Interim Results
De La Rue PLC
26 November 2002
INTERIM STATEMENT
Six months to 28 September 2002
- Profit before tax, exceptionals and goodwill amortisation of £19.6m
down, as expected, from £35.6m last year.
- Interim dividend increased by 4.8% to 4.4p per share (2001/2002 :
4.2p).
- Cash Systems' sales* were down 16.9% and operating profits* down
£10.1m to £4.3m. Last year the division benefited from one-off
sales of euro related equipment. In addition, delays in ordering by
financial institutions in the eurozone in the first half further
impacted revenues.
- As previously announced, Currency's results were affected in first
half by an unusually large number of new designs, which took longer
to prepare than repeat orders.
- Rationalisation of Security Products' manufacturing operations and
overhead reductions going to plan. Target annualised cost savings
now increased from £5m to £7m.
- Closing net debt at £21.0m (gearing 8%) after outflows of £17.0m net
for acquisitions/sale of investments and £32.4m for the share buy
back.
- To date, the Company has acquired for cancellation 11 million shares
(5.65%) under the share buy back programme at a cost of £32.4m.
Further authority is being sought from shareholders to approve an
extension to De La Rue's existing authority to repurchase shares
from an upper limit of 10% to 14.99%.
- Outlook for second half supported by improving prospects in Cash
Systems and strong banknote order book and the initial benefits of
the Security Products' manufacturing review.
* From continuing operations and before reorganisation costs and goodwill
amortisation.
Sir Brandon Gough, Chairman of De La Rue plc, commented on the results:
'While, as we've previously indicated, this has been a disappointing first half,
a strong banknote order book in Currency, planned action to reduce costs in
Security Products' manufacturing base and overheads and some improvement in Cash
Systems lead the Board to expect a significantly better result in the second
half. Current outlook for the full year is in line with our statement in
September provided there is no further deterioration in the trading environment
in our key markets.'
For further information please contact:
David Finnett Group Financial Controller +44 (0)1256 605310
Mark Fearon Head of Corporate Affairs +44 (0)1256 605303
Stephen Breslin Brunswick +44 (0)20 7404 5959
26 November 2002
Group Results
Group turnover from continuing operations fell by 8.4 per cent from £294.4m to
£269.6m while profit before tax* was also lower at £19.6m, down from £35.6m last
year. As a result, headline earnings per share fell from 13.4p to 7.3p.
Reorganisation costs in the first half were £18.7m. After outflows of £17.0m
net for acquisitions/sale of investments and £32.4m on purchasing our own shares
for cancellation in the first half, closing net debt was £21.0m. The underlying
effective tax rate increased from 27.3 per cent to 28.4 per cent.
In our September 2002 trading statement, we indicated that Cash Systems'
progress in the first half was even slower than we had previously expected,
predominantly due to customers in the eurozone holding back on re-ordering
following the euro changeover. In addition, Currency Systems also experienced
delays in ordering decisions for several major projects by US casinos and
commercial banks. As a result operating profits** in Cash Systems were down in
the first half from £14.4m to £4.3m.
As previously announced, in Currency the first half was affected by an unusually
large number of new designs in the order book, which took longer to prepare than
normal repeat orders. This situation has now been resolved and the second half
in Currency is now underpinned by a solid banknote order book.
The performance of our non-banknote Security Products business has been
disappointing and in September 2002 we announced our plans to improve the
effectiveness and focus of the manufacturing base, including the proposed
closure of our High Wycombe facility. The costs of this action will result in
an exceptional charge taken in the current half-year of £17.7m, £11.6m of which
is cash. We announced in September 2002, that a combination of the proposed
restructuring, the acquisition of House of Questa and associated reductions in
overheads in the division should result in ongoing annual savings of
approximately £5m. Since September we have identified further overhead savings
in Security Products and Global Services of £2m. Most of the £7m total savings
will come through in the 2003/2004 financial year.
