Interim Results
De La Rue PLC
25 November 2003
INTERIM STATEMENT
SIX MONTHS TO 27 SEPTEMBER 2003
TRADING SUMMARY
- Profit before tax, exceptional items and goodwill amortisation of
£19.7m* (2002/2003 £19.6m*), achieved despite additional pension costs of £3.7m
and ahead of the Board's original expectations at the start of the year.
- Strong cash flow performance with net cash inflow from operating
activities of £35.0m (2002/2003 £2.5m) in the first half (aided by customer
prepayments). The Group ended the first half with net cash of £13.9m.
- Strong first half in Security Paper and Print was underpinned by
higher levels of activity in the papermaking business and our success in winning
the Iraq banknote contract.
- Operating profits in Cash Systems were ahead of our expectations
reflecting the benefit of the ongoing cost reduction programmes, although down
on last year's result.
- Global Services strategic review completed. An exit from low margin
and declining product areas announced today. Global Services will cease as a
separate division.
- Interim dividend 4.4p (2002/2003 : 4.4p).
* before exceptional charges of £17.9m (2002/2003 £18.7m) and goodwill
amortisation of £1.7m (2002/2003 £1.7m)
Sir Brandon Gough, Chairman of De La Rue plc, commented on the results:
'The Group has made good progress in the first half of 2003 following a
disappointing performance last year. The improvement in underlying performance
reflects both the benefit of the cost reduction programmes initiated last year
and the strength of our Currency business. During the first half, our success in
winning the exceptional Iraq banknote contract and the commencement of bulk
deliveries against challenging timescales, is further testament to the power of
the De La Rue brand and to the business's ability to deliver on our customer's
requirements.
'Continuation into the second half of the favourable conditions that resulted in
an improvement in underlying first half performance, leads the Board to expect a
strong second half result.'
For further information please contact:
Stephen King Group Finance Director +44 (0)1256 605307
Mark Fearon Head of Corporate Affairs +44 (0)1256 605303
Jonathan Glass Brunswick +44 (0)20 7404 5959
25 November 2003
Group Results
Turnover increased by 7.6% from £269.6m to £290.1m and profit before tax,
exceptional items and goodwill amortisation was also slightly ahead at £19.7m*
(2002/2003 : £19.6m*). This represented a considerably better performance than
the Board had anticipated at the beginning of the year and is after taking
account of increased accrued pension charges of £3.7m. A strong first half
performance in Security Paper and Print, where operating profits (including
acquisitions and before exceptional items of £0.8m and goodwill amortisation
credit of £0.2m) were up £1.6m to £14.3m, offset the anticipated tough trading
conditions currently being experienced in other parts of the Group.
Headline earnings per share (excluding exceptional items) increased by 0.8p to
8.1p due to a reduction in the underlying effective tax rate to 26.0% (2002/2003
: 27.6%) and the effect of a lower number of shares in issue than last year,
following the share buy back programme. Basic earnings per share were (2.2)p
compared with (0.6)p last year.
An excellent first half in Currency was the key contributor to the strong
operating result in Security Paper and Print. This was primarily due to
significantly higher levels of activity in the papermaking business. In
addition, it reflected the commencement of deliveries in the period relating to
the Iraq banknote contract, announced in July 2003. The business goes into the
second half with a strong order book in both papermaking and print. Continuing
weak markets contributed to a poor first half performance in the Security
Products business.
In Cash Systems, first half revenues of £142.2m were down £4.4m on last year's
revenues of £146.6m as the tough trading conditions seen in the second half of
2002/2003 continued. Operating profits were ahead of our expectations at £2.2m
(before reorganisation costs of £1.9m and goodwill amortisation of £1.6m)
although down by £2.8m on last year's result. This better than expected
operating result was achieved by early benefit from the cost reduction
programmes.
