Annual Financial Report
De La Rue plc - Publication of Documents
De La Rue plc (the Company) has today posted or otherwise made available the following documents to shareholders:
Annual Report 2011
Notice of Annual General Meeting to be held on 21 July 2011
In accordance with Listing Rule 9.6.1, the Company has today submitted a copy of the above documents to the UK Listing Authority via the National Storage Mechanism and the documents will shortly be available for inspection at www.Hemscott.com/nsm.do
Copies of the documents are also available of the Company's website www.delarue.com
In addition, the information below which is extracted from the Annual Report 2011 is in accordance with the requirements of the DTR 4.1.3 and DTR 6.3.5 to make public an annual financial report.
DE LA RUE PLC ANNUAL REPORT ANNOUNCEMENT
YEAR TO 26 MARCH 2011
KEY FINANCIALS
|
|
2010/11 £m |
2009/10 £m |
|
|
Revenue |
463.9 |
561.1 |
|
|
Operating profit * |
40.4 |
109.2 |
|
|
Profit before tax and exceptional items |
33.3 |
104.1 |
|
|
Profit before tax |
72.8 |
96.6 |
|
|
|
|
|
|
|
Headline earnings per share * |
24.0p |
76.2p |
|
|
Basic earnings per share |
67.6p |
71.0p |
|
|
Dividend per share |
42.3p |
42.3p |
|
|
* |
Group operating profit and headline EPS are reported before net exceptional income of £39.5m in 2010/11 and an exceptional cost of £7.5m in 2009/10 |
||
Summary
· Operating profit of £40m, significantly below prior year, reflecting paper production issues and an unrelated reduction in banknote print volumes
· Following a comprehensive business review, an Improvement Plan has been formulated with a target operating profit in excess of £100m within three years
· Final dividend maintained at 28.2p, demonstrating the Board's confidence in the business and in delivering the Improvement Plan
· Exceptional gain of £55m from the sale of the Group's investment in Camelot
· UK Passport successfully launched on schedule in October 2010
Nicholas Brookes, Chairman, commented:
"The 2010/11 financial year has undoubtedly been a difficult one for De La Rue, our employees, customers and shareholders. We have dealt with a number of challenges including paper production issues, lower than expected banknote print volumes, changes in senior management and a takeover approach.
"De La Rue's strengthened senior management team and its loyal, experienced and skilled employees will build on the Group's fundamental strengths to put the business back on track.
"The Improvement Plan has a target to achieve an operating profit in excess of £100m within three years by both restoring revenue growth and delivering significant cost reduction. The Board is confident that this plan can be delivered and its decision to maintain the dividend reflects that confidence, and the strong fundamentals of the business."
Tim Cobbold, Chief Executive, commented:
"Current trading is in line with the Board's expectations with an encouraging order book profile and a good pipeline of opportunities.
"Whilst recognising the challenges ahead, I am confident that, given the strong fundamentals of De La Rue's business, the commitment of its employees and a clear Improvement Plan, we will deliver the value that our shareholders expect.
"I am determined that De La Rue will become a more efficient, customer focused, innovative business which will be well placed to grow sustainably in the future."
For enquiries, please contact:
|
Tim Cobbold |
Chief Executive |
+44 (0)1256 605000 |
|
Colin Child |
Group Finance Director |
+44 (0)1256 605000 |
|
Clare Lloyd Williams |
Group Communications Manager |
+44 (0)1256 605000 |
|
Jon Coles/Kate Holgate |
Brunswick |
+44 (0) 20 7404 5959 |
24 May 2011
|
1 |
As the world's largest integrated commercial security printer and papermaker, De La Rue is a trusted partner of governments, central banks, issuing authorities and commercial organisations around the world. The Group is involved in the design and production of over 150 national currencies and a wide range of security documents including passports, driving licences, authentication labels and tax stamps. In addition, the Group manufactures sophisticated, high speed, cash sorting equipment. De La Rue also offers a range of specialist services and software solutions including government identity schemes, product authentication systems and cash management processing solutions. De La Rue employs approximately 4,000 people worldwide and is listed on the London Stock Exchange. For further information visit De La Rue's website at www.delarue.com |
DE LA RUE PLC ANNUAL REPORT ANNOUNCEMENT
YEAR TO 26 MARCH 2011
SUMMARY OF GROUP RESULTS
The year was dominated by the paper production issues at one of the Group's facilities and an unrelated, but significant, reduction in banknote print volumes. These factors resulted in a reduction of 36 per cent in paper output while print volumes decreased by 24 per cent from the high levels experienced in the prior year. These issues are more fully described below.
Revenue fell by 17 per cent to £463.9m (2009/10: £561.1m) predominantly as a result of the lower paper and print volumes sold in the year representing £122m of the movement. Identity Systems (IDS) revenue increased by £31m following the completion of the implementation phase of the UK Passport contract. Security Products' revenue was down £12m mainly due to the flow through impact of lower internal component sales from the Holographics operation into the Currency business. During the year, favourable foreign exchange movements contributed £10m to revenue (2009/10: £27m).
Operating profit before exceptional items decreased by 63 per cent to £40.4m (2009/10: £109.2m) due to the volume shortfalls noted above as well as a less favourable product mix. These reductions were partly mitigated by an improved trading performance of £4m in Cash Processing Solutions (CPS), following the reorganisation of the business, and a favourable impact of foreign exchange of £6m (2009/10: £7m). Operating profit margins (before exceptional items) were 8.7 per cent (2009/10: 19.5 per cent).
There was an operating exceptional charge of £15.6m in the year (2009/10: £7.5m). This comprised costs of £29.0m arising from the paper production quality issues in addition to corporate costs of £2.6m relating to the takeover approach received at the end of 2010. These costs were partially offset by a one off curtailment gain of £16.0m arising from the closure of the defined benefit pension scheme to further accruals from 2013. In addition, a non operating exceptional profit of £55.1m has been recognised following the sale, for £77.6m, of the Group's investment in Camelot, the UK national lottery operator.
Profit before tax and exceptional items decreased by 68 per cent to £33.3m (2009/10: £104.1m) due to the trading issues noted above and in addition, there was no income in the year from associates (2009/10: £6.3m), following the sale of the Group's investment in Camelot. This was partly offset by lower external interest of £3.8m (2009/10: £5.1m) and pension interest charges of £3.3m (2009/10: £6.3m). Headline earnings per share decreased by 69 per cent to 24.0p (2009/10: 76.2p) while the basic earnings per share was 67.6p compared with 71.0p in 2009/10, representing a decrease of 5 per cent.
After paying a one off special pension contribution of £35.0m, the cash outflow from operations in the year was £20.3m (2009/10: inflow of £116.1m). Excluding this contribution cash generated from operations in the year was £14.7m. The reduction reflects the lower level of trading in the period and the paper production issues. The Group ended the year with net debt of £31.2m (2009/10: £11.0m). Interest cover remained good at 21.0 times (2009/10: 21.2 times).
PAPER PRODUCTION ISSUES
In July 2010 the Board commissioned an investigation by external lawyers into issues that had been brought to its attention internally. The investigation, which was completed in October 2010, found nothing of substance to support the matters raised other than in respect of some paper production issues where it was found that a small number of the many detailed specification parameters of some paper had fallen marginally short of specification. It was also established that certain paper specification test certificates had been deliberately falsified. The Board reported the findings of the investigation to the appropriate authorities, who are considering the matter, and is implementing a number of measures arising from the findings of the investigation.
Whilst the Board was satisfied that neither the physical security nor the security features in the paper were compromised, production and shipment of the affected banknote paper was immediately, and remains, suspended.
Discussions remain ongoing with the principal customer concerned and the authorities, and therefore there remains uncertainty as to the ultimate outcome of these issues, including their financial impact.
Supply of all other banknote paper and all the other activities of the Group, including banknote printing, were and remain unaffected. Every effort was made to keep customers well informed and the Board values their continuing support.
DIVIDENDS
The Board is recommending a final dividend of 28.2p per share (2009/10: 28.2p per share), subject to shareholders' approval. This will be paid on 4 August 2011 to shareholders on the register on 8 July 2011. Together with the interim dividend paid in January 2011, this will give a total dividend for the year of 42.3p (2009/10: 42.3p per share).
The Board's decision to maintain the dividend reflects its confidence in both the strong fundamentals of the business, including a robust cash flow and a strong balance sheet, and in its ability to recover from the setbacks of 2010/11.
IMPROVEMENT PLAN
An Improvement Plan has been formulated which has at its core the objective of leveraging the capabilities of the Group more effectively than it has done in the past and providing focus to its activities. This is a pragmatic plan and recognises that the business has fundamental strengths upon which De La Rue can build but that the Group must become more efficient and effective.
The target is to return the business to an operating profit in excess of £100m within a three year timeframe by restoring the growth in revenue to historic rates of around 4 per cent, although greater growth is expected in the current year. In addition c£30m of cost reductions are planned, accruing broadly evenly over the three years.
It is estimated that the Improvement Plan will incur exceptional charges in the region of £25m and related capital expenditure of approximately £20m, with the majority of the cash cost expected to arise in the first two years.
