Final Results
De La Rue PLC
24 May 2006
DE LA RUE PLC PRELIMINARY STATEMENT
YEAR TO 25 MARCH 2006
KEY FINANCIALS
Continuing Operations 2005/2006 2004/2005 Change
£m £m %
Sales 610.8 620.1 -1.5
Profit before tax and exceptional items* 76.2 65.2 +16.9
Profit before tax 73.7 40.6 +81.5
Headline earnings per share* 31.4p 25.9p +21.2
Basic earnings per share 30.2p 18.5p +63.2
Operating cash flow 106.7 98.7 +8.1
Net cash at end of year 91.6 106.5
Dividends per share 17.0p 15.3p +11.1
* before net exceptional charges of £2.5m (2004/2005 : £24.6m)
HIGHLIGHTS
• Profit before tax and exceptional items* from continuing operations
up 16.9 per cent to £76.2m (2004/2005 : £65.2m).
• Operating margins* improved by 2.6 percentage points to 11.4 per
cent (2004/2005 : 8.8 per cent).
• Strong cash generation. Operating cash flow was up 8.1 per cent to
£106.7m (2004/2005 : £98.7m).
• Closing net cash of £91.6m after capital returns of £103.6m through
ordinary and special dividends and the share buy back programme.
• Increase in the final dividend of 11.3 per cent to 11.8 pence per
share, bringing the full year dividend to 17.0 pence per share, an
increase of 11.1 per cent in the year (2004/2005 : 15.3p).
• Intention to continue the share buy back programme.
Nicholas Brookes, Chairman of De La Rue plc, commented:
'This is an excellent set of results that demonstrates the significant progress
that the Group has made in implementing its strategy of concentrating on core
activities, addressing underperforming businesses and improving operational
productivity.
'Continued margin improvement from the restructuring actions in Cash Systems
together with another strong year in Security Paper and Print division were the
key drivers of the performance. As a result during the year we were able to
return £103.6m to our shareholders through a combination of a special dividend,
an ongoing share repurchase scheme and ordinary dividends. This demonstrates our
continuing commitment to enhance total returns by distributing surplus cash flow
to our shareholders.
'Looking ahead, the Group's order book provides excellent visibility for the
first half of 2006/2007, particularly in the Currency activities where first
half banknote and paper volumes are expected to be ahead of last year. This,
combined with the ongoing benefits of restructuring and productivity
improvements, provides a sound platform for 2006/2007.'
For further information, please contact:
Leo Quinn Chief Executive +44 (0)1256 605303
Stephen King Finance Director +44 (0)1256 605303
Mark Fearon Head of Corporate Affairs +44 (0)1256 605303
Richard Mountain Financial Dynamics +44 (0) 207 269 7121
24 May 2006
SUMMARY OF GROUP RESULTS
De La Rue is pleased to report a strong performance for the year ended 25 March
2006, with all key performance indicators showing good improvements over 2004/
2005. This reflected primarily margin and operational efficiency improvements
which demonstrate the significant progress the Group has made this year in
implementing its strategy. Underlying profit before tax* increased by £11.0m or
16.9 per cent to £76.2m (2004/2005 : £65.2m) and operating profits* of £69.4m
represented an increase of £14.6m or 26.6 per cent compared with last year (2004
/2005 : £54.8m). After charging exceptional items, profit on continuing
activities before tax was £73.7m (2004/2005 : £40.6m), an increase of 81.5 per
cent on 2004/2005. Headline basic earnings per share* increased by 21.2 per cent
to 31.4p (2004/2005 : 25.9p) reflecting the improved trading performance. Basic
earnings per share were 30.2p compared with 18.5p in 2004/2005 representing an
increase of 63.2 per cent.
The main drivers behind the improved results were another excellent performance
in the Security Paper and Print activities and significant margin improvement in
Cash Systems as the benefits of the restructuring actions commenced in December
2004 began to come through. Overall, Group margins improved by 2.6 percentage
points to 11.4 per cent.
Cash generation was again strong with operating cash flow of £106.7m
representing the third successive year on year increase (2004/2005 : £98.7m).
This reflected both higher profits and working capital management, the latter
enhanced by an exceptionally high level of customer advance payments. Following
payments of the special dividend, 2004/2005 final dividend and 2005/2006 interim
dividend (total £95.8m) and the ongoing share buy back programme (£7.8m), the
Group ended the year with net cash on the balance sheet of £91.6m (2004/2005 net
cash : £106.5m).
*before net exceptional charges of £2.5m (2004/2005 : £24.6m)
Extracts from the Operational Review
SECURITY PAPER AND PRINT 2005/2006 2004/2005 Change
£m £m %
Sales 318.4 317.9 +0.2
Underlying operating profit* 51.0 45.4 +12.3
*before exceptional income of £0.9m (2004/2005 : income of £1.2m).
Underlying operating profit* for the Security Paper and Print division of £51.0m
were ahead of last year (2004/2005: £45.4m).
