Interim Results

RNS Number : 9431I

De La Rue PLC

26 November 2008

 

INTERIM STATEMENT

SIX MONTHS TO 27 SEPTEMBER 2008

HIGHLIGHTS Revenues* up 14.4 per cent, profit before tax** up 23.9 per cent and headline earnings per share*** up 28.1 per cent Operating profit margin* improved by 1.3 percentage points to 17.8 per cent Interim dividend per share increased by 110 per cent to 13.7p in line with previously announced dividend policy Successful completion of the disposal of Cash Systems+ for a cash consideration of £360.0 million Return of £460.0 million, equivalent to 305 pence per share, to shareholders on 28 November, 2008 James Hussey to succeed Leo Quinn as CEO with effect from 1 January 2009. For the last four years, James has been Managing Director of the Security Paper and Print Division (SPPD), which comprises the businesses of the continuing Group The Group enters the second half year with continued growth in its order book, which provides excellent visibility for the full year and into the first half of 2009/2010. Accordingly, the Board remains confident in the outlook for the current year

KEY FINANCIALS 

(Continuing Group excluding the disposed business of Cash Systems - excluding CPS)

	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Revenue*	244.7	213.9	+14.4%
Profit before tax**	49.8	40.2	+23.9%
Headline earnings per share***	23.7p	18.5p	+28.1%
Basic earnings per share***	21.8p	18.5p	+17.8%
Net cash at end of period	402.6	43.3
Dividends per share	13.7p	6.53p	+110%

* Group revenue, Group operating profit and Group operating cash flow is reported for continuing operations

** Group profit before tax is reported for continuing operations before exceptionals

*** Headline earnings per share are reported based on continuing operations before exceptionals. Basic earnings per share are reported for continuing operations.

+ Excluding Cash Processing Solutions (CPS) which has been retained within the Continuing Group

Nicholas Brookes, Chairman of De La Rue plc, commented:

'The Group has delivered an outstanding performance. These results demonstrate the continuing success of our strategy to drive profitable growth through innovation and productivity. 

'The Cash Systems disposal has removed our exposure to the retail banking sector and enables management to focus on our core business in Security Paper and Print.  

'Shareholders have approved the Group's proposal to return capital totalling £460.0 million, comprising the net proceeds of the sale of Cash Systems and the introduction of a modest level of debt on the balance sheet. 

Board changes

'The sale of Cash Systems and subsequent return of capital complete the strategic programme initiated by Leo Quinn in November 2004. Accordingly, Leo has informed the Board of his decision to leave De La Rue to pursue new challenges. 

'As CEO, Leo has led a team which has transformed the Group's portfolio and culture to build substantial value, of which £780m will have been returned to investors. He leaves the Group with strong foundations and with enhanced prospects. We thank him for his drive and leadership, which has created significant value for shareholders, and wish him well for the future.

'James Hussey is appointed De La Rue's new CEO effective 1 January 2009. For the last four years, James has been Managing Director of the Security Paper and Print Division - which comprises the continuing Group - and has more than 25 years' experience within De La Rue. The Board is pleased to have such a strong internal successor and is confident that James will continue to build on the achievements of De La Rue in recent years.

Outlook

'We enter the second half year with continued growth in our order book, which provides excellent visibility for the full year and into the first half of 2009/2010. Accordingly, the Board remains confident in the outlook for the current year.'

For further information, please contact:

Leo Quinn	Group Chief Executive	[phone]
Stephen King	Group Finance Director	[phone]
Gary Williams	Head of Corporate Affairs	[phone]
Andrew Lorenz	Financial Dynamics	[phone]

26 November 2008

INTERIM STATEMENT

De La Rue is pleased to report an excellent performance by its continuing operations for the half year ended 27 September 2008.  Revenue was up 14.4 per cent to £244.7m in the first half (2007/2008: £213.9m). Group operating profit of £43.5m (2007/2008: £35.3m) represented an increase of 23.2 per cent. Overall Group operating profit margin increased 1.3 percentage points to 17.8 per cent (2007/2008: 16.5 per cent). 

Profit before tax rose 23.9 per cent to £49.8m (2007/2008: £40.2m).  Headline earnings per share increased by 28.1 per cent to 23.7p.  Basic earnings per share were 21.8p compared with 18.5p last year.  There were exceptional charges of £2.6m in the period (2007/2008: nil), reflecting the restructuring costs associated with downsizing the central organisation, expected to total approximately £10.0m in the full year. 

Cash generated from operations in the first half was £13.0m (2007/2008: £29.7m). Increased working capital in the period reflected both the increased trading activity, particularly in Currency and, as anticipated, the reduction in advance payments from the historically high levels at the previous year end.  Overall, we remain confident in the Group's cash generation for the year as a whole.

In September 2008, De La Rue completed the sale of Cash Systems to a company incorporated for The Carlyle Group for a cash consideration of £360.0 million on a cash and debt free basis. 

The Group ended the half year with net cash of £402.6m, compared with net cash of £106.7m at the start of the year, including the proceeds from the disposal of the Cash Systems activities. The return of capital to shareholders totalling £460.0m will be completed on 28 November 2008.

 FUTURE STRATEGY

The Group intends to build on its position as a world leading manufacturer and supplier of banknotes and banknote paper to become the premier supplier to Central Banks, governments and international corporations globally of security features, authentication systems and products used in payment and identity transactions. The strategy will be to deliver value by leveraging existing customer relationships, continuing to drive productivity improvement and developing intellectual property to exploit adjacent market opportunities. The Board believes that through this strategy, De La Rue will be able to provide shareholders with higher returns. The Board also anticipates that the growth in the demand for security products will provide opportunities for De La Rue to develop its brand protection and identity products activities.