The Improvement Plan has four defining principles:
· Customer focus
The Group will adopt a One De La Rue approach to strengthen sales capability and reach. Regional and country sales plans are being developed and executed
· Innovation
De La Rue will accelerate product innovation and deploy new technologies to provide market leading security solutions and features. The Group will explore new partnerships to generate, within its market, new business streams to improve its competitive position and market access
· Professionalism
Standardised processes and common systems, including IT, will be adopted in order to improve and develop the level of professionalism in the business
· Operational excellence
De La Rue will reduce its cost base, improve quality and productivity, increase its market competitiveness and grow capacity through improved asset utilisation. Specific initiatives, which have already been started, include:
o Operational process improvement - reducing waste and improving quality
o Effective procurement
o Optimisation of Group facilities
Reshaped organisation
The organisation will be reshaped in order to strengthen further the senior management team and allow De La Rue's capabilities to be used more effectively. This structure will ensure management focus on each element of the Improvement Plan as follows:
· A new Group wide supply chain function will target quality improvement and waste reduction. External recruitment to lead this area is well advanced
· The senior management of the three smaller 'Solutions' businesses, CPS, Security Products and IDS will be consolidated into a single business unit. This business will be led by Kevin Freeguard, previously responsible for CPS and Security Products, and will maximise the use of common capabilities, whilst retaining appropriate market insight
· The senior management of the Currency business will concentrate on serving the customer to deliver revenue growth whilst maximising the synergies between its sales resource and that of the Solutions business. The Holographics operation, previously a part of Security Products, will become part of the Currency business, upon which it depends. The Currency business will continue to be led by Keith Brown
· A new business development function will lead and accelerate the innovation within the Group and will be responsible for all (non IT) related product development, R&D and for exploring new business relationships and partnerships. This will be led by Constance Baroudel, previously Group Director of Strategic Marketing
· To drive the change effectively through the organisation James Thorburn, previously Managing Director of IDS, will lead a Business Transformation team
PEOPLE
De La Rue is fortunate to have experienced and loyal employees and the Board would like to take this opportunity to thank them all for their dedication and hard work.
BOARD CHANGES
As previously announced, the year has seen a number of changes to the Board. Victoria Jarman joined as a Non-executive Director on 22 April 2010 and Colin Child joined the Board on 1 June 2010 as Group Finance Director. Simon Webb left this role and the Board on 31 May 2010.
James Hussey resigned from the Board as Chief Executive on 12 August 2010. On the same date Nicholas Brookes was appointed Executive Chairman and Colin Child, Group Finance Director, took on the additional role of Chief Operating Officer, roles held until 1 January 2011 when Tim Cobbold was appointed Chief Executive.
Tim brings a wealth of experience, including managing international businesses at the most senior level for more than 20 years. His experience is proving invaluable as the Group pursues its Improvement Plan and adopts a more modern and efficient approach which will not only help develop the De La Rue brand but ensure that the Group continues to meet the expectations of its international customer base.
OPERATIONAL REVIEWS
Currency
|
|
2010/11 £m |
2009/10 £m |
Change
|
|
Revenue |
289.0 |
411.2 |
(30)% |
|
Operating profit before exceptional items |
28.5 |
95.3 |
(70)% |
|
Operating profit margin |
9.9% |
23.2% |
|
|
Banknote print volume (notes) |
5.9bn |
7.8bn |
(24)% |
|
Banknote paper output (tonnes) |
9,900 |
15,500 |
(36)% |
Banknote print volume at 5.9bn notes (2009/10: 7.8bn) were 24 per cent below the high level of the prior year due to a number of factors including the timing of orders, changes by customers to existing order volumes and tenders that were expected but not issued or not won. This reduction reflects the potential for short term order variability caused by the timing of a small number of key orders.
Paper volumes of 9,900 tonnes (2009/10: 15,500 tonnes) were down 36 per cent primarily as a result of the suspension of certain supplies following the paper production issues.
Revenue fell by 30 per cent to £289.0m (2009/10: £411.2m) reflecting the reduction in trading volumes. Operating profit at £28.5m (2009/10: £95.3m) was down 70 per cent, the result of the lower volumes and adverse product mix compared with the prior year. Consequently operating margins were 9.9 per cent (2009/10: 23.2 per cent) down 13 percentage points after offsetting productivity benefits and a favourable foreign exchange impact (due to the continued weakness of sterling against the euro and the US dollar).
The year end order book, excluding currently suspended orders, was £155m (2009/10: £166m), with a greater weighting towards the first half than in the previous year. In addition enquiries are at a higher level than at this time last year and there is a good pipeline of opportunities.
The significant increase in worldwide cotton prices during the final quarter of the financial year had a limited impact. However, if prices remain at the current level, the impact in the 2011/12 financial year will be more significant.
Cash Processing Solutions
|
|
2010/11 £m |
2009/10 £m |
Change
|
|
Revenue |
57.4 |
56.9 |
1% |
|
Operating profit / (loss) before exceptional items |
0.5 |
(3.5) |
- |
|
Operating profit margin |
0.9% |
(6.2)% |
|
CPS has made steady progress during the year, returning to profit, despite continued challenging trading conditions and some delays in customer decision making. This progress is expected to continue in the new year.
Although revenue remained broadly unchanged, the business reported an increased operating profit of £0.5m (2009/10: loss £3.5m). This reflected the positive impact of both the restructuring in 2009/10 which delivered a significant reduction in the cost base and the rationalisation of the product range.
Sales of the large DLR 7000 banknote sorters progressed well across all market sectors and geographies leading to an improved product order book at the end of the year. Service revenues were maintained and remain an important source of income from the installed base.
Security Products
|
|
2010/11 £m |
2009/10 £m |
Change
|
|
Revenue |
63.3 |
74.9 |
(15)% |
|
Operating profit |
9.0 |
14.8 |
(39)% |
|
Operating profit margin |
14.2% |
19.8% |
|
Security Products had a difficult year reporting reduced revenue of £63.3m (2009/10: £74.9m) and operating profits of £9.0m (2009/10: £14.8m). Performance was adversely impacted by the reduction in banknote print and paper volumes in the Currency business which it supplies, compounded by an adverse product mix within the Holographics business. Together these issues resulted, despite the execution of a cost reduction plan to mitigate the impact, in a 6 percentage point reduction in the operating profit margin.
Sales cycles in the market can be lengthy but during the year the Division achieved some important contract wins, including the first advanced tax stamp solution which includes newly developed track and trace software. In addition, enhanced operational standards were successfully implemented for Microsoft, one of the business' major customers.
Identity Systems
|
|
2010/11 £m |
2009/10 £m |
Change
|
|
Revenue |
62.8 |
32.0 |
96% |
|
Operating profit |
2.4 |
2.6 |
(8)% |
|
Operating profit margin |
3.8% |
8.1% |
|
IDS reported increased revenue of £62.8m (2009/10: £32.0m). This increase is largely a result of the completion of the implementation phase of the UK Passport contract. Operating profit of £2.4m (2009/10: £2.6m) is after a £0.6m write down on an asset made obsolete following investment for the UK Passport. Excluding this write down, underlying profit would have been up 15 per cent.
During the year IDS successfully commenced production and issuance of the new UK Passport. This is one of the largest and most prestigious identity systems in the world with volumes of up to six million books on an annualised basis, worth £400m over 10 years.
The international part of the business performed satisfactorily, winning new contracts and implementing projects across the full product range, including an increasing number of electronic identity solutions.
INTEREST
The Group's net interest charge was £3.8m (2009/10: £5.1m), which reflects lower levels of debt in the first half of the year, following the cash receipts of £77.6m for the Group's investment in Camelot. In addition the IAS 19 (accounting for defined benefit pension plans) related finance item, arising from the difference between the interest on liabilities and the expected return on assets decreased to £3.3m (2009/10: £6.3m). The decrease is a result of higher than expected returns on the increased market valuation of pension assets at the 2009/10 year end and the additional scheme assets following the special contribution of £35m after the Camelot divestment noted above.
EXCEPTIONAL ITEMS
The results for the year include the following items:
· An exceptional operating gain of £16.0m arising as a result of the previously announced closure, to future accrual, of the Group's defined benefit pension schemes
· Exceptional operating charges of £29.0m relating to the paper production quality issues referred to above. These include the write off of inventories and trade receivables together with other costs relating to the investigation and rectification of these matters. Provision has not been made for the potential cost of resolutions or for potential fines from regulatory authorities (as more fully described in note 12: Contingent liabilities). The nature and extent of these resolutions will be the subject of ongoing discussions, the outcome of which cannot be estimated reliably at present
· Corporate costs of £2.6m incurred in relation to the engagement of legal and professional advisors following a takeover approach for the Group
· A non operating gain of £55.1m on the sale of the Group's investment in Camelot, the UK national lottery operator. The sale was completed on 8 July 2010
TAXATION
The net tax charge for the year was £5.4m (2009/10: £26.2m). The effective tax rate pre exceptional items, was 27.0 per cent, broadly in line with the previous year's rate. A credit of £3.6m (2009/10: £2.4m) arises on the exceptional charges noted above.