The main driver behind the improved divisional result was the Currency
activities which had another excellent year. This was achieved despite the
anticipated reduction in volumes in banknote printing, in part reflecting lower
overspill levels at 17 per cent compared to 31 per cent last year. Banknote
printing volumes overall were down 11.4 per cent compared with 2004/2005, but
this reduction was significantly mitigated by the benefit of improved work mix.
Banknote paper volumes were up 4.6 per cent on 2004/2005, which, together with
improved manufacturing efficiency and increased orders for high specification
paper that require more sophisticated banknote threads, contributed
significantly to the overall operating result. The Currency business ended the
year with a strong order book providing excellent visibility for the first half
of 2006/2007. Looking further forward the outlook as in previous years will
continue to be dependent on order volume and the work mix.
The Security Products and Identity Systems businesses also performed strongly.
Volume benefits of increased sales in authentication labels, fiscal stamps and
passports all contributed to improved results.
CASH SYSTEMS 2005/2006 2004/2005 Change
£m £m %
Sales 292.4 302.2 -3.2
Underlying operating profit* 18.4 9.4 +95.7
*before net exceptional charges of £3.4m (2004/2005: £25.8m)
Divisional sales were down overall due to the continued decline of the mature
European Teller Cash Dispensers (TCD) markets. This was partially offset by
continued growth of Teller Cash Recycler (TCR) volumes in the USA. The
performance of the Cash Processing Solutions (Sorter) business improved over the
prior year in a competitive environment. The OEM (ATM mechanisms) and Desktop
Products businesses performed strongly principally driven by volume growth in
the European and Asian markets.
Underlying operating profits* of £18.4m were strongly ahead of last year, driven
by continued margin improvements, reflecting the benefits of restructuring and
reducing fixed costs in the mature European markets. In addition, the adverse
impact of foreign exchange rates was significantly reduced this year,
particularly aided by the strength of the US Dollar.
During the year we continued to focus our attention on relocating production
capacity to lower cost facilities in China and Russia to improve the operational
productivity and competitiveness of the division. Overall divisional margins
more than doubled from 3.1 to 6.3 per cent which included £5m savings from
restructuring and a one-off benefit of £0.6m from the settlement of an
outstanding customer dispute, previously fully provided. The business remains
strongly cash generative with operating cash flow well ahead of operating
profits, together with good working capital management, the main drivers. Our
focus for the division remains on achieving operational improvements and
targeting emerging markets where we can generate growth.
RETURNS TO SHAREHOLDERS
Final Dividend
In line with our continued confidence in the cash generative characteristics of
the business, the Board is recommending an increased final dividend of 11.8p per
share, subject to shareholders' approval. This will be paid on 4 August 2006 to
shareholders on the register on 7 July 2006. Together with the increased interim
dividend paid in January 2006, this will give a total dividend for the year of
17.0p, an overall increase of 11.1 per cent on last year.
Share Buy Back
The Board announced at the interim results in November its intention to use the
existing authorities granted to it at the 2005 Extraordinary General Meeting
(EGM) to use surplus cash to purchase the Company's own shares for cancellation.
The upper limit of the Board's existing authority is 14.99 per cent of issued
capital. In the year, the Company acquired 1.6 million shares under the share
buy back programme at a cost of £7.8m. The Board expects to continue this
programme, funded with surplus cash and will seek shareholder approval to renew
its existing authority at the AGM. The exact amount and timing of future
purchases will be dependent on market conditions and ongoing cash generation.
Special Dividend
De La Rue completed the return of £68.3m to shareholders on 5 August 2005,
equivalent to 38.0p per share, through a special dividend accompanied by a
corresponding share consolidation. The capital return was consistent with the
Board's strategy to return surplus cash to shareholders.
GROUP STRATEGY
In December 2004, we focused the De La Rue organisation on improving the
operational performance and financial returns of the Group. During 2005/2006,
the Group made significant progress against its financial and operational
objectives. We believe that driving operational efficiency and focusing our
investment in our core businesses provides the best opportunity to deliver
improved shareholder value. The Group's strong cash generative characteristics
and ungeared balance sheet also give the Board scope to return surplus cash flow
to shareholders through a combination of progressive dividends, share buy backs
and where appropriate, other forms of capital return.
During the year we made the following progress on our key strategic initiatives:
Cash Systems restructuring
In Cash Systems, we are making good progress in implementing the restructuring
actions outlined in December 2004. The division is now benefiting from its
reorganisation into focused Strategic Business Units.
As expected, we completed the closure of the Eskilstuna (Sweden) and Portsmouth
(UK) factories during the second half of the year. The subsequent relocation of
associated manufacturing to lower cost facilities in China and Russia
respectively has reached its critical phase with the manufacturing of all
product variants now underway. The new supply chain is in the process of being
fully established and will be optimised over the next 12 months. Consequently, w
e continue to adopt a cautious approach in the execution of the programme to
ensure continuity of supply of products to our customers. As expected, higher
first half inventory levels in the division, arising from our supply chain
strategy to build up buffer stocks as a consequence of the restructuring, are
now starting to unwind as we complete the transition to the new production
arrangements.