DIVIDEND POLICY

As announced on 22 May 2008, the Board has concluded that it is appropriate to adopt a new dividend policy, which will first take effect in respect of the financial year ending 28 March 2009, for a dividend cover of approximately 1.75 times, based on the underlying earnings for the relevant financial year. The Board intends to maintain a progressive dividend policy and is prepared to see different levels of dividend cover as the result of any short term fluctuations in earnings. The interim dividend declared today (26 November 2008) reflects this policy.

Going forward, the Board will continue to monitor the shape of the balance sheet of the Group and where appropriate, consider future returns of surplus cash to shareholders. 

OPERATING REVIEWS

Group Profit (continuing operations)	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Currency*   Security Products* Identity Systems *	36.6  5.5 1.3	27.5 4.8 2.5	33.1% 14.6% (48.0%)
Cash Processing Solutions	0.1	0.5
Continuing operations   Associates   Interest on net bank balances Interest on retirement benefit obligation	43.5 4.9 2.3 (0.9)	35.3 2.9 1.7 0.3	23.2%
Group continuing PBT	49.8	40.2	23.9%
*Businesses comprising Security Paper and Print Division

Currency

	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Revenue	167.6	135.5	23.7%
Operating profit	36.6	27.5	33.1%
Operating profit margin	21.8%	20.3%	1.5% pts  1.5 % pts

In Currency, first half sales grew strongly, with banknote volumes up 15 per cent, despite less overspill. Last year, shipments were more significantly phased to the second half, but in the current year, we expect a more even distribution. Paper volumes were up 4.4 per cent and performance continues to benefit from strong capacity utilisation. Operating profits of £36.6m were 33.1 per cent ahead of last year (2007/2008: £27.5m), reflecting increasing volumes, ongoing productivity improvements and some foreign exchange benefits. 

Security Products

	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Revenue	34.8	39.5	(11.9%)
Operating profit	5.5	4.8	14.6%
Operating profit margin	15.8%	12.2%	3.6% pts

In Security Products, first half sales were £34.8m, compared to £39.5m for 2007/2008, reflecting the divestment in November 2007 of our 50 per cent shareholding in the lower-margin De La Rue Smurfit joint venture.  It is anticipated that Security Products' continued focus on brand licensing, government revenues and internal components will contribute to strong future growth. Operating profit grew by 14.6 per cent to £5.5m (2007/2008: £4.8m). Margins were also improved by increased productivity across the internal supply chain.

Identity Systems (IDS)

	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Revenue	16.0	13.4	19.4%
Operating profit	1.3	2.5	(48.0%)
Operating profit margin	8.1%	18.7%	(10.6%) pts

In IDS, first half sales grew by 19.4 per cent to £16.0m (2007/2008: £13.4m). The business won significant contracts in the period, including the supply of a complete ePassport system to the Malta government, and another with the New York State for a chip-based drivers' licence.

Operating profit of £1.3m was lower than in the prior year first half (2007/2008: £2.5m) reflecting the increase in fixed costs resulting from the investment in the newly-opened Malta ePassport factory. The prior year also benefited from the final run-off of a long-standing higher margin contract. 

Cash Processing Solutions (CPS)

	Half Year 2008/2009 £m	Half Year 2007/2008 £m	Increase/(Decrease) Half Year to Half Year
Revenue	31.3	30.4	3.0%
Operating profit	0.1	0.5	-
Operating profit margin	0.3%	1.6%	-

In line with our expectations, CPS sales were broadly flat for the period, but with orders up 20 per cent as Central Bank demand for sorters remained strong. Ongoing investment in the new product pipeline resulted in the delivery of two new products in support of our Central Bank strategy.

Discontinued Operations

The Group completed the sale of its Cash Systems activities on 1 September 2008. Profit from discontinued operations (after tax) was £298.1m, which included £12.7m (after tax) from the trading profit of the discontinued activities for the five months to 1 September 2008. The profit on sale was £285.4m after tax, representing the proceeds of £360.0m on a cash free, debt free basis, less net assets disposed and related transaction costs.

INTERIM DIVIDEND 

The interim dividend of 13.7p reflects the Group's move to a new dividend policy, which was announced on 22 May 2008. Following the share consolidation of 17 November 2008, this will be payable on 96.6m shares (2007/2008: 149.5m) on 14 January 2009 to shareholders on the register on 12 December 2008.

UK PENSION SCHEME

The Group has continued its agreed contributions of £12.0m per annum for the five years to 2011, of which £5.0m was paid in the first half. An additional one-off contribution to the Group pension fund of £15.0m was made during the period, following the sale of the Cash Systems activities. The results of the Group's next formal (tri-annual) funding valuation are due in 2010/2011. 

ASSOCIATES

Profit from associates was £4.9m (2007/2008: £2.9m). This represents the contribution from Camelot, the UK lottery operator, which completes the final year of operation under its current licence agreement in January 2009. In August 2007, Camelot was awarded Preferred Bidder status and will be granted the third lottery licence, with effect from 1 February 2009 for ten years, upon fulfilment of regulatory conditions. 