CASH FLOW AND BORROWINGS
Cash outflow from operations was £20.3m (2009/10: inflow of £116.1m) after a one off special pension contribution of £35.0m (2009/10: nil). Increased inventory reflected the ramp up of the UK Passport contract as well as higher closing banknote stock volumes while increased debtors reflected the timing of sales around the 2010/11 year end. Advance payments of £54.6m (2009/10: £44.0m) benefited from some large receipts immediately prior to the year end.
Capital expenditure of £30.7m (2009/10: £33.1m) was higher than depreciation, reflecting the phasing of investment expenditure between years predominantly within the IDS and Currency operations.
The Group ended the year with net debt of £31.2m (2009/10: £11.0m) largely reflecting the reduced trading noted above. The gross cash receipt of £77.6m for the Group's investment in Camelot was offset by special pension contributions totalling £42.5m, and dividend payments of £42.1m.
The Group utilises a £175m revolving credit facility which expires in September 2013. Key financial covenants on this facility are unchanged and require that the interest cover be greater than four times and the net debt to EBITDA ratio be less than three times.
UK PENSION SCHEME
Pension deficit and funding
During 2010/11, special funding payments of £42.5m were made to the Group's pension fund, comprising the scheduled contribution of £7.5m and a one off special contribution of £35m following the sale of the Group's investment in Camelot. Part of the scheduled contribution for 2010/11 was paid in the prior year.
IAS 19 - Employee Benefits
The valuation of the UK pension scheme under IAS 19 principles indicates a scheme deficit pre tax at 26 March 2011 of £100.5m (March 2010: £124.8m). This significant decrease in deficit during the year was due to the Group's special (£35m) and ongoing special contributions (£7.5m) along with the growth in the underlying stock market. This has been partly offset by the reduction, from 5.8 per cent to 5.6 per cent, in the bond discount rate used to value the scheme liabilities. The charge to operating profits in respect of the UK pension scheme for 2010/11 was £7.6m (2009/10: £4.5m). In addition, under IAS 19 there was a finance charge of £3.3m arising from the difference between the expected return on assets and the interest on liabilities (2009/10: £6.3m).
OUTLOOK
De La Rue's strengthened senior management team and its loyal, experienced and skilled employees will build on the Group's fundamental strengths to put the business back on track to deliver the value shareholders expect.
Current trading is in line with the Board's expectations with an encouraging order book profile and a good pipeline of opportunities.
The Improvement Plan has a target to achieve an operating profit in excess of £100m within three years by both restoring revenue growth and delivering significant cost reduction. The Board is confident that this plan can be delivered.
-ends-
Risk and risk management
De La Rue's reputation is based on security, integrity and trust. The risks outlined in this section represent the principal major uncertainties and trends which may have an impact on De La Rue's ability to implement effectively its future strategy. This section summarises the types of risks which are either specific to De La Rue or which could have a material adverse effect on the Group, together with the controls which have been put in place to manage those risks. It is not an exhaustive list as some risks may be as yet unknown and other risks, currently regarded as immaterial, could become material.
Risk management and governance structure
Risk owners and managers
• Responsible for operational management and oversight of risk within individual businesses or functional areas
• Allocation of appropriate levels of resource for individual risk controls
Risk Committee
• Proposes risk management framework
• Reviews business and Group risk registers
• Members include the Chief Executive, Group Finance Director, General Counsel and Company Secretary, business unit managing directors and Group Director of Business Continuity
• Considers actions to improve management of risk
• Considers new or emerging risks
Audit Committee
• Considers adequacy of internal controls and risk management framework
• Receives updates on risk management from the Chairman of the Risk Committee
• Receives reports from internal and external audit on status of internal controls
Board
• Responsible for governance structure
• Defines high level risk appetite and risk management framework
• Receives reports from Audit and Risk Committees on risk and internal controls
Combined Code
The Combined Code on Corporate Governance requires the Board to maintain a sound system of internal control to safeguard shareholders' investment and the Group's assets and at least annually to conduct a review of the effectiveness of the Group's system of internal controls. During the year, the Board carried out its annual review which covered all material controls, including financial, operational and compliance controls and risk management systems. Additionally, the Board received information about the Group's operations throughout the year enabling it regularly to evaluate the nature and extent of the risks to which the Group is exposed.
Internal Control
The Board has overall responsibility for the Group's system of internal control and for reviewing its effectiveness. It relies on the Audit and Risk Committees to assist in this process. This is the first full year since significant changes to the risk assessment procedures were implemented to improve the management of risks at the business unit and functional levels. A further review has been undertaken since year end by external risk advisers to assist the Board in determining whether, in the light of events during the year, further strengthening is necessary in the area of risk management and activities overseen by the Risk Committee. It is anticipated that, as a result of this review, further changes will be made to the Group's risk management framework and processes and these will be reported in the 2011/12 Annual Report. Some measures already undertaken are set out on page 38 of the De La Rue plc Annual Report 2011. Details of the Audit and Risk Committees are set out in the Corporate Governance Statement on pages 41 and 42 of the De La Rue plc Annual Report 2011.
Management is responsible for implementing the controls which are designed to meet the particular needs of the Group, and the risks to which it is exposed, with procedures intended to provide effective internal control. The controls by their nature are designed to manage rather than eliminate risk and can only provide reasonable but not absolute assurance against material misstatement or loss. The processes used by the Board and, on its behalf, by the Audit and Risk Committees have been in place throughout the year, and include reviewing:
• Monthly finance, operational and development reports
• Internal and external audit reports
• Significant issues identified by internal and external audits
• Significant Group risks and risk mitigation actions reported by the Risk Committee including updates to the Group's risk register
• Annual compliance statements in the form of self audit questionnaires
• Reports on other matters such as security, health, safety, environmental issues and fire risks
Internal Financial Control
The financial control framework includes the following key features:
• An annual strategic planning process
• An annual budget
• A system of monthly reporting by each business unit which involves comparison of actual results with the original budget and the updating of a full year forecast
• Monthly reporting of performance to the Board
• Audited annual Financial Statements
• Interim Financial Statements reviewed by the auditors
The main controls which address the financial implications of the major business risks are centred on strict approval procedures. These are reviewed annually, approved by the Board and apply to all subsidiaries. They include:
• Executive Directors' approval of all major non routine revenue expenditure
• Board approval of all major capital expenditure
• Board approval of all acquisitions and disposals
• A system of authorisation limits which cascades throughout the Group
• Board consideration of any matter likely to have a material effect on the Group
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. The Board of Directors monitors earnings per share, which the Group defines as the earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the year. The Board also monitors the level of dividends to ordinary shareholders. There were no changes to the Group's approach to capital management during the year and the Group is not subject to any externally imposed capital requirements.
Treasury, foreign exchange and borrowing facilities
The Group Treasury department provides a central service to Group companies and conducts its operations in accordance with clearly defined guidelines and policies, which have been reviewed and approved by the Board. Treasury transactions are only undertaken as a consequence of underlying commercial transactions or exposures and do not seek to take active risk positions. It is Group Treasury's role to ensure that the Group has sufficient available borrowing facilities to meet its needs in the foreseeable future.
Financial risk management
Overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
- Currency risk
- Interest rate risk
The Group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk and the management of capital are set out below.
The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board has established the Risk Committee, which is responsible for developing and monitoring the Group's risk management policies. The Committee reports regularly to the Board on its activities.
The Group's risk management policies are established 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. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group's overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Financial risk management is carried out by Group Treasury under policies approved by the Board.
Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group's operating units. Group Treasury provides written principles for overall 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.
The Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by the Internal Audit function. The Internal Audit function undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
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 mainly by the individual characteristics of each customer. The demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Geographically, there is no concentration of credit risk. Where appropriate, letters of credit are used to mitigate the credit risk from customers.
The Group has established a credit policy that ensures that sales of products are made to customers with an appropriate credit history. The Group has a policy to procure advance payments during order negotiation which further reduces credit risk. Derivative counterparties and cash transactions are limited to high credit quality financial institutions and the Group has policies that limit the amount of credit exposure to any one financial institution.
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 when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility in funding by keeping committed credit lines available.
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 objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
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 net 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 and between 60 per cent and 100 per cent 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 and through foreign currency swaps.
Interest rate risk
All material financial assets and liabilities are maintained at floating rates of interest. Where the Group has forecast average levels of debt above £50m on a continuing basis, floating to fixed interest rate swaps will be used to fix the interest rate on a minimum of 50 per cent of the Group's debt for a period of at least 12 months.