Continued difficult trading conditions and, in particular, timing delays in
Identity Systems' projects have delayed the expected recovery of Global
Services. As a result the division made an operating loss** of £2.5m, which was
marginally better than last year (operating loss of £2.7m). Better order books
should lead to some improvement in the second half.
Dividend
An increased interim dividend of 4.4p per share, up 4.8per cent on last years'
interim dividend will be paid on 17 January 2003 to shareholders on the register
on 13 December 2002. As outlined at the full year 2001/2002 results in May the
timing of the interim dividend payment has been be brought forward from April to
January to spread payments more equally over the year. As a result, the Company
will have made three dividend payments in the year ending 29 March 2003.
* Before reorganisation costs and goodwill amortisation
** From continuing operations and before reorganisation costs and goodwill
amortisation
Share Buy back
In May 2002, the Board announced its intention to use, where appropriate, the
existing authorities granted to it at the 2001 Annual General Meeting (AGM) to
acquire for cancellation up to 10 per cent of the issued share capital in the
market place. The Board renewed this authority at the AGM on 17 July 2002. To
date, the Company has acquired and cancelled 11 million shares (5.65 per cent)
under the share buy back programme at a cost of £32.4m. The Board is to seek
shareholder approval at an Extraordinary General Meeting for an extension to De
La Rue's existing authority to repurchase shares from an upper limit of 10% to
14.99% of issued capital. Further details will be given in a circular, which
will be sent to shareholders shortly.
Acquisitions
During the first half, Group expenditure on acquisitions was £31.4m.
In May 2002, we acquired 85 per cent of Sequoia Voting Systems Inc. from
Jefferson Smurfit Group plc. Sequoia is one of the largest providers of voting
equipment and software, ballot printing and election services in the USA. The
cash consideration was US$23m (£15.1m) with a future payment of up to US$12m
(£8.0m) dependent on certain performance criteria, linked to sales growth, being
met.
In June 2002, Cash Systems completed the acquisition of the banking automation
business of Papelaco for €20.5m (£12.8m) having received the necessary
regulatory approval from the Portuguese competition authorities. A future
payment of up to €10.5m (£6.5m) is payable dependant on certain performance
criteria being met, linked to sales and margin growth. In addition, in June
2002 the division acquired Serbatech Inc., a small Canadian based service
business for CAN$ 640,000 (£260,000).
In September 2002, Security Products acquired the entire share capital of House
of Questa Ltd, a UK based high security gravure printer, for a total
consideration of £3.2m.
Board and Management Changes
In September 2002, we were pleased to announce the appointment of Stephen King
as Group Finance Director and an executive director of the Board with effect
from 31 January 2003. He joins De La Rue from Aquila Networks plc, formerly
Midlands Electricity plc, where he has been Group Finance Director since 1997.
Mr King, 42, has a broad range of financial and commercial expertise and we look
forward to his contribution to the Board.
Jon Marx has resigned as Managing Director of Global Services and Security
Products. Since joining De La Rue in February 2000 Jon has overseen the
integration of Security Products and Global Services and more recently he has
led the strategic review of Security Products' manufacturing base, the results
of which are currently being implemented. We would like to thank Jon for his
valuable contribution. Until a successor is appointed Ian Much, De La Rue's
Chief Executive, has assumed responsibility for the division. The emphasis now
will be on developing a greater focus on sales and marketing for Global Services
as well as the completion of the reorganisation of Security Products'
manufacturing operations.
Cash Systems
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
Sales * 140.2 168.7 370.5
Operating profit * 4.3 14.4 36.0
* From continuing operations and before reorganisation costs and goodwill
amortisation
Cash Systems' operating profits* in the first half were £4.3m, down £10.1m on
the comparable period last year. As outlined in May, last year the division
benefited from one-off sales of euro related equipment, but first half revenues
this year in Cash Systems were below expectations in a tough trading
environment. The major factor was postponements in ordering by financial
institutions in the eurozone. In addition, delays in ordering decisions for
several major projects by US casinos and commercial banks also affected the
Currency Systems business. Elsewhere the Service, OEM and Retail businesses
were all in line with our expectations.
