Last checked at 16 Jun 2009 17:44
De La Rue plc - Continuing Obligations
In accordance with Listing Rules 9.6.1 the following documents are being forwarded to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility:
Annual Report 2009
Notice of Annual General Meeting 2009
Form of Proxy
Copies of the above documents may be obtained from the General Counsel and Company Secretary, De La Rue plc, De La Rue House, Jays Close, Viables, Basingstoke, RG22 4BS. Copies are also on the Company's website www.delarue.com.
In addition, in accordance with the requirements of the Disclosure and Transparency Rules 4.1.3 and 6.3.5, a copy of the annual financial results announcement document is attached.
Edward Peppiatt
Company Secretary
16 June 2009
DE LA RUE PLC ANNUAL FINANCIAL REPORT
YEAR TO 28 MARCH 2009
HIGHLIGHTS
(Continuing Group including Cash Processing Solutions but excluding the disposed businesses of Cash Systems)
Operating profit margin up 2.2 percentage points to 19.2 per cent driven by productivity, volume and foreign exchange benefits*
PBT up 18.5 per cent to £105m*
Currency operating profit up 25 per cent to £82.8m
Central cost reduction programme largely complete
Strong underlying operating cash flow from continuing operations of £88.9m**
Extension of Bank of England contract for five years
Return to shareholders of £460m in November 2008
Final dividend increase to 27.4p, making a total of 41.1p for the year, up 92 per cent
Good order book coverage in all businesses for 2009/2010
KEY FINANCIALS
| 2008/2009 £m | 2007/2008 £m | Movement % | |
| Revenue | 502.4 | 467.0 | 7.6 |
| Operating profit before exceptional items | 96.5 | 79.2 | 21.8 |
| Profit before tax and exceptional items | 105.0 | 88.6 | 18.5 |
| Profit before tax | 96.1 | 91.2 | 5.4 |
| Headline earnings per share from continuing operations* | 57.0p | 41.7p | 36.7 |
| Basic earnings per share from continuing operations | 50.9p | 43.4p | 17.3 |
| Dividend per share | 41.1p | 21.4p | 92.1 |
*Excluding exceptional items
**Before special pension contribution of £15m and exceptional cash items of £4.5m
Nicholas Brookes, Chairman of De La Rue plc, commented:
"I am pleased to report another excellent year of trading across all our activities. These results - and the continuing strength of the order book in each of our businesses - highlight the quality and resilience of De La Rue in terms of long-term growth, profitability and underlying cash generation.
"De La Rue is now focused on meeting the needs of our customers in the high value areas of currency, security, identity and authentication following the sale of Cash Systems.
"On behalf of my fellow Directors, I welcome James Hussey and Simon Webb to the Board. Their energy and passion for the business will be key in ensuring the continuing success of our strategy for the newly-focused Group.
"As announced in March, De La Rue entered the year with good order book coverage across its businesses which is expected to continue despite the uncertain global economic environment. As a result, the Board has confidence in the outlook for the current year."
For further information, please contact:
| James Hussey | Chief Executive | +44 (0)1256 605308 |
| Simon Webb | Finance Director | +44 (0)1256 605308 |
| Gary Williams | Head of Corporate Affairs | +44 (0)1256 605308 |
| Andrew Lorenz | Financial Dynamics | +44 (0)207 269 7291 |
20 May 2009
SUMMARY OF GROUP RESULTS
De La Rue reports another excellent performance for the year ended 28 March 2009. Revenues for the continuing Group grew by 8 per cent to £502.4m (2007/2008: £467.0m) and operating profit rose by 22 per cent to £96.5m (2007/2008: £79.2m). Operating profit margins (before exceptional items) for the continuing Group were 2.2 percentage points higher at 19.2 per cent (2007/2008: 17.0 per cent), reflecting the benefits of productivity improvements, volume, customer mix and foreign exchange. Overall for the continuing Group, movement in the value of sterling against the euro and US Dollar contributed £25m to revenue and £6m to operating profit.
Profit before tax and exceptional items increased by 18.5 per cent to £105.0m (2007/2008: £88.6m). Headline earnings per share increased by 37 per cent to 57.0p (2007/2008: 41.7p) reflecting the improved trading performance and the benefits of the share consolidation carried out in conjunction with the special dividend payment. Basic earnings per share from continuing operations were 50.9p compared with 43.4p in 2007/2008, representing an increase of 17 per cent.
Cash generated from continuing operations was £69.4m (2007/2008: £86.7m). The cash movement in the year reflected positive working capital management partially offset by the increased trading activity and, as expected, a reduction in advance payments of £23m, from £63m at 29 March 2008 to £40m at 28 March 2009 as well as an additional one-off contribution of £15m to the Group pension fund as a result of the disposal of Cash Systems. Following the return to shareholders of £460m in November 2008, the Group ended the year with net debt of £33.1m (2007/2008 net cash: £106.7m).
STRATEGY
The Group's strategy is to build on its position as the world-leading producer of banknotes and banknote paper to become the premier supplier to central banks, governments and international corporations of security features and authentication systems used in payment and identity transactions. These are the markets for Currency (including Cash Processing Solutions), Security Products and Identity Systems.
The strategy aims to deliver value by extending existing customer relationships, continuing to drive productivity improvement and developing intellectual property to capitalise on market opportunities. The Board believes that through this strategy, De La Rue will continue to enhance shareholder value. The Board also anticipates that the growth in the demand for security products and identity solutions will provide opportunities for De La Rue to develop its brand protection and identity products activities.
BANK OF ENGLAND
Following completion of an eight month process, De La Rue announces that the Bank of England has extended the minimum term of its banknote supply agreement by a period of five years.
RESULTS FROM CONTINUING BUSINESSES
| CURRENCY | 2008/2009 £m | 2007/2008 £m |
| Revenue Underlying growth on prior year* | 348.6 +6% | 316.7 |
| Operating profit Operating profit margin | 82.8 23.7% | 66.5 21.0% |
*excluding impact of exchange
In Currency, banknote volumes remained consistent (up 3 per cent on 2007/2008), with a number of new banknote families being launched and a particularly strong sales mix. Overspill represented only 11 per cent (2007/2008: 29 per cent). Productivity efficiencies increased paper output (up 3 per cent on 2007/2008) with the business continuing to benefit from strong capacity utilisation.