Principal risks
|
Each division and every Group function has developed and maintains a risk register, capturing significant risks to which the relevant business unit is exposed or which have been identified as a risk to the Group by the relevant function. These risks are reviewed on a regular basis by the Risk Committee, which identifies those risks which could have a material adverse impact in the context of the Group as a whole, and which are then reported to the Board. The principal risks identified by the Risk Committee and reported to the Board in 2010/11 are set out below. These do not appear in any particular order of potential materiality or probability of occurrence. |
||
|
Risk |
|
Mitigation |
Non compliance/illegal behaviour by third parties acting outside the law or De La Rue policiesIn some countries De La Rue relies on the services of third parties to represent its interests. There is a risk that third parties such as suppliers or agents could operate in a manner contrary to the Group's strict policies on ethical business conduct or the law, exposing the Group to potential financial and reputational damage. |
|
The Group has a process for the appointment and remuneration of third party partners which operates independently of the sales function. This process was reviewed during the year in anticipation of the implementation of the UK Bribery Act (the 'Act') and the changes will be reviewed by external advisers to provide further assurance. The process includes a risk assessment of overseas agents and external advisers are engaged to undertake due diligence as appropriate. The process covers, inter alia, the appointment, reappointment and remuneration of agents. Further control measures have been introduced such as dedicated training for sales personnel, senior managers and agents on the Code of Conduct and anti bribery and corruption issues with a particular focus on achieving compliance with the Act. Whistleblowing procedures have also been improved to encourage employees to report any suspicious conduct. |
Illegal behaviour or serious misconduct by employeesThere are already many controls across the business to ensure that standards of behaviour by employees are maintained at an appropriate level. However, as has been demonstrated during the year, it is possible that employees acting either singly or in collusion with others could act in contravention of the Group's stringent requirements. This could result in major reputational and financial damage to the business. |
|
The Business Code of Conduct is kept under regular review and is enforced robustly, including dealing with non compliances through disciplinary processes where necessary. The code has been fundamentally reviewed during the year and was relaunched in May 2011 as the Code of Business Principles. All employees will receive a briefing on the code from a senior manager. As part of the new code, the Group's whistleblowing policies and procedures will also be relaunched. Strict recruitment procedures are maintained including mandatory vetting processes and probationary periods for all employees. |
Loss of key siteThere are a number of key manufacturing sites across the business. The total loss of any one of these key sites could have a major financial impact, particularly where the site forms a single source of supply for the business. |
|
The Group aims to achieve the highest standards of health, safety and environmental management. Risk engineering to minimise risks, particularly from fire hazards and the use of flammable solvents, is a key focus to ensure that site risks are clearly prioritised and resourced and actions taken, wherever possible, to eliminate or minimise these risks. The development, updating and testing of business continuity plans is also an essential component in maintaining assurance for the continuity of operations. |
Health and safety failureAll De La Rue's activities are subject to extensive internal Health, Safety and Environmental (HSE) procedures, processes and controls. Nevertheless, there is a risk that failure of process could in the worst case lead to a serious injury or fatality. |
|
The Group has detailed corporate health and safety standards which are internally audited and supplemented by certification to the OHSAS18001 standard in all major facilities providing regular independent external audit verification. The Health, Safety and Environment Committee reviews HSE performance regularly. The Committee is chaired by the General Counsel and Company Secretary and is constituted of representatives from the Executive Committee, including the Chief Executive and managing directors of each division, as well as functional heads. Each manufacturing facility has clear HSE action plans which are prioritised, monitored and subject to review by local senior management to ensure that health and safety standards are maintained. HSE performance is reported to the Board monthly. |
Product securityThere is the potential for reputational damage in the event of the loss of materials from a manufacturing site 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. |
|
Security is a key focus across De La Rue Robust physical and audit security procedures at production sites reduce the risk of an inadvertent loss or theft during manufacturing. Movements of security materials between De La Rue sites and for onward delivery to customers are conducted applying stringent operational procedures using carefully selected carriers and suitably screened personnel. All movements are risk managed and monitored globally on a 24/7 basis. Procedures are kept under continuous review and any incident or non compliance is always fully investigated. |
Environmental breachDe La Rue's main banknote paper manufacturing site is at Overton mill which is located in an environmentally sensitive area. Any significant breach of operations, such as unauthorised discharges, could result in immediate suspension of operations at the site. |
|
Environmental awareness is afforded high priority at all De La Rue manufacturing sites and particularly at Overton. To ensure continued compliance with regulations, constant monitoring of all key operating parameters is in place with regular testing of discharge water against performance criteria agreed by the Environment Agency. Controls and specialist personnel are in place on a continuous basis throughout the year, with regular training and awareness programmes in place for all employees. |
Adverse movements in foreign exchangeThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and euro. Any material exposure to foreign exchange risk could have a major effect on the Group's profits. |
|
The Group aims to hedge between 60 and 100 per cent of foreign exchange exposure risk arising from future commercial transactions and recognised assets and liabilities. An annual review of hedging policy is presented to the Board. |
Breach of competition regulationsBreach of competition regulations could result in significant financial penalties as well as reputational damage. |
|
Regular training takes place for all sales and other personnel who may have contact with competitors, for example at industry forums or during formal tender processes. |
Information securityThe confidentiality, integrity and availability of information systems could be affected by factors that include human error, ineffective design or operation of key controls or through malfunction or deliberate attack. Outages and interruptions could affect the Group's ability to conduct day to day operations and any compromise of the confidentiality of information could impact its reputation with current and potential customers. |
|
De La Rue keeps all aspects of its security arrangements under regular review. There are a number of controls in place to manage this risk including network segregation, access restrictions, system monitoring, security reviews and vulnerability assessments of infrastructure and applications. Disaster recovery plans are in place to help recover from significant outages or interruptions and a major business impact assessment has recently been undertaken to improve the effectiveness of business continuity arrangements. |
Geo political instabilityPolitical unrest has the potential to delay procurement decisions for sensitive products such as banknotes and passports. Unexpected changes in key government positions may result in the unilateral cancellation of contracts under local jurisdiction. Breakdown of law and order can also disrupt freight schedules and increase shipping and delivery risks. |
|
Close and regular contact is maintained with all key stakeholders so that any changes in customer requirements can be identified early. Financial risk exposure is mitigated through the use of secured payment mechanisms such as letters of credit or through close management of costs prior to receipt of payments.
|
Failure to manage changeAs detailed in the Chief Executive's review on pages 6 to 9 of the De La Rue plc Annual Report 2011, the Group will be undertaking a major programme of change in 2011/12. Failure to manage this process could result in disruptions to the business or dilution of the intended benefits. |
|
A dedicated and fully resourced change team will be established under the full time guidance of a member of the Executive Committee. |
Responsibility Statement of the Directors in respect of the Annual Report Announcement
|
The 2011 Annual Report and Accounts, which will be issued to shareholders on 14 June 2011, contain a responsibility statement in compliance with Rule 4.1.12 of the Financial Services Authority's Disclosure & Transparency Rules. This states that each of the Directors as at 24 May 2011, the date of approval of the 2011 Annual Report and Accounts, confirms that to the best of their knowledge: (a) the Group Financial Statements prepared in accordance with International Financial Reporting Statements as adopted by the EU (adopted IFRS), 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 (b) the management report represented by the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face |
The Board
The Board of Directors that served during the year to 26 March 2011 and their respective responsibilities can be found on pages 32 and 33 of the De La Rue plc Annual Report 2011.
