Preliminary Statement
De La Rue PLC
26 May 2004
DE LA RUE PLC
PRELIMINARY STATEMENT
Year to 27 March 2004
Key Financials
2003/2004 2002/2003**
£m £m
Sales 682.5 582.7
Profit /(loss) before tax 22.5 (4.1)
Earnings per share 6.8p (4.0)p
Profit before tax, exceptional items and goodwill
amortisation* 58.7 48.7
Headline earnings per share* 24.2p 19.2p
Cash flow from operating activities 92.1 59.1
Net cash at end of period 41.1 8.2
Dividends per share 14.2p 13.6p
* before exceptional charges of £33.7m (2002/2003 £49.2m) and goodwill
amortisation of £2.5m (2002/2003 £3.6m)
** restated for the adoption of UITF Abstract 38 (Accounting for ESOP Trusts).
This has resulted in an increase in the previously reported profit by £0.6m and
earnings per share by 0.3p.
Trading Highlights
• Results demonstrate strength of Currency business which benefited from a
significant Iraq banknote order and a return to normal paper volumes.
• Improved underlying operating performance in Cash Systems was offset by
increased pension charges and an adverse foreign exchange environment.
Results reflect the benefit of cost reduction programmes implemented
throughout the year.
• Following the cessation of Global Services as a strategic activity, the Board
is now focusing the Group around the core activities of Security Paper and
Print and Cash Systems.
• UK Pension Scheme review now completed and scheme broadly fully funded at the
year end.
Sir Brandon Gough, Chairman of De La Rue plc, commented on the results:
'De La Rue's results show a strong improvement over 2002/2003. The strength of
the Currency business continues to underpin the Group's performance and our
success in delivering the exceptional Iraq banknote contract demonstrates the
unique skill sets of the business and its ability to meet challenging customer
requirements. For the most part the markets for Cash Systems remained slow,
particularly in Europe, and our focus remains on tightly controlling costs. The
results also reflect the benefits of the reorganisation programmes undertaken in
Cash Systems and Security Products.
'Following the exceptional volumes in Currency during the second half, the
business starts the year with a strong order book for both banknote printing and
papermaking. This is expected to underpin a stronger first half in 2004/2005,
although it is not expected that full year volumes in Currency will reach the
exceptional levels of 2003/2004. We anticipate that 2004/2005 will see the full
year benefits of the completion of the restructuring programmes in both Cash
Systems and Security Products. However, in Cash Systems the benefits will be
mitigated by the effect of continuing weakness of key currencies, in particular
the US dollar. During 2004/2005 the Presidential election in the USA will
aggravate the pressures Sequoia is facing.
'Given the strong position in which Currency enters the year, the Board remains
confident about the outlook for the Group.'
For further information please contact:
Stephen King Group Finance Director +44 (0)1256 605307
Mark Fearon Group Head of Corporate Affairs +44 (0)1256 605303
Richard Mountain Financial Dynamics +44 (0) 207 269 7291
26 May 2004
Financial Results
De La Rue is pleased to report improved results for the year ended 27 March
2004. Turnover increased by 17.1 per cent from £582.7m to £682.5m and profit
before tax, exceptional items and goodwill amortisation was strongly ahead at
£58.7m* (2002/2003 : £48.7m*). This represented a considerably better
performance than the Board had expected at the beginning of the year,
particularly after taking into account £8.0m of increased pension charges. The
main drivers behind the improved Group result were an exceptional performance in
the Currency business, coupled with earlier than anticipated delivery of savings
from the cost reduction programmes initiated in Cash Systems and Security
Products.
Headline earnings per share (which excludes exceptional items and goodwill
amortisation)* increased from 19.2p to 24.2p reflecting the improved trading, a
small reduction in the underlying effective tax rate to 26.2 per cent (2002/2003
26.5 per cent) and the effect of a reduced number of shares in issue, following
the share buy back programme last year. Basic earnings per share were 6.8p
compared with (4.0)p in 2002/2003.
Cash flow remains a key strength of the Group with a net cash inflow from
operating activities of £92.1m (2002/2003 : £59.1m), significantly enhanced by a
high level of advance payments associated with a number of Currency contracts
around the year end. The Group ended the year with net cash on the balance sheet
of £41.1m compared with net cash of £8.2m last year.
* before exceptional charges of £33.7m (2002/2003 - £49.2m) and goodwill
amortisation of £2.5m (2002/2003 - £3.6m)
Dividend
Subject to shareholders' approval, the Board is recommending an increased final
dividend of 9.8p per share, which will be paid on 6 August 2004 to shareholders
on the register on 9 July 2004. This will give a total dividend for the year of
14.2p, an overall increase of 4.4 per cent on last year.
Board Changes
We have separately announced today that Nicholas Brookes, currently De La Rue's
senior independent non-executive director, will become non-executive Chairman
when Sir Brandon Gough retires immediately after the Annual General Meeting on
22 July 2004. In addition, following these changes, Michael Jeffries will become
Chairman of the Remuneration Committee and the Company's senior independent
non-executive director. The Board is hugely grateful to Sir Brandon for his
leadership over the last seven years and wishes him well in his retirement.
Leo Quinn joined the Board on 29 March 2004 as Chief Executive Designate and
will succeed Ian Much as Group Chief Executive on 31 May 2004, when Ian retires
from the Company. The Board would like to thank Ian for his significant
contribution to the Group's development over the last five and a half years and
to wish him well in his retirement.