Operating profit margins rose reflecting increasing volumes, efficiencies from increased productivity across the business, customer mix and the benefit of the current Sterling exchange rates for the US Dollar and the euro.
| CASH PROCESSING SOLUTIONS (CPS) | 2008/2009 £m | 2007/2008 £m |
| Revenue | 66.0 | 58.4 |
| Underlying growth on prior year* | +4% | |
| Operating Profit Operating profit margin | 0.4 0.6% | 0.4 0.7% |
*excluding impact of exchange
The strategy of integrating the offerings of CPS for central banks with those of Currency is progressing well. The business has refreshed its large sorter range and is benefiting from demand for high-speed, low-cost cash handling solutions.
| SECURITY PRODUCTS | 2008/2009 £m | 2007/2008 £m |
| Revenue | 69.7 | 74.8 |
| Underlying growth on prior year* | -3% | |
| Operating Profit Operating profit margin | 11.0 15.8% | 8.4 11.2% |
*excluding impact of exchange and De La Rue Smurfit disposal
The Security Products business delivered a good performance, with a strong profit improvement underpinned by continuing productivity improvements. Underlying revenue was marginally down year on year with a decline in brand licensing revenues due to the current economic climate, partially offset by growth in high-margin internal components sales, particularly from Security Paper and Holographics.
| IDENTITY SYSTEMS (IDS) | 2008/2009 £m | 2007/2008 £m |
| Revenue | 30.4 | 26.5 |
| Underlying growth on prior year* | +6% | |
| Operating Profit Operating profit margin | 2.3 7.6% | 3.9 14.7% |
*excluding impact of exchange
In IDS, the business successfully pursued its strategy of building revenues, both in standard and e-solutions, and finished the year with an increased order backlog. Operating profit margins reflected the absence of higher margin one-off projects and, as expected the investment in the Malta ePassport factory which came on line at the start of the year.
ASSOCIATES
The main associated company is Camelot, the UK lottery operator, which in the current year transitioned to a new 10-year licence agreement. Profit from associates after tax was £8.9m (2007/2008: £7.1m) and dividends received from associates was £10.3m (2007/08: £7.7m). As previously announced, De La Rue is reviewing the options in relation to its shareholding in Camelot and will only pursue any outcomes of this review that fully reflect the value of its investment in Camelot.
RETURNS TO SHAREHOLDERS
Dividend
The Board is recommending a final dividend of 27.4p per share (2007/2008: 14.87p per share), subject to shareholders' approval. This will be paid on 31 July 2009 to shareholders on the register on 10 July 2009. Together with the increased interim dividend paid in January 2009, this will give a total dividend for the year of 41.1p (2007/2008: 21.4p per share).
Overall, this equates to an uplift of 92 per cent in the level of ordinary dividend and reflects the policy announced in May 2008.
Share Consolidation
Following the return of £460m to shareholders in November 2008, the issued share capital was reduced to 96,650,482 from 150,774,752 shares.
INTEREST
The Group's net interest income was £1.4m (2007/2008: £2.0m) which reflected the net benefit from the underlying cash generation of the Group. In addition, the IAS19 related finance item, arising from the difference between the interest on liabilities and the expected return on assets, was a charge of £1.8m compared with a credit of £0.3m the previous year.
TAXATION
Tax for the year on continuing operations was £28.5m, including an exceptional tax credit of £0.9m (2007/2008: £24.7m). The effective tax rate on continuing operations pre exceptional items was 28 per cent, in line with the last full year's charge.
EXCEPTIONAL ITEMS AND DISCONTINUED OPERATIONS
In accordance with the basis of preparation outlined in note 1, the following exceptional items are included within the income statement.
| 2008/2009 | 2007/2008 | |
| £m | £m | |
| Reorganisation of central operations | (8.9) | - |
| Profit on disposal of investment | - | 2.6 |
| Exceptional items - continuing operations | (8.9) | 2.6 |
| Exceptional items - tax | 0.9 | - |
| Profit from discontinued operations | 296.5 | - |
During the year, De La Rue announced its intention to reduce central costs by approximately 50 per cent following the disposal of Cash Systems. This programme is largely complete.
Central reorganisation costs relating to this programme principally cover redundancy, separation costs and site rationalisation charges. Tax credits relating to exceptional items were £0.9m, with a credit of £1.9m in relation to the central reorganisation being partly offset by a £1.0m charge in respect of the phasing out of Industrial Buildings Allowances, included in the Finance Act 2008.
In the prior year, profit from disposal of investments comprises a £1.7m gain from the sale of the Group's Valora investment and £0.9m gain on the sale of its 50 per cent stake in De La Rue Smurfit.
The Group completed the sale of its Cash Systems activities on 1 September 2008. Profit from discontinued operations (after tax) was £296.5m, which included £12.6m (after tax) from the trading profit of the discontinued activities for the five months to 1 September 2008. The profit on the disposal represents the proceeds of Cash Systems on a cash free, debt free basis, less net assets disposed and related transaction costs.
CASH FLOW AND BORROWINGS
Underlying operating cash flow from continuing operations was £88.9m (2007/2008: £86.7m), before the £15m one-off additional pension contribution and the cash flow impact of exceptional items of £4.5m.
Increased working capital in the year reflected both the increased trading activity and, as expected, a reduction in advance payments of £23m from £63m at 29 March 2008 to £40m at 28 March 2009. Asset working capital ratios remained consistent with the prior year.
Capital expenditure of £29.3m (2007/2008: £19.2m) was higher than depreciation, reflecting the timing of the longer term investment programme directed at enhancing the future capability of the business.
Following the return to shareholders of £460m in November 2008, the Group ended the year with net debt of £33.1m (2007/2008 net cash: £106.7m).
During the year, 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 require that the interest cover be greater than four times, and the net debt to EBITDA ratio be less than three times.
UK PENSION SCHEME
Funding
Special funding payments of £27m were made to the Group pension fund, comprising a regular contribution of £12m (payable per annum for five years to 2011) and a further additional one-off contribution of £15m following the disposal of Cash Systems. The results of the Group's next formal triennial funding valuation are due in early 2010.