INTEREST

The Group's interest income on net bank balance of £2.3m (2007/2008: £1.7m) reflected both the benefit from the proceeds of the disposal of the Cash Systems activities for £360.0m on 1 September 2008 and the underlying cash generation of the Group. 

EXCEPTIONAL ITEMS

An exceptional charge of £2.6m was incurred during the half year representing costs associated with downsizing the central organisation of the continuing operations following the sale of the Cash Systems activities. This is expected to total approximately £10.0m in the full year.  

TAXATION

Tax for the period on continuing operations was £14.2m, including an exceptional tax charge of £0.3m.  Excluding exceptional tax, the effective rate on continuing operations was 28.0 per cent, in line with last year's full year charge. Within discontinued operations, a tax charge of £35.7m relates to the disposal of Cash Systems of which £17.8m is payable as set out below whilst the remaining £17.9m mainly arises from movements in deferred tax and other provisions. Of the cash tax payable on the disposal of £17.8m, £3.7m was paid at the time of the disposal, £6.5m remains payable in 2008/2009 and £7.6m is payable in 2009/2010. 

CASH FLOW

Cash generated from operations in the first half was £13.0m (2007/2008: £29.7m). Increased working capital in the period reflects both the increased trading activity and, as expected, a reduction in advance payments from £61.3m at 29 March 2008 to £47.9m at 27 September 2008. Special funding payments of £20.0m were made to the UK Pension Scheme as outlined above.  

Capital expenditure of £11.8m was above that of last year and of depreciation, reflecting the timing of the longer term investment programme. We remain confident in the Group's cash generation for the year as a whole.

Group net cash was £402.6m at 27 September 2008, including the proceeds from the sale of Cash Systems. A capital return of £460.0m, equivalent to 305 pence per share will be made to shareholders on 28 November 2008, comprising the net proceeds from the sale of Cash Systems and the partial draw down of the Group's borrowing facilities.

During the period, the Group negotiated new borrowing facilities of £175m, comprising a £50.0m three-year term loan drawn on 14 November, 2008, and a £125.0m revolving facility. Key covenants on these facilities relate to interest cover, at greater than four times, and net debt: EBITDA, at less than three times. Following the agreed return of capital to shareholders, the Group's anticipated net debt would lie very comfortably within these covenant levels.

OUTLOOK 

We enter the second half year with continued growth in our order book, which provides excellent visibility for the full year and into the first half of 2009/2010. Accordingly, the Board remains confident in the outlook for the current year.

-ends-

RISK AND RISK MANAGEMENT

The principal risks faced by the Group and the risk management systems and processes were described in the 2008 Annual Report, a copy of which is available on request from the company's registered office at De La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS or at www.delarue.com. The Interim Statement includes a commentary on primary uncertainties affecting the Group's business for the remaining six months of the financial year.

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 a leading provider of cash sorting equipment and software solutions to Central Banks, helping them to reduce the cost of handling cash. De La Rue also pioneers new technologies in government identity solutions for national identification, driver's licence and passport issuing schemes. De La Rue employs over 4,000 people worldwide and is a member of the FTSE 250.   For further information visit De La Rue's website at www.delarue.com.
2.	A presentation to analysts will take place at 9:00 am 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/  ([phone]).
4.	De La Rue Financial Calendar:
	2008/2009
	Return of capital from disposal of Cash Systems   Ex-dividend date for interim dividend Record date for interim dividend Payment of  interim dividend Financial Year End	28 November 2008 10 December 2008 12 December 2008 14 January 2009 28 March 2009
5.	The average number of shares for the full year will be 130.8 million.

Responsibility Statement of the Directors in respect of the Interim Statement

We confirm that to the best of our knowledge:

•    the Condensed Interim Financial Statement has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;  •    the Interim Management Statement includes a fair review of the information required by:  (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Condensed Interim Financial Statement; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions to those described in the last set of Annual Financial Statements.

The Board

The Board of Directors that served during the six months to 27 September 2008 and their respective responsibilities can be found on pages 34 and 35 of the De La Rue plc Annual Report 2008. 

For and on behalf of the Board 

Nicholas Brookes

Chairman

25 November 2008    

Independent Review Report to De La Rue plc

Introduction

We have been engaged by the company to review the Condensed Interim Financial Statement in the Interim Statement for the six months ended 27 September 2008 which comprises Group condensed consolidated interim income statement, Group condensed consolidated interim balance sheet, Group condensed consolidated interim cash flow statement, Group condensed consolidated interim statement of recognised income and expense and the notes to the condensed consolidated interim financial statement. We have read the other information contained in the Interim Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Interim Financial Statement.

This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The Interim Statement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed Interim Financial Statement included in this Interim Statement has been prepared in accordance with 

IAS 34 'Interim Financial Reporting' as adopted by the EU.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the Condensed Interim Financial Statement in the Interim Statement based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Condensed Interim Financial Statement in the Interim Statement for the six months ended 27 September 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