Leo, 47, joins De La Rue from Invensys plc, where for almost three years he was
Chief Operating Officer of the Production Management Division, based in
Massachusetts, USA. Leo also spent 16 years with Honeywell Inc., the engineering
Group, in a variety of senior management roles in the USA, Europe, the Middle
East and Africa.
Associates
Profit from associates before interest and tax increased from £9.2m to £10.0m.
The main associated company is Camelot, the UK lottery operator. Dividends
received from associates of £7.2m were lower than last year's income of £9.0m,
as last year Camelot made a one off payment of retained profits which arose from
the interim licence period.
Interest Charge
The Group's net interest charge was £0.6m (including interest received by
associates of £nil) (2002/2003 - net interest income £0.9m including interest
received by associates £0.4m). Excluding interest received by associates, the
Group's net interest charge of £0.6m was £1.1m higher than the previous year.
Taxation
Excluding exceptional items and goodwill amortisation, the underlying effective
tax rate was
26.2 per cent (2002/2003 : 26.5 per cent). The effective tax rate was lower than
the standard UK corporate tax rate of 30.0 per cent due to a combination of the
favourable settlement of outstanding issues from prior years and the benefit of
profit contribution from lower rate tax regimes.
Exceptional Items
A summary of the main cash costs and non cash charges are tabulated below:
Cash Non Cash Total
£m £m £m
Security Paper and Print
Reorganisation Costs
Security Products 0.9 - 0.9
Global Services 7.8 1.3 9.1
Cash Systems
Reorganisation Costs 5.2 - 5.2
Goodwill impairment - ATS Money Systems - 6.1 6.1
Sequoia Goodwill impairment - 12.6 12.6
Profit on disposal of fixed assets - (0.2) (0.2)
------ --------- -------
Exceptional pre tax costs 13.9 19.8 33.7
------ --------- -------
Reorganisation costs in Cash Systems relate to the restructuring announced last
year. Global Services reorganisation costs relate to the provision for the
cessation of its activities and particularly the closure of the Peterborough and
Byfleet manufacturing sites.
The net profit on disposal of fixed assets arises from the sale of surplus Group
properties offset by the loss of £2.6m arising from the sales of IMW property
assets announced in August 2003.
As announced at the interim results, as a consequence of poor 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.
As a result of trading experienced since the acquisition of ATS Money Systems
Inc., on 23 May 2001, the carrying value of goodwill has been impaired by an
exceptional charge of £6.1m.
Cash Flow and Borrowings
During the year net cash inflow from operating activities was £92.1m compared
with £59.1m in 2002/2003. This primarily reflected favourable working capital
movements and included significant advance payments associated with a number of
Currency contracts around the year end. These will represent cash outflows in
the first half of 2004/2005. Capital expenditure of £33.3m was higher than last
year due to the purchase of major new equipment for the Group's banknote
factories at Debden, Malta and Gateshead. 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 at £32.9m (2002/2003 : £41.8m outflow),
resulting in closing net cash of £41.1m at the end of the period compared with
net cash of £8.2m at the start of the year.
Foreign Exchange
Principal exchange rates used in translating the Group's results
------------- ---------- ---------- --------- ---------
2004 2004 2003 2003
Average Year end Average Year End
------------- ---------- ---------- --------- ---------
US dollar 1.69 1.81 1.54 1.57
Euro 1.44 1.50 1.56 1.46
Swedish krona 13.19 13.87 14.26 13.43
------------- ---------- ---------- --------- ---------
When managing foreign exchange transactional risk, protection is taken in the
foreign exchange markets whenever a business confirms a sale or purchase in a
non-domestic currency unless it is impractical or uneconomical to do so.
Overseas earnings are not hedged. For the year ended 27 March 2004 adverse
foreign exchange impacted the Group by £5.6m. Based on current exchange rates we
expect further adverse impacts on 2004/2005 of approximately £8.0m.
UK Pension Scheme
The Group accounts for pensions in accordance with SSAP24, having deferred the
introduction of FRS17 (Retirement Benefits) in accordance with the transitional
measures set out by the Accounting Standard Board.
As outlined in the interim results the Scheme's actuary completed the triennial
valuation of
De La Rue's UK Pension Scheme. Based on data as at 6 April 2003 it indicated a
deficit of approximately £40m on an ongoing actuarial basis. The Trustee of the
Scheme has approved this valuation. The charge to the profit and loss account
for 2003/2004 under the new valuation was £9.9m (2002/2003 : £1.9m).
In light of the April 2003 deficit and the evidence of increased volatility in
equity values, the Company completed the review of its Pension Scheme
arrangements in the second half. The following structural changes to the UK
Pension Scheme have now been agreed:
• In conjunction with the Trustee, a revised investment strategy to
progressively increase the proportion of Scheme investments in bonds from
30 per cent towards 50 per cent.
• Retention of the final salary section of the Scheme for existing members
but with the introduction of a new section for employees who join the
Scheme after 30 June 2004, which combines a final salary element with a
defined contribution element.
• Company contribution rates have increased from 6.1 per cent of
pensionable salaries in 2002/2003 to 17 per cent from January 2004
onwards. Members' contributions will also increase from 5 per cent to
7 per cent of pensionable salary by 1 April 2005. We have decided to
phase in this change at a rate of 1 per cent per annum with the first
increase effective on 1 July 2004. Company cash contributions will
reduce accordingly.