We outlined in February 2003 that the focus within Cash Systems would be on
alignment of the cost base of the business to underpin trading in the current
tough market conditions, particularly in Europe. We announced 300 job losses in
the division and during the first half we have identified a further 50
redundancies at our Dallas and Lisbon manufacturing sites. Of the 350
redundancies identified to date, approximately 250 have now been completed with
the balance to follow in the second half.
Global Services' revenues increased from £29.4m to £35.0m. The operating loss of
£2.3m (before exceptional costs of £12.6m and goodwill amortisation of £0.3m)
was marginally better than the loss in the same period last year.
Cash flow remains a key strength with a net cash inflow from operating
activities of £35.0m (2002/2003 : £2.5m) albeit assisted by favourable working
capital associated with Iraq. The Group ended the half-year with net cash of
£13.9m compared with net cash of £8.2m at the start of the year.
* before exceptional charges of £17.9m (2002/2003 £18.7m) and goodwill
amortisation of £1.7m (2002/2003 £1.7m)
Dividend
An interim dividend of 4.4p per share will be paid on 16 January 2004 to
shareholders on the register on 12 December 2003.
Disposals
In August 2003 De La Rue disposed of its entire shareholding in IMW Immobilien
AG for a net consideration of £6.4m in cash, after repayment of related
inter-company debt. The net carrying value of the assets attributable to De La
Rue was £9.0m.
De La Rue had retained its shareholding in IMW (formerly Garny AG) following
earlier disposals and the remaining investment represented the related property
portfolio.
UK Pension Scheme
The triennial valuation of De La Rue's UK pension scheme has now been completed
by the scheme's actuary, based on data as at 6 April 2003. The Group accounts
for pensions in accordance with SSAP24, having deferred the introduction of
FRS17 pending the implementation of International Accounting Standard 19.
The preliminary results of the triennial valuation, which are subject to
approval by the Trustee of the scheme, reflect the poor performance of the
financial markets during the period and show a deficit of approximately £40.0m.
The deficit was assessed at 6 April 2003 as required. Since then, however,
equity prices have improved.
The previous triennial valuation, assessed at 6 April 2000, indicated a fund
surplus of £40.0m. The change in the fund's position will increase annual
charges going forward and the cost for 2003/2004 under the new valuation will be
around £9.5m, in line with expectations (2002/2003 : £1.9m). The charge under
SSAP 24 in the first half of this year was £4.7m compared with £1.0m in 2002/
2003. The net operating charge under FRS 17 in the first half would have been
similar to the actual charge on a SSAP 24 basis.
As a result of the 2003 triennial review the company is reviewing its UK pension
scheme arrangements. The review, involving discussions with key stakeholders,
has now commenced and is expected to be completed by the end of the financial
year.
OPERATING REVIEWS
Security Paper and Print
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
-------- -------- ----------
Sales
Continuing operations 97.5 94.3 213.8
Acquisitions 17.3 - -
-------- -------- ----------
114.8 94.3 213.8
Operating profit*
Continuing operations 13.1 12.7 30.4
Acquisitions 1.2 - -
-------- -------- ----------
14.3 12.7 30.4
* before exceptional items of £0.8m (2002/2003 : £17.7m) and goodwill
amortisation credit of £0.2m (2002/2003 : nil).
Currency
Operating profits in the Currency business were higher than in the equivalent
period last year, despite increased pensions costs of £1.7m. This was primarily
as a result of much higher levels of activity in the papermaking business, which
was supported by the return to the market of a large overspill customer after
several years absence. Additionally, it reflected the commencement of deliveries
in the period for the previously announced Iraq contract, although other
significant contracts were also secured in the first half. The integration of
the former Bank of England printing works at Debden, acquired at the beginning
of the current financial year, is proceeding well and it made its anticipated
contribution to divisional profits in the half year.
The business goes into the second half with a strong order book. In addition the
second half will also see the completion of the exceptional Iraq order. Next
year, we expect the print and papermaking markets to return to historical
ordering patterns and volumes.
Security Products
During the first half, we completed the closure of our High Wycombe facility in
the UK. Continuing weak markets contributed to a poor first half performance.