KPMG Audit Plc

Chartered Accountants 

London

25 November 2008

GROUP CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT - UNAUDITED

FOR THE HALF YEAR ENDED 27 SEPTEMBER 2008

				2008/09	2007/08	2007/08
				Half Year	Half Year	Full Year
					Restated*	Restated*
			Notes	£m	£m	£m
	Revenue		3	244.7	213.9	467.0
	Operating expenses			(201.2)	(178.6)	(387.8)
	Operating profit		3	43.5	35.3	79.2
	Share of profits of associated companies after taxation			4.9	2.9	7.1
	Reorganisation costs			(2.6)
	Profit on disposal of a business					0.9
	Profit on disposal of investments					1.7
	Non-operating items			(2.6)	-	2.6
	Profit before interest and taxation			45.8	38.2	88.9
	Interest income			3.9	2.8	4.4
	Interest expense			(1.6)	(1.1)	(2.4)
	Retirement benefit obligation finance income			16.6	16.9	33.7
	Retirement benefit obligation finance cost			(17.5)	(16.6)	(33.4)
				1.4	2.0	2.3
	Profit before taxation			47.2	40.2	91.2
	Taxation	- UK	4	(10.7)	(8.2)	(17.7)
		- Overseas	4	(3.5)	(3.1)	(7.0)
	Profit after taxation			33.0	28.9	66.5
	Discontinued operations		5	298.1	6.7	21.9
	Profit for the period			331.1	35.6	88.4
	Profit attributable to equity shareholders of the Company			330.7	35.4	88.1
	Profit attributable to minority interests			0.4	0.2	0.3
				331.1	35.6	88.4
	Basic earnings per ordinary share - continuing operations		6	21.8p	18.5p	43.4p
	Diluted earnings per ordinary share - continuing operations		6	21.5p	18.1p	42.7p
	Basic earnings per ordinary share - discontinued operations		6	198.7p	4.4p	14.4p
	Diluted earnings per ordinary share - discontinued operations		6	196.2p	4.3p	14.0p
	Basic earnings per ordinary share		6	220.5p	22.9p	57.8p
	Diluted earnings per ordinary share		6	217.7p	22.4p	56.7p
	The directors propose a dividend of 13.70p per share for the half year ended 27 September 2008 which will utilise £13.2m of shareholders' funds. These financial statements do not reflect this dividend payable, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the year ending 28 March 2009.
	* Restated for the disposal of Cash Systems (excluding CPS). See note 1

GROUP CONDENSED CONSOLIDATED INTERIM BALANCE SHEET - UNAUDITED

AS AT 27 SEPTEMBER 2008

			2008/09	2007/08	2007/08
			Half Year	Half Year	Full Year
		Notes	£m	£m	£m
	ASSETS
	Non-current assets		134.5	139.6	143.2
	Property, plant and equipment		18.9	31.6	33.2
	Intangible assets		23.0	21.3	22.5
	Investments in associates and joint ventures		0.2	0.4	0.2
	Available for sale financial assets		15.3	38.2	25.9
	Deferred tax assets		0.7	0.1	0.8
	Other receivables		0.9	0.4	0.4
	Derivative financial instruments
			193.5	231.6	226.2
	Current assets
	Inventories		60.9	100.3	94.9
	Trade and other receivables		104.1	118.5	114.0
	Current tax assets		-	0.2	0.4
	Derivative financial instruments		8.4	5.4	19.1
	Cash and cash equivalents		434.8	66.0	120.3
			608.2	290.4	348.7
	Total assets		801.7	522.0	574.9
	LIABILITIES
	Current Liabilities
	Borrowings		(28.2)	(11.9)	(8.6)
	Trade and other payables		(171.3)	(241.7)	(245.3)
	Current tax liabilities		(51.2)	(27.0)	(31.7)
	Derivative financial instruments		(8.5)	(2.8)	(15.8)
	Provisions for other liabilities and charges		(17.7)	(16.8)	(23.1)
			(276.9)	(300.2)	(324.5)
	Non-current liabilities
	Borrowings		(4.0)	(10.8)	(5.0)
	Retirement benefit obligations	9	(18.2)	(75.2)	(25.3)
	Deferred tax liabilities		-	(3.6)	(0.6)
	Derivative financial instruments		(1.1)	(0.4)	(2.1)
	Other non-current liabilities		(0.1)	(2.9)	(1.9)
			(23.4)	(92.9)	(34.9)
	Total liabilities		(300.3)	(393.1)	(359.4)
	Net assets		501.4	128.9	215.5
	EQUITY
	Ordinary share capital		44.7	44.5	44.6
	Share premium account		23.1	21.6	22.5
	Capital redemption reserve		5.5	5.5	5.5
	Fair value reserve		(1.0)	1.7	0.7
	Cumulative translation adjustment		(0.9)	0.6	13.4
	Other reserves		(83.8)	(83.8)	(83.8)
	Retained earnings		511.1	133.6	210.3
	Total equity attributable to shareholders of the Company		498.7	123.7	213.2
	Minority interests		2.7	5.2	2.3
	Total equity		501.4	128.9	215.5

GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS - UNAUDITED

FOR THE HALF YEAR ENDED 27 SEPTEMBER 2008

		2008/09	2007/08	2007/08
		Half Year	Half Year	Full Year
			Restated*	Restated*
	Notes	£m	£m	£m
Cash flows from operating activities
Profit before tax		47.2	40.2	91.2
Adjustments for:
Finance income and expense		(1.4)	(2.0)	(2.3)
Depreciation and amortisation		10.4	12.6	22.1
Decrease/(increase) in inventories		0.5	(6.8)	(4.0)
Increase in trade and other receivables		(17.6)	(26.2)	(12.6)
Increase in trade and other payables		0.8	15.4	12.5
Decrease in reorganisation provisions		(0.2)	(0.2)	(0.9)
Special pension fund contribution		(20.0)	(4.9)	(12.0)
Profit on disposal of a business		-	-	(0.9)
Profit on disposal of investments		-	-	(1.7)
Loss/(profit) on disposal of property, plant and equipment		-	(0.2)	0.9
Share of income from associates after tax		(4.9)	(2.9)	(7.1)
Other non-cash movements		(1.8)	4.7	1.5
Cash generated from continuing operations		13.0	29.7	86.7
Cash generated from discontinued operations		(10.0)	0.9	37.3
Tax paid - continuing operations		(9.9)	(5.2)	(14.7)
Tax paid - discontinued operations		(4.4)	(6.1)	(12.8)
Net cash flows from operating activities		(11.3)	19.3	96.5
Cash flows from investing activities
Disposal of subsidiary undertaking (net of cash disposed) - discontinued		339.7	-	2.1
Investment in associates		-	(10.0)	(10.0)
Proceeds from sale of investment		-	-	1.7
Purchases of property, plant and equipment (PPE) & software intangibles - continuing		(11.8)	(7.4)	(19.2)
Purchases of property, plant and equipment (PPE) & software intangibles - discontinued		(1.1)	(1.8)	(3.1)
Development assets capitalised - continuing		(3.3)	(1.8)	(0.1)
Development assets capitalised - discontinued		(0.6)	(1.9)	(4.6)
Proceeds from sale of PPE		0.1	0.2	1.3
Interest received		2.7	2.8	4.3
Interest paid		(1.4)	(0.5)	(1.2)
Dividends received from associates		4.4	4.7	7.7
Net cash flows from investing activities		328.7	(15.7)	(21.1)
Net cash inflow before financing activities		317.4	3.6	75.4
Cash flows from financing activities
Proceeds from issue of share capital		2.9	3.4	5.2
Own share purchases		-	(4.2)	(4.2)
Proceeds from borrowing		24.0	2.3	2.2
Finance lease principal payments		(2.4)	(2.5)	(4.5)
Dividends paid to shareholders		(22.3)	(95.6)	(105.4)
Dividends paid to minority interests		-	-	(0.4)
Net cash flows from financing activities		2.2	(96.6)	(107.1)
Net increase/(decrease) in cash and cash equivalents in the period		319.6	(93.0)	(31.7)
Cash and cash equivalents at the beginning of the year		116.7	149.0	149.0
Exchange rate effects		(1.9)	(0.9)	(0.6)
Cash and cash equivalents at the end of the period	8	434.4	55.1	116.7
Cash and cash equivalents consist of:
Cash at bank and in hand		262.8	43.8	49.9
Short term bank deposits		172.0	22.2	70.4
Bank overdrafts		(0.4)	(10.9)	(3.6)
	8	434.4	55.1	116.7
* Restated for the disposal of Cash Systems (excluding CPS). See note 1

GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF RECOGNISED INCOME AND EXPENSE - UNAUDITED

FOR THE HALF YEAR ENDED 27 SEPTEMBER 2008

		2008/09	2007/08	2007/08
		Half Year	Half Year	Full Year
		£m	£m	£m
	Foreign currency translation difference for foreign operations	(1.0)	1.2	10.9
	Actuarial (losses)/gains on retirement benefit obligations	(16.1)	29.7	73.5
	Effective portion of changes in fair value of cash flow hedges	(2.4)	2.9	1.6
	Net gain on hedges of net investment in foreign operations	-	0.2	3.3
	Income tax on income and expenses recognised directly in equity	5.2	(10.8)	(22.9)
	Net (loss)/gain recognised directly in equity	(14.3)	23.2	66.4
	Profit for the financial period	331.1	35.6	88.4
	Total recognised income and expense for the period	316.8	58.8	154.8
	Total recognised income and expense for the period attributable to:
	Equity shareholders of the Company	316.4	58.6	154.5
	Minority interests	0.4	0.2	0.3
		316.8	58.8	154.8

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

1	BASIS OF PREPARATION AND ACCOUNTING POLICIES
	This statement is the condensed consolidated financial information of the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities as at and for the half year ended 27 September 2008. It has been prepared in accordance with the requirements of IAS34 Interim Financial Reporting as adopted by the European Union. The condensed consolidated interim financial statements have been prepared as at 27 September 2008, being the last Saturday in September. The comparatives for 2007/08 financial year are for the half year ended 29 September 2007 and the full year ended 29 March 2008. The Group completed the disposal of the Cash Systems Business (excluding Cash Processing Solutions) on 1 September 2008. In accordance with the requirements of IFRS 5 (non-current assets held for sale and discontinued operations). Cash Systems has been classified as a discontinued operation and has been disclosed as such. The comparatives have been restated accordingly. The condensed consolidated financial statements do not constitute financial statements as defined in section 240 of the Companies Act 1985 and do not include all of the information and disclosures required for the full annual financial statements. They should be read in conjunction with the Annual Report 2008 which is available on request from the Company's registered office at De La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS or at www.delarue.com. The condensed consolidated financial statements were approved by the Board of Directors on 25 November 2008. The financial information contained in the condensed consolidated financial statements in respect of the year ended 29 March 2008 has been extracted from the Annual Report 2008 which has been filed with the Registrar of Companies. The auditor's report on these financial statements was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The half yearly results for the current and comparative periods are unaudited. The auditors have carried out a review of the Interim Statement 2008/09 and their report is set out on page 9. The condensed consolidated financial statements in this Interim Statement have been prepared using accounting policies and methods of computation consistent with those set out in the Annual Report 2008 which are prepared in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRS').

