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Good morning, everyone. Welcome to the De La Rue plc interim results presentation for the 6 months ended 24th September 2022. Thank you for joining us today, whether in the room with us or via the webcast. The results were announced this morning and are available on our website, www.delarue.com.
I'm Louise Rich, Head of Investor Relations, and our CEO, Clive Vacher; and our CFO, Rob Harding, will present on the results for the first half to you shortly. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] Importantly, before we start, I'd like to draw your attention to the cautionary wording on forward-looking statements within the results announcement and on Slide 2 of the presentation.
And now I would like to pass over to Clive.
Thank you, Louise, and good morning, everyone. Welcome to De La Rue's first half results for the 2022/'23 financial year. I am Clive Vacher, CEO. We are approaching the end of the 3-year turnaround plan. So today, in addition to the standard agenda on H1 results and full year outlook, I plan to provide an assessment of the progress we have made and importantly, our vision for the next 3 years. I hope that you will conclude, as I do, that we are able to weather the current extraordinary times as a result of the resilience we have built into the business and that our strategy for the future is compelling and value-generating. After that, I will hand over to Rob Harding, our CFO, to give you more detail on the financial performance before returning to sum up and take questions at the end.
For the first half of financial year '22, '23, our group operating profit was GBP 9.3 million. This is consistent with the guidance we gave in July at the time we announced the termination of the relationship agreement with Portals.
Revenues in our Authentication division rose 2.5% to GBP 45.5 million. In Currency, subdued market demand by our central bank customers reduced Currency revenues by 12.3% to GBP 116.4 million. The adjusted operating profit in Authentication of GBP 4.9 million is down from GBP 8.8 million for the equivalent period last year due to a combination of the sales mix and supply chain pressures.
We expect recovery in the second half to give a broadly flat operating profit for this division compared with last financial year. In Currency, we saw adjusted operating margin percentages holding in the first half despite supply chain pressures, once the impact of the GBP 3 million volume shortfall payment to Portals is excluded.
Importantly, we have broken the trend that has been present in De La Rue over many previous years when downturns in currency demand led to losses in the division. When I announced the turnaround plan in early 2020, I made it clear that, in Currency, we will build a flexible business that makes money in down cycles and makes more money in better economic times. In H1, due to our actions over the past 3 years, we have achieved this. And despite the ongoing challenging environment, Currency will continue to be profitable in the second half of the year. I want to be clear that we've been very proactive in cost control and reduction as well as with operational execution and that we will continue to do so. Indeed, it is our responsibility to do so because a high cost base, coupled with a lack of flexibility were some of the key reasons why De La Rue went through troubled times in the past. Positively, however, with the cost actions we are taking now, we are also building a highly efficient operating model that will allow us to flex back up and deliver strongly when our markets recover. We are also announcing today that we have extended our existing banking facilities to January 2025. Rob will give more information on this later. The banks signed this extension less than a week ago. We are, therefore, surprised that our auditors, Ernst & Young, have chosen to flag a potential concern with our interest covenant next financial year. The Board and management strongly disagree with this and believe it is based on an analysis that is neither plausible nor realistic. The first half of our financial year also saw some important milestones. The second polymer line at Westhoughton became fully operational in April. We secured the termination of the relationship agreement with Portals Paper in July.
And in September, we announced further growth investment in Malta, specifically a second line for passport polycarbonate pages in conjunction with increased demand from and extension of our Australian passport contract. These milestones have provided De La Rue with greater freedom to operate and will enable future growth.
The turnaround plan, which I set out early in 2020, saved De La Rue. Since that time, we have been building a company which is increasingly resilient. As we have worked through the plan, we have dealt with several legacy issues and we have more to deal with, which we will. We mitigated several legacy cost challenges. This includes negotiating with the pension fund trustees to reduce the annual pension deficit repair payments from GBP 24 million to GBP 15 million, saving a total of GBP 57 million in cash over the period to 2029.
The termination of the relationship agreement with Portals for the supply of banknotes paper relieved us of GBP 119 million in future obligations, money that we would have had to pay to Portals over 6 years regardless of volumes of paper required. We exited that agreement at a cost of just GBP 16.7 million and, as I will explain later, we are liberated and the global sourcing of our paper requirements is going well.