IAS 19 Accounting
The valuation of the UK Pension Scheme under IAS 19 principles indicates a scheme deficit pre-tax at 28 March 2009 of £67.5m (March 2008: £20.7m). This significant increase in deficit during the year has mainly arisen due to the volatile markets partly offset by the benefit of the Group's special contributions of £27.0m. The charge to operating profits in respect of the UK Pension Scheme for 2008/2009 was £5.8m (2007/2008: £10.0m). In addition, under IAS 19 there was a finance charge of £1.8m arising from the difference between the expected return on assets and the interest on liabilities.
OUTLOOK
As announced in March, De La Rue entered the year with good order book coverage across its businesses which is expected to continue despite the uncertain global economic environment. As a result, the Board has confidence in the outlook for the current year.
-ends-
Notes to Editors
| 1 | De La Rue is the world's largest commercial security printer and papermaker, involved in the production of over 150 national currencies and a wide range of security documents such as passports, authentication labels and fiscal stamps. The Company is also 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 approximately 4,000 people worldwide and is a member of the FTSE250. For further information visit De La Rue's website at www.delarue.com |
| 2 | High resolution photographs are available to the media free of charge at http://www.newscast.co.uk/ (+44 (0) 207 608 1000). |
| 3 | Foreign Exchange Principal exchange rates used in translating the Group's results: |
| £ | 2008/2009 | 2007/2008 | |||
| Avg | Year End | Avg | Year End | ||
| US Dollar | 1.73 | 1.43 | 2.01 | 1.99 | |
| euro | 1.21 | 1.08 | 1.42 | 1.26 | |
| 4 | De La Rue Financial Calendar: | |
| 2009/2010 | ||
| Ex-dividend date | 8 July 2009 | |
| Record date (Ordinary Dividend) | 10 July 2009 | |
| Annual General Meeting | 23 July 2009 | |
| Payment of 2008/09 final dividend | 31 July 2009 | |
| 2009/10 Interim Results | 24 November 2009 | |
| 5 | Share Consolidation |
| As a consequence of the return of cash and share consolidation, the Company's authorised share capital was reduced to £66.0m representing 111,673,300 deferred shares of 1p each and 144,641,840 ordinary shares of 44152/175p each. The issued share capital was reduced to 96,650,482 from 150,774,752 ordinary shares |
Principal Risks and Risk Management
De La Rue's reputation is based on security, integrity and trust. This section therefore only summarises the types of risks which are either specific to the continuing businesses of De La Rue or which could have a material, adverse effect on the Group, following the disposal of the Cash Systems business. It also describes the risk management systems and processes in place and significant events during 2008/2009.
No business is risk free even if it has detailed processes and procedures for identifying and managing risks. The Combined Code on Corporate Governance requires the Board to maintain a sound system of internal control to safeguard shareholders' investment and the Company's assets and at least annually to conduct a review of the effectiveness of the Group's system of internal controls. The Board carried out its annual review which covered
all material controls, including financial, operational and compliance controls and risk management systems. Additionally, the Board received information about the Group's operations throughout the year enabling it regularly to evaluate the nature and extent of the risks to which the Company is exposed. The Board is therefore able to confirm that its system of internal control has been in place throughout 2008/2009.
Internal Control and Internal Financial Control
The Board has overall responsibility for the Group's system of internal control and for reviewing its effectiveness. It relies on the Audit Committee and Risk Committee to, assist in this process. Details of the Audit and Risk Committees are set out in the Corporate Governance Statement. Management is responsible for implementing the controls which are designed to meet the particular needs of the Group, and the risks to which it is exposed, with procedures intended to provide effective internal control. Business Unit Managing Directors, to whom general managers of smaller businesses report, are responsible for establishing and maintaining these procedures. The controls by their nature are designed to manage rather than eliminate risk and can only provide reasonable but not absolute assurance against material misstatement or loss. The processes used by the Board and, on its behalf, by the Audit and Risk Committees have been in place throughout the year, and include:
Reviewing:
monthly finance, operational and development reports;
internal and external audit plans;
significant issues identified by internal and external audits;
significant Group risks and risk mitigation actions reported by the Risk Committee including updates to the Group's risk register;
annual compliance statements in the form of self-audit questionnaires;
reports on other such matters as security, health and safety, environmental issues and fire risks; and
discussing with management risks identified by management and/or the audit process and any changes from the previous review.
The financial control framework includes the following key features:
an annual strategic planning process;
an annual budget;
a system of monthly reporting by each operating subsidiary which involves comparison of actual results with the original budget and the updating of a full year forecast;
monthly reporting of performance to the Board;
audited annual financial statements; and
interim financial statements reviewed by the auditors.
The main control procedures which address the financial implications of the major business risks are centred on strict approval procedures. These are reviewed annually, approved by the Board and apply to all subsidiaries. They include:
executive Directors' approval of all major non-routine revenue expenditure;
Board approval of all major capital expenditure;
Board approval of all acquisitions and disposals;
a system of authorisation limits which cascades throughout the Group; and
Board consideration of any matter having a material effect on the Group.
The operation of the Group Treasury department is discussed in the Annual Report and Accounts on page 38.
Following the disposal of Cash Systems, the internal audit function was outsourced entirely to Ernst & Young who have, in conjunction with senior management and the Audit Committee, carried out a review of the focus of, and way in which internal audits will be carried out in the future with the objective of targeting resources better and improving the process.
Specific Risks Strategy, Technology, Competition and Market Concentration
The Group's strategy and progress in implementing it is outlined on pages 20 to 33 of the Annual Report and Accounts. The Board is responsible for strategy, carrying out an annual review based upon extensive, detailed reviews of individual businesses' plans. De La Rue operates in niche markets principally based on the production and management of cash. The main strategic threat is perceived to be a technological revolution which renders cash obsolete, such as e-cash.
The business primarily operates in developing countries with approximately 85 per cent of its customer base outside Europe and the USA. Such developing countries are likely to be significantly behind any trend to e-cash technologies. Even in the UK, banknote volumes have not been significantly eroded by existing cashless payment methods such as debit and credit cards.
In addition, such technologies require critical mass to gain credibility and this in turn requires an established common infrastructure to support it. Finally, cultural factors in many countries maintain strong demand for cash as a method of transaction.