However, we expect some operating improvement in the second half as a result of
lower overheads. Trading in the first half in De La Rue Tapes, which makes
security threads for banknotes, improved as a result of stronger demand in the
banknote papermaking business. We expect to see this trend continue in the
second half. Portals Bathford, our pulp based papermaking business, performed
well with good production volumes in the first half.
Cash Systems
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
-------- -------- ----------
Sales 142.2 146.6 310.9
Operating profit* 2.2 5.0 11.6
*before exceptional items of £1.9m (2002/2003 : £1.0m) and goodwill amortisation
of £1.6m (2002/2003 : £1.5m)
In Cash Systems, first half revenues of £142.2m were down £4.4m on last year's
revenues of £146.6m as the tough trading conditions seen in the second half of
2002/2003 continued. Operating profits were ahead of our expectations at £2.2m
(although down by £2.8m on last year's result), reflecting savings from the cost
reduction programmes, despite increased pensions costs of £0.7m.
During the first half, our priority in our financial institutions business has
been to reduce the cost base in the current tough market conditions,
particularly in Europe. As expected market conditions in the worst affected
markets, notably Germany and Spain, have remained similar to last year, although
some operating improvement is now being seen as a result of lower overheads. The
anticipated tough first half trading situation in Europe continued to be offset
by continued growth of the North American market. Teller automation remains by
far the largest business within Cash Systems both in terms of product sales and
service revenues and during the first half, volumes of Teller Cash Dispensers
were strong. In addition, the self-service business, formed out of the
acquisition of the Papelaco equipment manufacturing business in June 2002,
performed well. We continue to roll out the self-service product range to
several of the most developed European territories.
As announced at the preliminary results 2002/2003, we have also taken action to
reduce the cost base of the large sorter business in line with the difficult
prevailing market conditions. The business had an encouraging first half with
better than expected large system sales.
The customer service business, which supports all Cash Systems businesses,
continues to be a significant profit driver of the division. The business
performed well in the first half and in line with last year.
Global Services
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
-------- -------- ----------
Sales 35.0 29.4 59.9
Operating loss* (2.3) (2.8) (4.0)
*before exceptional items of £12.6m (2002/2003 : nil) and goodwill amortisation
of £0.3m (2002/2003 : £0.2m)
Global Services' revenues increased by £5.6m to £35.0m with an operating loss of
£2.3m, which was marginally better than the loss of £2.8m in the same period
last year. The result also included increased pensions costs of £0.3m.
De La Rue Holographics' revenues were down in the first half due to the timing
of banknote order receipts particularly in the first quarter. In August 2003, De
La Rue was named by FIFA as the official brand protection partner of the 2006
World Cup to be held in Germany. Under the terms of the contract we will supply
holograms to approximately 300 firms who will produce official merchandise for
the event.
Reduced call-off by a major customer in Identity Systems resulted in lower than
expected first half volumes for our installed base of contracts. Timing delays
on expected new system sales also continued to affect revenues. During the
period, De La Rue was awarded a number of new contracts including the driver's
licence system for the province of Quebec, adding to our North America installed
base.
In Sequoia Voting Systems competitive pricing has become an increasing feature
of the market, consequently affecting margins and leading to a small loss in the
first half. Volumes remain encouraging and in the period the business won a
number of significant contracts against strong competition. We expect the
business to return to profit in the second half, but this is unlikely to offset
first half losses. As announced in March 2003, we completed the closure and the
outsourcing of Sequoia's Exeter, USA ballot printing facility in the first half
with the loss of 60 jobs.
Global Services Strategic Review
The Board has completed the strategic review of Global Services, including the
Security Products activities. Its criterion has been the creation of long-term
value for shareholders.
The principal conclusions from the review are that Global Services should cease
to exist as a strategic activity and that the Group should exit from a number of
low margin and declining product areas within the Security Products business.
These include UK personal cheques, export stamps, UK vouchers and coin bags,
which are currently undertaken at De La Rue's Peterborough and Byfleet
facilities in the UK. These sites currently employ about 200 staff.