We are delivering our cost saving programme ahead of schedule, cumulative cost
savings of £6.5m have been achieved at the end of 2005/2006. We remain on target
to achieve annualised savings of £9.0m by the end of 2006/2007. Total headcount
reductions of 468 have been completed, of which 287 people left the business
during 2005/2006.
Improving Productivity
Improving operational productivity across the Group is central to achieving our
strategy. We continue to engage the entire organisation in the Group's
objectives through clear actions and a methodology to drive improved operational
performance across all businesses. The Group's strong cash flow is an indication
of the benefits of these focused actions. A working capital reduction of £14.5m,
although significantly enhanced by a high level of customer advance payments,
was also driven by lower levels of inventory and improved trade creditor
management.
The key areas of management focus in 2006/2007 will be to ensure the successful
completion of our restructuring plans and to continue to seek out and drive
operational improvements in all of our core businesses.
Associates
Profit from associates after interest and tax was higher at £6.8m (2004/2005 :
£6.4m). The main associated company is Camelot, the UK lottery operator which
reported an improved sales performance on the previous year. Dividends received
from associates of £8.1m were higher than last year's income of £5.6m, due to a
one-off payment in the year.
Interest Charge
The Group's net interest income was £1.8m, which was £0.7m lower than the
previous year. In addition the IAS 19 related finance item, arising from the
difference between the interest on liabilities and the expected return on
assets, is included here and was a charge of £1.8m compared with a credit of
£1.5m the previous year.
Taxation
The underlying effective tax rate excluding exceptional items was 29.4 per cent
(2004/2005 : 26.4 per cent), the increase reflecting the mix of taxable profits
from overseas activities and the elimination of tax losses in the USA. The
effective tax rate after exceptional items was 29.7 per cent (2004/2005 : 31.8
per cent).
Exceptional Items
A summary of the main exceptional items is set out below:
2005/2006 2004/2005
£m £m
Reorganisation costs - Cash Systems 4.2 14.3
Reorganisation costs - Security Products (0.5) (0.8)
Income from investment previously impaired (0.4) (0.4)
Profit from disposal of investment (0.8) -
Portuguese ATM business goodwill impairment - 11.5
--------- ---------
Exceptional items - continuing operations 2.5 24.6
--------- ---------
--------- ---------
Profit on disposal of discontinued operations - (8.9)
--------- ---------
Reorganisation costs charged in the year in Cash Systems relate to final element
of the restructuring of the business which commenced during 2004/2005. The total
programme cost of £18.5m is in line with that initially indicated.
Income from investments relates to a £0.4m loan repayment from the Group's
associate holding in Valora.
Profit from disposal of investments arises from the sale of the Group's stake in
a small distributor in South Africa.
Cash Flow and Borrowings
During the year operating cash flow was £106.7m compared with £98.7m in 2004/
2005 reflecting the rise in operating profits and the continued drive to reduce
working capital across the Group. This was also further enhanced by continued
high levels of advance payments. Capital expenditure of £19.6m was lower than
depreciation and reflected the phasing of expenditure in Security Paper and
Print.
After payment in the first half of the special dividend (£68.3m), the 2004/2005
final dividend (£19.1m), the 2005/2006 interim dividend (£8.4m) and £7.8m in
respect of the ongoing share buy back programme closing net cash was £91.6m
compared with £106.5m at last year end.
Foreign Exchange
Principal exchange rates used in translating the Group's results
£ 2005/2006 2006 2004/2005 2005
Average Year end Average Year end
------------- -------- -------- -------- --------
US dollar 1.79 1.74 1.84 1.87
Euro 1.46 1.45 1.47 1.44
Swedish Krona 13.69 13.58 13.35 13.13
------------- -------- -------- -------- --------
$
Swedish Krona 7.65 7.80 7.26 7.02
------------- -------- -------- -------- --------
When managing foreign exchange transactional risk, protection is taken in the
foreign exchange markets whenever a business has a firm expectation of
confirming a sale or purchase in a non-domestic currency unless it is
impractical or uneconomical to do so. Translation of overseas earnings is not
hedged. For the year ended 25 March 2006 adverse foreign exchange impacted the
Group profits by £1.8m mostly arising from transaction exposure.
UK Pension Scheme
The Group's last formal (triennial) valuation of the Company's defined benefit
pension Scheme took place on 6 April 2003. The Group is currently in the process
of completing the latest triennial valuation as at 6 April 2006. The results of
this valuation will be available later this year.
The Group has adopted IAS 19 during the year and the pension deficit has been
incorporated onto the balance sheet. The valuation under IAS 19 principles
indicates a scheme deficit of approximately £80.5m after tax at 25 March 2006
(March 2005 : £81.1m). The charge to operating profits in respect of the UK
pension scheme for 2005/2006 was £9.1m (2004/2005 : £10.1m). In addition, under
IAS 19 there is a finance charge of £1.8m arising from the difference between
the interest on liabilities and the expected return on assets (2004/2005 : £1.5m
credit). This charge is included with the Group interest charge in the profit
and loss account.