Cash Systems' trading has been historically second half weighted and we
anticipate that this will be the case this year, provided that the trading
environment does not deteriorate further in our key markets. First half
operating margins have inevitably suffered as a result of the decreased revenues
but these are expected to recover in the second half. As announced in May 2002,
we have refocused Cash Systems predominantly on three market facing business
units with effect from the start of the current financial year.
In September 2002, we concluded an agreement with Nantian Electronics to form a
joint venture to target the growing Chinese market for cash handling products.
Nantian is a leading systems integrator and provider of products and solutions
for electronic banking in China. The initial scale of the operation will be
modest and we intend to develop and manufacture products specifically designed
to meet local needs.
Business stream performance
Sales in our Financial Institutions (FI) business were lower in the first half
than expected due to weak ordering levels in the eurozone, following last year's
changeover to the single currency. As a result, volumes of Teller Cash
Recyclers and Teller Cash Dispensers were significantly lower and this impacted
revenues. The German and Spanish markets, in particular, remain slow but we are
now seeing a return to more normal ordering patterns in most of the regions in
the eurozone. Consequently, we expect a better second half in FI. The slow
start to the year has also been partly offset elsewhere in FI and in particular
our US and Swiss businesses have had an excellent first half. Another key
success has been a recent outsourcing contract with a large European commercial
bank. Under the contract, De La Rue will provide all the hardware and software
requirements to meet its needs for managing and supporting self service cash
transactions. We are already working with other banks to examine further
opportunities in this area.
The acquisition of Papelaco, which we completed in June, has given us an
excellent foundation to enter the banking self-service market, and we completed
the integration of the business within FI in the first half. We are now
concentrating on launching the Papelaco range in several of the most developed
European territories. Papelaco's sales in the first half have been in line with
our expectations and the second half order book is encouraging.
First half sales in Currency Systems were lower despite a significant increase
in worldwide sales of the 6000 banknote sorter. Unfortunately, this has been
more than offset by delays in ordering decisions for several major projects by
US casinos and commercial banks. An improving order book for large sorters
should lead to a better second half result.
The newly formed Retail Payment Solutions business performed in line with our
expectations and we are continuing to develop our approach to the market. Our
initial focus has been on developing solutions for the UK and USA markets and we
are currently operating trials with several key retail customers. These are
progressing well and, once fully developed, these solutions will be rolled out
to a wider geographic market in 2003/2004.
The Original Equipment Manufacture business, which makes dispensing mechanisms
for ATM's, had a good first half with excellent sales in all regions. Our
technology licensing agreement with Itautec Philco in Brazil, announced last
year, has progressed well with good volumes in the first half. Under the
agreement, De La Rue licenses technology to allow Itautec to manufacture De La
Rue's NMD 100 cash dispenser platform.
The Customer Services business has also had a strong first half with good
underlying sales growth. We continue to see excellent growth opportunities for
the business and in June 2002 we acquired Serbatech Inc., a small Canadian based
service business which enables us to penetrate the Canadian market further
following the acquisition last year of Haliburton and White.
Security Paper and Print
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
Sales 94.3 108.0 226.8
Operating profit * 12.7 19.3 41.1
* Before reorganisation costs
Currency
Operating profits in the Currency business were lower than last year. This was
mainly due to a large number of new designs in the banknote order book, which
have taken longer to prepare than repeat orders. This situation has now been
resolved, and consequently we expect a much better second half from Currency
underpinned by a strong banknote order book. The emphasis for the remainder of
the year will centre on order fulfilment. Next year, we expect the banknote
paper market to return to historical ordering patterns and volumes.
The closure of the Singapore banknote printing factory, announced in March 2002,
is on schedule for completion by the financial year-end. The consequent
reorganisation of our four remaining worldwide printing operations is nearing
completion. We are already manufacturing the same volume of banknotes as were
previously produced by five plants.
