of technical specification.

A shortfall in quality management could have a material adverse impact on the Group's relationship with key customers, harm the Group's reputation, and may lead to a material increase in costs for the Group as a result of it having to pay damages in respect of the late delivery, rectification and/or the complete remake of relevant products and/or the termination of key contracts. This could have a material adverse effect on the Group's business, operations and financial condition and/or prospects.

We operate an enhanced end to end quality management system with defined standards and acceptable limits for all products across all production sites. The process is run by dedicated quality professionals. All manufacturing sites are certified to ISO 9001:2015 quality management system standards.

1 ,2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

Failure to implement the Turnaround Plan and run the business

Our business has seen a considerable level of organisational change and it is a possibility that business leaders may be unable to sustainably manage the level of change required to simultaneously Transform and Fix the business (enact the Turnaround Plan) while ensuring that day to day business goals are achieved. The risk is further exacerbated by the potential impacts of the COVID-19 pandemic.

As a result, key processes may break down and projects may fail to meet milestones, resulting in operational disruption, financial loss and serious consequences for the business

The business has developed a strong leadership commitment and an aligned Executive Leadership Team.

We are executing the Turnaround Plan to:

1. Provide clear objectives classified into Run, Fix and Transform.

2. Cascade clear and concise objectives via business units and support functions, to provide line of sight to strategy and link business as usual with longer term goals.

3. Provide a robust prioritisation process with regular reviews of programmes and projects.

Our aim is to continue to provide clear process improvement programmes across several areas of the business.

1 ,2, 3

Decreasing

 

Exposure

Impact

Mitigation

Impact

Outlook

Loss of a key site or process

All our manufacturing sites are 
exposed to business interruption risks.

The total loss of any one of these sites could have a major financial impact, particularly where the site represents a single source of supply.

All our manufacturing sites and Head Office are certified to the ISO 22301: 2019 Business Continuity standard, under a single, Group level certification. Although we coordinate business continuity risk centrally, each site has a business continuity advisor and focal point for all continuity and resilience matters.

We maintain a degree of interoperability across all our manufacturing sites, and where this is not possible look to partner with the appropriate third party. We aim to minimise risk by adopting the highest standards of risk engineering in our production processes. We also maintain business continuity stock as appropriate.

These controls are monitored via internal auditing and through monthly business continuity reporting, quarterly business continuity management steering committee meetings and regular ELT, Risk and Audit Committee meetings.

1 ,2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

Sustainability and climate change

We recognise that the business must undergo a climate change-related transition by addressing carbon reduction, energy usage, waste management and use of plastics in our operations.

Governments, the financial community and industries, including our own business and our customers', see the 2020s as a call to action, with major new commitments to achieving net zero carbon emissions.

Moving towards carbon neutrality is a competitive and an ethical necessity within our business. Our customer base is becoming more demanding in this area placing pressures on their supply chains, including our business and our material suppliers. The impact of not addressing this could be significant and result in loss of business and reputational damage.

De La Rue have set a goal to reach carbon net zero by 2030 in our own operations and the areas under our own operational control. We have commenced a "Transform Sustainability" programme to address the key areas of energy reduction, increasing our use of renewables, reducing our waste and reducing our reliance on the use of plastics in packaging. We are also focusing on providing recycling solutions for end of life polymer banknote products. We continue to work with our customers and partners to reduce the carbon impact of our products.

2, 3

Increasing

 

Exposure

Impact

Mitigation

Impact

Outlook

Breach of information security

A breakdown in the control environment including collusion, non-compliance or an external attack could lead to a cyber security breach resulting in the loss of critical data.

Any compromise in the software functionality or confidentiality of information could impact our reputation with current and potential customers.

Our corporate information security management system is certified to the ISO27001:2013 Information Security standard. This is supported by an independent information security team which is focused on ensuring that all hardware and software deployed is compliant with built in security.

We maintain a strict control environment to enforce disciplined software development and information security practices and behaviours. Several key technical controls are in place to manage this risk, including agile software development techniques, behaviour analytics, quality reviews, regular testing, network segregation, access restrictions, system monitoring, security reviews and vulnerability assessments of infrastructure and applications.

We also conduct supplier reviews on a risk basis and ensure all our employees undertake mandatory information security
e-learning.

Our processes and policies are monitored and audited internally and externally.

1 ,2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

Failure of a key supplier

We have close trading relationships with several key suppliers, including unique producers of specialised components that we incorporate into our finished products.

Failure of a key supplier, the inability to source critical materials or poor supplier performance in terms of quality or delivery could disrupt our supply and ability to deliver on time and in full. This could result in the payment of damages and/or forfeiting performance bonds or loss of contracts and result in material reputational damage.