The table below summarises the key assumptions over the past three years for the
UK defined benefit scheme. It can be seen that AA bond interest rates have
decreased significantly over the period while inflation and salary growth have
remained largely stable. Overall the lower the interest rates the higher the
liabilities derived from a discounting of the estimated future cash liability
profile. This, coupled with rises in mortality assumptions, have been the main
factors which have led to the adverse impact on scheme liabilities and the
overall scheme funding position.
2005/2006 2004/2005 2003/2004
Key Assumptions
Interest Rate (AA bond rate) 4.9 5.5 5.5
Salary Growth 3.9 4.25 4.25
Inflation 2.9 3.0 3.0
UK Pension Scheme
Assets £510.0m £438.1m £409.4m
Liabilities £625.0m £554.0m £504.8m
(Deficit) - gross (£115.0m) (£115.9m) (£95.4m)
- after tax (£80.5m) (£81.1m) (£66.8m)
As part of the current (triennial) valuation, the Group will be consulting with
the Trustee and all stakeholders on the development of the UK defined benefit
pension scheme.
Outlook
Looking ahead, the Group's order book provides excellent visibility for the
first half of 2006/2007, particularly in the Currency activities where first
half banknote and paper volumes are expected to be ahead of last year. This,
combined with the ongoing benefits of restructuring and productivity
improvements, provides a sound platform for 2006/2007.
-ends-
Notes to Editors
1. De La Rue is the world's largest commercial security printer and papermaker,
involved in the production of over 150 national currencies and a wide range
of security documents such as passports, authentication labels and fiscal
stamps. The Company is also pioneering new technologies worldwide in
government identity solutions for national identification, drivers licence
and passport issuing schemes. Employing over 6,000 people across 31
countries, it is also a leading provider of cash handling equipment and
software solutions to banks and retailers worldwide, helping them to reduce
the cost of handling cash.
2. A presentation to analysts will take place at 9:00am today at The London
Stock Exchange, 10 Paternoster Square, London, EC4M 7LS
3. High resolution photographs are available to the media free of charge at
http://www.newscast.co.uk/ (+44 (0) 207 608 1000).
4. De La Rue Financial Calendar:
2006/2007
Ex-dividend date 5 July 2006
Record date 7 July 2006
Annual Report issued 16 June 2006
Annual General Meeting 27 July 2006
Payment of 2005 final dividend 4 August 2006
2006 Interim Results 28 November 2006
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 25 MARCH 2006
2006 2006 2006 2005 2005 2005
£m £m £m £m £m £m
Before Exceptional Before Exceptional
Notes Note Exceptionals Items Total Exceptionals Items Total
Continuing Operations
Sales 2 610.8 610.8 620.1 620.1
Operating expenses (541.4) (3.7) (545.1) (565.3) (25.0) (590.3)
Other income 1.2 1.2 - 0.4 0.4
--------- --------- -------- --------- --------- -------
Operating profit 2 69.4 (2.5) 66.9 54.8 (24.6) 30.2
--------- --------- -------- --------- --------- -------
Share of profits of
associated companies
after taxation 6.8 6.8 6.4 6.4
Interest income 3.8 3.8 5.7 5.7
Interest expense (2.0) (2.0) (3.2) (3.2)
Retirement benefit obligation
net finance (cost)/income (1.8) (1.8) 1.5 1.5
--------- --------- -------- --------- --------- -------
Profit before taxation 76.2 (2.5) 73.7 65.2 (24.6) 40.6
Taxation 3 (22.4) 0.5 (21.9) (17.2) 4.3 (12.9)
--------- --------- -------- --------- --------- -------
Profit after taxation 53.8 (2.0) 51.8 48.0 (20.3) 27.7
--------- --------- -------- --------- --------- -------
Discontinued operations - - - - - 6.9
--------- --------- -------- --------- --------- -------
Profit for the financial year 51.8 34.6
--------- --------- -------- --------- --------- -------
Profit attributable to equity
shareholders 50.9 33.0
Profit attributable to
minority interests 0.9 1.6
--------- --------- -------- --------- --------- -------
51.8 34.6
--------- --------- -------- --------- --------- -------
Basic earnings per ordinary
share - continuing operations 4 30.2p 14.6p
Diluted earnings per ordinary
share - continuing operations 4 29.4p 14.5p
--------- --------- -------- --------- --------- -------
Basic earnings per ordinary
share - discontinued operations - 3.9p
Diluted earnings per ordinary
share - discontinued operations - 3.9p
--------- --------- -------- --------- --------- -------
GROUP BALANCE SHEET
AT 25 MARCH 2006
2006 2005
Note £m £m
ASSETS
Non-current assets