As promised in the turnaround plan, we saved cost of over GBP 36 million annually by December 2020, and we continue to add to that total with additional efficiencies on an ongoing basis, which we are accelerating due to the current times. In addition, we restructured the business, working through several legacy footprint issues, and we have a clear understanding of our optimal manufacturing strategy.
We reduced 5 banknote print sites to 4 and consolidated our R&D teams from both Authentication and Currency into one site. At the same time, we transitioned to a divisional structure which continues to mature. You have seen how our actions have substantially improved the financial performance of the business.
Adjusted operating profit from the ongoing divisions grew from GBP 1.4 million to GBP 35.8 million in just 2 years from financial year '20 to financial year '22. Adjusted operating margins on the same basis increased from just 0.3% to 9.6% over this time frame. In 2020, we successfully refinanced the business and as previously stated, these facilities now run to January 2025.
Our turnaround actions have ensured that De La Rue can weather the current market conditions and is well positioned to take advantage of growth in the future. Across the group, we have made progress in several areas. The expansion of our factory in Malta will create a super site with additional capacity for both Currency and Authentication to grow in the future.
We relaunched our ESG strategy and have been recognized as a European Climate Leader by the Financial Times, who placed us in the top quartile of their rankings in position 41 out of 400 for the second year running. We have also joined over 3,000 leading businesses and financial institutions in committing to the Science Based Targets initiative, which means a validation of our commitment towards meaningful environmental change.
The Authentication division has seen revenue growth of 22.4% in the 2 years to financial year '22, with adjusted operating profits rising by over 50% in the same period. We have created a business with an 18% adjusted operating margin and, while the financials will flatten this financial year, we have a strategy that we'll see continued revenue and margin growth in this division over time. We extended the contract with Microsoft for a further 5 years and started to supply polycarbonate data pages for the Australian passports on a contract which we recently extended to 10 years. Our government revenue solutions business has also signed a number of significant new contracts and now holds 100% of the tax stamp schemes in the Gulf Cooperation Council region. There is still plenty of potential for growth in this market, with 65 countries signed up to the Framework Convention on Tobacco Control and continuing to commit to implementation. In the Currency division, we have transformed an operating loss of GBP 9.4 million in financial year 2020 into an adjusted operating profit of GBP 19.5 million in financial year 2022. Our expansion at Westhoughton completed within budget, has created a fully operational second polymer line, and we continue to increase both our win rate and market share in a business where we are one of only two providers.
We have converted a number of key customers from paper to polymer over the last 3 years. Polymer now represents 5% of the global total market of 180 billion banknotes per annum, up from 3%. Converting the world to polymer remains a fundamental part of our strategy.
I will now switch to the current environment, and I will address the supply chain challenges first. We continue to make good progress in a very tough environment. When we last updated the market on our financial performance back in May of this year, we feared that we were facing supply chain headwinds of up to GBP 10 million. Through a combination of realignment, dual sourcing and management of existing suppliers, we have more than halved that risk to an estimated GBP 4.5 million today. This is still, of course, a significant headwind, but a more manageable one. In today's market slowdown, it is more difficult for us to pass these cost increases onto our customer base. While we are able to do this in a limited way, we also understand that tight management and mitigating -- mitigation of inflationary pressures is key. On the right-hand side of this chart, there is an example of the proactivity of our supply chain management teams and our focus on making the right decisions at the right time. The chart shows the fluctuating price of energy and gas in the U.K. over the past year, with the dotted line representing the government's energy price cap for businesses. The solid lines on the chart, numbered 1 to 4, show the price points at which we have set up our energy supply contracts. Our U.K. demand up to September 2024 has been fixed at 130p and 180p a therm against a winter price cap of 255p per therm. This will save us an estimated GBP 4 million in the next 12 months even taking the winter price cap into account.
It also removes the risk of exposure to the wildly fluctuating energy prices that this country has experienced in recent times. In addition, our exit from the agreement with Portals for the supply of banknote paper is progressing well. Orders have been placed with 5 paper manufacturers so far at lower aggregate pricing than what we would have paid under the Portals' agreement.