Consequently, the Company is announcing today its intention to exit the
Peterborough business. De La Rue will close the Byfleet facility and transfer
the equipment required to support domestic stamp production to its Dunstable
facility in the UK. The above proposals are subject to appropriate employee
consultation, which has begun.
The Security Paper and Print division will now comprise banknote printing and
papermaking operations, together with the Tapes and Holographics activities,
which are intrinsically linked with the banknote market. It will also include
the Security Products business, which will now centre on authentication labels,
travellers cheques, passports, fiscal stamps and domestic postage stamps at the
Dunstable, Dulles and Nairobi facilities. The Portal's Bathford pulp-based
papermaking facility will continue to supply the printing businesses. The Board
is pleased to announce the recent signing of multi-year contracts commencing in
January 2004, for the worldwide exclusive supply of secure labels for a leading
software provider.
The re-organisation will commence immediately and on completion the Board
expects that all businesses within Security Paper and Print to be profitable in
2004/2005. The exceptional costs associated with the strategic reorganisation,
to be incurred over the next 12 months, are estimated to be £10m, will be
charged in the second half and will be substantially cash. The elimination of
losses, together with related overhead savings will benefit the Group by
approximately £3m per annum.
The Sequoia Voting Systems business, acquired in May 2002, will be reported
within Cash Systems reflecting its close alignment with the self-service market
and common customer services requirements. Although the fair value review of
Sequoia is not due to be completed until March 2004, the Board has decided to
accelerate this as part of the strategic review. In the light of the
increasingly competitive market being faced by the business the Board has
determined that the goodwill is not sustainable. Consequently, an exceptional
non-cash goodwill write down of £12.6m has been made in the first half.
The above changes will be reflected in the preliminary results in May 2004.
Associates
Profit from associates before interest and tax increased from £3.6m in the first
half of 2002/2003 to £5.6m in the current half year. The main associated company
is Camelot, the UK lottery operator.
Interest
The Group's net interest charge of £0.1m was £1.2m down on last year's income of
£1.1m.
Taxation
Excluding exceptional items, the underlying effective tax rate was 26 per cent
(2002/03 : 27.6 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
A summary of the main cash costs and non cash charges are tabulated below:
Cash Non Cash Total
£m £m £m
Reorganisation Cash Systems (1.9) - (1.9)
costs
Security Products (0.8) - (0.8)
Loss on disposal of fixed assets - (2.6) (2.6)
Sequoia goodwill impairment - (12.6) (12.6)
_________ _________ _________
Exceptional pre-tax costs (2.7) (15.2) (17.9)
Reorganisation costs in Cash Systems relate to the ongoing restructuring
announced last year. The Security Products charge is in respect of the closure
of High Wycombe, which was completed in the first half. The reorganisation costs
have been included within operating profit.
The loss on disposal arises from the sale of IMW property assets announced in
August 2003 for a net consideration of £6.4m.
As a result of trading experienced since the acquisition of Sequoia, the
carrying value of goodwill relating to the company has been impaired by an
exceptional charge of £12.6m.
Cash flow
The net cash inflow from operating activities was £35.0m in the first half,
compared with £2.5m in the first half of 2002/03 due mainly to favourable
working capital movements (including pre-payments associated with Iraq, a
proportion of which will be paid to sub-contractors in the second half). Capital
expenditure of £14.0m was £6.4m higher than last year. Acquisitions and
disposals comprised the purchase of the Bank of England banknote printing
factory at Debden, Essex and the sale of IMW Immobilien AG.
The overall net cash flow was positive by £5.7m (2002/2003 : £71.0m outflow),
resulting in closing net cash of £13.9m at the end of the period compared with
£21.0m net debt at the end of the first half of last year, and net cash of £8.2m
at the start of the year.
Outlook
Continuation into the second half of the favourable conditions that resulted in
an improvement in underlying first half performance, leads the Board to expect a
strong second half result.