Property, plant and equipment 139.3 148.9
Intangible assets 28.9 23.8
Investments in associates and joint ventures 12.7 14.0
Other investments - 0.3
Available for sale financial assets 0.5 -
Deferred tax assets 53.9 57.1
Trade and other receivables 0.2 1.1
-------------------------------------- ------ ------- -------
235.5 245.2
-------------------------------------- ------ ------- -------
Current assets
Inventories 71.6 73.8
Trade and other receivables 92.2 86.0
Current tax assets 1.3 2.7
Derivative financial instruments 1.3 -
Cash and cash equivalents 388.8 140.7
-------------------------------------- ------ ------- -------
555.2 303.2
-------------------------------------- ------ ------- -------
Total assets 790.7 548.4
-------------------------------------- ------ ------- -------
LIABILITIES
Current liabilities
Borrowings (284.6) (17.8)
Trade and other payables (182.5) (166.3)
Current tax liabilities (29.8) (23.1)
Derivative financial instruments (1.2) -
Provisions for other liabilities and charges (22.3) (24.0)
-------------------------------------- ------ ------- -------
(520.4) (231.2)
Non-current liabilities
Borrowings (12.6) (16.4)
Retirement benefit obligations (119.6) (119.9)
Deferred tax liabilities (0.8) (1.4)
Derivative financial instruments (0.5) -
Other non-current liabilities (0.5) (0.4)
-------------------------------------- ------ ------- -------
(134.0) (138.1)
Total liabilities (654.4) (369.3)
-------------------------------------- ------ ------- -------
Net assets 136.3 179.1
-------------------------------------- ------ ------- -------
EQUITY
Ordinary share capital 1 45.9 46.1
Share premium account 1 20.6 17.0
Revaluation reserve 1 1.8 1.8
Capital redemption reserve 1 3.9 3.5
Fair value and other reserves 1 (0.5) -
Cumulative translation adjustment 1 2.2 3.4
Other reserve 1 (83.8) (83.8)
Retained earnings 1 142.4 187.4
-------------------------------------- ------ ------- -------
Total shareholders' funds 132.5 175.4
Equity minority interests 3.8 3.7
-------------------------------------- ------ ------- -------
Total equity 136.3 179.1
-------------------------------------- ------ ------- -------
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 25 MARCH 2006
2006 2005
Notes £m £m
Cash flows from operating activities
Cash generated from operations 6a 106.7 98.7
Tax paid (10.1) (7.6)
-------------------------------------- ------ ------- -------
Net cash flows from operating activities 96.6 91.1
-------------------------------------- ------ ------- -------
Cash flows from investing activities
Disposal of subsidiary undertaking - 7.2
Proceeds from sale of investment 0.8 -
Acquisition of minority interests - (2.2)
Purchases of property, plant and equipment (PPE) &
software intangibles (19.6) (20.5)
Development assets capitalised (3.7) (2.6)
Proceeds from sale of PPE 1.6 7.1
Income from investments 0.4 0.4
Interest received 3.8 5.7
Interest paid (1.5) (3.1)
Dividends received from associates 8.1 5.6
-------------------------------------- ------ ------- -------
Net cash flows from investing activities (10.1) (2.4)
-------------------------------------- ------ ------- -------
Net cash inflow before financing activities 86.5 88.7
Cash flows from financing activities
Proceeds from issue of share capital 6.3 2.7
Own share purchase (7.8) -
Proceeds from borrowing 2.4 3.1
Repayment of borrowings (2.4) (23.1)
Finance lease principal payments (4.3) (4.3)
Dividends paid to shareholders (95.8) (25.8)
Dividends paid to minority interests (0.9) (0.5)
-------------------------------------- ------ ------- -------
Net cash flows from financing activities (102.5) (47.9)
-------------------------------------- ------ ------- -------
Net increase in cash and cash equivalents in the year (16.0) 40.8
Cash and cash equivalents at the beginning of the year 126.3 84.5
Exchange rate effects (2.5) 1.0
-------------------------------------- ------ ------- -------
Cash and cash equivalents at the end of the year 107.8 126.3
-------------------------------------- ------ ------- -------
Cash and cash equivalents consist of: 6b
Cash at bank and in hand 318.6 40.3
Short term bank deposits 70.2 100.4
Bank overdrafts (281.0) (14.4)
-------------------------------------- ------ ------- -------
107.8 126.3
-------------------------------------- ------ ------- -------
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 25 MARCH 2006
2006 2005
£m £m
Exchange differences (1.1) 3.4
Actuarial gains on retirement benefit obligations 2.3 (22.1)
Tax on actuarial gain on retirement benefit obligations (0.7) 6.7