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

2	RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVES

		Attributable to Equity Shareholders							Minority interest	Total equity
		Share capital £m	Share premium account £m	Capital redemption reserve £m	Fair value and other reserve £m	Cumulative translation adjustment £m	Other reserve £m	Retained earnings £m	£m	£m
	Balance at 31 March 2007	44.7	21.4	5.3	(0.5)	(0.8)	(83.8)	173.6	5.0	164.9
	Foreign currency translation difference for foreign operations					1.2				1.2
	Actuarial gain on retirement benefit obligations							29.7		29.7
	Effective portion of changes in fair value of cash flow hedges				2.9					2.9
	Net gain on hedges of net investment in foreign operations					0.2				0.2
	Income tax on income and expenses recognised directly in equity				(0.7)			(10.1)		(10.8)
	Net gain recognised directly in equity	-	-	-	2.2	1.4	-	19.6	-	23.2
	Profit for the period							35.4	0.2	35.6
	Total income recognised for the period	-	-	-	2.2	1.4	-	55.0	0.2	58.8
	Share capital issued		0.2							0.2
	Purchase of shares for cancellation	(0.2)		0.2				(4.2)		(4.2)
	Allocation of shares for cancellation							3.2		3.2
	Employee share scheme:
	- value of services provided							1.6		1.6
	Dividends paid							(95.6)		(95.6)
	Balance at 29 September 2007	44.5	21.6	5.5	1.7	0.6	(83.8)	133.6	5.2	128.9
	Foreign currency translation difference for foreign operations					9.7				9.7
	Actuarial gain on retirement benefit obligations							43.8		43.8
	Effective portion of changes in fair value of cash flow hedges				(1.3)					(1.3)
	Net gain on hedges of net investment in foreign operations					3.1				3.1
	Income tax on income and expenses recognised directly in equity				0.3			(12.4)		(12.1)
	Net gain/(loss) recognised directly in equity	-	-	-	(1.0)	12.8	-	31.4	-	43.2
	Profit for the period	-	-	-			-	52.7	0.1	52.8
	Total income recognised for the period				(1.0)	12.8		84.1	0.1	96.0
	Share capital issued	0.1	0.9							1.0
	Purchase of shares for cancellation									-
	Allocation of shares for cancellation							0.8		0.8
	Employee share scheme:
	- value of services provided							1.6		1.6
	Dividends paid							(9.8)	(0.4)	(10.2)
	Disposal of a business								(2.6)	(2.6)
	Balance at 29 March 2008	44.6	22.5	5.5	0.7	13.4	(83.8)	210.3	2.3	215.5
	Foreign currency translation difference for foreign operations					(1.0)				(1.0)
	Actuarial loss on retirement benefit obligations							(16.1)		(16.1)
	Effective portion of changes in fair value of cash flow hedges				(2.4)					(2.4)
	Income tax on income and expenses recognised directly in equity				0.7			4.5		5.2
	Net loss recognised directly in equity	-	-	-	(1.7)	(1.0)	-	(11.6)	-	(14.3)
	Profit for the period							330.7	0.4	331.1
	Total income recognised for the period	-	-	-	(1.7)	(1.0)	-	319.1	0.4	316.8
	Share capital issued	0.1	0.6							0.7
	Purchase of shares for cancellation									-
	Allocation of shares for cancellation							2.2		2.2
	Employee share scheme:
	- value of services provided							1.8		1.8
	Dividends paid							(22.3)		(22.3)
	Disposal of a business					(13.3)				(13.3)
	Balance at 27 September 2008	44.7	23.1	5.5	(1.0)	(0.9)	(83.8)	511.1	2.7	501.4

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

3	SEGMENTAL ANALYSIS

	The Group's primary reporting format is by business segment. Following the disposal of the Cash Systems activities (excluding Cash Processing Solutions (CPS)) the Group comprises the Security Paper and Print Division and Cash Processing Solutions (which was previously disclosed within Cash Systems). The Currency and Security Products businesses are involved in the production of a wide range of national currencies and security documents, including authentication labels, travellers' cheques and fiscal stamps. The Identity Systems business is involved in the production of passports, including ePassports, together with other secure identity products. The CPS business is primarily focussed on the production of large sorters for central banks complementing our Currency business. Additional information on Security Paper and Print has been provided on a voluntary basis.
	Analysis by business segment			2008/09	2007/08	2007/08
				Half Year	Half Year	Full year
					Restated*	Restated*
				£m	£m	£m
	Revenue by business segment
		Security Paper and Print
			Currency	167.6	135.5	316.7
			Security Print	34.8	39.5	74.8
			Identity Systems	16.0	13.4	26.5
		Cash Processing Solutions		31.3	30.4	58.4
		Eliminations		(5.0)	(4.9)	(9.4)
				244.7	213.9	467.0
	Operating profit by business segment
		Security Paper and Print
			Currency	36.6	27.5	66.5
			Security Print	5.5	4.8	8.4
			Identity Systems	1.3	2.5	3.9
		Cash Processing Solutions		0.1	0.5	0.4
				43.5	35.3	79.2
	Analysis by geographical segment
	Revenue by destination
	United Kingdom and Ireland			31.5	29.2	61.5
	Rest of Europe			29.6	24.0	54.9
	The Americas			34.9	32.3	92.7
	Rest of world			148.7	128.4	257.9
				244.7	213.9	467.0
	* Restated for the disposal of Cash Systems (excluding CPS). See note 1