In addition, the Company made a lump sum contribution to the Pension Scheme of
£6.47m in the year. We believe that this, together with the combination of
increased company and member contributions and the structural changes we have
made to the Scheme, will continue to ensure the ongoing financial strength of De
La Rue's pension Scheme. The improvement in equity markets over the course of
2003/2004, combined with the changes outlined above has resulted in the Scheme
being broadly fully funded at the year end, on the ongoing actuarial basis.
UITF Abstract 38
The Urgent Issues Task Force (UITF) issued Abstract 38 (Accounting for ESOP
Trusts) in December 2003. The Group has adopted the Abstract in the accounts to
27 March 2004 and under this own shares held by the De La Rue Employee Share
Ownership Trust have been reclassified from fixed asset investments to a
reduction in shareholders' funds. A prior year adjustment has been made to
reflect this change in accounting policy and all comparatives for 2002/2003
restated. This has led to a reduction in the amortisation charge of £0.6m in the
profit before tax for 2002/2003 and a corresponding increase in earnings per
share by 0.3p.
Extracts from the Operational Reviews
SECURITY PAPER AND PRINT 2003/2004 2002/2003 change
£m £m £m
---------- --------- ---------
Sales 303.6 248.5 55.1
Continuing operations 36.7 - 36.7
Acquisitions
---------- --------- ---------
Underlying operating profit* 340.3 248.5 91.8
Continuing operations 39.0 29.4 9.6
Acquisitions 3.4 - 3.4
---------- --------- ---------
42.4 29.4 13.0
* before exceptional items of £10.0m (2002/2003 : £19.9m) and amortisation of
negative goodwill £0.5m (2002/2003 : £0.2m)
Currency
Currency had an excellent year with operating profits substantially ahead of
last year, despite an increase in pension costs of £3.4m. This was primarily
driven by the impact of the exceptional order in relation to Iraq banknotes
announced in July 2003. The banknote printing business has performed strongly
this year against demanding manufacturing schedules and timescales, given the
exceptional second half volumes (due predominantly to the Iraq contract).
Following the closure of our Singapore manufacturing facility last year, the
ability of De La Rue's worldwide manufacturing facilities to flex up their
production to meet the additional volume requirements this year has been an
outstanding achievement.
Equally successful has been the integration of the former Bank of England
printing works at Debden, acquired on 31 March 2003, which has made a good
contribution to operating profits this year. Considerable progress has been made
in re-organising the facility to introduce a more rigorous quality regime and
managing the cost base in line with the approach at other Currency sites. As
anticipated at the time of acquisition, while the primary focus at Debden
continues to be on long run work for the production of Sterling, during the year
we have successfully undertaken export work at the site.
The papermaking business has seen significantly improved volumes, which
increased 38 per cent year on year. This partly reflected a return to
traditional paper ordering patterns of a large customer, exceptional
requirements for the banknote printing business and a sizeable order from a
customer who rarely orders paper on the world market.
The Currency business has started the 2004/2005 financial year with a strong
order book for paper and printing, both ahead of last year. However, it is not
anticipated that full year volumes will hit the exceptional peaks of 2003/2004
and overall we expect trading to return to more normal levels.
Cash generation continues to be a key strength of the Currency business with
operating cash flow in excess of operating profits for a third year running.
Security Products
Following a weak start to the year, Security Products' performance was much
improved during the second half. In particular, this was as a result of the
benefits of the reorganisation of the manufacturing base announced in the second
half of 2002/2003. The reorganisation, which included the closure of the High
Wycombe site in the UK, was completed in June 2003 as expected. In addition,
trading activity during the second half was much improved with a number of
significant contracts secured, particularly within the Security Print business.
It was particularly pleasing to announce an exclusive multi year contract with
Microsoft(R) for the supply of secure labels for its range of software products.
In November 2003, we announced the outcome of the strategic review of Global
Services, including the Security Products activities. The key actions from the
review are now well underway and comprise the exit from a number of low margin
and declining product areas within Security Print. These include UK personal
cheques, export stamps, UK vouchers and coin bags, which are undertaken at De La
Rue's Peterborough and Byfleet facilities in the UK employing about 200 people.
The closure of Byfleet, together with the transfer of equipment to supply
domestic stamp production to our Dunstable facility in the UK, is now in
progress. Our efforts to dispose of the Peterborough cheque printing business as
a going concern were unsuccessful. Consequently, in February 2004 we also
announced our intention to close the site. We expect to close both manufacturing
facilities by the end of 2004/2005.
The exceptional costs associated with the strategic reorganisation are £9.1m,
and are substantially cash. The elimination of losses, together with related
overhead savings will benefit the Group by approximately £3m per annum.
Through operational cost savings and the emphasis on higher margin products we
expect to see a further improvement in Security Products' trading performance
during 2004/2005. As outlined at the interim results, we expect all Security
Products businesses to make a positive contribution to operating profits next
year.