We are in the process of finalizing a global tender involving up to 17 paper makers. This will give us the opportunity to maximize competition and to reduce transport emission and costs by establishing localized and sustainable supply routes for each of our sites. We also reaffirm our forecast of achieving at least the previous stated GBP 4 million annual saving on our paper costs from next year due to the freedom on banknote paper sourcing that we now have.
And touching briefly on semiconductor availability. This is improving, but we continue to monitor it carefully as small gaps in supply do remain. Today's external environment requires a lot of proactive management. In Authentication, we have seen slower growth in the last 6 months than in recent times, but are renewing our focus on revenue and margin improvement. Dave Sharratt, who joined the group in September as the Managing Director for Authentication, is putting a greater focus on targeted sales growth and execution.
Long-term contracts, such as the GRS schemes in Qatar, Bahrain and Oman, will continue to drive value. These 3 contracts are now fully onboarded and revenue-generating as are the data pages being manufactured for Australian passports. Brand has been adversely impacted by the slowing of global PC sales, together with a reduction in the volume of COVID vaccines produced.
The mix of sales in the first half and continued investment in projects for future growth, reduced Authentication's adjusted operating profit compared with last year. We have implemented price rises where possible and are undertaking a divisional restructuring program. We expect this to provide benefits in the second half and substantial annualized savings from the next financial year onwards. Now to the situation in Currency. Back in February 2020, when we first set out the turnaround plan, we promised that the actions we would take would allow Currency to make money in down cycles and more money in better years. In the past 6 months, we have kept that commitment, demonstrating that Currency can be profitable in tough economic times. Central banks are working through the stocks built up during COVID, and we are seeing order delays in key markets due to the cost of living crisis and countries access to foreign exchange. This is having an impact on our order book, which is down from approximately GBP 210 million at the end of the first half of the year to just under GBP 180 million today. The divisional management in Currency is reacting to this downturn by taking cost out of the business, but doing so in a manner that allows us to flex back up when the market improves. We are also refining the divisional organizational structure to capture more share of the depressed market and build greater certainty about order timings. There are some tentative indications of the market returning as high inflation has started to drive orders from some countries, but it is too soon for us to call a return to normality. Therefore, the Currency volume projections for our FY'24 plan do not yet assume any substantive growth from this year's levels. But if the market does improve, we will be ready.
As previously discussed, we are continuing to adapt the business as challenges to revenue continue. The turnaround plan took over GBP 36 million worth of annualized costs out of the business. Current initiatives are expected to produce an additional GBP 12 million per annum in cost savings by the end of the next financial year, and these will be accompanied by greater productivity.
Finally, in this section, our guidance for the full year. Due to the unpredictability of the external environment, particularly when it comes to timing of customer orders, the potential range of outcomes for adjusted operating profit this year is larger than will be the case in normal times. For this reason, we think it is prudent to guide to a full year adjusted operating profit in the range of GBP 30 million to GBP 33 million versus current market expectations of GBP 36 million. With careful management of working capital and cash, we leave our end of year net debt expectations unchanged in the GBP 88 million to GBP 92 million range. I'm now going to focus on the picture for the next financial year and our 3-year vision. Let's start with the next financial year, financial year '23-'24. This will be a milestone year in De La Rue's journey.
Next year is when we make the transition from being a cash user driven by the investments in the future that we've been making and the solving of key legacy issues to generating free cash flow after pension payments. Let me give you the details of why this will be the case. Next year, we will increase our profitability with an improved EBITDA. Importantly, in making this statement, we have not assumed significant market recovery in FY'24.
The rise in EBITDA will be based on the actions we have already taken and continue to take to create greater productivity, lower costs and a more optimized capacity in which to place greater margin work. Additionally, we see growth in existing programs that are already up and running. Our CapEx requirements next financial year will halve from a planned GBP 30 million this year to a going forward run rate of GBP 15 million per year as our turnaround investments are completed.