4

TAXATION

A tax charge on continuing operations of 28.0% (six months to 29 September 2007: 28.1% ; year to 29 March 2008 27.9%) has been provided based on the estimated effective rate of tax for the year arising on the profits on continuing operations. This excludes an exceptional tax charge of £0.3m being the net of a £1m charge related to changes in Industrial Buildings Allowances and a £0.7m tax credit on exceptional restructuring costs.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

5	DISCONTINUED OPERATIONS
	The Group successfully completed the disposal of Cash Systems (excluding Cash Processing Solutions) on 1 September 2008.
	Results of discontinued operations
		2008/09	2007/08	2007/08
		Half Year	Half Year	Full Year
		£m	£m	£m
	Revenue	121.7	131.2	286.6
	Operating expenses	(104.0)	(117.6)	(251.1)
	Operating profit	17.7	13.6	35.5
	Taxation on operating profits on discontinued operations	(5.0)	(6.9)	(13.6)
	Profit on disposal of discontinued operations before tax	321.1	-	-
	Taxation on profit of discontinued operations	(35.7)	-	-
		285.4	-	-
	Profit for the year from discontinued operations	298.1	6.7	21.9
	Cash flows from/(used in) discontinued operations
	Net cash (used in)/from operating activities	(10.0)	0.9	37.3
	Tax paid	(4.4)	(6.1)	(12.8)
	Net cash used in investing activities	(1.7)	(3.7)	(7.7)
	Net cash from financing activities	-	-	-
	Net cash (used in)/from discontinued operations	(16.1)	(8.9)	16.8
	Effect of disposal on the financial position of the Group
		£m
	Property, plant and equipment	10.5
	Intangible fixed assets	16.3
	Inventories	41.7
	Trade and other receivables	39.2
	Cash and cash equivalents	11.3
	Trade and other payables	(17.6)
	Mobilisation payments	(12.0)
	Other current assets and liabilities	(12.2)
	Retirement benefit obligations	(2.8)
	Provisions for liabilities and charges	(5.7)
	Deferred income	(23.3)
	Net assets and liabilities	45.4
	Amounts paid by purchaser	356.0
	Amounts payable by purchaser	13.2
	Disposal costs paid	(5.0)
	Disposal costs accrued	(11.0)
	Taxation accrued	(35.7)
	Reserves recycled on disposal	13.3
	Net assets and liabilities disposed	(45.4)
	Profit on disposal of discontinued operations	285.4
	Consideration received satisfied in cash	356.0
	Cash disposed of	(11.3)
	Disposal costs paid	(5.0)
	Disposal of subsidiary undertakings (net of cash disposal)	339.7

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

6	EARNINGS PER SHARE		2008/09	2007/08	2007/08
			Half Year	Half Year	Full year
				Restated*	Restated*
			pence per share	pence per share	pence per share
	Basic earnings per share		220.5	22.9	57.8
	Diluted earnings		217.7	22.4	56.7
	Headline earning per share		23.7	18.5	41.7
	Earnings per share are based on the profit for the period attributable to ordinary shareholders of £330.7m (2007/08: £35.4m) as shown in the Group condensed consolidated income statement. The weighted average number of ordinary shares used in the calculations is 149,956,557 (2007/08: 154,787,381) for basic earnings per share and 151,938,908 (2007/08: 157,964,839) for diluted earnings per share after adjusting for dilutive share options.
	Reconciliation of earnings per share are set out below	2008/09		2007/08	2007/08
		Half Year		Half Year	Full year
				Restated*	Restated*
		pence per share		pence per share	pence per share
	Basic EPS	220.5		22.9	57.8
	Effect of dilutive options	(2.8)		(0.5)	(1.1)
	Diluted EPS	217.7		22.4	56.7
	Earnings per share from continuing operations
	Basic EPS	220.5		22.9	57.8
	Profit on disposal - Cash Systems division excluding CPS	(214.0)
	Pre tax profit from discontinued operations	(11.8)		(8.8)	(23.3)
	Taxation on discontinued activities	27.1		4.4	8.9
	Basic EPS from continuing operations	21.8		18.5	43.4
	Effect of dilutive options	(0.3)		(0.4)	(0.7)
	Diluted EPS from continuing operations	21.5		18.1	42.7
	Earnings per share from discontinued operations
	Basic EPS
	Profit on disposal - Cash Systems division excluding CPS	214.0
	Pre tax profit from discontinued operations	11.8		8.8	23.3
	Taxation on discontinued activities	(27.1)		(4.4)	(8.9)
	Basic EPS from discontinued operations	198.7		4.4	14.4
	Effect of dilutive options	(2.5)		(0.1)	(0.4)
	Diluted EPS from discontinued operations	196.2		4.3	14.0
	The Directors are of the opinion that the publication of the headline earnings is useful to readers of interim statements and annual accounts as they give an indication of underlying business performance.
			2008/09	2007/08	2007/08
			Half Year	Half Year	Full year
				Restated*	Restated*
			pence per share	pence per share	pence per share
	Reconciliation of headline earnings per share
	Basic earnings per share		220.5	22.9	57.8
	Reorganisation costs		1.9
	Profit on disposal - Cash Systems division excluding CPS		(214.0)
	Pre tax profit from discontinued operations		(11.8)	(8.8)	(23.3)
	Taxation on discontinued activities		27.1	4.4	8.9
	Profit on the disposal of continuing operations				(0.6)
	Profit on the disposal of investments				(1.1)
	Headline earnings per share		23.7	18.5	41.7
	* Restated for the disposal of Cash Systems (excluding CPS). See note 1

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

7	EQUITY DIVIDENDS
		2008/09	2007/08	2007/08
		Half Year	Half Year	Full year
		£m	£m	£m
	Final dividend for the year ended 31 March 2007 of 13.27p paid on  3 August 2007	-	21.2	21.2
	Final dividend for the year ended 29 March 2008 of 14.87p paid on  1 August 2008	22.3	-	-
	Interim dividend for the period ended 29 September 2007 of 6.53p paid on 16 January 2008	-	-	9.8
	Special dividend of 46.5p paid on 3 August 2007	-	74.4	74.4
		22.3	95.6	105.4
	An interim dividend of 13.70p has been proposed for the half year ended 27 September 2008. In accordance with IFRS the interim dividend has not been accrued in these condensed consolidated in interim financial statements.