CASH SYSTEMS 2003/2004 2002/2003 change
£m £m £m
Sales 302.6 310.9 (8.3)
Underlying operating profit* 8.8 11.8 (3.0)
* before exceptional items of £11.3m (2002/2003 £26.5m) and goodwill
amortisation of £2.6m (2002/2003 £3.3m)
In Cash Systems, revenues of £302.6m were down £8.3m on last year's result as
the tough trading conditions seen in the second half of 2002/2003 continued into
2003/2004. Operating profits (before exceptional items and goodwill
amortisation) were ahead of our expectations at £8.8m, although down by £3.0m on
last year's result. The impact of additional pension charges of £1.5m together
with a weakening US Dollar, however, masks an underlying improvement in the
operating performance of the division, driven by the achievement of earlier than
anticipated benefit from cost reduction programmes. The business remains
strongly cash generative.
The focus within the division will continue to be on alignment of the cost base
of the business to underpin trading in the current tough market conditions,
particularly in Europe. In 2002/2003, we announced 300 job losses in the
division and during the first half of 2003/2004, we identified a further 50
redundancies at our Dallas and Lisbon manufacturing sites. Of the 350
redundancies identified to date, approximately 330 have now been completed. The
majority of the costs associated with these actions were included in the 2002/
2003 financial year although a further £5.2m of charges have arisen in 2003/
2004.
Key Markets and Product Businesses
Teller automation remains by far the largest business within Cash Systems both
in terms of product sales and service revenues. Sales of Teller Cash Dispensers,
which form a key platform of our teller automation offering to retail banks,
continued to grow both in terms of revenue and order intake. Sales and order
intake of the TCR TwinsafeTM (our recycler platform) were in line with our
expectations and slightly ahead of last year.
We continue to make progress in our self-service offering to retail banks, which
was formed out of the acquisition of the Papelaco equipment manufacturing
business in June 2002. The roll out of the self-service product range to several
of the most developed European territories continues. The potential for offering
these solutions to our customers remains attractive, particularly in niche areas
such as bundle note depositing terminals within bank branch networks.
After disappointing revenues in 2002/2003, performance in the large sorter
business improved this year. This was due to the effect of the rationalisation
programme (in engineering and manufacturing) initiated at the beginning of 2003/
2004.
Customer Services, which supports all Cash Systems' product streams, performed
in line with our expectations. The business remains a key profit driver for the
division and integral to our solutions offering to our customers.
Key Geographies
As expected, market conditions in Europe, particularly in the worst affected
markets of Germany and Spain, have remained similar to last year, although some
operating improvement is now being seen as a result of lower overheads. The
Latin American markets were also tough. The North American market, however,
remains a key growth region and continues to be the largest in terms of
divisional revenues. During the year both the USA and Canadian markets grew in
line with our expectations and we see considerable potential for further
penetration going forward. We also continue to see potential for growth in the
Asia Pacific region, as well as the African and Middle East countries, which
performed in line with expectations.
SEQUOIA VOTING SYSTEMS 2003/2004 2002/2003 change
£m £m £m
Sales 44.2 25.2 19.0
Underlying operating loss* (1.9) (2.6) 0.7
* before exceptional items of £12.6m (2002/2003 : £2.8m) and goodwill
amortisation of £0.4m (2002/2003 : £0.5m)
The Sequoia Voting Systems business, acquired in May 2002, supplies electronic
voting systems to the US and international electoral markets. It reported a
small operating loss in 2003/2004, despite a substantial upturn in volumes in
the run up to the US Presidential elections in November 2004 which reflected
continued low industry margins. The US electronic voting systems market has seen
intense price competition over the last 18 months, with unit prices falling by
an average of 25 per cent during that period. In addition, the uncertain
legislative environment and political resistance to the adoption of touch screen
technology has also hindered development of the market this year. The outlook
for Sequoia for 2004/2005 is for increased losses, reflecting significantly
lower machine sales in a Presidential election period and the need to provide
higher levels of support for our customers during the November election process.
In addition, management is evaluating strategies to mitigate these effects.
In the light of continuing adverse market conditions, during the first half the
Board accelerated the fair value review of the Sequoia business, which was due
to take place in March 2004. It determined that the goodwill was not sustainable
and consequently, an exceptional non-cash goodwill write down of £12.6m was
announced at the interim results.
Outlook
Following the exceptional volumes in Currency during the second half, the
business starts the year with a strong order book for both banknote printing and
papermaking. This is expected to underpin a stronger first half in 2004/2005,
although it is not expected that full year volumes in Currency will reach the
exceptional levels of 2003/2004. We anticipate that 2004/2005 will see the full
year benefits of the completion of the restructuring programmes in both Cash
Systems and Security Products. However in Cash Systems the benefits will be
mitigated by the effect of continuing weakness of key currencies, in particular
the US dollar. During 2004/2005 the Presidential election in the USA will
aggravate the pressures Sequoia are facing.
Given the strong position in which Currency enters the year, the Board remains
confident about the outlook for the Group.
-ends-
Note 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. The Company
is a leading provider of cash handling equipment and software solutions to
banks and retailers worldwide, helping them to reduce the cost of handling
cash. Employing over 6,600 people across 31 countries, De La Rue is also
pioneering new technologies worldwide in government identity solutions for
national identification, driver's licence, passport issuing schemes and
election systems.