Security Products
Trading in the Security Products business continues to be weak. In September
2002, we announced the reorganisation of the manufacturing operations of the
business to create focused factories around our main product classes and their
respective specialist production processes. The review also addressed the
current overcapacity in the manufacturing base and we announced our intention to
cease production at our High Wycombe factory in the UK. The reorganisation,
which will result in the loss of 350 jobs, is expected to be completed by the
end of June 2003 and we have recently reached agreement with the union and
employee groups over the closure of the site.
In September 2002, Security Products also announced the acquisition of the
entire share capital of House of Questa Ltd, a UK based high security gravure
printer, for a total consideration of £3.2m. We propose to consolidate the
existing gravure printing operations based at High Wycombe at the House of
Questa facility in Byfleet, UK. The site will become a focused facility for
postage stamp production and other high security gravure web printing.
Portals Bathford, our pulp based papermaking business, performed in line with
expectations, but De La Rue Tapes, which produces security threads for
banknotes, had a slow first half as a result of weak demand in the banknote
papermaking business. However, we expect a much better second half backed by
the improving banknote paper order book in Currency.
A combination of the proposed reorganisation, the acquisition of House of Questa
and associated reductions in overheads in Global Services should result in some
savings in the current financial year and ongoing annual savings of £7m in
Global Services and Security Products, most of which will come through in the
2003/2004 financial year.
Global Services
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
Sales * 17.9 19.3 48.1
Operating (loss)/profit * (2.5) (2.7) 0.5
* From continuing operations and before reorganisation costs and goodwill
amortisation
Continued difficult trading conditions and, in particular, longer decision
cycles on Identity Systems' projects have delayed the expected recovery of
Global Services. Revenues declined to £17.9m (2001/2002: £19.3m) and the
division made an operating loss* of £2.5m, marginally better than last year's
operating loss* of £2.7m. Better order books should lead to some improvement in
the second half.
Business stream performance
The Identity Systems business now has a substantial base of several long-term
government contracts which provide it with an ongoing revenue stream. Although
margins in the first half were reduced due to a lower number of new
installations and implementations, we are seeing significant interest from
government customers in large-scale national identity and drivers licence
projects. These projects are, however, larger and more complex and consequently
decision cycles are much longer.
De La Rue Holographics' revenues were also down in the first half due to reduced
demand particularly for currency components, arising from both the euro and De
La Rue Currency. Other sectors have been more in line with expectations and we
expect a better second half on the back of stronger demand for banknote paper.
In May 2002, we announced the acquisition of 85 per cent of the share capital of
Sequoia Voting Systems Inc. In October, as expected, the Help America Vote Act
2002 was signed by President Bush, releasing over US$3.9bn of Federal funding
(plus matching State funding) for the upgrading of election systems over the
next four years. We believe that this will now accelerate the evolution of the
market to adopting highly secure automated election systems and there is already
a high level of interest in such systems. We are hopeful of a favourable
outcome, but in the event that it is not possible to convert these enquiries to
shipments in the final quarter of the 2002/2003 financial year, we anticipate
that the business will make a loss in the current year.
Associates
Profit from associates before interest and tax fell from £4.5m in the first half
of 2001/2002 to £3.6m in the current half year. The main associated company is
Camelot, the UK lottery operator. Our share of Camelot's profit was expected to
fall, following commencement of the second lottery licence in January 2002,
reflecting the decrease in De La Rue's effective shareholding from 26.67 per
cent to 20 per cent. In addition, the new lottery licence has reduced
shareholders' contribution from each 100p collected from around 1.0p to just
under 0.5p.
Interest
The Group's net interest income of £1.1m was £0.2m down on last year due to a
decline of £1.1m in interest received from associates, partly offset by an
improvement of £0.9m in the Group's own interest income. This was the result of
an improved average net cash position in the first half in 2002/2003 compared
with 2001/2002.
Taxation
Excluding exceptional items, the underlying effective tax rate was 28.4 per cent
(2001/02 27.3 per cent). We expect that, in the absence of unforeseen events,
the tax rate for the full year will be at a similar level.