-ends-
Notes to Editors
1. High resolution images can be downloaded from NewsCast at www.newscast.co.uk
2. 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. The Company
is pioneering new technologies worldwide in government identity solutions
for national identification, drivers licence, passport issuing schemes and
election systems. Employing over 6,500 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.
GROUP PROFIT AND LOSS ACCOUNT
FOR THE HALF YEAR ENDED 27 SEPTEMBER 2003
2003/04 2002/03 2002/03
Half Year Half Year Full Year
Notes £m £m £m
Turnover
Continuing operations 272.8 269.6 582.7
Acquisitions 17.3 - -
---------- ---------- ----------
1 290.1 269.6 582.7
---------- ---------- ----------
Operating profit/(loss)
Continuing operations 13.0 14.9 38.0
2 - Exceptional costs (2.7) (18.7) (31.9)
- Loss on impairment of - - (1.3)
investments ---------- ---------- ----------
10.3 (3.8) 4.8
Acquisitions 1.2 - -
---------- ---------- ----------
Operating profit/(loss) before 11.5 (3.8) 4.8
goodwill amortisation
Goodwill amortisation
2 - Exceptional costs (12.6) - (16.0)
- Other (1.7) (1.7) (3.6)
---------- ---------- ----------
1 Group operating loss (2.8) (5.5) (14.8)
Share of profits of associated 5.6 3.6 9.2
companies ---------- ---------- ----------
Total operating profit/(loss) 2.8 (1.9) (5.6)
2 Loss on disposal of fixed assets (2.6) - -
---------- ---------- ----------
Profit/(loss) on ordinary activities 0.2 (1.9) (5.6)
before interest ---------- ---------- ----------
----------
Net interest: Group (0.2) 0.9 0.5
Associates 0.1 0.2 0.4
---------- ---------- ----------
0.1 1.1 0.9
---------- ---------- ----------
Profit/(loss) on ordinary activities 0.1 (0.8) (4.7)
before taxation
Tax on profit/(loss) on ordinary (3.7) 0.2 (2.5)
activities ---------- ---------- ----------
Loss on ordinary activities after (3.6) (0.6) (7.2)
taxation
Equity minority interest (0.3) (0.6) (0.7)
---------- ---------- ----------
Loss for the period (3.9) (1.2) (7.9)
Dividends (7.5) (8.3) (24.6)
---------- ---------- ----------
Transferred to reserves (11.4) (9.5) (32.5)
---------- ---------- ----------
3 Earnings per ordinary share (2.2)p (0.6)p (4.3)p
Diluted earnings per ordinary (2.2)p (0.6)p (4.3)p
share ---------- ---------- ----------
3 Headline earnings per ordinary share 8.1p 7.3p 18.9p
before exceptional items & goodwill
amortisation ---------- ---------- ----------
Dividends per ordinary share 4.4p 4.4p 13.6p
---------- ---------- ----------
GROUP BALANCE SHEET
AT 27 SEPTEMBER 2003
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
Fixed assets
Intangible assets 36.1 71.2 54.6
Tangible assets 164.5 163.4 163.4
Investments : Associates 13.9 13.6 13.5
Other investments 0.2 1.7 0.2
Own shares 19.0 19.4 19.1
---------- ---------- ----------
233.7 269.3 250.8
---------- ---------- ----------
Current assets
Stocks 112.1 111.1 99.2
Debtors 118.7 119.5 119.1
Deferred taxation 31.1 31.3 37.2
Cash at bank and in hand 57.3 38.1 51.4
---------- ---------- ----------
319.2 300.0 306.9
Creditors: amounts falling due within one
year
Short term borrowings (2.1) (1.7) (0.5)
Other creditors (227.2) (180.2) (208.3)
---------- ---------- ----------
Net current assets 89.9 118.1 98.1
---------- ---------- ----------
Total assets less current liabilities 323.6 387.4 348.9
Creditors: amounts falling due after more
than one year
Long term borrowings (41.3) (57.4) (42.7)
Other creditors (0.5) (2.5) (4.9)
Provisions for liabilities and charges (44.7) (54.7) (53.2)