Key suppliers are monitored and managed through supplier analytics, contract management programmes and digitised contract management tools. This ensures that all key supplier contracts have been reviewed on their financial strength and their ability to deliver to our quality standards and security, as well as their business continuity arrangements as a part of the onboarding process. Key suppliers are audited on a rotational basis and have a recovery plan in case of failure.

As a contingency, alternative suppliers are pre-qualified wherever possible and where necessary we retain higher levels of stocks.

2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

Breach of product security

Loss of product or high security components from a manufacturing site could occur as a result of negligence or theft. Loss of product while in transit, particularly during transhipment, through the failure of freight companies or through the loss of an aircraft or vessel as a result of an accident or natural disaster, is also possible.

Any loss of product or high security components has the potential to cause reputational and financial damage. In certain circumstances, customer contracts may mean that we are liable for those losses.

We have dedicated security personnel, robust standardised physical security and materials control policies and procedures at our production sites, which reduce the risk of inadvertent loss or theft during manufacturing. This is overseen and monitored by Group Security, HSE and Risk to ensure compliance. Vetting of personnel, training and auditing is conducted in line with the Group Baseline Security Manual (our security policies). All manufacturing sites are now vertically aligned to ISO14298:2013 and INTERGRAF certification Requirements. All the finished product manufacturing sites certified to Central Bank level, as testament of our commitment to product security.

We apply risk assessed stringent operational procedures - and use vetted and approved carriers and personnel - to handle movements of security materials between our sites and onward delivery to customers. All movements are monitored, risk managed and conducted in line with Transported Asset Protection Association standards.

We ensure that product security verification and reconciliation are embedded and monitored throughout all sites to ensure that product is stored, shipped, reconciled and destroyed securely and safely. We also maintain a comprehensive global insurance programme.

2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

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/or substantial fines for individuals, the leadership team, the Board and the Company. In addition, it may lead to a withdrawal of our banking facilities, as well as disbarment from future tenders.

We utilise strong policies and processes to ensure national and international sanction compliance. This is overseen by the Sanctions Board and internal and external auditing of the programme.

Commercial opportunities are considered against the sanction risk as standard within the request for approval process and we utilise customer relationship management systems to identify medium and high sanction risk opportunities. If identified these are investigated by legal, treasury and commercial teams to ensure compliance.

2, 3

No change

 

Exposure

Impact

Mitigation

Impact

Outlook

COVID-19

The COVID-19 pandemic could have a material adverse effect on the Group's supply chain, distribution network, manufacturing operations and/or weakening customer demand.

If the COVID-19 pandemic continues and results in a prolonged period of onerous restrictions, there is potential impact to the global supply and distribution infrastructure of the business.

If current measures fail to adequately mitigate the impact of the COVID-19 pandemic in the countries in which the Group has a manufacturing presence, there is also a risk that one or more of the Group's manufacturing sites may be forced to partially or fully cease operations for a prolonged period as a result of the introduction of more stringent restrictions by the relevant authorities and/or the absence of a significant number of employees for COVID-19 related reasons.

As part of De La Rue's response to COVID-19, the business has invoked a long-standing Pandemic Incident Management Plan throughout the Group, and all sites are working towards the following four key objectives:

1. Ensuring the safety of our employees and their families.

2. Playing our part in restricting the spread of the virus.

3. Continuing to run the business, serving our customers worldwide with the timely provision of high-quality products and services.

4. Ensuring that De La Rue emerges resilient to the impact of the pandemic.

Our manufacturing sites are spread across several sites in the UK, Malta, Kenya, North America and Sri Lanka which allows us the ability to reprioritise and potentially relocate production in the event of a business continuity incident.

1 ,2, 3

Decreasing

 

 

Related Party Transactions (note 30 to the 2020/21 Financial Statements)

 

During the year the Group traded on an arm's length basis with the associated company Fidink S.A. (33.3% owned). The Group's trading activities with this company included £8.2m (FY 2020: £30.9m) for the purchase of security ink and other consumables. At the balance sheet date there were creditor balances of £1.5m (FY 2020: £2.5m) with Fidink S.A.

 

Intra-group transactions between the Parent and the fully consolidated subsidiaries or between fully consolidated subsidiaries are eliminated on consolidation.

 

 

Key management compensation

 

 

2021

2020

 

£m

£m

Salaries and other short term employee benefits

Retirement benefits:

- Defined contribution

Termination benefits

3.3

 

0.1

-

2.9

 

0.4

1.1

 

3.4

4.4

 

Key management comprises members of the Board (including the fees of Non-executive Directors) and the ELT. 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.

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