We will continue to manage working capital closely and keep a tight control of costs, including realizing the full additional GBP 12 million of savings through the current initiatives already mentioned. Against this, we are, of course, expecting financing fees to rise primarily because of the increase in base rates, but also because our new renewed facilities carry an additional margin. Next year, both cash and operating profit will benefit by at least GBP 4 million from expected efficiencies arising from the termination of the Portals agreement. The investments that we've made in our manufacturing capability will position us well to benefit from recovery in our underlying markets. In particular, the higher-margin areas of polymer, GRS, brand and passport polycarbonates are expected to improve, enabled by these investments. Dave Sharratt, our new Managing Director, is rebuilding a strong leadership team with sales and customer service at its core and profitable growth as its central aim.
Looking across the group, we will continue to drive further positive cultural change at De La Rue. With changes to various management positions in both divisions, we now have a greater focus on sales and the customer base. We are also restructuring our product development processes, adopting a cross-functional integrated team approach. This will enable us to bring innovations to market more quickly while driving greater commercial returns.
And to finish my section, I would like to share our view for how we will strengthen the company and drive financial performance over the next 3 years. Firstly, in Authentication, we know that the GRS market is growing, and we intend to maintain our strong #2 position as it develops. We have 9 contracts in place as of today, and there is significant scope to expand these contracts to include additional products.
The 65 countries that signed up to the World Health Organization's Tobacco Control protocol remain committed to track and trace schemes even if their progress has been slower than expected. Implementation of a De La Rue GRS scheme has proved significantly to increase tax revenue, an attractive prospect for governments, particularly at present.
We are, therefore, confident that we can continue to expand existing schemes and to sign new contracts with additional countries in the next 3 years. We have compelling digital and physical GRS solutions, and we'll continue to invest here, including exploration of more advanced digital only track and trace solutions.
In the ID space, there is a trend from traditional passports towards ones with highly secure polycarbonate data pages. We have a world-leading offering in this space, and are currently supplying data pages for the Australian passport and a number of other smaller customers.
We already know that strong demand in FY'24 will mean high utilization of our second production line, which will be operational next April. It has also been over 3 years since the sale of Identity Solutions business, which means we are now free from our non-compete obligations and can market this area of our business strongly. We are looking to develop the long-term Microsoft relationship further with a view to additional contract extensions.
Finally, we are targeting a substantial increase in the remaining brand area of the business within the same time frame. This is a volume-dependent business, and such growth would have a positive impact on our financial performance and will come with minimal additional investment.
In the Currency division, we know that periods of economic uncertainty and high inflation have historically driven demand for more bank notes. We are seeing encouraging signs that inflation is driving banknote demand in places. However, it is also too soon to know if this is the start of a trend. And therefore, we are planning prudently in the short term. In this division, we will focus on achieving a healthy return on the capital invested over the last 3 years.
We will continue to optimize our banknote footprint and capacity according to the needs of both the market and our customers, including completion of our Malta expansion. The Currency division has already made significant efficiency improvements, and we expect further ongoing productivity gains going forward.
We expect polymer to continue to grow to between 6% and 7% of the market by 2026 as the conversion to polymer continues. We also expect polymer security features to generate high-margin growth using game-changing technologies that will be unique to De La Rue. As central banks increasingly move higher value banknotes on to polymer, the opportunities for security features on polymer will expand. Our portfolio today is stronger and more focused than it was at the start of the turnaround.
Additionally, the combination of the industry-leading quality of our polymer substrate and our unique security features creates differentiation and further barriers to entry. Executing these plans will lead to a group business that is progressively increasing free cash flow starting next financial year.
Finally, we will make significant progress in repairing our defined benefit pension deficit over the next 3 years. While the final payment is currently due in March 2029, we continue to explore alongside the trustees, opportunities for improving the overall position.
Before handing over to Rob, there is a conclusion that I would like to share with you. The annual Board review on delivering value to shareholders, which includes looking into the possibility of corporate actions, has concluded that the greatest value generation will come with executing the current strategy and keeping the current group structure. This has been the subject of an independent assessment, which also supports this conclusion.
And now I will pass over to Rob to cover more details of our financials.