Exceptional Items
There was an exceptional charge of £18.7m, comprising £17.7m for the
reorganisation of the Security Products business, including the proposed closure
of the High Wycombe plant. Of this amount, £11.6m is cash. The remaining £1.0m
were further costs incurred in the integration of CSI with our Cash Processing
business.
Cashflow
The net cash inflow from operating activities was £2.5m in the first half,
compared with £18.3m in the first half of 2001/02. There were outflows of £17.0m
net for acquisitions/sale of investments, £32.4m for the share buy-back
programme; and dividend payments of £25.4m.
The overall net debt change was an outflow of £71.0m (2001/02 £65.9m) resulting
in closing net debt of £21.0m at the end of the period compared with £29.8m net
debt at the end of the first half of last year, and net funds of £50.0m at the
end of the full year.
FRS 17 - Pensions Accounting
The Company previously announced its intention to adopt FRS 17 for the current
year. The Accounting Standards Board has announced subsequently that full
implementation of the standard has been deferred in order for a consensus on
pensions accounting to be reached with the International Accounting Standards
Board. The Company consequently announced in September its decision to defer
full implementation, but it will continue to comply with the transitional
arrangements. The net charge to P&L under FRS17 would have been similar in the
first half to the actual charge on a SSAP 24 basis.
Outlook
As indicated in September 2002, a strong banknote order book in Currency,
planned action to reduce costs in Security Products' manufacturing base and
overheads and some improvement in Cash Systems lead the Board to expect a
significantly better result in the second half. Current outlook for the full
year is in line with our statement in September provided there is no further
deterioration in the trading environment in our key markets.
Despite the difficult trading conditions in the first half, the Board remains
confident that De La Rue's underlying business is strong. In addition, a
combination of anticipated market developments and actions already taken to
improve manufacturing efficiencies and reduce overheads will position the
Company to make significant progress in 2003/2004.
-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 travellers cheques and vouchers.
Employing over 6,500 people across 31 countries, the company 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. De La
Rue is also pioneering new technologies from tailored solutions to protect the
world's brands through to government identity solutions for national
identification, drivers' licence, passport issuing schemes and election systems.
2. An interview with Ian Much in video/audio and text will be
available from 07:00 on 26 November 2002 on: http://www.delarue.com and on
http://www.cantos.com
Independent review report to De La Rue plc
Introduction
We have been instructed by the company to review the financial information,
which comprise the Group profit and loss account, the Group balance sheet, the
Group cash flow statement, the Group statement of total recognised gains and
losses and the related notes. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
The maintenance and integrity of the De La Rue plc website is the responsibility
of the directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website. Legislation in the United
Kingdom governing the preparation and dissemination of financial information may
differ from legislation in other jurisdictions.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 September 2002.
PricewaterhouseCoopers
Chartered Accountants
London
25 November 2002
GROUP PROFIT AND LOSS ACCOUNT