For and on behalf of the Board
Nicholas Brookes
Chairman
24 May 2011
GROUP INCOME STATEMENTFor the year ended 26 March 2011
|
|
|
|
|
|
|
2011 |
2010 |
|
Revenue |
|
463.9 |
561.1 |
|
Operating expenses - ordinary |
|
(423.5) |
(451.9) |
|
Operating expenses - exceptional |
3 |
(15.6) |
(7.5) |
|
Total operating expenses |
|
(439.1) |
(459.4) |
|
Operating profit |
|
24.8 |
101.7 |
|
Comprising: |
|
|
|
|
Operating profit before exceptional items |
|
40.4 |
109.2 |
|
Exceptional items |
3 |
(15.6) |
(7.5) |
|
|
|
|
|
|
Profit on sale of associated undertaking |
3 |
55.1 |
- |
|
Share of profits of associated companies after taxation |
|
- |
6.3 |
|
Profit before interest and taxation |
|
79.9 |
108.0 |
|
Interest income |
|
0.9 |
0.3 |
|
Interest expense |
|
(4.7) |
(5.4) |
|
Retirement benefit obligation finance income |
9 |
35.7 |
26.4 |
|
Retirement benefit obligation finance cost |
9 |
(39.0) |
(32.7) |
|
Net finance cost |
|
(7.1) |
(11.4) |
|
Profit before taxation |
|
72.8 |
96.6 |
|
Comprising: |
|
|
|
|
Profit before tax and exceptional items |
|
33.3 |
104.1 |
|
Exceptional items |
3 |
39.5 |
(7.5) |
|
|
|
|
|
|
Taxation |
4 |
(5.4) |
(26.2) |
|
Comprising: |
|
|
|
|
Tax on profit before tax and exceptional items |
4 |
(9.0) |
(28.6) |
|
Tax on exceptional items |
4 |
3.6 |
2.4 |
|
|
|
|
|
|
Profit for the year |
|
67.4 |
70.4 |
|
Comprising: |
|
|
|
|
Profit for the year before exceptional items |
|
24.3 |
75.5 |
|
Profit/(loss) for the year on exceptional items |
3 |
43.1 |
(5.1) |
|
|
|
|
|
|
Profit attributable to equity shareholders of the Company |
|
66.9 |
69.9 |
|
Profit attributable to non controlling interests |
|
0.5 |
0.5 |
|
|
|
67.4 |
70.4 |
|
Earnings per share attributable to the Company's equity holders |
|
|
|
|
Basic |
5 |
67.6p |
71.0p |
|
Diluted |
5 |
67.2p |
70.5p |
GROUP STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 26 March 2011
|
|
|
|
|
|
|
2011 |
2010 |
|
Profit for the financial year |
|
67.4 |
70.4 |
|
Other comprehensive income |
|
|
|
|
Foreign currency translation differences for foreign operations |
|
(1.3) |
0.1 |
|
Actuarial losses on retirement benefit obligations |
|
(31.0) |
(72.3) |
|
Effective portion of change in fair value of cash flow hedges, net of amounts recycled to the Income Statement |
|
6.8 |
6.6 |
|
Income tax relating to components of other comprehensive income |
|
5.3 |
21.4 |
|
Other comprehensive income for the year, net of tax |
|
(20.2) |
(44.2) |
|
Comprehensive income for the year |
|
47.2 |
26.2 |
|
Comprehensive income for the year attributable to: |
|
|
|
|
Equity shareholders of the Company |
|
46.7 |
25.7 |
|
Non controlling interests |
|
0.5 |
0.5 |
|
|
|
47.2 |
26.2 |
GROUP BALANCE SHEETAt 26 March 2011 |
|
|
|
|
|
Notes |
2011 |
2010 |
|
Assets |
|
|
|
|
Non current assets |
|
|
|
|
Property, plant and equipment |
8 |
162.0 |
165.6 |
|
Intangible assets |
|
23.3 |
19.3 |
|
Investments in associates and joint ventures |
|
0.1 |
0.1 |
|
Deferred tax assets |
|
27.8 |
36.5 |
|
Derivative financial instruments |
|
0.3 |
0.8 |
|
|
|
213.5 |
222.3 |
|
Current assets |
|
|
|
|
Inventories |
|
67.5 |
61.0 |
|
Trade and other receivables |
|
89.7 |
76.5 |
|
Current tax assets |
|
6.7 |
3.9 |
|
Derivative financial instruments |
|
15.5 |
20.4 |
|
Cash and cash equivalents |
|
32.6 |
41.6 |
|
Non current assets held for sale |
|
- |
20.5 |
|
|
|
212.0 |
223.9 |
|
Total assets |
|
425.5 |
446.2 |
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Borrowings |
|
(63.8) |
(51.7) |
|
Trade and other payables |
|
(164.4) |
(164.2) |
|
Current tax liabilities |
|
(33.1) |
(34.5) |
|
Derivative financial instruments |
|
(13.5) |
(24.7) |
|
Provisions for other liabilities and charges |
|
(27.0) |
(26.1) |
|
|
|
(301.8) |
(301.2) |
|
Non-current liabilities |
|
|
|
|
Borrowings |
|
- |
(0.9) |
|
Retirement benefit obligations |
9 |
(102.9) |
(127.1) |
|
Deferred tax liabilities |
|
(1.0) |
(0.3) |
|
Derivative financial instruments |
|
(0.6) |
(2.1) |
|
Other non current liabilities |
|
(2.4) |
(5.1) |
|
|
|
(106.9) |
(135.5) |
|
Total liabilities |
|
(408.7) |
(436.7) |
|
Net assets |
|
16.8 |
9.5 |
|
Equity |
|
|
|
|
Share capital |
|
45.6 |
45.5 |
|
Share premium account |
|
29.1 |
28.4 |
|
Capital redemption reserve |
|
5.9 |
5.9 |
|
Hedge reserve |
|
1.0 |
(3.9) |
|
Cumulative translation adjustment |
|
2.5 |
3.8 |
|
Other reserves |
|
(83.8) |
(83.8) |
|
Retained earnings |
|
13.0 |
10.4 |
|
Total equity attributable to shareholders of the Company |
|
13.3 |
6.3 |
|
Non controlling interests |
|
3.5 |
3.2 |
|
Total equity |
|
16.8 |
9.5 |
GROUP STATEMENT OF CHANGES IN EQUITYFor the year ended 26 March 2011 |
|
|
|||||||
|
|
Attributable to equity shareholders |
Non controlling |
Total |
||||||
|
|
|
Share |
Capital |
|
Cumulative |
|
|
|
|
|
Balance at 28 March 2009 |
45.0 |
26.5 |
5.9 |
(8.6) |
3.7 |
(83.8) |
29.0 |
2.9 |
20.6 |
|
Comprehensive income for the year |
- |
- |
- |
4.7 |
0.1 |
- |
20.9 |
0.5 |
26.2 |
|
Share capital issued |
0.5 |
1.9 |
- |
- |
- |
- |
- |
- |
2.4 |
|
Employee share scheme: |
|
|
|
|
|
|
|
|
|
|
- value of services provided |
- |
- |
- |
- |
- |
- |
1.5 |
- |
1.5 |
|
Income tax on income and expenses recognised directly in equity |
- |
- |
- |
- |
- |
- |
(0.1) |
- |
(0.1) |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(40.9) |
(0.2) |
(41.1) |
|
Balance at 27 March 2010 |
45.5 |
28.4 |
5.9 |
(3.9) |
3.8 |
(83.8) |
10.4 |
3.2 |
9.5 |
|
Comprehensive income for the year |
- |
- |
- |
4.9 |
(1.3) |
- |
43.1 |
0.5 |
47.2 |
|
Share capital issued |
0.1 |
0.7 |
- |
- |
- |
- |
- |
- |
0.8 |
|
Employee share scheme: |
|
|
|
|
|
|
|
|
|
|
- value of services provided |
- |
- |
- |
- |
- |
- |
1.9 |
- |
1.9 |
|
Income tax on income and expenses recognised directly in equity |
- |
- |
- |
- |
- |
- |
(0.5) |
- |
(0.5) |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(41.9) |
(0.2) |
(42.1) |
|
Balance at 26 March 2011 |
45.6 |
29.1 |
5.9 |
1.0 |
2.5 |
(83.8) |
13.0 |
3.5 |
16.8 |
GROUP CASH FLOW STATEMENTFor the year ended 26 March 2011 |
|
|
|
|
|
|
2011 |
2010 |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
|
72.8 |
96.6 |
|
Adjustments for: |
|
|
|
|
Finance income and expense |
|
7.1 |
11.4 |
|
Depreciation and amortisation |
|
24.4 |
23.0 |
|
(Increase)/decrease in inventory |
|
(7.9) |
4.3 |
|
(Increase)/decrease in trade and other receivables |
|
(11.6) |
16.6 |
|
Decrease in trade and other payables |
|
(9.9) |
(9.9) |
|
Decrease in reorganisation provisions |
|
(1.4) |
(5.0) |
|
Special pension fund contributions |
|
(42.5) |
(17.0) |
|
Loss on disposal of property, plant and equipment |
|
1.4 |
0.9 |
|
Share of income from associates after tax |
|
- |
(6.3) |
|
Non operating exceptional items |
3 |
(55.1) |
- |
|
Other non cash movements |
|
2.4 |
1.5 |
|
Cash generated from operating activities |
|
(20.3) |
116.1 |
|
Tax received/(paid) |
|
4.8 |
(21.0) |
|
Net cash flows from operating activities |
|
(15.5) |
95.1 |
|
Cash flows from investing activities |
|
|
|
|
Disposal of subsidiary undertakings |
|
- |
(1.0) |
|
Net proceeds from sale of investment in associate |
|
75.4 |
- |
|
Purchases of property, plant, equipment and software intangibles |
|
(30.7) |
(33.1) |
|
Development assets capitalised |
|
(4.3) |
(2.3) |
|
Proceeds from sale of property, plant and equipment |
|
0.3 |
0.5 |
|
Loans made to associates |
|
- |
(0.6) |
|
Dividends received from associates |
|
- |
6.8 |
|
Net cash flows from investing activities |
|
40.7 |
(29.7) |
|
Net cash inflow before financing activities |
|
25.2 |
65.4 |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital |
|
0.8 |
2.4 |
|
Proceeds from /(repayments of) borrowings |
|
6.0 |
(32.9) |
|
Finance lease principal payments |
|
(0.2) |
(3.1) |
|
Interest received |
|
0.9 |
0.4 |
|
Interest paid |
|
(4.5) |
(3.7) |
|
Dividends paid to shareholders |
|
(41.9) |
(40.4) |
|
Dividends paid to non controlling interests |
|
(0.2) |
(0.2) |
|
Net cash flows from financing activities |
|
(39.1) |
(77.5) |
|
Net decrease in cash and cash equivalents in the year |
|
(13.9) |
(12.1) |
|
Cash and cash equivalents at the beginning of the year |
|
37.8 |
50.1 |
|
Exchange rate effects |
|
(0.5) |
(0.2) |
|
Cash and cash equivalents at the end of the year |
|
23.4 |
37.8 |
|
Cash and cash equivalents consist of: |
|
|
|
|
Cash at bank and in hand |
7 |
31.9 |
35.1 |
|
Short term bank deposits |
7 |
0.7 |
6.5 |
|
Bank overdrafts |
7 |
(9.2) |
(3.8) |
|
|
7 |
23.4 |
37.8 |
1 Basis of preparation and accounting policies
|
|
The preliminary announcement for the year ended 26 March 2011 has been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (collectively "IFRSs") as adopted by the European Union (EU) at 26 March 2011. Details of the accounting policies applied are those set out in De La Rue plc's Annual Report 2010, as updated for the following changes in accounting policies: |
|
• IFRS 1 (Revised), First-time Adoption of International Financial Reporting Standards, which is effective for accounting periods beginning on or after 1 July 2009, simplifies the structure of IFRS 1 without making any technical changes |
|
• Amendments to IFRS 2, Group Cash-Settled Share-based Payments Transactions, which is effective for accounting periods beginning on or after 1 January 2010, provides a clear basis to determine the classification of share-based payment awards in both consolidated and separate Financial Statements • IFRS 3 (Revised), Business Combinations, which is effective for accounting periods beginning on or after 1 July 2009, harmonises business combination accounting with US GAAP. The standard continues to apply the acquisition method to business combinations, but with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently re-measured at fair value through profit or loss; goodwill and non controlling interests may be calculated on a gross or net basis; and all transaction costs, which under previous practice were treated as part of the cost of a business combination, are to be expensed • IAS 27, Consolidated and Separate Financial Statements, which is effective for accounting periods beginning on or after 1 July 2009, requires the effects of all transactions with non-controlling interests where there is no change in control to be recorded in equity. Such transactions will no longer result in goodwill or gains and losses |
|
• Amendment to IAS 39, Financial Instruments: Recognition and Measurement, for Eligible Hedged Items, which is effective for accounting periods beginning on or after 1 July 2009, clarifies how to apply the principles that determine whether a hedged risk or portion of cash flows is eligible for designation • IFRIC 16, Hedges of a Net Investment in a Foreign Operation, which is effective for accounting periods beginning on or after 1 July 2009, clarifies which currency exposures qualify for hedge accounting; which entity within a group can hold the hedging instrument; and how to determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item when an investment in a foreign operation is disposed of • Amendment to IAS 32, Financial Instruments: Presentation, which has been endorsed by the EU and which is effective for accounting periods beginning on or after 1 February 2010, addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer |
|
The financial information set out above does not constitute the company's statutory accounts for the periods ended 26 March 2011 or 27 March 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. These consolidated financial statements have been prepared on the going concern basis and using the historical cost convention, modified for certain items carried at fair value, as stated in the Group's accounting policies.