Thank you, Clive, and good morning, everyone. Firstly, I'd like to take you through the key highlights from our income statement, showing half 1 performance compared to prior half. If we start at the top, you can see revenues of GBP 164.3 million compared to GBP 179.2 million for the prior half, which is down 8.3%, and that drop is essentially Currency volume driven.
Gross profits of GBP 41.8 million are down versus prior half of GBP 48.5 million. Of this GBP 6.7 million drop, GBP 5.3 million of that is Currency, GBP 1.7 million is Authentication, and we've had some dampening of ID at GBP 0.3 million. As Clive said, adjusted operating profits are down GBP 8.1 million from GBP 17.4 million to GBP 9.3 million for this half. And I'll cover this profit walk in a short slide shortly.
On an IFRS basis, half 1 is an operating loss of GBP 12.6 million versus GBP 13.8 million profit for the prior half. And that's driven essentially by GBP 21.4 million of exceptional items. And if we look at that GBP 21.4 million, GBP 19.3 million is Portals, which is a combination of the GBP 16.8 million settlement we had in July and the remaining GBP 2.5 million is noncash credit loss provision. The remaining GBP 2.1 million of exceptionals is in relation to restructuring costs.
Lastly, on this slide, we have our 2 EPS metrics, adjusted and IFRS, with the adjusted EPS metric at 2p versus 6.4p for the prior half. If I move on to the next slide, this has our revenue bridge, and that compares to GBP 179.2 million of revenue for the prior half to the 163 -- GBP 164.3 million for this half. As I highlighted earlier, Currency is clearly that's driving this delta with revenues for half 1 down GBP 16.3 million or 12.3% from GBP 132.7 million to GBP 116.4 million.
And this is essentially the softening of the banknote market post-COVID that Clive referred to. This fall was marginally dampened by a GBP 1.1 million or a 2.5% revenue increase for Authentication, which saw its revenues rise from GBP 44.4 million to GBP 45.5 million. And that's driven by greater revenues from our Australian passport contract plus new GRS schemes such as Bahrain, Oman and Qatar going live, and these have more than offset revenue falls that we've seen in our brand business plus the impact of a global slowdown in PC sales.
Finally, ID revenues also showed a small positive delta of GBP 0.3 million. If we move on to the next slide, that's got the adjusted operating profit bridge, and this is obviously bridging the GBP 17.4 million in the prior half to the GBP 9.3 million for this year. And we can see from this graph that we've got GBP 3.9 million of adverse movements across both Currency and Authentication and GBP 0.3 million swing on ID.
If I look firstly at Currency, the GBP 3.9 million drop in profits is essentially driven by gross profits being down GBP 5.3 million, which is lower revenues' volumes flowing through. And that's been dampened by GBP 1.4 million of favorable operating expenses, stringent cost control to dampen that. For Authentication, as I said, they're also down GBP 3.9 million half-on-half, and that's driven by GBP 1.7 million drop in gross profits, which is really sales mix driven plus a GBP 1.5 million increase in overheads, which has been addressed currently through restructuring and cost-out actions.
And Authentications also had extra GBP 700,000 allocation of central overheads, given the division now accounts for a greater proportion of group revenues. Lastly, we see on this slide, GBP 300,000 variance from ID, which is essentially driven by one-off items that we had in the prior half, essentially equipment sales.
If I move on to cash flow now. Again, we've got a bridge here between the GBP 9.3 million adjusted operating profits that I spoke of earlier and the net cash inflow for the half of GBP 0.8 million. There was a cash outflow from operating activities of GBP 2.8 million in the half. That's driven by the GBP 9.3 million operating profits, adding GBP 9.2 million of depreciation and amortization, lesser working capital build of GBP 10.5 million, and that excludes the Portals accrual of GBP 16.7 million. And then we've had pension payments of GBP 8.4 million, plus a number of other movements, such as provisions, cash exceptionals, noncash items and tax.
Next along, we see a cash inflow from financing activities of GBP 11 million, and that primarily includes a GBP 16.5 million drawdown on our borrowing facilities. Lastly, liability payments of GBP 1.1 million and net interest payments of GBP 4.4 million. Finally, on the right hand side of this slide, you can see a cash outflow from investing activities of GBP 7.4 million and that's driven by GBP 11.2 million of CapEx, less grant income of GBP 3.4 million and GBP 0.4 million in terms of proceeds from the sale of equipment.