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2002
2002/03 2001/02 2001/02
Half Year Half Year Full Year
Notes £m £m £m
Turnover
Continuing operations 251.7 294.4 641.7
Acquisitions 17.9 - -
269.6 294.4 641.7
Discontinued operations - 9.5 9.5
1 269.6 303.9 651.2
Operating (loss)/profit
Continuing operations 14.5 31.0 77.6
2 - Reorganisation costs (18.7) (1.5) (11.1)
(4.2) 29.5 66.5
Acquisitions 0.4 - -
(3.8) 29.5 66.5
Discontinued operations - (1.2) (1.4)
Operating (loss)/profit before goodwill amortisation (3.8) 28.3 65.1
Goodwill amortisation (1.7) (1.3) (2.8)
1 Operating (loss)/profit (5.5) 27.0 62.3
Share of profits of associated companies 3.6 4.5 11.8
Profit on disposal of discontinued operations - - 1.5
Profit on sale of investments - 8.6 22.7
Profit on disposal of fixed assets - 0.1 -
(Loss)/profit on ordinary activities before interest (1.9) 40.2 98.3
Net interest: Group 0.9 - (0.4)
Associates 0.2 1.3 3.0
1.1 1.3 2.6
(Loss)/profit on ordinary activities before taxation (0.8) 41.5 100.9
Tax on profit on ordinary activities 0.2 (8.5) (22.2)
(Loss)/profit on ordinary activities after taxation (0.6) 33.0 78.7
Equity minority interest (0.6) (1.1) (1.5)
(Loss)/profit for the period (1.2) 31.9 77.2
Dividends (8.3) (8.0) (25.5)
Transferred to reserves (9.5) 23.9 51.7
3 Earnings per ordinary share (0.6)p 16.8p 40.7p
Diluted earnings per ordinary share (0.6)p 16.4p 40.0p
3 Headline earnings per ordinary share before 7.3p 13.4p 29.4p
reorganisation costs & goodwill amortisation
Dividends per ordinary share 4.4p 4.2p 13.4p
GROUP BALANCE SHEET
AT 28 SEPTEMBER 2002
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
Fixed assets
Intangible assets 71.2 44.7 45.7
Tangible assets 163.4 173.6 167.7
Investments : Associates 13.6 33.8 17.6
Other investments 1.7 4.9 2.4
Own shares 19.4 15.4 19.8
269.3 272.4 253.2
Current assets
Stocks 111.1 104.6 97.3
Debtors 119.5 145.6 138.6
Deferred taxation 31.3 34.9 30.5
Cash at bank and in hand 38.1 58.6 87.2
300.0 343.7 353.6
Creditors: amounts falling due within one year
Short term borrowings (1.7) (46.6) (12.4)
Other creditors (180.2) (203.1) (203.4)
Net current assets 118.1 94.0 137.8
Total assets less current liabilities 387.4 366.4 391.0
Creditors: amounts falling due after more than one
year
Long term borrowings (57.4) (41.8) (24.8)
Other creditors (2.5) (0.3) (2.7)
Provisions for liabilities and charges (54.7) (41.3) (47.6)
272.8 283.0 315.9
Capital and reserves
Called up share capital 46.1 48.5 48.8
Share premium account 12.9 7.1 11.5
Capital redemption reserve 2.8 - -
Revaluation reserve 1.8 1.8 1.8
Other reserve (83.8) (83.8) (83.8)
Profit and loss account 289.2 306.4 334.5
Shareholders' funds 269.0 280.0 312.8
Equity minority interests 3.8 3.0 3.1
272.8 283.0 315.9
GROUP CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2002
2002/03 2001/02 2001/02
Half Year Half Year Full Year
Notes £m £m £m
4a Net cash inflow from operating activities 2.5 18.3 88.3
Dividends received from associated companies 6.5 8.7 28.3
4b Returns on investments and servicing of finance 1.2 (0.3) (1.0)
Taxation (1.7) (9.6) (11.2)
4c Capital expenditure and financial investment 6.9 (10.0) (22.0)
4d Acquisitions and disposals (31.4) (40.9) (38.0)
Equity dividends paid (25.4) (24.0) (24.1)
Net cash (outflow)/inflow before use of liquid resources (41.4) (57.8) 20.3
and financing
4e Management of liquid resources 43.4 38.9 8.7
4f Financing (3.2) 25.3 (23.9)
(Decrease)/increase in cash in the period (1.2) 6.4 5.1
Reconciliation of net cash flow to movement in
net (debt)/funds
(Decrease)/increase in cash in the period (1.2) 6.4 5.1
Cash inflow from decrease in liquid resources (43.4) (38.9) (8.7)
Cash (inflow)/outflow from (increase)/decrease in debt (28.2) (21.2) 30.3