Cash flow hedges recognised (1.5) -
Tax on cash flow hedges 0.1 -
Net investment hedge 0.5 -
Current tax on share options 0.8 -
Deferred tax on share options 1.2 0.2
Purchase of Treasury shares (7.8) -
Allocation of Treasury shares 2.5 -
------------------------------------------ ------- -------
Net loss recognised directly in equity (3.7) (11.8)
Profit for the financial year 51.8 34.6
------------------------------------------ ------- -------
Total recognised income and expense for the year 48.1 22.8
Restatement for the effects of IAS32 and IAS39 (0.2) -
------------------------------------------ ------- -------
Total recognised income and expense for the year 47.9 22.8
------------------------------------------ ------- -------
Total recognised income and expense for the year attributable
to:
Equity shareholders of De La Rue plc 47.9 22.7
Minority interests - 0.1
------------------------------------------ ------- -------
47.9 22.8
------------------------------------------ ------- -------
NOTES TO THE PRELIMINARY STATEMENT
1 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Attributable to equity shareholders Minority Total
------------------------------- interest equity
Share Share Revaluation Capital Fair Cumulative Other Retained £m £m
capital premium reserve redemption value translation reserve earnings
account reserve and adjustment
other
reserve
£m £m £m £m £m £m £m £m
Balances at
28 March
2004 45.8 14.6 1.8 3.5 - - (83.8) 194.0 3.8 179.7
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Exchange
differences - - - - - 3.4 - - - 3.4
Actuarial
loss on
retirement
benefit
obligations - - - - - - - (22.1) - (22.1)
Tax on
actuarial
loss on
retirement
benefit
obligations - - - - - - - 6.7 - 6.7
Tax on
share
options - - - - - - - 0.2 - 0.2
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Net loss
recognised
directly in
equity - - - - - 3.4 - (15.2) - (11.8)
Profit for
the
financial
year - - - - - - - 33.0 1.6 34.6
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Total
income
recognised
for the
financial
year - - - - - 3.4 - 17.8 1.6 22.8
Share
capital
issued 0.3 2.4 - - - - - - - 2.7
Employee
share
scheme:
- value of
services
provided - - - - - - - 1.4 - 1.4
Dividends - - - - - - - (25.8) (1.7) (27.5)
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Balance at
26 March
2005 46.1 17.0 1.8 3.5 - 3.4 (83.8) 187.4 3.7 179.1
Adoption of
IAS32 and
IAS39 - - - - 0.4 (0.6) (0.2)
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Balance at
27 March
2005 46.1 17.0 1.8 3.5 0.4 3.4 (83.8) 186.8 3.7 178.9
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Exchange
differences - - - - - (1.2) - - 0.1 (1.1)
Actuarial
gain on
retirement
benefit
obligations - - - - - - - 2.3 - 2.3
Tax on
actuarial
loss on
retirement
benefit
obligations - - - - - - - (0.7) - (0.7)
Current tax
on share
options - - - - - - - 0.8 - 0.8
Deferred
tax
on share
options - - - - - - - 1.2 - 1.2
Cash flow
hedges
recognised - - - - (1.5) - - - - (1.5)
Tax on cash
flow hedges - - - - 0.1 - - - - 0.1
Net
investment
hedge - - - - 0.5 - - - - 0.5
Purchase of
Treasury
shares (0.4) - - 0.4 - - - (7.8) - (7.8)
Allocation
of
Treasury
shares - - - - - - - 2.5 - 2.5
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Net loss
recognised
directly in
equity (0.4) - - 0.4 (0.9) (1.2) - (1.7) 0.1 (3.7)
Profit for
the
financial
year - - - - - - - 50.9 0.9 51.8
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Total
income
recognised
for
the year (0.4) - - 0.4 (0.9) (1.2) - 49.2 1.0 48.1
Share
capital
issued 0.2 3.6 - - - - - - - 3.8
Employee
share
scheme
- value of
services
provided - - - - - - - 2.2 - 2.2
Dividends
paid
(note 5) - - - - - - - (95.8) (0.9) (96.7)
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
Balance at
25 March
2006 45.9 20.6 1.8 3.9 (0.5) 2.2 (83.8) 142.4 3.8 136.3
----- ----- ------ ------ ------ ------ ----- ------ ----- -----
2 SEGMENTAL ANALYSIS
The Group's primary reporting format is by business segment. The Group is
organised on a worldwide basis into two business segments: Cash Systems and
Security Paper and Print. The Group disposed of its investment in Sequoia Voting
Systems during the prior year. The secondary reporting format is by geographical
segment. The Cash Systems division is predominantly involved in the provision of
cash handling equipment and software solutions to banks and retailers worldwide.
Security Paper and Print is involved in the production of national currencies
and a wide range of security documents such as authentication labels and
identity documents.