|
2 Segmental analysis
|
|
The Group's international operations are managed and reported internally on a divisional basis that reflects the different characteristics of each business. These Divisions have been disclosed as reportable segments because they are the components that the Board monitors regularly in making decisions about operating matters such as allocating resources to businesses and assessing performance. The principal financial information reviewed by the Board, which is the Group's Chief Operating Decision Maker, is revenue and operating profit before exceptional items, measured on an IFRS basis. The Group's segments are: |
|
• Currency - provides banknote paper, printed banknotes and banknote security features |
|
• Cash Processing Solutions - primarily focused on the production of large sorters for central banks, complementing the Currency business |
|
• Security Products - produces security documents, including authentication labels and tax stamps |
|
• Identity Systems - involved in the production of passports, including ePassports, together with other secure identity products |
|
2011 |
Currency |
Cash Processing Solutions |
Security Products |
Identity Systems |
Exceptional items |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Total revenue |
289.0 |
57.4 |
63.3 |
62.8 |
- |
472.5 |
|
Less: Inter segment revenue |
(0.6) |
- |
(8.0) |
- |
- |
(8.6) |
|
Revenue |
288.4 |
57.4 |
55.3 |
62.8 |
- |
463.9 |
|
Operating profit before exceptional items |
28.5 |
0.5 |
9.0 |
2.4 |
- |
40.4 |
|
Exceptional items - operating (note 3) |
(29.0) |
- |
- |
- |
13.4 |
(15.6) |
|
Operating profit/(loss) |
(0.5) |
0.5 |
9.0 |
2.4 |
13.4 |
24.8 |
|
Profit on sale of associated undertaking |
|
|
|
|
|
55.1 |
|
Net interest expense |
|
|
|
|
|
(3.8) |
|
Retirement benefit obligations net finance expense |
|
|
|
|
|
(3.3) |
|
Profit before taxation |
|
|
|
|
|
72.8 |
|
Segment assets |
197.1 |
35.3 |
23.9 |
53.7 |
- |
310.0 |
|
Unallocated assets |
|
|
|
|
|
115.5 |
|
Total assets |
|
|
|
|
|
425.5 |
|
Segment liabilities |
(106.2) |
(22.6) |
(10.8) |
(28.2) |
- |
(167.8) |
|
Unallocated liabilities |
|
|
|
|
|
(240.9) |
|
Total liabilities |
|
|
|
|
|
(408.7) |
|
Capital expenditure on property, plant and equipment |
6.1 |
0.8 |
1.7 |
14.6 |
- |
23.2 |
|
Capital expenditure on intangible assets |
2.3 |
2.7 |
- |
2.0 |
- |
7.0 |
|
Depreciation of property, plant and equipment |
15.8 |
2.1 |
2.4 |
2.9 |
- |
23.2 |
|
Amortisation of intangible assets |
0.4 |
0.6 |
- |
0.2 |
- |
1.2 |
|
2010 |
Currency |
Cash Processing Solutions |
Security Products |
Identity Systems |
Exceptional items |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Total revenue |
411.2 |
56.9 |
74.9 |
32.0 |
- |
575.0 |
|
Less: Inter segment revenue |
(1.1) |
- |
(12.8) |
- |
- |
(13.9) |
|
Revenue |
410.1 |
56.9 |
62.1 |
32.0 |
- |
561.1 |
|
Operating profit before exceptional items |
95.3 |
(3.5) |
14.8 |
2.6 |
- |
109.2 |
|
Exceptional items - operating (note 3) |
- |
(7.5) |
- |
- |
- |
(7.5) |
|
Operating profit |
95.3 |
(11.0) |
14.8 |
2.6 |
- |
101.7 |
|
Share of profits of associated companies after taxation |
|
|
|
|
|
6.3 |
|
Net interest expense |
|
|
|
|
|
(5.1) |
|
Retirement benefit obligations net finance expense |
|
|
|
|
|
(6.3) |
|
Profit before taxation |
|
|
|
|
|
96.6 |
|
Segment assets |
194.4 |
39.5 |
24.9 |
30.2 |
- |
289.0 |
|
Unallocated assets |
|
|
|
|
|
157.2 |
|
Total assets |
|
|
|
|
|
446.2 |
|
Segment liabilities |
(120.3) |
(20.9) |
(13.4) |
(14.6) |
- |
(169.2) |
|
Unallocated liabilities |
|
|
|
|
|
(267.5) |
|
Total liabilities |
|
|
|
|
|
(436.7) |
|
Capital expenditure on property, plant and equipment |
31.5 |
1.7 |
0.9 |
7.2 |
- |
41.3 |
|
Capital expenditure on intangible assets |
3.2 |
- |
0.2 |
0.7 |
- |
4.1 |
|
Depreciation of property, plant and equipment |
14.4 |
2.7 |
2.3 |
0.8 |
- |
20.2 |
|
Amortisation of intangible assets |
1.5 |
1.0 |
0.1 |
0.2 |
- |
2.8 |
|
Unallocated assets principally comprise centrally managed property, plant and equipment, associates and other investments, deferred tax assets, current tax assets, derivative financial instrument assets and cash and cash equivalents which are used as part of the Group's financing offset arrangements. Unallocated liabilities comprise borrowings, derivative financial instrument liabilities, current and non current tax liabilities, deferred tax liabilities, retirement benefit obligations, and centrally held accruals and provisions. |
3 Exceptional items |
|
|
|
|
2011 |
2010 |
|
Curtailment gain on closure of defined benefit scheme to further accrual |
16.0 |
- |
|
Costs relating to paper production quality issues |
(29.0) |
- |
|
Corporate costs |
(2.6) |
- |
|
Reorganisation of CPS |
- |
(4.8) |
|
Legacy overseas indirect tax |
- |
(2.7) |
|
Exceptional items in operating profit |
(15.6) |
(7.5) |
|
Profit on sale of associated undertaking |
55.1 |
- |
|
Total exceptional items |
39.5 |
(7.5) |
|
Tax on exceptional items |
3.6 |
2.4 |
|
|
|
|
|
The curtailment gain is a result of the closure, to further accruals from 2013, of the defined benefit pension scheme and the freeze in pensionable salary increases from the current year. These changes result in a reduction in the pension liabilities. The Group has identified paper production quality and certification issues as more fully described in note 12: Contingent liabilities. Provision has been made for the costs associated with the issues identified at this stage and which include the write off of inventories and trade receivables and other costs relating to the investigation and rectification of these matters. Provision has not been made for the potential costs of resolutions or for potential fines from regulatory authorities. The nature and extent of these resolutions and potential fines will be the subject of ongoing discussion, the outcome of which cannot be estimated reliably at present. Corporate costs of £2.6m were incurred in relation to the engagement of legal and professional advisors following a takeover approach for the Group. The profit arising on the sale of an associated undertaking is in respect of the sale of the Group's share in Camelot, the UK national lottery operator, which was completed on 8 July 2010. The gain shown represents the consideration received of £77.6m, net of expenses and the cost of investment. |
|
Exceptional charges of £7.5m in the prior year represent the resolution of a legacy overseas indirect tax issue and the reorganisation of CPS. Reorganisation costs principally comprised redundancy charges and rationalisation of products and site capabilities. |
|
Tax credits relating to exceptional items arising in the year were £1.1m (2010: £1.0m). In addition, there was also an exceptional tax credit of £2.5m in respect of the determination of the tax treatment of prior year exceptional items (2010: £1.4m prior year credit). |
4 Taxation
|
|
|
|
|
2011 |
2010 |
|
Consolidated Income Statement |
|
|
|
Current tax: |
|
|
|
UK Corporation tax: |
|
|
|
- Current tax |
0.7 |
19.5 |
|
- Adjustment in respect of prior years |
(4.2) |
(4.3) |
|
|
(3.5) |
15.2 |
|
Overseas tax charges: |
|
|
|
- Current year |
2.9 |
5.2 |
|
- Adjustment in respect of prior years |
3.4 |
(0.7) |
|
|
6.3 |
4.5 |
|
Total current income tax expense |
2.8 |
19.7 |
|
Deferred tax: |
|
|
|