---------- ---------- ----------
237.1 272.8 248.1
---------- ---------- ----------
Capital and reserves
Called up share capital 45.5 46.1 45.4
Share premium account 13.0 12.9 12.5
Revaluation reserve 1.8 1.8 1.8
Capital redemption reserve 3.5 2.8 3.5
Other reserve (83.8) (83.8) (83.8)
Profit and loss account 253.4 289.2 264.5
---------- ---------- ----------
Shareholders' funds 233.4 269.0 243.9
Equity minority interests 3.7 3.8 4.2
---------- ---------- ----------
237.1 272.8 248.1
---------- ---------- ----------
GROUP CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 27 SEPTEMBER 2003
2003/04 2002/03 2002/03
Half Year Half Year Full Year
Notes £m £m £m
4a Net cash inflow from operating 35.0 2.5 59.1
activities
Dividends received from associated 3.5 6.5 9.0
companies
4b Returns on investments and servicing (0.1) 1.2 (1.1)
of finance
Taxation (0.5) (1.7) (3.7)
4c Capital expenditure and financial (13.5) 6.9 (3.7)
investment
4d Acquisitions and disposals (4.9) (31.4) (33.4)
Equity dividends paid (16.2) (25.4) (33.3)
---------- ---------- ----------
Net cash inflow/(outflow) before use 3.3 (41.4) (7.1)
of liquid resources and
financing
4e Management of liquid resources (1.2) 43.4 28.2
4f Financing (0.8) (3.2) (25.5)
---------- ---------- ----------
Increase/(decrease) in cash in the 1.3 (1.2) (4.4)
period ---------- ---------- ----------
Reconciliation of net cash flow to
movement in
net funds/(debt)
Increase/(decrease) in cash in the 1.3 (1.2) (4.4)
period
Cash outflow/(inflow) from increase/ 1.2 (43.4) (28.2)
(decrease) in liquid resources
Cash outflow/(inflow) from decrease/ 1.4 (28.2) (11.4)
(increase) in debt ---------- ---------- ----------
Change in net funds resulting from 3.9 (72.8) (44.0)
cash flows
Translation difference 1.8 1.8 2.2
---------- ---------- ----------
Movement in net cash/(debt) in the 5.7 (71.0) (41.8)
period
Net funds at start of period 8.2 50.0 50.0
---------- ---------- ----------
Net funds/(debt) at end of period 13.9 (21.0) 8.2
---------- ---------- ----------
Analysis of net funds/(debt)
Cash 28.8 26.0 24.2
Liquid resources 28.5 12.1 27.2
Overdrafts (2.1) (0.9) (0.5)
Other debt due within one year - (0.8) -
Other debt due after one year (41.3) (57.4) (42.7)
---------- ---------- ----------
Net funds/(debt) at end of period 13.9 (21.0) 8.2
---------- ---------- ----------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS
FOR THE HALF YEAR ENDED 27 SEPTEMBER 2003
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
---------- ---------- ----------
Loss for the period: Group (8.4) (3.8) (14.8)
Associates 4.5 2.6 6.9
---------- ---------- ----------
(3.9) (1.2) (7.9)
Currency translation differences on
foreign
currency net investments 0.3 (2.9) 0.5
---------- ---------- ----------
Total recognised losses for the (3.6) (4.1) (7.4)
period ---------- ---------- ----------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE HALF YEAR ENDED 27 SEPTEMBER 2003
2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
Loss for the period (3.9) (1.2) (7.9)
Dividends (7.5) (8.3) (24.6)
---------- ---------- ----------
(11.4) (9.5) (32.5)
Share capital issued 0.6 1.5 1.1
Transfer to share premium - (0.5) -
Shares repurchased - (32.4) (38.0)
Currency translation differences on
foreign
currency net investments 0.3 (2.9) 0.5
---------- ---------- ----------
Net increase/(decrease) in shareholders' (10.5) (43.8) (68.9)
funds
Opening shareholders' funds 243.9 312.8 312.8