Analysis by business segment
2006 2006 2006 2005 2005 2005
Cash Security Group Cash Security Group
Systems Paper Systems Paper
and and
Print Print
Continuing operations £m £m £m £m £m £m
Sales 292.4 318.4 610.8 302.2 317.9 620.1
------- ------- ------ ------- ------- ------
Underlying operating profit
- segment result 18.4 51.0 69.4 9.4 45.4 54.8
Exceptional items (3.4) 0.9 (2.5) (25.8) 1.2 (24.6)
------- ------- ------ ------- ------- ------
Operating profit/(loss) 15.0 51.9 66.9 (16.4) 46.6 30.2
Share of post tax profits of
associates 6.8 6.4
Net interest income 1.8 2.5
Retirement obligations
net finance (cost)/income (1.8) 1.5
------ ------
Profit before taxation 73.7 40.6
Taxation (21.9) (12.9)
------ ------
Profit after taxation 51.8 27.7
------- ------- ------ ------- ------- ------
Discontinued activities
Profit from discontinued
operations - 6.9
------- ------- ------ ------- ------- ------
Profit for the year 51.8 34.6
------- ------- ------ ------- ------- ------
Segment assets 118.6 176.6 295.2 110.6 186.6 297.2
Unallocated assets 495.5 251.2
------- ------- ------ ------- ------- ------
Total assets 790.7 548.4
------- ------- ------ ------- ------- ------
Segment liabilities (99.8) (83.9) (183.7) (88.8) (79.8) (168.6)
Unallocated liabilities (470.7) (200.7)
------- ------- ------ ------- ------- ------
Total liabilities (654.4) (369.3)
------- ------- ------ ------- ------- ------
Capital expenditure on
property, plant and
equipment 4.7 10.4 15.1 7.4 11.9 19.3
Capital expenditure on
intangible assets 5.1 3.2 8.3 3.0 1.4 4.4
Depreciation of property,
plant and equipment 6.0 17.6 23.6 6.6 19.8 26.4
Amortisation of intangible
assets 2.3 1.1 3.4 1.9 0.3 2.2
Impairment of goodwill - - - 11.5 - 11.5
------- ------- ------ ------- ------- ------
Analysis by UK & Rest of The Rest of Group
geographical Ireland Europe Americas World
segment 2006 £m £m £m £m £m
Sales by destination 76.8 190.9 129.8 213.3 610.8
------ ------ ------- ------- ------
Segment assets 146.3 79.9 49.5 19.5 295.2
Unallocated assets 495.5
------
Total assets 790.7
------
Capital expenditure on
property, plant and
equipment 8.3 3.9 1.8 1.1 15.1
Capital expenditure on
intangible assets 5.3 2.6 0.4 - 8.3
------ ------ ------- ------- ------
Analysis by geographical
segment 2005
Sales by destination 70.0 182.2 153.6 214.3 620.1
------ ------ ------- ------- ------
Segment assets 147.0 79.7 47.8 22.7 297.2
Unallocated assets 251.2
------
Total assets 548.4
------
Capital expenditure on
property, plant and
equipment 9.3 3.6 5.1 1.3 19.3
Capital expenditure on
intangible assets 1.8 1.8 0.8 - 4.4
------ ------ ------- ------- ------
Underlying operating profit comprises operating profit before exceptional items.
Unallocated assets principally comprise centrally managed property, plant and
equipment, associates and other investments, deferred 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, deferred tax liabilities, retirement benefit obligations, and centrally
held accruals and provisions.
3 TAXATION
2006 2006 2006 2005 2005 2005
Before Exceptional Total Before Exceptional Total
exceptionals items exceptionals items
£m £m £m £m £m £m
Current tax 19.0 (0.6) 18.4 11.6 11.6
Deferred tax 3.4 0.1 3.5 5.6 (4.3) 1.3
-------- -------- ------ -------- -------- ------
22.4 (0.5) 21.9 17.2 (4.3) 12.9
-------- -------- ------ -------- -------- ------
The tax on the Group's consolidated profit before tax differs from the UK tax
rate of 30% as follows:
2006 2006 2006 2005 2005 2005
Before Exceptional Total Before Exceptional Total
exceptionals items exceptionals items
£m £m £m £m £m £m
Profit before tax 76.2 (2.5) 73.7 65.2 (24.6) 40.6
-------- -------- ------ -------- -------- ------
Tax calculated
at UK tax rate at 30% 22.9 (0.7) 22.2 19.6 (7.4) 12.2
Rate adjustment
relating to overseas
profits (1.3) (1.3) (2.3) (2.3)
Overseas dividends 1.9 1.9 0.6 0.6
Income not subject to
tax (0.1) (0.1) (2.0) (2.0)
Expenses not deductible
for tax purposes 2.4 0.3 2.7 1.3 5.1 6.4
Adjustment for tax on
profits of associate (2.1) (2.1) (1.9) (1.9)
Prior year adjustments (1.1) (1.1) (1.2) (1.2)
Utilisation of
previously unrecognised
tax losses (0.3) (0.3)
Tax losses for which no
deferred income tax
asset was recognised - - 1.1 1.1
-------- -------- ------ -------- -------- ------
Tax charge 22.4 (0.5) 21.9 17.2 (4.3) 12.9
-------- -------- ------ -------- -------- ------
Deferred income tax assets are recognised for tax loss carry-forwards to the
extent that the realisation of the related tax benefit through future taxable
profits is probable.