Change in net funds resulting from cash flows (72.8) (53.7) 26.7
Loans and finance leases acquired with subsidiaries - (12.7) (12.8)
Translation difference 1.8 0.5 -
Movement in net (debt)/cash in the period (71.0) (65.9) 13.9
Net funds at start of period 50.0 36.1 36.1
Net (debt)/funds at end of period (21.0) (29.8) 50.0
Analysis of net (debt)/funds
Cash 26.0 33.4 31.8
Liquid resources 12.1 25.2 55.4
Overdrafts (0.9) (4.5) (4.8)
Other debt due within one year (0.8) (42.1) (7.6)
Other debt due after one year (57.4) (41.8) (24.8)
Net (debt)/funds at end of period (21.0) (29.8) 50.0
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2002
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
(Loss)/profit for the period: Group (3.8) 28.0 66.7
Associates 2.6 3.9 10.5
(1.2) 31.9 77.2
Currency translation differences on foreign
currency net investments (2.9) (2.9) (0.2)
Total recognised (losses)/gains for the period (4.1) 29.0 77.0
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE HALF YEAR ENDED 28 SEPTEMBER 2002
2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
(Loss)/profit for the period (1.2) 31.9 77.2
Dividends (8.3) (8.0) (25.5)
(9.5) 23.9 51.7
Share capital issued 1.5 4.1 8.8
Transfer to share premium (0.5) - (2.4)
Shares repurchased (32.4) - -
Currency translation differences on foreign
currency net investments (2.9) (2.9) (0.2)
Net (decrease)/increase in shareholders' funds (43.8) 25.1 57.9
Opening shareholders' funds 312.8 254.9 254.9
Closing shareholders' funds 269.0 280.0 312.8
NOTES TO THE INTERIM STATEMENT
1 Segmental analysis 2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
Turnover by class of business
Continuing operations Cash Systems 140.2 168.7 370.5
Security Paper and Print 94.3 108.0 226.8
Global Services 17.9 19.3 48.1
- Less inter-segment sales (0.8) (1.6) (3.7)
251.7 294.4 641.7
Acquisition Cash Systems 6.4 - -
Global Services 11.5 - -
17.9 - -
Discontinued operations Global Services - 9.5 9.5
269.6 303.9 651.2
Operating (loss)/profit by class of business
Continuing operations Cash Systems 4.3 14.4 36.0
Security Paper and Print 12.7 19.3 41.1
Global Services (2.5) (2.7) 0.5
14.5 31.0 77.6
- Reorganisation costs Cash Systems (1.0) (1.5) (3.8)
Security Paper and Print (17.7) - (7.3)
(18.7) (1.5) (11.1)
Acquisition Cash Systems 0.7 - -
Global Services (0.3) - -
0.4 - -
Discontinued operations Global Services - (1.2) (1.4)
(3.8) 28.3 65.1
Goodwill amortisation Cash Systems (1.5) (1.2) (2.2)
Global Services (0.2) (0.1) (0.6)
(1.7) (1.3) (2.8)
(5.5) 27.0 62.3
Turnover by geographical area of operation
United Kingdom and Ireland 145.8 165.6 350.5
Rest of Europe 100.0 116.2 251.5
The Americas 75.8 58.9 134.5
Rest of world 24.1 20.8 52.6
Less inter-area sales (76.1) (57.6) (137.9)
269.6 303.9 651.2
Operating (loss)/profit by geographical area of
operation
United Kingdom and Ireland *(26.9) 1.9 14.7
Rest of Europe 13.4 21.1 41.9
The Americas 7.3 2.4 6.9
Rest of world 0.7 1.6 (1.2)
(5.5) 27.0 62.3
Turnover by geographical area of destination
United Kingdom and Ireland 33.0 40.4 79.1
Rest of Europe 83.6 124.7 277.9
The Americas 83.5 75.4 162.6
Rest of world 69.5 63.4 131.6
269.6 303.9 651.2
* after deducting re-organisation costs of £18.1m.
2 Reorganisation costs
Reorganisation costs of £18.7m (2001/02 £1.5m) have been charged to
operating profit. These costs relate to the following:
£m
Security Products 17.7
CSI 1.0
18.7
The charge for Security Products arose as a result of the manufacturing
review which we announced in May 2002. Of the £17.7m, £11.6m is cash, with
the balance of £6.1m relating to asset write-offs.
The £1.0m charge is part of the further expected cost for the integration
of CSI with our Cash Processing business.