---------- ---------- ----------
Closing shareholders' funds 233.4 269.0 243.9
---------- ---------- ----------
NOTES TO THE INTERIM STATEMENT
1 Segmental analysis 2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
Turnover by class of business
Continuing Cash Systems 142.2 146.6 310.9
operations
Security Paper and 97.5 94.3 213.8
Print
Global Services 35.0 29.4 59.9
- Less inter-segment sales (1.9) (0.7) (1.9)
---------- ---------- ----------
272.8 269.6 582.7
Acquisition Security Paper and 17.3 - -
Print
---------- ---------- ----------
290.1 269.6 582.7
---------- ---------- ----------
Operating profit/(loss) by class of
business
Continuing Cash Systems 2.2 5.0 11.6
operations
Security Paper and 13.1 12.7 30.4
Print
Global Services (2.3) (2.8) (4.0)
---------- ---------- ----------
13.0 14.9 38.0
---------- ---------- ----------
- Exceptional Cash Systems (1.9) (1.0) (10.5)
costs
Security Paper and (0.8) (17.7) (18.6)
Print
Global Services - - (2.8)
---------- ---------- ----------
(2.7) (18.7) (31.9)
- Loss on impairment of investments
Security Paper and - - (1.3)
Print ---------- ---------- ----------
Acquisitions Security Paper and 1.2 - -
Print ---------- ---------- ----------
11.5 (3.8) 4.8
---------- ---------- ----------
Goodwill Cash Systems (1.6) (1.5) (19.3)
amortisation
Security Paper and 0.2 - 0.2
Print
Global Services (12.9) (0.2) (0.5)
---------- ---------- ----------
(14.3) (1.7) (19.6)
---------- ---------- ----------
(2.8) (5.5) (14.8)
---------- ---------- ----------
Turnover by geographical area of
operation
United Kingdom and Ireland 161.8 145.8 320.0
Rest of Europe 112.9 100.0 216.5
The Americas 77.1 75.8 136.2
Rest of world 14.3 24.1 42.8
Less inter-area sales (76.0) (76.1) (132.8)
---------- ---------- ----------
290.1 269.6 582.7
---------- ---------- ----------
Operating profit/(loss) by geographical
area of operation
United Kingdom and Ireland (3.9) (23.4)* (17.2)
Rest of Europe 13.9 13.4 14.5
The Americas (11.7) 3.8* (15.6)
Rest of world (1.1) 0.7 3.5
---------- ---------- ----------
(2.8) (5.5) (14.8)
---------- ---------- ----------
Turnover by geographical area of
destination
United Kingdom and Ireland 41.4 33.0 68.8
Rest of Europe 84.4 83.6 174.7
The Americas 79.9 83.5 173.0
Rest of world 84.4 69.5 166.2
---------- ---------- ----------
290.1 269.6 582.7
---------- ---------- ----------
* operating profit/(loss) for The Americas and UK and Ireland has been restated
by £3.5m to reflect a change in the costs allocation basis made in the second
half of last year.
The acquisition relates to the Bank of England's banknote printing operations
based at Debden in Essex which was purchased by the Group on 31 March 2003. The
profit for the period of £1.2m is shown after charging redundancy and other
costs incurred in the normal course of business.
2 Exceptional items
2003/04 2002/03
Half Year Half Year
Reorganisation costs - Cash (1.9) (1.0)
Systems
- Security Products (0.8) (17.7)
Loss on disposal of fixed assets (2.6) -
Sequoia goodwill impairment (12.6) -
---------- ----------
(17.9) (18.7)
---------- ----------
Reorganisation costs in Cash Systems relate to the ongoing restructuring
announced last year. The Security Products charge is in respect of the
closure of High Wycombe which was completed in the first half. The
reorganisation costs have been included within operating profit.
The loss on disposal arises from the sale of the IMW property assets
announced in August for a net consideration of £6.4m.