If I move on to net debt and banking. Net debt landed at GBP 86.5 million for half 1, which is an increase that we anticipated on the year-end position of GBP 71.4 million. As Clive said, we are still guiding towards the range of GBP 88 million to GBP 92 million for the full year. And this takes into account the payments to exit the Portals contracts that we announced earlier this year.
The group has recently extended its banking facilities out to the 1st of January 2025, as the current facility was due to expire at the beginning of December 2023. The key features of this facility are our RCF cash drawdown component of up to GBP 175 million, bond and guarantee facilities of a minimum of GBP 100 million.
In terms of fees, we've got upfront arrangement fees of 25 basis points, additional margin of 25 basis points and further arrangement fees totaling 95 basis points payable between June and December of next year, and the covenant tests remain unchanged. Lastly, on this slide on covenants. The EBIT net interest position at half year was 4.5x, and that's versus a covenant of 3x. And the net debt and EBITDA position was 2.1x versus a covenant of 3x.
The last slide before I pass back to Clive is on pensions. Firstly, if I cover the actuarial position, which drives any contributions required from the company. The last formal valuation as of April 2021, was a deficit of GBP 119.5 million, and this formed the basis of the reduced contributions of GBP 15 million per annum for the 6 years through to March 2029. An informal valuation as of October 2022, shows this has fallen by GBP 27.5 million over the last 18 months to GBP 92 million.
There's clearly been a lot of market volatility over the last few months. And this has had us seen a significant fall in the estimated full buyout of the scheme versus what we saw in April 2021. The buyout figure itself is not something we disclose to the market, but it's greater than the actuarial deficit figure and the recent buyout position has fallen due to essentially a number of factors, but the widening of credit spreads and more favorable reinsurance pricing that we've seen in the market.
Over this period of volatility, no additional cash contributions have been requested or required from the company in terms of the pension scheme. To explore wider strategic opportunities and efficiencies, the company has recently instigated and moved to a sole trustee model, and that's something I'll be working through over the next few months.
This slide also highlights the partial buy-in that the trustees announced back in May for a premium of GBP 319 million. Finally, on this slide, as of the 24th of September 2022, on an IAS 19 basis, the scheme had a net deficit of GBP 36.8 million versus a GBP 29.8 million surplus as of the 26th of March 2022. But as I've said in other announcements, it's the actuarial rather than the IAS 19 position that determines company contributions.
I'd now like to pass back to Clive for his concluding remarks.
Thank you, Rob. In summary, our H1 adjusted operating profit was in line with the guidance given in July. Due to the unpredictable external environment, we are prudently guiding to full year adjusted operating profit of GBP 30 million to GBP 33 million versus market expectations of GBP 36 million.
The turnaround plan saved De La Rue and established an increasingly resilient company able to weather the current headwinds. In Authentication, while we're seeing slower growth, we have a renewed focus on revenue and margin improvement going forward, and we see strong opportunities globally. In Currency, we are responding to a down cycle that is affecting the currency industry as a whole.
However, due to the actions that we have taken over the past 3 years, we have broken the trend of Currency making losses when the market turns downwards, and this business will continue to be profitable. In short, we are delivering on our 2020 commitment that Currency will be profitable in down cycles and make more money in better economic times. Our supply chain headwinds are reducing due to effective and timely management and mitigating actions, but of course, this still remain a challenge in today's environment.
We continue to drive efficiency in our cost base, with a focus on productivity. Our management has a compelling, value-generating vision for the next 3 years and has positioned the company for positive growth, especially when our markets recover. And finally, we will turn the corner next financial year to be a positive cash flow generating company after pension payments. Thank you.
I will now hand back to Louise to manage the Q&A session.
Thank you, Clive. Now if we can move to questions, I'll start by taking questions from the room and then cover questions that have been submitted via the website. [Operator Instructions]
It's James Beard at Numis. Two questions, please. On Authentication, you've obviously made a leadership change there. What is the sort of change in sales emphasis that you're sort of talking to in the statement this morning? And why you decided to make that change in sort of sales emphasis? What's the sort of the long-term price as a result of doing that?