8	NOTES TO THE GROUP CONDENSED CONSOLIDATED INTERM STATEMENT OF CASH FLOWS
		2008/09	2007/08	2007/08
		Half Year	Half Year	Full year
		£m	£m	£m
	Analysis of net cash
	Cash at bank and in hand	262.8	43.8	49.9
	Short term bank deposits	172.0	22.2	70.4
	Bank overdrafts	(0.4)	(10.9)	(3.6)
	Cash and cash equivalents	434.4	55.1	116.7
	Other debt due within one year	(27.8)	(1.0)	(5.0)
	Borrowings due after one year	(4.0)	(10.8)	(5.0)
	Net cash at end of period	402.6	43.3	106.7

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

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.
		2008/09	2007/08	2007/08
		Half Year	Half Year	Full year
		£m	£m	£m
	UK retirement benefit obligations	(16.6)	(71.3)	(20.7)
	Overseas retirement benefit obligations	(1.6)	(3.9)	(4.6)
	Retirement benefit obligations	(18.2)	(75.2)	(25.3)
	Deferred tax	5.0	22.4	7.0
	Net retirement benefit obligations	(13.2)	(52.8)	(18.3)
	The majority of the Group's retirement benefit obligations are in the UK:
		UK	UK	UK
		£m	£m	£m
	At 30 March 2008 / 1 April 2007	(20.7)	(104.3)	(104.3)
	Current service cost included in operating profit	(3.0)	(6.1)	(10.0)
	Net finance cost	(0.9)	0.3	0.4
	Actuarial gains and losses arising over the year	(16.4)	29.6	73.4
	Cash contributions and benefits paid	24.4	9.2	20.5
	Transfers	-	-	(0.7)
	At 27 September 2008 / 29 September 2007 / 29 March 2008	(16.6)	(71.3)	(20.7)
	Amounts recognised in the consolidated balance sheet:
	Fair value of plan assets	503.5	536.3	507.4
	Present value of funded obligations	(514.5)	(601.8)	(522.4)
	Funded defined benefit pension plans	(11.0)	(65.5)	(15.0)
	Present value of unfunded obligations	(5.6)	(5.8)	(5.7)
	Net liability	(16.6)	(71.3)	(20.7)
	Amounts recognised in the consolidated income statement:
	Included in employee benefits expense:
	Current service cost	(3.0)	(6.1)	(10.0)
	Included in net finance cost:
	Expected return on plan assets	16.6	16.8	33.7
	Interest cost	(17.5)	(16.5)	(33.3)
		(0.9)	0.3	0.4
	Total recognised in the consolidated income statement	(3.9)	(5.8)	(9.6)
	Actual return on plan assets	(15.6)	13.7	(9.9)
	Amounts recognised in the statement of recognised income and expense:
	Actuarial losses on plan assets	(32.2)	(3.1)	(43.6)
	Actuarial gains on defined benefit pension obligations	15.8	32.7	117.0
	Amounts recognised in the statement of recognised income and expense	(16.4)	29.6	73.4

	Principal actuarial assumptions:	2008/09	2007/08	2007/08
		Half Year	Half Year	Full year
		UK	UK	UK
		%	%	%
	Future salary increases	4.10	4.10	4.10
	Future pension increases - past service	3.60	3.30	3.60
	Future pension increases - future service	3.40	3.10	3.40
	Discount rate	7.00	5.70	6.80
	Inflation rate	3.50	3.20	3.50
	Expected return on plan assets	6.73	6.59	6.73
	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 27 September 2008, 29 September 2007 and 29 March 2008 mortality assumptions are based on the PxA92 birth year tables multiplied by a rating of 125% and allowance for medium cohort mortality improvements in future. The resulting life expectancy for a 65 year old pensioner is 20.2 years.

.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED

10	RELATED PARTY TRANSACTIONS
	During the year the Group traded with Fidink (33.3%). The Group's trading activities with Fidink in the period comprise £5.3m for the purchase of ink and other consumables. At the balance sheet date there was a creditor balance of £1.5m with this company.

	Key management compensation
			2008/09	2007/08	2007/08
			Half Year	Half Year	Full Year
			£'000	£'000	£'000
	Salaries and other short-term employee benefits		2,573.0	1,597.0	4,005.0
	Termination benefits		114.0	75.6	75.7
	Retirement benefits:
		Defined contribution	2.0	2.9	6.0
		Defined benefit	220.0	208.7	367.3
	Share-based payments		902.0	799.0	2,223.0
			3,811.0	2,683.2	6,677.0
	Key management comprises members of the Board and the Operating Board. Key management compensation includes fees of non-executive Directors, 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.

 

END

 

 

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