Operational Issues
Currency
The Currency business operates within a defined market and the business is exposed to the short term ordering cycles of central banks. Significant year on year changes in volume or customer mix could affect profitability. The loss of key customers, either in banknotes or banknote paper, could have a major effect on the Group's results and prospects which the business mitigates by achieving as much diversity of customers as possible. De La Rue seeks to mitigate the risk of counterfeiting by focusing on innovation in technologies, features and products to stay ahead of changing markets and the competition and in particular the counterfeiter. Failure to develop new technology to meet customers' needs, delays in bringing products to market or failure to protect material intellectual property rights may have an adverse impact upon the Group's prospects.
Cash Processing Solutions
The CPS business is exposed to long ordering processes of central banks and commercial banks, frequently for customers in the developing world. Significant year on year changes in volume or customer mix could affect profitability, which the business mitigates by achieving a diversity of its customer base.
One of the strengths of the CPS business is that a significant part of the business is annual service and maintenance of the installed base. These are very stable, long term contracts to maintain mission critical machine operation.
CPS' total solution package typically represents a major investment by its customers. Therefore, the profitability of the CPS business in any given period can fluctuate significantly, depending upon the customer demand and the specific solutions delivered in that period. CPS continues to invest in and develop its product portfolio to ensure that the products continue to provide the flexible tailored solutions that De La Rue's customers demand.
Reputation
Damage to reputation may arise from an incident or event which is in monetary terms not material. Matters which could affect De La Rue's reputation would include significant breaches of security or a contravention of law, such as competition law or anti-bribery law, environment or health and safety law or a failure to maintain appropriate standards of corporate responsibility. De La Rue operates throughout the world and in areas where the local standards may not equate to the standards applicable in the UK or those that De La Rue requires all its subsidiaries and employees to follow as regards business behaviour. Any material damage to De La Rue's reputation could have a major effect on the Group's prospects. Details of these standards are set out in the Corporate Responsibility Report in the Annual Report and Accounts on pages 41 to 45.
On 27 July 2007 the Company announced that the Serious Fraud Office ('SFO') was investigating the Company. We believe this is in response to allegations of corruption made by a former employee against whom the Company has obtained and enforced a judgement for the recovery of monies stolen from it. The Company believes the allegations made by this individual, who has since pleaded guilty to theft from the Company and was sentenced to three years' imprisonment in February 2008, are false. The Company understands that these investigations are continuing and remains ready to co-operate with the SFO. At present, the Company is not able to quantify the impact of any action the SFO may take as a result of this investigation and is not yet in a position to comment further.
Significant effort is made to ensure that employees understand legal obligations. There is an established anti-trust compliance programme and the Company's Business Code of Conduct (accessible on the Company's website) defines what standards of behaviour are expected. Agents and distributors are also required to adhere to the Company's standards. The Board has accepted recommendations following a further review of its policies and procedures against the recommendations made by Lord Woolf as described in the Corporate Responsibility section of the Annual Report and Accounts on page 41.
Security
The nature of the Group's activities requires stringent security processes and procedures to minimise the consequences of possible breaches, some of which, such as changes in arrangements by carriers, may be outside the Group's control. Any material breach of security could have a major effect on the Group's prospects.
Overton Mill
The Group is highly dependent on its paper mill at Overton which is close to the River Test in Hampshire, UK. The business of Currency would suffer significant losses to its printing business if the mill were out of action for a sustained period of time, either by reason of fire or some other accident or because of environmental contamination of the River Test, which is a Site of Special Scientific Interest. The Group regularly reviews its physical protection systems and updates them as necessary to mitigate this risk. The consequences of fire or physical loss to any of its printing plants are less significant because the Group has the flexibility to switch production to different plants.
General Risks
Economic conditions
Significant changes in economic conditions, for example: the prices of commodities such as cotton, energy or inks; changes in interest rates, rates of inflation, economic growth and other factors could substantially and adversely affect the business, financial and operating performance of the Group notwithstanding the Group's normal policy of buying commodities at prevailing market prices under medium term supply contracts. A number of businesses are relatively energy intensive, either because of production processes or due to the proportionately high costs of transportation.
In addition, no one element of the above commodities represents more than 30 per cent of the total final cost element of a finished banknote. Vertical integration gives greater internal control with more than 60 per cent of costs now in house. Further mitigation is achieved through the rolling process of contract negotiation which provides the opportunity to update processes to reflect the cost base.
Security Products is more exposed to the economic cycle than Currency due to the proportion of commercial organisations that it serves.
Although the identity market is more insulated against the current economic climate than most, pressure on state finances may mean the cancellation or postponement of government identity projects. Passport and identity document issuance volumes are also expected to decrease as travel reduces or renewals are postponed. There are also risks around the supply of critical document and system components as the external supply chain struggles to deal with the limited availability of credit and working capital. Although these effects have not been significant to date, it is expected that the threat of these challenges will persist well into 2009/2010.
Legislation and regulation
De La Rue is subject to the laws and regulations of countries where it does business. Failure to comply with such laws and regulations could impose additional costs on or have an adverse impact on the performance of and/or damage the reputation of the business carried on by the Group.
Financial Risk Management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk, cash flow interest rate risk and commodity price risk.
Any material exposure could adversely impact the Group's earnings. This is not a material risk for the Company's sufficiency of working capital over the next 12 months. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures as soon as they arise but does not take speculative positions. Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group's operating units.
Group Treasury provides written principles for overall risk management, as well as policies covering specific risks, such as foreign exchange, interest rate, credit, use of derivative financial instruments and the investment of excess liquidity. The Board authorises all risk management instruments and policies.
(a) Market Risk
Foreign Exchange Risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group aims to hedge such exposures where possible and practical. However, any material exposure to foreign exchange risk could have a major effect on the Group's profits. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward contracts, transacted with Group Treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency. Group Treasury is responsible for managing the net position in each foreign currency by using external forward foreign exchange contracts transacted with financial institutions.
For segment reporting purposes, each subsidiary designates contracts with Group Treasury as fair value hedges or cash flow hedges, as appropriate. External forward foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis.
The Group's risk management policy is to hedge firm commitments and between 60 per cent and 100 per cent of forecast exposures in each major currency for the subsequent 12 months. Forecast transactions must be highly probable for hedge accounting purposes. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies and through foreign currency swaps.
(b) Credit Risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high-credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution.
(c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility in funding by keeping committed credit lines available.