And then second question on polymer currency. To what extent were volumes in H1 of polymer sales impacted by the weaker global backdrop for banknotes? And given that you've now opened the second line at Westhoughton, what are your expectations for volumes there as you sort of move into second half and into FY'24?
Thanks, James. So let's deal with your first question first. In terms of the Authentication leadership change, what it's allowed us to do is to take a really good top-to-bottom relook at the Authentication business.
And I think we concluded a number of things, that there were further changes that we could make to focus more strongly on the higher-margin parts of the business and to actually reduce or stop some of the parts of the business that were not necessarily going to give us a commercial return commensurate with where we're trying to take the overall margin of that business.
One of the other things that I think is worth noting in Authentication is that it is a business that's volume dependent, particularly when we talk about our brand business. And one of the things that we can see is that we have capacity in our brand business that is untapped at the moment, that we can switch on at very minimal additional investment, but would actually take that brand business considerably -- to considerably better return.
So what we have done is brought in Dave Sharratt, who has sales and customer focus at his core, in his DNA. And he is already building up and changing the way in which we go and market our business. Now what that will do, I think, overtime, will have a positive impact on the brand business. And in the GRS business, I think what we will be seeing is a greater focus in the short term of expanding existing schemes that we have because the new schemes are reliant on governments putting it high on the agenda. And of course, governments worldwide at the moment are fairly distracted. So we see really good opportunity in expanding existing schemes, and short term, some opportunity in new schemes, but we think that the new schemes will accelerate as we go over the next 3 years.
In terms of your question on polymer sales, so our expectation for the full year in polymer is that it will be marginally -- polymer volumes will be marginally ahead of last year. Not quite as much as expected, but we still stand by that it was absolutely the right decision at the right time to have that second line running.
What we're finding with the polymer business is that, at the moment, there are -- it can be quite lumpy because there are some major converts to polymer that make a huge difference at various points of the year. We are extremely well positioned with the big customers of polymer, particularly the new conversions. And we expect those to strongly contribute to further growth next year, but the overall position this year will be that it will be marginally up on the previous year rather than a long way out. Next year looks pretty good.
Shall we move to questions from the web?
Super. Well, the first question is from [ Mark Pain ] from CFO services, and this is for you, Rob. In the consolidated interim statement of comprehensive income, the line item remeasurement of losses, gains on retirement benefit obligations shows GBP 74 million negative. With rapidly increasing yields on long-dated bonds, I would have expected this to be a positive number. Does this signify that the company pension fund has lost a substantial amount of its own -- has it lost a substantial amount on its liability-driven investments? Or is it purely a 24th of September 2022 position? If the latter, what is the management's expectation for this line item in the next 6 months?
Yes. Thanks for that question. I think if I differentiate between the accounting numbers on this and the actuarial. So if I start with the accounting one, as you can see, we have swung from a surplus to a deficit and that swing over the last 6 months. The principal reason for that, I think there is some notes in the accounts on this is that we've had that partial buy-in of the scheme, GBP 390 million, we paid about GBP 97 million premium for that. So that's had an impact on our accounting basis.
Historically, we've seen swings over the last few years, for those of you who've been around, of swings from surplus to deficits, but the key thing here is that, that is not a determinant of the company contributions in terms of paying off a deficit. If I look at this from an actuarial perspective, as I said earlier, we started with GBP 119 million deficit as April '21. 18 months later, it's come down to GBP 92 million. So it has fallen GBP 27.5 million. That's the critical thing that is kind of determined in terms of company contributions.
On a buyout basis, the increase in gilts that we've seen through this recent market volatility has substantially reduced the buyout position from where it was back in April, that has come down substantially. And that is largely driven because of the market volatility and there are [indiscernible] in place. We've seen the liabilities fall on actuarial basis, assets have fallen too. But from a buyout perspective, is improved significantly because of those widening spreads, but also because of favorable reinsurance pricing that we're seeing.