For more information visit www.delarue.com
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 27 MARCH 2004
Notes 2004 2004 2004 2003 2003 2003
(restated) (restated)
£m £m £m £m £m £m
Before Exceptional Before Exceptional
Exceptionals Items Total Exceptionals Items Total
Turnover
Continuing
operations 645.8 645.8 582.7 582.7
Acquisitions 36.7 36.7
----------- --------- --------- ------ --------- --------- --------
1 682.5 682.5 582.7 582.7
----------- --------- --------- ------ --------- --------- --------
Operating profit
Continuing operations 45.9 45.9 38.6 38.6
Reorganisation costs (15.2) (15.2) (31.9) (31.9)
----------- --------- --------- ------ --------- --------- --------
Loss on impairment
of investments - (1.3) (1.3)
----------- --------- --------- ------ --------- --------- --------
45.9 (15.2) 30.7 38.6 (33.2) 5.4
----------- --------- --------- ------ --------- --------- --------
Acquisitions 3.4 3.4 -
----------- --------- --------- ------ --------- --------- --------
Operating profit
before goodwill
amortisation 49.3 (15.2) 34.1 38.6 (33.2) 5.4
Goodwill
amortisation (2.5) (18.7) (21.2) (3.6) (16.0) (19.6)
----------- --------- --------- ------ --------- --------- --------
1,2 Group operating profit
/(loss) 46.8 (33.9) 12.9 35.0 (49.2) (14.2)
Share of operating
profits of associated
companies 10.0 10.0 9.2 9.2
----------- --------- --------- ------ --------- --------- --------
Total operating profit
/(loss) 56.8 (33.9) 22.9 44.2 (49.2) (5.0)
Profit on disposal of
fixed assets - 0.2 0.2
----------- --------- --------- ------ --------- --------- --------
Profit/(loss) on
ordinary activities
before interest 56.8 (33.7) 23.1 44.2 (49.2) (5.0)
----------- --------- --------- ------ --------- --------- --------
Net interest: Group (0.6) (0.6) 0.5 0.5
Associates - - 0.4 0.4
------- -------- --------- --------- ------ --------- --------- --------
(0.6) (0.6) 0.9 0.9
------- -------- --------- --------- ------ --------- --------- --------
Profit/(loss) on
ordinary activities
before taxation 56.2 (33.7) 22.5 45.1 (49.2) (4.1)
3 Tax on profit/(loss)
on ordinary
activities (15.0) 5.0 (10.0) (12.5) 10.0 (2.5)
------------- --------- --------- ------ --------- --------- --------
Profit/(loss) on
ordinary activities
after taxation 41.2 (28.7) 12.5 32.6 (39.2) (6.6)
Equity minority
interests (0.4) (0.4) (1.0) 0.3 (0.7)
------------- --------- --------- ------ --------- --------- --------
Profit/(loss) for the
financial year 40.8 (28.7) 12.1 31.6 (38.9) (7.3)
Dividends (24.8) (24.8) (24.6) (24.6)
------------- --------- --------- ------ --------- --------- --------
Transferred from
reserves 16.0 (28.7) (12.7) 7.0 (38.9) (31.9)
------------- --------- --------- ------ --------- --------- --------
4 Earnings per ordinary
share 23.0p (16.2)p 6.8p 17.2p (21.2)p (4.0)p
4 Diluted earnings per
ordinary share 23.0p (16.2)p 6.8p 17.1p (21.1)p (4.0)p
4 Headline earnings per
ordinary share 24.2p (5.8)p 18.4p 19.2p (11.9)p 7.3p
Dividends per ordinary
share 14.2p 14.2p 13.6p 13.6p
------------- --------- --------- ------ --------- --------- --------
GROUP BALANCE SHEET
AT 27 MARCH 2004
2004 2003
(restated)
£m £m
Fixed assets
Intangible assets 28.2 54.6
Tangible assets 164.4 163.4
Investments: Associates 13.2 13.5
Other investments 0.2 0.2
----------------------------------------- ------- --------
206.0 231.7
----------------------------------------- ------- --------
Current assets
Stocks 99.7 99.2
Debtors 116.6 119.1
Deferred taxation 33.1 37.2
Cash at bank and in hand 85.5 51.4
----------------------------------------- ------- --------
334.9 306.9
Creditors: amounts falling due within one year
Short term borrowings (8.3) (0.5)
Other creditors (214.5) (208.3)
----------------------------------------- ------- --------
Net current assets 112.1 98.1
----------------------------------------- ------- --------
Total assets less current liabilities 318.1 329.8
Creditors: amounts falling due after more than one year
Long term borrowings (36.1) (42.7)
Other creditors (13.6) (4.9)
Provisions for liabilities and charges (50.8) (53.2)
----------------------------------------- ------- --------
217.6 229.0
----------------------------------------- ------- --------
Capital and reserves
Called up share capital 45.8 45.4
Share Premium 14.6 12.5
Revaluation reserve 1.8 1.8
Capital redemption reserve 3.5 3.5
Other reserve (83.8) (83.8)
Profit and loss account 232.2 245.4
----------------------------------------- ------- --------
Shareholders' funds 214.1 224.8
Equity minority interests 3.5 4.2
----------------------------------------- ------- --------
217.6 229.0
----------------------------------------- ------- --------
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 27 MARCH 2004
Notes 2004 2003
£m £m
-------------------------------------- -------- -------
5a Net cash inflow from operating activities 92.1 59.1
Dividends received from associated companies 7.2 9.0
5b Returns on investments and servicing of finance (1.5) (1.1)
Taxation (11.2) (3.7)
5c Capital expenditure and financial investment (31.8) (3.7)
5d Acquisitions and disposals (5.1) (33.4)
Equity dividends paid (24.1) (33.3)
-------------------------------------- -------- -------
Net cash inflow/(outflow) before use of liquid resources
and financing 25.6 (7.1)
5e Management of liquid resources (30.3) 28.2
5f Financing 7.6 (25.5)
-------------------------------------- -------- -------
Increase/(decrease) in cash in the period 2.9 (4.4)