(d) Cash Flow and Fair Value Interest Rate Risk
De La Rue's interest rate management policy is generally to borrow and invest cash at floating rates. The Group's interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's exposure to cash flow interest rate risk arises principally from cash balances held. Current low levels of borrowings are all at floating rates. At higher levels of borrowings the policy is to manage the interest rate exposure through the use of floating to fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates so as to achieve a target split.
Capital Management
The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors earnings per share, which the Group defines as the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the year. The Board also monitors the level of dividends to ordinary shareholders. The Group's strong cash generative characteristics and current low gearing has given the Board scope regularly to return to shareholders surplus cash flow through a combination of progressive dividends, share buy backs and special dividends. There were no changes to the Group's approach to capital management during the year and the Group is not subject to any externally imposed capital requirements.
Responsibility Statement of the Directors in respect of the Annual Report Announcement
| The 2009 Annual Report and Accounts, which will be issued on June 15th 2009, contains a responsibility statement in compliance with Rule 4.1.12 of the Financial Services Authority's Disclosure & Transparency Rules. This states that each of the directors as at 19 May 2009, the date of approval of the 2009 Annual Report and Accounts, confirms that to the best of their knowledge:
| |
| (a) | the financial statements prepared in accordance with International Financial Reporting Statements as adopted by the EU ('adopted IFRS'), give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and |
| (b) | the parent Company financial statements in this report, which have been prepared in accordance with UK Accounting Standards (UK Generally Accepted Accounting Practice) and applicable law, give a true and fair view of the assets, liabilities, financial position and profit of the Company |
| (c) | the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. |
The Board
The Board of Directors that served during the year to 28 March 2009 and their respective responsibilities can be found on pages 46 and 47 of the De La Rue plc Annual Report 2009.
For and on behalf of the Board
Nicholas Brookes
Chairman
19 May 2009
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 28 MARCH 2009
| 2009 | 2008 | |||
| Restated* | ||||
| £m | £m | |||
| Note | Total | Total | ||
| Continuing Operations | ||||
| Revenue | 3 | 502.4 | 467.0 | |
| Operating expenses | (405.9) | (387.8) | ||
| Operating profit before exceptional items | 96.5 | 79.2 | ||
| Exceptional items - operating | 4 | (8.9) | - | |
| Operating profit | 87.6 | 79.2 | ||
| Share of profits of associated companies after taxation | 8.9 | 7.1 | ||
| Profit on the disposal of a business | - | 0.9 | ||
| Profit on the disposal of investments | - | 1.7 | ||
| Exceptional items - non-operating | 4 | - | 2.6 | |
| Profit before interest and taxation | 96.5 | 88.9 | ||
| Interest income | 7.8 | 4.4 | ||
| Interest expense | (6.4) | (2.4) | ||
| Retirement benefit obligation finance income | 33.3 | 33.7 | ||
| Retirement benefit obligation finance cost | (35.1) | (33.4) | ||
| Profit before taxation | 96.1 | 91.2 | ||
| Taxation | - UK | 5 | (21.8) | (18.2) |
| - Overseas | 5 | (6.7) | (6.5) | |
| Profit for the year from continuing operations | 67.6 | 66.5 | ||
| Discontinued operations | ||||
| Profit for the year from discontinued operations | 6 | 296.5 | 21.9 | |
| Profit for the financial year | 364.1 | 88.4 | ||
| Profit attributable to equity shareholders of the Company | 363.0 | 88.1 | ||
| Profit attributable to minority interests | 1.1 | 0.3 | ||
| 364.1 | 88.4 | |||
| Earnings per share attributable to the Company's equity holders | ||||
| From continuing operations | ||||
| Basic | 7 | 50.9p | 43.4p | |
| Diluted | 7 | 50.4p | 42.7p | |
| From discontinued operations | ||||
| Basic | 7 | 226.8p | 14.4p | |
| Diluted | 7 | 224.6p | 14.0p | |
| On profit for the year | ||||
| Basic | 7 | 277.7p | 57.8p | |
| Diluted | 7 | 275.0p | 56.7p | |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
GROUP BALANCE SHEET
AT 28 MARCH 2009
| 2009 | 2008 | ||
| Note | £m | £m | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 10 | 148.3 | 143.2 |
| Intangible assets | 18.3 | 33.2 | |
| Investments in associates and joint ventures | 21.1 | 22.5 | |
| Deferred tax assets | 29.3 | 25.9 | |
| Other receivables | - | 0.8 | |
| Derivative financial instruments | 11.6 | 0.4 | |
| 228.6 | 226.0 | ||
| Current assets | |||
| Inventories | 65.3 | 94.9 | |
| Trade and other receivables | 82.5 | 114.2 | |
| Current tax assets | 0.4 | 0.4 | |
| Derivative financial instruments | 23.3 | 19.1 | |
| Cash and cash equivalents | 58.5 | 120.3 | |
| 230.0 | 348.9 | ||
| Total assets | 458.6 | 574.9 | |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | (40.1) | (8.6) | |
| Trade and other payables | (158.5) | (245.3) | |
| Current tax liabilities | (40.4) | (31.7) | |
| Derivative financial instruments | (27.7) | (15.8) | |
| Provisions for other liabilities and charges | (32.5) | (23.1) | |
| (299.2) | (324.5) | ||
| Non-current liabilities | |||
| Borrowings | (51.5) | (5.0) | |
| Retirement benefit obligations | 11 | (69.7) | (25.3) |
| Deferred tax liabilities | - | (0.6) | |
| Derivative financial instruments | (14.3) | (2.1) | |
| Other non-current liabilities | (3.3) | (1.9) | |
| (138.8) | (34.9) | ||
| Total liabilities | (438.0) | (359.4) | |
| Net assets | 20.6 | 215.5 | |
| EQUITY | |||
| Share capital | 2 | 45.0 | 44.6 |
| Share premium account | 2 | 26.5 | 22.5 |
| Capital redemption reserve | 2 | 5.9 | 5.5 |