- Origination and reversal of temporary differences, UK |
3.3 |
6.1 |
|
- Origination and reversal of temporary differences, Overseas |
(0.7) |
0.4 |
|
Total deferred tax expense |
2.6 |
6.5 |
|
Total income tax expense in the consolidated Income Statement |
5.4 |
26.2 |
|
Consolidated Statement of Comprehensive Income: |
|
|
|
- On pension actuarial adjustments |
(7.7) |
(20.3) |
|
- On cash flow hedges |
1.9 |
1.9 |
|
- On foreign exchange on quasi equity balances |
0.5 |
(3.0) |
|
Income tax credit reported within comprehensive income |
(5.3) |
(21.4) |
|
Consolidated Statement of Changes in Equity: |
|
|
|
- On share options |
0.5 |
0.1 |
|
Income tax credit reported within equity |
0.5 |
0.1 |
|
The tax on the Group's consolidated profit before tax differs from the UK tax rate of 28 per cent as follows: |
||||||
|
|
2011 |
2010 |
||||
|
|
Before |
Exceptional |
|
Before |
Exceptional |
|
|
Profit before tax |
33.3 |
39.5 |
72.8 |
104.1 |
(7.5) |
96.6 |
|
Tax calculated at UK tax rate of 28 per cent |
9.3 |
11.1 |
20.4 |
29.1 |
(2.1) |
27.0 |
|
Effects of overseas taxation |
(1.4) |
- |
(1.4) |
(1.9) |
- |
(1.9) |
|
Non taxable disposal of Camelot |
- |
(15.4) |
(15.4) |
- |
- |
- |
|
Expenses not deductible for tax purposes |
1.2 |
1.5 |
2.7 |
1.1 |
1.1 |
2.2 |
|
Adjustment for tax on profits of associate |
- |
- |
- |
(1.8) |
- |
(1.8) |
|
(Utilisation)/increase in unutilised tax losses |
(0.7) |
1.7 |
1.0 |
(0.2) |
- |
(0.2) |
|
Adjustments in respect of prior years |
0.7 |
(2.5) |
(1.8) |
2.3 |
(1.4) |
0.9 |
|
Change in UK tax rate |
(0.1) |
- |
(0.1) |
- |
- |
- |
|
Tax charge/(credit) |
9.0 |
(3.6) |
5.4 |
28.6 |
(2.4) |
26.2 |
|
The underlying effective tax rate excluding one-off items was 27.0 per cent (2010: 27.5 per cent). |
||||||
5 Earnings per share |
|
|
|
|
|
2011 |
2010 |
|
|
Total operations |
|
|
|
|
Basic earnings per share |
67.6 |
71.0 |
|
|
Diluted earnings per share |
67.2 |
70.5 |
|
|
Headline |
|
|
|
|
Basic earnings per share |
24.0 |
76.2 |
|
|
Diluted earnings per share |
23.9 |
75.7 |
|
|
Basic earnings per share is calculated by dividing the earnings attributable to ordinary 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 cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted for the impact of all dilutive potential ordinary shares. The Directors are of the opinion that the publication of the headline earnings is useful to readers of the accounts as they give an indication of underlying business performance. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. |
|||
|
Earnings |
2011 |
2010 |
|
Earnings for basic and diluted earnings per share |
66.9 |
69.9 |
|
(Less) / add: Exceptional items |
(39.5) |
7.5 |
|
Less: Tax on exceptional items |
(3.6) |
(2.4) |
|
Earnings for headline earnings per share |
23.8 |
75.0 |
|
Weighted average number of ordinary shares |
2011 |
2010 |
|
For basic earnings per share |
99.0 |
98.4 |
|
Dilutive effect of share options |
0.6 |
0.7 |
|
For diluted earnings per share |
99.6 |
99.1 |
6 Equity dividends |
|
|
|
|
2011 |
2010 |
|
Final dividend for the year ended 27 March 2010 of 28.2p paid on 5 August 2010 |
27.9 |
- |
|
Interim dividend for the period ended 25 September 2010 of 14.1p paid on 11 January 2011 |
14.0 |
- |
|
Final dividend for the year ended 28 March 2009 of 27.4p paid on 31 July 2009 |
- |
27.0 |
|
Interim dividend for the period ended 26 September 2009 of 14.1p paid on 13 January 2010 |
- |
13.9 |
|
|
41.9 |
40.9 |
|
A final dividend per equity share of 28.2p has been proposed for the year ended 26 March 2011, payable on 4 August 2011. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements. |
||
7 Group cash flow statement |
|
|
|
|
2011 |
2010 |
|
Analysis of net cash |
|
|
|
Cash at bank and in hand |
31.9 |
35.1 |
|
Short term bank deposits |
0.7 |
6.5 |
|
Bank overdrafts |
(9.2) |
(3.8) |
|
Total cash and cash equivalents |
23.4 |
37.8 |
|
Borrowings due within one year |
(54.6) |
(47.9) |
|
Borrowings due after one year |
- |
(0.9) |
|
Net debt |
(31.2) |
(11.0) |
8 Property, plant and equipment |
|
|
|
|
|
|
|
Land and |
Plant and |
Fixtures and |
In course of |
|
|
Cost or valuation |
|
|
|
|
|
|
At 28 March 2009 |
53.6 |
282.0 |
16.0 |
14.5 |
366.1 |
|
Exchange differences |
(0.1) |
0.3 |
0.1 |
(0.5) |
(0.2) |
|
Additions |
- |
17.9 |
0.6 |
22.8 |
41.3 |
|
Transfers from assets in the course of construction |
- |
13.2 |
1.7 |
(14.9) |
- |
|
Disposals |
- |
(6.9) |
(0.6) |
(1.9) |
(9.4) |
|
At 27 March 2010 |
53.5 |
306.5 |
17.8 |
20.0 |
397.8 |
|
Exchange differences |
(0.4) |
(2.1) |
(0.2) |
(0.1) |
(2.8) |
|
Additions |
- |
8.8 |
0.9 |
13.5 |
23.2 |
|
Transfers from assets in the course of construction |
1.1 |
11.8 |
0.6 |
(13.5) |
- |
|
Reclassifications |
- |
(3.5) |
3.5 |
- |
- |
|
Disposals |
(0.1) |
(6.6) |
(1.9) |
(0.7) |
(9.3) |
|
At 26 March 2011 |
54.1 |
314.9 |
20.7 |
19.2 |
408.9 |
|
Accumulated depreciation |
|
|
|
|
|
|
At 28 March 2009 |
20.0 |
186.2 |
11.6 |
- |
217.8 |
|
Exchange differences |
- |
0.3 |
0.1 |
- |
0.4 |
|
Depreciation charge for the year |
1.2 |
17.4 |
1.6 |
- |
20.2 |
|
Disposals |
- |
(5.8) |
(0.4) |
- |
(6.2) |
|
At 27 March 2010 |
21.2 |
198.1 |
12.9 |
- |
232.2 |
|
Exchange differences |
(0.1) |
(1.3) |
(0.2) |
- |
(1.6) |
|
Depreciation charge for the year |
1.5 |
20.1 |
1.6 |
- |
23.2 |
|
Reclassifications |
- |
(3.2) |
3.2 |
- |
- |
|
Disposals |
(0.1) |
(5.6) |
(1.2) |
- |
(6.9) |
|
At 26 March 2011 |
22.5 |
208.1 |
16.3 |
- |
246.9 |
|
Net book value at 26 March 2011 |
31.6 |
106.8 |
4.4 |
19.2 |
162.0 |
|
Net book value at 27 March 2010 |
32.3 |
108.4 |
4.9 |
20.0 |
165.6 |
|
Net book value at 28 March 2009 |
33.6 |
95.8 |
4.4 |
14.5 |
148.3 |
9 Retirement benefit obligations |
|
|
|
The Group operates pension plans throughout the world covering the majority of employees. These plans are devised in accordance with local conditions and practices in the country concerned. The assets of the Group's plans are generally held in separately administered trusts or are insured. |
||
|
|
2011 |
2010 |
|
UK retirement benefit obligations |
(100.5) |
(124.8) |
|
Overseas retirement benefit obligations |
(2.4) |
(2.3) |
|
Retirement benefit obligations |
(102.9) |
(127.1) |
|
Deferred tax |
27.7 |
35.5 |
|
Net retirement benefit obligations |
(75.2) |
(91.6) |
|
|
|
|
|
The largest defined benefit pension plan operated by the Group is in the UK: |
||
|
|
2011 |
2010 |
|
At 27 March 2010/28 March 2009 |
(124.8) |
(67.5) |
|
Current service cost included in operating profit |
(7.6) |
(4.5) |
|
Curtailments |
16.0 |
- |
|
Net finance expense |
(3.2) |
(6.2) |
|
Actuarial losses arising over the year |
(31.1) |
(72.4) |
|
Cash contributions and benefits paid |
50.2 |
25.9 |
|
Transfers |
- |
(0.1) |
|
At 26 March 2011/27 March 2010 |
(100.5) |
(124.8) |
|
|
|
|
|
Amounts recognised in the consolidated Balance Sheet: |
|
|
|
Fair value of plan assets |
638.5 |
569.2 |
|
Present value of funded obligations |
(732.0) |
(687.3) |
|
Funded defined benefit pension plans |
(93.5) |
(118.1) |
|
Present value of unfunded obligations |
(7.0) |
(6.7) |
|
Net liability |
(100.5) |
(124.8) |
|
|
|
|
|
Amounts recognised in the consolidated Income Statement: |
|
|
|
Included in employee benefits expense: |
|
|
|
- Current service cost |
(7.6) |
(4.5) |
|
Included in profit from operations: |
|
|
|
- Curtailments |
16.0 |
- |