-------------------------------------- -------- -------
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash in the period 2.9 (4.4)
Cash outflow/(inflow) from increase/(decrease) in liquid
resources 30.3 (28.2)
Cash outflow from increase in debt (5.1) (11.4)
-------------------------------------- -------- -------
Change in net funds resulting from cash flows 28.1 (44.0)
Translation difference 4.8 2.2
-------------------------------------- -------- -------
Movement in net funds in the period 32.9 (41.8)
Net funds at start of period 8.2 50.0
-------------------------------------- -------- -------
Net funds at end of period 41.1 8.2
-------------------------------------- -------- -------
Analysis of net funds
Cash 28.0 24.2
Liquid resources 57.5 27.2
Overdrafts (1.0) (0.5)
Other debt due within one year (7.3) -
Other debt due after one year (36.1) (42.7)
-------------------------------------- -------- -------
Net funds at end of period 41.1 8.2
-------------------------------------- -------- -------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 27 MARCH 2004
2004 2003
(restated)
£m £m
Profit/(loss) for the financial year:
Group 5.0 (14.2)
Associates 7.1 6.9
----------------------------------------- -------- --------
12.1 (7.3)
Currency translation differences on foreign currency net
investments (0.5) 0.5
----------------------------------------- -------- --------
Total recognised gains/(losses) for the year 11.6 (6.8)
Prior year adjustment (see below) 0.6 -
----------------------------------------- -------- --------
Total recognised gains/(losses) since last annual report 12.2 (6.8)
----------------------------------------- -------- --------
There is no material difference between the reported profit shown in the
consolidated profit and loss account and the profit for the relevant periods
restated on an historical cost basis.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 27 MARCH 2004
2004 2003
(restated)
£m £m
Profit/(loss) for the financial year 12.1 (7.3)
Dividends (24.8) (24.6)
---------------------------------------- -------- --------
(12.7) (31.9)
Share capital issued 2.5 1.1
Shares repurchased - (38.0)
Currency translation differences on foreign currency net
investments (0.5) 0.5
---------------------------------------- -------- --------
Net decrease in shareholders' funds (10.7) (68.3)
Opening shareholders' funds 224.8 293.1
---------------------------------------- -------- --------
Closing shareholders' funds 214.1 224.8
---------------------------------------- -------- --------
The opening shareholders' funds of £224.8m in 2003/2004 (2002/2003: £293.1m)
includes a prior year adjustment of £19.1m (2002/2003: £19.7m) relating to own
shares held.
The Group has decided to adopt the requirements of Urgent Issues Task Force
Abstract 38 and show the cost of own shares purchased as a deduction from
shareholders' funds. Prior year comparatives have been restated to reflect the
change of accounting policy, leading to an increase in the previously reported
operating profit for 2002/03 by £0.6m.
NOTES TO THE PRELIMINARY STATEMENT
1 SEGMENTAL 2004 2004 2004 2003 2003 2003
ANALYSIS (restated)(restated)
Turnover Profit Net Turnover Profit Net
before assets before assets
tax tax
Continuing £m £m £m £m £m £m
operations -
before exceptionals
Cash Systems 302.6 8.8 72.1 310.9 11.8 87.1
-------- ------- ------- -------- -------- --------
Security Paper &
Print 303.6 39.0 81.6 248.5 29.4 102.5
Acquisitions 36.7 3.4 13.0
-------- ------- ------- -------- -------- --------
340.3 42.4 94.6 248.5 29.4 102.5
-------- ------- ------- -------- -------- --------
Voting Systems 44.2 (1.9) (0.6) 25.2 (2.6) 10.1
Less inter-segment
sales (4.6) - (1.9)
-------- ------- ------- -------- -------- --------
682.5 49.3 166.1 582.7 38.6 199.7
-------- ------- ------- -------- -------- --------
Exceptional costs
Cash Systems (5.2) (10.5)
Security Paper &
Print (10.0) (19.9)
Voting Systems - (2.8)
-------- ------- ------- -------- -------- --------
(15.2) (33.2)
-------- ------- ------- -------- -------- --------
Goodwill
amortisation
Cash Systems (8.7) (19.3)
Security Paper &
Print 0.5 0.2
Voting Systems (13.0) (0.5)
-------- ------- ------- -------- -------- --------
(21.2) (19.6)
-------- ------- ------- -------- -------- --------
682.5 12.9 166.1 582.7 (14.2) 199.7
-------- ------- ------- -------- -------- --------
Associated
companies
(analysed below) 10.0 13.2 9.2 13.5
Non-operating
items 0.2 -
Net Interest
including
associates (0.6) 0.9
------- --------
Profit/(loss)
before
taxation 22.5 (4.1)
------- --------
Unallocated net
assets/
(liabilities) (2.8) 7.6
------- --------
Capital
employed 176.5 220.8
Net funds 41.1 8.2
------- --------
Net assets 217.6 229.0
---------------- -------- ------- ------- -------- -------- --------
Geographical
area by
operation
United Kingdom
and Ireland 406.1 9.7 58.1 320.0 (16.6) 80.9
Rest of Europe 232.8 20.7 61.7 216.5 14.5 67.0
The Americas 161.8 (18.3) 30.8 136.2 (15.6) 40.7
Rest of world 39.3 0.8 15.5 42.8 3.5 11.1
Less inter-area
sales (157.5) (132.8)
-------- ------- ------- -------- -------- --------
682.5 12.9 166.1 582.7 (14.2) 199.7
---------------- -------- ------- ------- -------- -------- --------
The profit before tax in 2004 is shown after reorganisation costs of £15.2m
(2003 : £31.9m) comprising UK and Ireland £9.5m (2003 : £22.8m), Rest of Europe
£4.3m (2003 : £5.2m), Americas £1.4m (2003 : £3.9m), Rest of World £Nil (2003 :
£Nil).