| Hedge reserve | 2 | (8.6) | 0.7 |
| Cumulative translation adjustment | 2 | 3.7 | 13.4 |
| Other reserve | 2 | (83.8) | (83.8) |
| Retained earnings | 2 | 29.0 | 210.3 |
| Total equity attributable to shareholders of the Company | 17.7 | 213.2 | |
| Minority interests | 2 | 2.9 | 2.3 |
| Total equity | 20.6 | 215.5 |
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 28 MARCH 2009
| 2009 | 2008 Restated* | ||
| Notes | £m | £m | |
| Cash flows from operating activities | |||
| Profit before tax | 96.1 | 91.2 | |
| Adjustments for: | |||
| Finance income and expense | 0.4 | (2.3) | |
| Depreciation and amortisation | 21.3 | 22.1 | |
| Increase in inventory | (0.1) | (4.0) | |
| Increase in trade and other receivables | (30.4) | (12.6) | |
| Increase in trade and other payables | 17.5 | 12.5 | |
| Increase/(decrease) in reorganisation provisions | 4.4 | (0.9) | |
| Special pension fund contribution (including £15m one off contribution) | (27.0) | (12.0) | |
| Profit on the disposal of a business | - | (0.9) | |
| Profit on the disposal of investments | - | (1.7) | |
| (Profit)/loss on disposal of property, plant and equipment | (0.1) | 0.9 | |
| Share of income from associates after tax | (8.9) | (7.1) | |
| Other non-cash movements | (3.8) | 1.5 | |
| Cash generated from continuing operations | 69.4 | 86.7 | |
| Cash generated from discontinued operations | (2.2) | 37.3 | |
| Tax paid - continuing operations | (20.5) | (14.7) | |
| Tax paid - discontinued operations | (10.0) | (12.8) | |
| Net cash flows from operating activities | 36.7 | 96.5 | |
| Cash flows from investing activities | |||
| Disposal of subsidiary undertakings | 333.7 | 2.1 | |
| Investment in associates | - | (10.0) | |
| Proceeds from sale of investment | - | 1.7 | |
| Purchases of property, plant and equipment (PPE) & software intangibles - continuing operations | (29.3) | (19.2) | |
| Purchases of property, plant and equipment (PPE) & software intangibles - discontinued operations | (0.7) | (3.1) | |
| Development assets capitalised - continuing operations | (3.3) | (0.1) | |
| Development assets capitalised - discontinued operations | (1.1) | (4.6) | |
| Proceeds from sale of PPE | 0.5 | 1.3 | |
| Interest received | 7.6 | 4.3 | |
| Interest paid | (4.1) | (1.2) | |
| Dividends received from associates | 10.3 | 7.7 | |
| Net cash flows from investing activities | 313.6 | (21.1) | |
| Net cash inflow before financing activities | 350.3 | 75.4 | |
| Cash flows from financing activities | |||
| Proceeds from issue of share capital | 7.0 | 5.2 | |
| Own share purchase | - | (4.2) | |
| Return of capital | (119.3) | - | |
| Proceeds from borrowings | 77.6 | 2.2 | |
| Finance lease principal payments | (3.9) | (4.5) | |
| Dividends paid to shareholders | (376.7) | (105.4) | |
| Dividends paid to minority interests | (0.5) | (0.4) | |
| Net cash flows from financing activities | (415.8) | (107.1) | |
| Net decrease in cash and cash equivalents in the year | (65.5) | (31.7) | |
| Cash and cash equivalents at the beginning of the year | 116.7 | 149.0 | |
| Exchange rate effects | (1.1) | (0.6) | |
| Cash and cash equivalents at the end of the year | 50.1 | 116.7 | |
| Cash and cash equivalents consist of: | 9 | ||
| Cash at bank and in hand | 43.4 | 49.9 | |
| Short term bank deposits | 15.1 | 70.4 | |
| Bank overdrafts | (8.4) | (3.6) | |
| 50.1 | 116.7 |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 28 MARCH 2009
| 2009 | 2008 Restated* | |
| £m | £m | |
| Foreign currency translation differences for foreign operations | 3.6 | 10.9 |
| Actuarial gain on retirement benefit obligations | (75.0) | 73.5 |
| Effective portion of changes in fair value of cash flow hedges | (13.0) | 1.6 |
| Net gains on hedge of net investment in foreign operations | - | 3.3 |
| Income tax on income and expenses recognised directly in equity | 25.4 | (22.9) |
| Net gains recognised directly in equity | (59.0) | 66.4 |
| Profit for the financial year | 364.1 | 88.4 |
| Total recognised income and expense for the year | 305.1 | 154.8 |
| Attributable to: | ||
| Equity shareholders of the Company | 304.0 | 154.5 |
| Minority interests | 1.1 | 0.3 |
| Total recognised income and expense for the year | 305.1 | 154.8 |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
NOTES TO THE FINANCIAL STATEMENT
| 1 | BASIS OF PREPARATION AND ACCOUNTING POLICIES |
| The financial statements preliminary for the year ended 28 March 2009 have been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (collectively "IFRSs") as adopted by the European Union (EU) at 28 March 2009. Details of the accounting policies applied are those set out in De La Rue plc's Annual Report 2009. The financial information presented in this announcement do not constitute statutory accounts of De La Rue plc and its subsidiaries ("the Group") within the meaning of Section 240 of the Companies Act 1985. The annual financial information presented in this condensed financial statement for the year ended 28 March 2009 is based on and is consistent with that included in the Group's audited financial statements for the year ended 28 March 2009, and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor's report on those financial statements is unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and does not contain any statement under Section 237(2) or (3) of the Companies Act 1985. Statutory accounts for the year ended 28 March 2008 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. These consolidated financial statements have been prepared on the going concern basis and using the historical cost convention, modified for certain items carried at fair value, as stated in the Group's accounting policies. Those items that the Group present as exceptional are items which, in the judgement of the Directors, need to be disclosed separately by virtue of their size or incidence in order to obtain a proper understanding of the financial information. 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. |