And one of the key things we're trying to do as a company is trying to lock in or protect the kind of fall that we've seen in buyout over the last 18 months or so because, obviously, there is a risk that if those start to come back, the market comes back and gilt start to narrow, then obviously, there's a risk that the buyout position goes up.
So it's critically important for us to try and leverage the opportunity around the fall in that buyout value. And I think moving to a sole trustee model will really unlock the opportunities -- the wider opportunities that this potentially presents to the company and also making sure that we can operate at pace and drive efficiency through at speed.
Great. The next question is from Rob Paterson. Management have not bought shares in De La Rue since the fundraising. Should investors have seen this as a sign that in reality you don't have confidence in the future of the business?
Rob, absolutely not. That is not how we see it. I think we all have personal circumstances in terms of our own shareholdings and position. I personally put in GBP 150,000 of my money at the time of the equity raise. I stand by the future of this company. I am very pleased that I hold that shareholding. But I think there is always a limit on what one personally can do in terms of investment.
So I would not read that in any way as a negative. I have full confidence in where we're going. I'm actually very excited about the future. I think we have a really exceptional value creating position. And I think you will see the company start to accelerate even as I say, without assuming too much market change next year.
Okay. We have 3 questions from Richard Bernstein from [indiscernible]. You state that the second polymer line in Westhoughton is now fully operational. Is it not the case that De La Rue is currently consulting with staff to significantly reduce or mothball this facility because you haven't won any business worthy of announcing? That's the first question.
No. That's not correct. It's not correct in the sense of mothballing the lines. We were always and continually look at staffing levels and making sure that we optimize the running of our capacity. We currently have running in Westhoughton, a very substantial and large run of work. And although there is certain consultations going on in that facility, that is related to our ongoing adjustments of thing. But the talk of mothballing the facility is completely incorrect.
Okay. Did the turnaround plan include today's material uncertainty going -- concern or disqualifications just 28 months after we, the shareholders, gave you GBP 100 million?
I'm not sure whether to take that question as somewhat sarcastic or what it's intended to get to. I think what I will say about today's comments from EY is what I said in the presentation. The only way that management and the Board understand that position is through an overabundance of caution from EY based on an analysis that must assume considerable downside to our base plan and considerable downside without any mitigation actions from management.
And that's why I said earlier, and I will say again that I believe EY's position on this is based on an analysis that is neither plausible nor realistic. And I think that gives you a little bit of a sense of the depth of feeling on this matter.
And the final question from Richard. In Kenya, you print 1 billion notes a year. What volumes are you expecting for 2023 given that most of the staff have recently been made redundant?
We don't disclose individual print volumes at any of our print sites.
Okay. A follow-up question then from Rob Paterson. How, if at all, does management plan to engage with Crystal Amber after today's disappointing results?
I think it's very clear that what we stated and continue to state is that we have, and I personally have, over the last 3 years, continually engaged with Crystal Amber, met on many, many occasions, listened to Crystal Amber's concern. And indeed, we have a meeting scheduled for this afternoon. So that will be the next time that we will sit and listen to Crystal Amber and their concerns.
Unless there's any further questions from the room, I'll hand back to you, Clive for any closing remarks.
Great. Thank you very much. Just in concluding, therefore, I do think it's really important just to highlight three things. Number one is that this management team saved De La Rue, and it was the turnaround plan that was enacted that saved the company.
Secondly, that although, of course, when we set out the turnaround plan in February 2020, we were not expecting the world to fairly rapidly change in the sense of COVID and wars and other inflationary pressures. So of course, that plan was not done with those in mind, but what I think is the second point I'd like to stress is that because of the actions that we have taken over the last 3 years, we are building a strong and resilient company, able to weather the current economic environment. That would not have been the case if we hadn't done what we have done over the last 3 years.
And thirdly, the third point that I'd like to conclude with is that going forward, we have made a very firm commitment to free cash flow generation starting next financial year and continuing thereafter based on an increased profitability, lower capital expenditure, greater focus on working capital management and greater efficiencies and productivities throughout the business.
So I personally am very excited about leading De La Rue going forward, and I'm very, very positive about its future. Thank you.