Inter-area sales of £157.5m (2003 : £132.8m) comprise: UK & Ireland £53.1m (2003
: £51.4m), Rest of Europe £67.7m (2003 : £53.3m), Americas £19.3m (2003 :
£6.0m), Rest of World £17.4m (2003 : £22.1m).
------------------- -------- ------- ------- -------- ------- ------
Geographical area by
destination
United Kingdom and Ireland 83.1 68.8
Rest of Europe 179.0 174.7
The Americas 178.9 173.0
Rest of world 241.5 166.2
-------- --------
682.5 582.7
------------------- -------- ------- ------- -------- ------- ------
Associated companies are analysed as
follows:
Security Paper and Print - - - 0.2
Cash Systems - - 0.6 -
UK lottery 10.0 13.2 8.6 13.3
------- ------- ------- ------
10.0 13.2 9.2 13.5
------- ------- ------- ------
Geographical area by operation
United Kingdom and Ireland 10.0 13.2 8.6 13.3
Rest of Europe (0.1) 0.6 -
Rest of world 0.1 - 0.2
------- ------- ------- ------
10.0 13.2 9.2 13.5
------------------- -------- ------- ------- -------- ------- ------
The Group's cash and borrowings are managed centrally and therefore interest is
not attributable to individual classes of business or geographical segments.
Unallocated net assets and liabilities, which consist of assets and liabilities
relating to non-divisional operations, are controlled centrally and cannot be
allocated meaningfully to individual classes of business or geographical
segments.
Following the announcement in November 2003 of the outcome of the strategic
review of Global Services, that division has now been disbanded and actions to
exit from a number of product areas are underway. All the businesses previously
reported under Global Services, with the exception of Sequoia Voting Systems,
are now included within Security Paper and Print above and comparatives
restated. This has resulted in an increase of £34.7m to turnover within Security
Paper and Print and an increase of £1.4m to operating profit. Sequoia Voting
Systems is shown separately as a business segment.
2 OPERATING COSTS EXCLUDING AMORTISATION OF GOODWILL 2004 2003
£m (restated)
£m
Cost of sales
Continuing operations 434.6 387.4
Reorganisation costs 13.0 31.9
---------- ----------
447.6 419.3
Acquisitions 25.3 -
---------- ----------
472.9 419.3
---------- ----------
Distribution costs
Continuing operations 21.6 20.2
---------- ----------
Administration and other expenses
Continuing operations 143.7 136.5
Reorganisation costs 2.2 -
Loss on impairment of investments - 1.3
Acquisitions 8.0
---------- ----------
153.9 137.8
----------------------------------- ---------- ----------
648.4 577.3
----------------------------------- ---------- ----------
3 TAXATION 2004 2003
£m £m
Tax on profit on ordinary activities
United Kingdom
Current tax
Corporation tax at 30% (2002 : 30%) 8.4 6.6
Adjustments in respect of prior years (4.0) (0.8)
---------- ----------
4.4 5.8
Double taxation relief (0.5) (0.7)
---------- ----------
3.9 5.1
---------- ----------
Overseas tax 4.0 6.5
Adjustments in respect of prior years 0.3 (0.6)
---------- ----------
4.3 5.9
---------- ----------
Tax on share of associates 2.9 1.9
---------- ----------
11.1 12.9
---------- ----------
Deferred tax
Origination and reversal of timing difference 2.7 (0.4)
Adjustments in respect of prior years 1.2 (0.8)
Tax on share of associates - 0.8
---------- ----------
3.9 (0.4)
---------- ----------
Total tax charge excluding exceptionals 15.0 12.5
---------- ----------
Exceptional items (5.0) (10.0)
---------- ----------
Total tax charge after exceptionals 10.0 2.5
---------- ----------
The effective rate remains below the UK nominal rate of 30%. A summary
reconciliation is shown below.
2004 2003
(restated)
£m £m
Profit before tax on ordinary activities before
exceptional items 56.2 45.1
----------------------------------- ---------- ----------
Expected tax charge at 30% 16.9 13.5
Rate adjustments relating to overseas profits (1.6) (2.8)
Overseas dividends 1.5 0.2
Disallowables & other items (2.0) 3.4
Adjustments in respect of prior years (3.7) (1.4)
----------------------------------- ---------- ----------
Current tax charge (excluding exceptional items) 11.1 12.9
----------------------------------- ---------- ----------
4 EARNINGS PER SHARE 2004 2003
Pence per share (restated)
----------------------------------- ---------- ----------
Basic 6.8 (4.0)
Fully diluted 6.8 (4.0)
----------------------------------- ---------- ----------
Earnings per share are based on the profit for the year attributable to ordinary
shareholders of £12.1m (2003 loss of £7.3m) as shown in the Group profit and
loss account. The weighted average number of ordinary shares used in the
calculations is 177,032,098 (2003 183,656,364) for basic earnings per share and
177,453,669 (2003 184,714,858) for diluted earnings per share after adjusting
for dilutive share options.