|
Included in net finance expense: |
|
|
|
- Expected return on plan assets |
35.7 |
26.4 |
|
- Interest expense |
(38.9) |
(32.6) |
|
|
(3.2) |
(6.2) |
|
Total recognised in the consolidated Income Statement |
5.2 |
(10.7) |
|
Actual return on plan assets |
46.4 |
143.8 |
|
|
|
|
|
Amounts recognised in the Statement of Comprehensive Income: |
|
|
|
Actuarial gains on plan assets |
10.7 |
117.4 |
|
Actuarial losses on defined benefit pension obligations |
(41.8) |
(189.8) |
|
Amounts recognised in the Statement of Comprehensive Income |
(31.1) |
(72.4) |
|
|
|
|
|
Principal actuarial assumptions: |
|
|
|
|
2011 |
2010 |
|
Future salary increases |
- |
4.10 |
|
Future pension increases - past service |
3.80 |
3.70 |
|
Future pension increases - future service |
3.50 |
3.50 |
|
Discount rate |
5.60 |
5.80 |
|
Inflation rate |
3.60 |
3.50 |
|
Expected return on plan assets: |
|
|
|
Equities |
8.50 |
8.25 |
|
Bonds |
5.60 |
5.80 |
|
Gilts |
4.20 |
4.60 |
|
|
|
|
|
The expected rate of return on plan assets has been determined following advice from the plans' independent actuary and is based on the expected return on each asset class together with consideration of the long term asset strategy. |
||
|
The mortality assumptions used to assess the defined benefit obligation for the UK plan are based on tables issued by the Continuous Mortality Investigation Bureau. At 26 March 2011 and 27 March 2010 mortality assumptions are based on the PxA92 birth year tables multiplied by a rating of 125 per cent and allowance for medium cohort mortality improvements in future, with a 0.5 per cent mortality improvement underpin. The resulting life expectancy for a 65 year old pensioner is 20.6 years (2010:20.5 years). |
||
10 Related party transactions |
|
|
|
During the year the Group traded on an arms length basis with the associated company Fidink (33.3 per cent owned) The Group's trading activities with this company included £22.8m (2010: £12.7m) for the purchase of ink and other consumables. At the balance sheet date there were creditor balances of £1.9m (2010: £1.1m) with Fidink. Intra Group transactions between the parent and the fully consolidated subsidiaries or between fully consolidated subsidiaries are eliminated on consolidation. Such transactions were contracted on an arms length basis. |
||
|
|
2011 |
2010 |
|
Salaries and other short-term employee benefits |
2,267.3 |
2,661.4 |
|
Termination benefits |
333.0 |
1,578.9 |
|
Retirement benefits: |
|
|
|
- Defined contribution |
24.5 |
31.2 |
|
- Defined benefit |
113.4 |
422.8 |
|
Share-based payments |
1,051.3 |
801.0 |
|
|
3,789.5 |
5,495.3 |
|
|
|
|
|
Key management comprises members of the Board (including fees of Non-executive Directors) and the Executive Committee. Key management compensation includes 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. |
||
11 Share based payments |
|
|
||||
|
At 26 March 2011, De La Rue plc has a number of share based payment plans, which are described below. These plans have been accounted for in accordance with the fair value recognition provisions of IFRS 2, 'Share Based Payments', which means that IFRS 2 has been applied to all grants of employee share based payments granted after 7 November 2002 that had not vested at 1 January 2005 and cash settled awards outstanding at 1 January 2005. The compensation cost and related liability that have been recognised for De La Rue's share based compensation plans are set out in the table below: |
||||||
|
|
Expense recognised for the year |
Liability at end of year |
||||
|
|
2011 |
2010 |
2011 |
2010 |
||
|
Annual bonus plan |
0.1 |
- |
- |
- |
||
|
Deferred bonus and matching plan |
0.5 |
0.9 |
- |
- |
||
|
Performance share plan |
0.1 |
- |
- |
- |
||
|
Recruitment share award |
0.6 |
- |
- |
- |
||
|
Retention share award |
0.4 |
- |
- |
- |
||
|
Savings related share option plan |
0.2 |
0.6 |
- |
- |
||
|
US employee share plan |
- |
0.1 |
- |
- |
||
|
|
1.9 |
1.6 |
- |
- |
||
12 Contingent liabilities |
|
De La Rue has extensive international operations and is subject to various legal and regulatory regimes, including those covering taxation matters. While the outcome of litigation and other disputes can never be predicted with certainty, having regard to legal advice received and the insurance arrangements of the Company and its subsidiaries, the Directors believe that adequate provision has been made to cover these matters. In July 2010 the Board commissioned an investigation by external lawyers into issues that had been brought to its attention internally. The investigation, which was completed in October 2010, found nothing of substance to support the matters raised other than in respect of some paper production issues where it was found that a small number of the many detailed specification parameters of some paper had fallen marginally short of specification. It was also established that certain paper specification test certificates had been deliberately falsified. The Board reported the findings of the investigation to the appropriate authorities, who are considering the matter, and is implementing a number of measures arising from the findings of the investigation. Provision, as described in note 3: Exceptional items, has been made for the costs associated with the paper production issues identified at this stage including the write off of inventories and trade receivables and other costs relating to the investigation and rectification of these matters. Provision has not been made for the potential cost of resolutions or for potential fines from regulatory authorities. The nature and extent of these resolutions will be the subject of ongoing discussions, the outcome of which cannot be estimated reliably at present. The timing, response and outcome of the consideration by the authorities of the reported findings of the investigation is also uncertain and the financial consequences, if any, cannot be estimated reliably at present. |
13 Capital commitments |
|
|
|
|
2011 |
2010 |
|
The following commitments existed at the balance sheet date: |
|
|
|
Contracted but not provided for in the accounts |
4.0 |
22.1 |
14 Dates |
|
The consolidated accounts have been prepared as at 26 March 2011, being the last Saturday in March. The comparatives for the 2009/10 financial year are for the year ended 27 March 2010. |
15 Statutory accounts |
|
Statutory accounts for the year ended 26 March 2011 will be made available to shareholders for subsequent approval at the Annual General Meeting and copies will be available from the Company Secretary at De La Rue plc, De La Rue House, Jays Close, Viables, Hampshire, RG22 4BS. |
|
|
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16 Foreign Exchange |
||||
|
Principal exchange rates used in translating the Group's results: |
||||
|
|
2010/11 |
2009/10 |
||
|
|
Avg |
Year End |
Avg |
Year End |
|
US dollar |
1.55 |
1.61 |
1.58 |
1.49 |
|
Euro |
1.17 |
1.14 |
1.13 |
1.11 |
|
|
||||
17 De La Rue Financial Calendar: 2011/12 |
||||
|
Ex dividend date |
6 July 2011 |
|
||
|
Record date (ordinary dividend) |
8 July 2011 |
|
||
|
Annual General Meeting |
21 July 2011 |
|
||
|
Payment of 2010/11 final dividend |
4 August 2011 |
|
||
|
2011/12 Interim Results |
November 2011 |
|
||
This information is provided by RNS
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