3 Reconciliation of earnings per share 2002/03 2001/02 2001/02
Half Year Half Year Full Year
pence pence pence
per per per
share share Share
As calculated under FRS 14 (0.6) 16.8 40.7
Profit on the disposal of discontinued operations - - (0.7)
Profit on sale of investments - (5.0) (12.0)
Loss on disposal of fixed assets and assets held for - - (0.1)
resale
Amortisation of goodwill 0.8 1.0 1.5
Headline earnings per share as defined by the IIMR 0.2 12.8 29.4
Reorganisation costs 7.1 0.6 5.0
Headline earnings per share before items above 7.3 13.4 34.4
The eps of (0.6)p as calculated under FRS 14 is the £1.2m loss for the
period divided by 187,633,672 shares in issue.
4 Notes to Group cash flow statement 2002/03 2001/02 2001/02
Half Year Half Year Full Year
£m £m £m
a Reconciliation of operating profit to net cash
inflow from operating activities
Operating (loss)/profit (5.5) 27.0 62.3
Depreciation and amortisation 18.5 13.7 29.1
Increase in stocks (6.8) (14.5) (8.4)
Decrease/(increase) in debtors 12.2 (25.1) (6.5)
(Decrease)/increase in creditors (26.5) 17.4 7.8
Increase/(decrease) in reorganisation provisions 10.0 (0.3) 3.4
Other items 0.6 0.1 0.6
Net cash inflow from operating activities 2.5 18.3 88.3
b Returns on investments and servicing of finance
Interest received 3.7 3.9 3.4
Interest paid (2.5) (3.7) (3.5)
Dividends paid to minority shareholders - (0.5) (0.9)
Net cash inflow/(outflow) from returns on investments and 1.2 (0.3) (1.0)
servicing of finance
c Capital expenditure and financial investments
Purchase of tangible fixed assets (7.6) (12.8) (21.6)
Purchase of intangible fixed assets - - (0.4)
Sale of tangible fixed assets 0.1 1.1 1.6
Sale of investments 14.4 11.9 13.3
Purchase of own shares - (10.2) (14.9)
Net cash inflow/(outflow) for capital expenditure and
financial investment 6.9 (10.0) (22.0)
d Acquisitions and disposals
Purchase of subsidiary undertakings (31.4) (44.9) (44.8)
Net cash acquired with subsidiary undertakings - - 0.7
Sale of subsidiary undertakings - - 2.8
Net cash sold with subsidiary undertaking - - (0.8)
Sale of assets held for disposal - 4.0 4.1
Net cash outflow for acquisitions and disposals (31.4) (40.9) (38.0)
e Management of liquid resources
Net decrease in short term deposits 43.4 38.9 8.7
f Financing
Debt due within one year:
Loans raised 0.7 19.7 -
Loans repaid (0.1) (15.0) (16.9)
Debt due beyond one year:
Loans raised 28.2 17.0 24.6
Loans repaid - - (37.4)
Capital element of finance lease rental repayments (0.6) (0.5) (0.6)
Shares repurchased (32.4) - -
Share capital issued 1.0 4.1 6.4
Net cash (outflow)/inflow from financing (3.2) 25.3 (23.9)
5 This interim statement has been prepared in accordance with the guidelines
published by the Accounting Standards Board.
6 The statement has been prepared applying the accounting policies described
in pages 40 and 41 of the 2002 Annual Report and Accounts, and should be
read in conjunction with the Report and Accounts.
7 The results for the half years to 28 September 2002 and 29 September 2001
are unaudited and do not constitute the Group's statutory accounts.
8 The statutory accounts for the year ended 30 March 2002 have been delivered
to the Registrar of Companies. The report of the auditors on those accounts
was unqualified and did not contain a statement under either section
237(2) or 237(3) of the Companies Act 1985.
9 This interim statement was approved by the Board on 25 November 2002 and is
being posted to all shareholders. Copies are available from the Company
Secretary, De La Rue plc, De La Rue House, Jays Close, Viables,
Basingstoke, Hampshire, RG22 4BS.
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