| 2 | RECONCILATION OF MOVEMENT IN CAPITAL AND RESERVES FOR THE YEAR ENDED 28 MARCH 2009 |
| Attributable to equity shareholders | Minority interest | Total equity | |||||||||||||||
| Share capital £m | Share premium account £m | Capital redemption reserve £m | Hedge reserve £m | Other reserve £m | Other reserve £m | Retained earnings £m | £m | £m | |||||||||
| Balances 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 differences for foreign operations | - | - | - | - | 10.9 | - | - | - | 10.9 | ||||||||
| Actuarial gain on retirement benefit obligations | - | - | - | - | - | - | 73.5 | - | 73.5 | ||||||||
| Effective portion of changes in fair value of cash flow hedges | - | - | - | 1.6 | - | - | - | - | 1.6 | ||||||||
| Net gains on hedge of net investment in foreign operations | - | - | - | - | 3.3 | - | - | - | 3.3 | ||||||||
| Income tax on income and expenses recognised directly in equity | - | - | - | (0.4) | - | - | (22.5) | - | (22.9) | ||||||||
| Net gain recognised directly in equity | - | - | - | 1.2 | 14.2 | - | 51.0 | - | 66.4 | ||||||||
| Profit for the financial year | - | - | - | - | - | - | 88.1 | 0.3 | 88.4 | ||||||||
| Total income recognised for the year | - | - | - | 1.2 | 14.2 | - | 139.1 | 0.3 | 154.8 | ||||||||
| Share capital issued | 0.1 | 1.1 | - | - | - | - | - | - | 1.2 | ||||||||
| Purchase of shares for cancellation | (0.2) | - | 0.2 | - | - | - | (4.2) | - | (4.2) | ||||||||
| Allocation of treasury shares | - | - | - | - | - | - | 4.0 | - | 4.0 | ||||||||
| Employee share scheme: | |||||||||||||||||
| - value of services provided | - | - | - | - | - | - | 3.2 | - | 3.2 | ||||||||
| Dividends paid | - | - | - | - | - | - | (105.4) | (0.4) | (105.8) | ||||||||
| 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 differences for foreign operations | - | - | - | - | 3.6 | - | - | - | 3.6 | ||||||||
| Actuarial gain on retirement benefit obligations | - | - | - | - | - | - | (75.0) | - | (75.0) | ||||||||
| Effective portion of changes in fair value of cash flow hedges | - | - | - | (13.0) | - | - | - | - | (13.0) | ||||||||
| Net gains on hedge of net investment in foreign operations | - | - | - | - | - | - | - | - | - | ||||||||
| Income tax on income and expenses recognised directly in equity | - | - | - | 3.7 | - | - | 21.7 | - | 25.4 | ||||||||
| Net gain recognised directly in equity | - | - | - | (9.3) | 3.6 | - | (53.3) | - | (59.0) | ||||||||
| Profit for the financial year | - | - | - | - | - | - | 363.0 | 1.1 | 364.1 | ||||||||
| Total income recognised for the year | - | - | - | (9.3) | 3.6 | - | 309.7 | 1.1 | 305.1 | ||||||||
| Share capital issued | 0.8 | 4.0 | - | - | - | - | - | - | 4.8 | ||||||||
| Return of capital | (0.4) | - | 0.4 | - | - | - | (119.3) | - | (119.3) | ||||||||
| Allocation of shares for cancellation | - | - | - | - | - | - | 2.2 | - | 2.2 | ||||||||
| Employee share scheme | |||||||||||||||||
| - value of services provided | - | - | - | - | - | - | 2.8 | - | 2.8 | ||||||||
| Dividends paid | - | - | - | - | - | - | (376.7) | (0.5) | (377.2) | ||||||||
| Disposal of a business | - | - | - | - | (13.3) | - | - | - | (13.3) | ||||||||
| Balance at 28 March 2009 | 45.0 | 26.5 | 5.9 | (8.6) | 3.7 | (83.8) | 29.0 | 2.9 | 20.6 | ||||||||
| Nature and purpose of other reserves | |
| a) | Share premium account This reserve arises from the issuance of shares for consideration in excess of their nominal value |
| b) | Capital redemption reserve The reserve represents the nominal value of shares redeemed by the Company |
| c) | Hedge reserve The reserve records the portion of any gain or loss on hedging instruments that are determined to be effective hedges. When the hedged transaction occurs, the gain or loss on the hedging instrument is transferred out of equity to the income statement. If a forecast transaction is no longer expected to occur, the gain or loss on the related hedging instrument previously recognised in equity is transferred to the income statement. |
| d) | Cumulative translation adjustment This reserve records exchange differences arising from the translation of the financial statements of foreign entities. Upon disposal of foreign operations, the related accumulated exchange differences are recycled to the income statement. This reserves also records the effect of hedging net investments in foreign operations |
| e) | Other reserve On 1 February 2000, the Company issued and credited as fully paid 191,646,873 ordinary shares of 25p each and paid cash of £103.7m to acquire the issued share capital of De La Rue plc, following the approval of a High Court Scheme of Arrangement. In exchange for every 20 ordinary shares in De La Rue plc shareholders received 17 ordinary shares plus 920p in cash. The profit and loss account reserve of £83.8m arose as a result of this transaction. |
| 3 | SEGMENTAL ANALYSIS |
| The Group's primary reporting format is by business segment. Following the disposal of the Cash Systems business (excluding Cash Processing Solutions (CPS)), the Group comprises Security Paper and Print Division and Cash Processing Solutions (which was previously disclosed within Cash Systems). The Currency and Security Print 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 focused in 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 |
| Security Paper & Print | Cash Processing Solutions | Eliminations /Exceptional items | Continuing operations | Discontinued operations | |||
| 2009 | Currency | Security | Identity Systems | ||||
| £m | £m | £m | £m | £m | £m | £m | |
| Revenue | 348.6 | 69.7 | 30.4 | 66.0 | (12.3) | 502.4 | 121.6 |
| Underlying operating profit | 82.8 | 11.0 | 2.3 | 0.4 | - | 96.5 | 17.6 |
| Exceptional items - operating | (8.9) | (8.9) | - | ||||
| Operating profit | 82.8 | 11.0 | 2.3 | 0.4 | (8.9) | 87.6 | 17.6 |