As a result of trading experienced since the acquisition of Sequoia, the
carrying value of the goodwill relating to the company has been impaired by
an exceptional charge of £12.6m.
3 Reconciliation of earnings per 2003/04 2002/03 2002/03
share
Half Year Half Year Full Year
pence pence pence
per per per
share share Share
As calculated under FRS 14 (2.2) (0.6) (4.3)
Loss on impairment of investment - - 0.7
Loss on disposal of fixed assets and 1.3 - 0.2
assets held for resale
Amortisation of goodwill 7.9 0.8 10.4
---------- ---------- ----------
Headline earnings per share as 7.0 0.2 7.0
defined by the IIMR
Reorganisation costs 1.1 7.1 11.9
---------- ---------- ----------
Headline earnings per share before 8.1 7.3 18.9
items above ---------- ---------- ----------
The earnings per share of (2.2)p as calculated under FRS 14 is the £3.9m
loss for the period divided by 176,792,599 shares in issue.
4 Notes to Group cash flow statement 2003/04 2002/03 2002/03
Half Year Half Year Full Year
£m £m £m
a Reconciliation of operating profit
to net cash
inflow from operating activities
Operating loss (2.8) (5.5) (14.8)
Depreciation and amortisation 26.8 18.5 49.4
(Increase)/decrease in stocks (11.3) (6.8) 8.6
Decrease in debtors 0.6 12.2 15.9
Increase/(decrease) in creditors 30.5 (26.5) (9.8)
(Decrease)/increase in (8.1) 10.0 7.4
reorganisation provisions
Other items (0.7) 0.6 2.4
---------- ---------- ----------
Net cash inflow from operating 35.0 2.5 59.1
activities ---------- ---------- ----------
b Returns on investments and servicing
of finance
Interest received 0.8 3.7 4.2
Interest paid (0.9) (2.5) (3.8)
Dividends paid to minority - - (1.5)
shareholders ---------- ---------- ----------
Net cash (outflow)/inflow from (0.1) 1.2 (1.1)
returns on investments and servicing ---------- ---------- ----------
of finance
c Capital expenditure and financial
investment
Purchase of tangible fixed assets (13.1) (7.6) (20.7)
Purchase of intangible fixed (0.9) - (0.6)
assets
Sale of tangible fixed assets 0.5 0.1 1.7
Sale of investments - 14.4 15.9
---------- ---------- ----------
Net cash (outflow)/inflow for
capital expenditure and
financial investment (13.5) 6.9 (3.7)
---------- ---------- ----------
d Acquisitions and disposals
Purchase of subsidiary (9.3) (31.4) (33.6)
undertakings
Net (overdraft)/cash acquired with (1.2) - 0.2
subsidiary undertakings
Sale of subsidiary undertakings 6.4 - -
Net cash sold with subsidiary (0.8) - -
undertaking ---------- ---------- ----------
Net cash outflow for acquisitions (4.9) (31.4) (33.4)
and disposals ---------- ---------- ----------
e Management of liquid resources
Net (increase)/decrease in short (1.2) 43.4 28.2
term deposits ---------- ---------- ----------
f Financing
Debt due within one year:
Loans raised - 0.7 -
Loans repaid - (0.1) (7.0)
Debt due beyond one year:
Loans raised - 28.2 24.1
Loans repaid (1.4) - (5.0)
Capital element of finance lease - (0.6) (0.7)
rental repayments
Shares repurchased - (32.4) (38.0)
Share capital issued 0.6 1.0 1.1
---------- ---------- ----------
Net cash outflow from financing (0.8) (3.2) (25.5)
---------- ---------- ----------
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 48 and 49 of the 2003 Annual Report and Accounts, and should be
read in conjunction with the Report and Accounts.
7 The results for the half years to 27 September 2003 and 28 September 2002
are unaudited and do not constitute the Group's statutory accounts.
8 The statutory accounts for the year ended 29 March 2003 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 24 November 2003 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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