-------------------------------------- -------- ----------
pence pence
per per
Reconciliation of earnings per share share share
(restated)
-------------------------------------- -------- ----------
As calculated under FRS 14 6.8 (4.0)
Loss on impairment of investments - 0.7
Loss/(profit) on the disposal of fixed assets and assets
held for resale (0.1) 0.2
Amortisation of goodwill 11.7 10.4
-------------------------------------- -------- ----------
Headline earnings per share as defined by the IIMR 18.4 7.3
Reorganisation costs 5.8 11.9
-------------------------------------- -------- ----------
Headline earnings per share before items shown above 24.2 19.2
-------------------------------------- -------- ----------
The Institute of Investment Management and Research (IIMR) has published
Statement of Investment Practice No. 1 entitled 'The Definition of Headline
Earnings'. The headline earnings per share shown above have been calculated
according to the definition set out in the IIMR's statement. The reconciling
items between earnings per share as calculated according to FRS 14 and as
calculated according to the definition of the IIMR's headline earnings include
the underlying tax effects.
The directors are of the opinion that the publication of the IIMR's headline
earnings figure is useful to readers of interim statements and annual accounts.
5 NOTES TO GROUP CASH FLOW STATEMENT 2004 2003
(restated)
£m £m
a Reconciliation of operating profit/(loss) to net cash inflow from operating
activities
Operating profit/(loss) 12.9 (14.2)
Depreciation and amortisation 45.3 49.4
(Increase)/decrease in stocks (3.8) 8.6
Decrease in debtors 10.2 15.9
Increase/(decrease) in creditors 30.0 (9.8)
Decrease/(increase) in reorganisation provisions (2.5) 7.4
Other items - 1.8
------------------------------------- -------- ----------
Net cash inflow from operating activities 92.1 59.1
------------------------------------- -------- ----------
b Returns on investments and servicing of finance
Interest received 2.0 4.2
Interest paid (2.4) (3.8)
Dividends paid to minority shareholders (1.1) (1.5)
------------------------------------- -------- ----------
Net cash outflow from returns on investments and (1.5) (1.1)
servicing of finance -------- ----------
-------------------------------------
c Capital expenditure and financial investment
Purchase of tangible fixed assets (33.3) (20.7)
Purchase of intangible fixed assets - (0.6)
Sale of tangible fixed assets 1.5 1.7
Sale of investments - 15.9
------------------------------------- -------- ----------
Net cash outflow for capital expenditure and financial (31.8) (3.7)
investment -------- ----------
-------------------------------------
d Acquisitions and disposals
Purchase of subsidiary undertakings (0.9) (33.6)
Net (overdraft)/cash acquired with subsidiary (9.8) 0.2
undertakings
Sale of subsidiary undertakings 6.4 -
Net cash sold with subsidiary undertakings (0.8) -
------------------------------------- -------- ----------
Net cash outflow from acquisitions and disposals (5.1) (33.4)
------------------------------------- -------- ----------
e Management of liquid resources
Net (increase)/decrease in short term deposits (30.3) 28.2
------------------------------------- -------- ----------
f Financing
Debt due within one year:
Loans raised 7.9 -
Loans repaid - (7.0)
Debt due beyond one year:
Loans raised 17.1 24.1
Loans repaid (19.0) (5.0)
Capital element of finance lease rental repayments (0.9) (0.7)
Share repurchase - (38.0)
Share capital issued 2.5 1.1
------------------------------------- -------- ----------
Net cash inflow/(outflow) from financing 7.6 (25.5)
------------------------------------- -------- ----------
6 The consolidated accounts have been prepared as at 27 March 2004, being the
last Saturday in March. The comparatives for the 2003 financial year are for
the year ended 29 March 2003.
7 This statement has been prepared in accordance with the guidelines
published by the Accounting Standards Board.
8 The Institute of Investment Management and Research (IIMR) has published
Statement of Investment Practice No. 1 entitled 'The Definition of Headline
Earnings'. The headline earnings per ordinary share shown in this
preliminary statement have been calculated according to the definition set
out in the IIMR's statement. Also shown are the reconciling items between
earnings per share as calculated according to FRS 14 and as calculated
according to the definition of the IIMR's headline earnings.
9 The financial information set out above (Group Profit and Loss Account,
Group Balance Sheet, Group Cash Flow Statement, Group Statement of Total
Recognised Gains and Losses and Notes thereto) and extracts from the
Financial Review do not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 27 March 2004 will be posted to
shareholders on 17 June 2004 for subsequent approval at the Annual General
Meeting and copies will be available from the Company Secretary at De La Rue
plc, De La Rue House, Jays Close, Viables, Hampshire, RG22 4BS. The report
of the auditors on these accounts is unqualified and does not contain a
statement under either section 237(2) or 237(3) of the Companies Act 1985.
Statutory accounts for the year ended 29 March 2003 have been delivered to
the Registrar of Companies.
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