The Group did not recognise deferred income tax assets of £6.9m (2005: £7.2m) in
respect of losses amounting to £18.2m (2005: £21.3m) that can be carried forward
against future taxable income.
4 EARNINGS PER SHARE
2006 2005
pence per pence per
share share
------------------------------- -------- --------
Basic earnings per share 30.2 18.5
Diluted earnings per share 29.4 18.4
Headline earnings per share 31.4 25.9
------------------------------- -------- --------
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 dilutive share options.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.
2006 2005
Weighted Weighted
average average
number of Earnings number of Earnings
Earnings shares per share Earnings shares per share
£m m pence £m m pence
---------------- -------- -------- --------- -------- -------- --------
Basic EPS 50.9 168.6 30.2 33.0 178.3 18.5
Effect of
dilutive
options 4.5 (0.8) - 1.1 (0.1)
---------------- -------- -------- --------- -------- -------- --------
Diluted EPS 50.9 173.1 29.4 33.0 179.4 18.4
---------------- -------- -------- --------- -------- -------- --------
The Directors are of the opinion that the publication of the headline earnings
per share is useful to readers of interim statements and annual accounts as they
give an indication of underlying business performance.
Reconciliation of headline earnings per share 2006 2005
pence per pence per
share share
Basic earnings per share 30.2 18.5
Income from investment previously impaired (0.2) (0.2)
Profit on disposal of investments (0.5) -
Profit on disposal of discontinued operations - (5.0)
Impairment of goodwill - 6.4
Reorganisation costs 1.9 6.2
---------------------------- -------- --------
Headline earnings per share 31.4 25.9
---------------------------- -------- --------
5 EQUITY DIVIDENDS
2006 2005
£m £m
Final dividend for 2004/05 of 10.6p paid on 5.8.2005 19.1 -
Special dividend of 38.0p paid on 5.8.2005 68.3 -
Interim dividend for 2005/06 of 5.2p paid on 18.1.2006 8.4 -
Final dividend for 2003/04 of 9.8p paid on 6.8.2004 - 17.5
Interim dividend for 2004/05 of 4.7p paid on 19.1.2005 - 8.3
--------------------------------- -------- --------
95.8 25.8
--------------------------------- -------- --------
A final dividend per equity share of 11.8 pence has been proposed for the year
ended 25 March 2006, payable on 4 August 2006. In accordance with IFRS
accounting requirements this dividend has not been accrued in these consolidated
financial statements.
6 NOTES TO GROUP CASH FLOW STATEMENT
2006 2005
£m £m
a Cash generated from operating activities
Profit before tax 73.7 49.3*
Adjustments for:
Finance income and expense - (4.0)
Depreciation and amortisation 27.0 28.6
Goodwill impairment - 11.5
Decrease in inventories 3.5 25.5
(Increase)/decrease in trade and other receivables (5.6) 22.7
Increase/(decrease) in trade and other payables 16.6 (20.7)
Decrease in reorganisation provisions (3.4) (0.9)
Profit on the disposal of discontinued operations - (8.9)
Loss on disposal of fixed assets 1.2 -
Share of income from associates after tax (6.8) (6.4)
Income from investments (1.2) (0.4)
Other non-cash movements 1.7 2.4
--------------------------- ------- ------
Cash generated from operations 106.7 98.7
--------------------------- ------- ------
b Analysis of net cash
Cash at bank and in hand 318.6 40.3
Short-term bank deposits 70.2 100.4
Bank overdrafts (281.0) (14.4)
--------------------------- ------- ------
Total cash and cash equivalents 107.8 126.3
Other debt due within one year (3.6) (3.4)
Borrowings due after one year (12.6) (16.4)
--------------------------- ------- ------
Net cash at end of period 91.6 106.5
--------------------------- ------- ------
* Profit before tax includes pretax result of discontinued operations of £8.7m,
consisting of £8.9m profit on disposal and loss before tax of £0.2m
7 The consolidated accounts have been prepared as at 25 March 2006, being the
last Saturday in March. The comparatives for the 2005 financial year are for the
year ended 26 March 2005.
8 This statement has been prepared in accordance with the guidelines published
by the Accounting Standards Board.
9 The financial information set out above (Group profit and loss account, Group
balance sheet, Group cash flow statement, Group statement of total recognised
gains and losses and notes thereto) and extracts from the financial review do
not constitute statutory accounts for those years within the meaning of Section
240 of the Companies Act 1985.
Statutory accounts for the year ended 25 March 2006 will be posted to
shareholders on 16 June 2006 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. The report of
the auditors on these accounts is unqualified and does not contain a statement
under either Section 237(2) or 237(3) of the Companies Act 1985. Financial
statements for 2004/05 have been delivered to the Registrar and included the
auditors' report which was unqualified and did not contain a statement either
under Section 237(2) of the Companies Act 1985 (accounting records or returns
inadequate or accounts not agreeing with records and returns), or Section 237(3)
(failure to obtain necessary information and explanations).
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