| Share of profits of associated companies after taxation | 8.9 | - | |||||
| Profit on sale of business | - | 316.8 | |||||
| Net interest income | 1.4 | - | |||||
| Retirement benefit obligations net finance charge | (1.8) | - | |||||
| Profit before taxation | 96.1 | 334.4 | |||||
| Taxation | (28.5) | (37.9) | |||||
| Profit for the financial year | 67.6 | 296.5 | |||||
| Segment assets | 186.2 | 26.5 | 14.9 | 48.0 | 275.6 | - | |
| Unallocated assets | 183.0 | - | |||||
| Total assets | 458.6 | - | |||||
| Segmental liabilities | (100.7) | (14.3) | (15.3) | (20.0) | (150.5) | - | |
| Unallocated liabilities | (287.5) | - | |||||
| Total liabilities | (438.0) | - | |||||
| Capital expenditure on property, plant and equipment | 22.0 | 2.0 | 0.4 | 3.8 | 28.2 | 0.7 | |
| Capital expenditure on intangible assets | 1.2 | 0.1 | - | 2.6 | 3.9 | 1.1 | |
| Depreciation of property, plant and equipment | 14.9 | 2.6 | 0.7 | 1.4 | 19.6 | 1.3 | |
| Amortisation of intangible assets | 1.1 | 0.1 | 0.1 | 0.4 | 1.7 | 1.1 | |
| Security Paper & Print | Cash Processing Solutions | Eliminations | Continuing operations | Discontinued operations | |||
| 2008 (Restated*) | Currency | Security | Identity Systems | ||||
| £m | £m | £m | £m | £m | £m | £m | |
| Revenue | 316.7 | 74.8 | 26.5 | 58.4 | (9.4) | 467.0 | 286.6 |
| Operating profit | 66.5 | 8.4 | 3.9 | 0.4 | - | 79.2 | 35.5 |
| Share of profits of associated companies after taxation | 7.1 | - | |||||
| Exceptional items - non operational | 2.6 | - | |||||
| Net interest income | 2.0 | - | |||||
| Retirement benefit obligations net finance income | 0.3 | - | |||||
| Profit before taxation | 91.2 | 35.5 | |||||
| Taxation | (24.7) | (13.6) | |||||
| Profit for the financial year | 66.5 | 21.9 | |||||
| Segment assets | 168.3 | 26.0 | 12.4 | 35.4 | 242.1 | 110.5 | |
| Unallocated assets | 222.3 | - | |||||
| Total assets | 464.4 | 110.5 | |||||
| Segmental liabilities | (103.1) | (12.1) | (12.9) | (14.2) | (142.3) | (97.2) | |
| Unallocated liabilities | (119.9) | - | |||||
| Total liabilities | (262.2) | (97.2) | |||||
| Capital expenditure on property, plant and equipment | 11.2 | 1.5 | 4.1 | 1.4 | 18.2 | 6.0 | |
| Capital expenditure on intangible assets | 0.7 | - | 0.1 | - | 0.8 | 5.4 | |
| Depreciation of property, plant and equipment | 12.1 | 4.4 | 0.2 | 2.3 | 19.0 | 3.0 | |
| Amortisation of intangible assets | 1.4 | 0.3 | - | 1.4 | 3.1 | 2.0 | |
Analysis by geographical segment
| 2009 | UK & Ireland | Rest of Europe | The Americas | Rest of World | Continuing operations | Discontinued operations |
| £m | £m | £m | £m | £m | £m | |
| Revenue by destination | 62.1 | 80.5 | 63.5 | 296.3 | 502.4 | 121.6 |
| Segment assets | 159.8 | 58.4 | 31.6 | 25.8 | 275.6 | - |
| Unallocated assets | 183.0 | - | ||||
| Total assets | 458.6 | - | ||||
| Capital expenditure on property, plant and equipment | 19.0 | 3.9 | 3.5 | 1.8 | 28.2 | 0.7 |
| Capital expenditure on intangible assets | 2.6 | - | 1.3 | - | 3.9 | 1.1 |
| 2008 (Restated *) | UK & Ireland | Rest of Europe | The Americas | Rest of World | Continuing operations | Discontinued operations |
| £m | £m | £m | £m | £m | £m | |
| Revenue by destination | 61.5 | 54.9 | 92.7 | 257.9 | 467.0 | 286.6 |
| Segment assets | 139.6 | 48.5 | 26.8 | 27.2 | 242.1 | 110.5 |
| Unallocated assets | 222.3 | - | ||||
| Total assets | 464.4 | 110.5 | ||||
| Capital expenditure on property, plant and equipment | 6.4 | 9.8 | 0.5 | 1.5 | 18.2 | 6.0 |
| Capital expenditure on intangible assets | 0.8 | - | - | - | 0.8 | 5.4 |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| Underlying operating profit comprises operating profit before exceptional items. Unallocated assets principally comprise centrally managed property, plant and equipment, associates and other investments, deferred tax assets, current tax assets, derivative financial instrument assets and cash and cash equivalents which are used as part of the Group's financing offset arrangements. Unallocated liabilities comprise borrowings, derivative financial instrument liabilities, current and non-current tax liabilities, deferred tax liabilities, retirement benefit obligations, and centrally held accruals and provisions. |
| 4 | EXCEPTIONAL ITEMS | ||
| The Group presents certain items as exceptional. These are items which, in the judgement of the Directors, need to be disclosed separately by virtue of their size or incidence in order for the reader to obtain a proper understanding of the financial information.
| |||
| 2009 £m | 2008 £m | ||
| Operating - Reorganisation of central operations | (8.9) | - | |
| Non-operating - Profit on disposal of investments | - | 2.6 | |
| Exceptional items - continuing operations | (8.9) | 2.6 | |
| Exceptional items - tax | 0.9 | - | |
| During the year, De La Rue announced its intention to reduce central costs by approximately 50 per cent following the disposal of Cash Systems. This programme is largely complete. Central reorganisation costs relating to this programme principally cover redundancy, separation costs and site rationalisation charges. Tax credits relating to exceptional items were £0.9m, with a credit of £1.9m in relation to the central reorganisation being partly offset by a £1.0m charge in respect of the phasing out of Industrial Buildings Allowances, included in the Finance Act 2008. In the prior year, profit from disposal of investments comprises a £1.7m gain from the sale of the Group's Valora investment and £0.9m gain on the sale of its 50 per cent stake in De La Rue Smurfit. | |||
| 5 | TAXATION |
| 2009 £m | 2008 Restated* £m | ||
| Current tax | |||
| UK Corporation tax | |||
| Current tax | 11.6 | 19.3 | |
| Double tax relief | (0.5) | (3.3) | |
| Adjustment in respect of prior years | 0.2 | (0.4) | |
| 11.3 | 15.6 | ||
| Overseas tax charges | |||
| Current year | 6.3 | 6.8 | |
| Adjustment in respect of prior years | 0.2 | (1.1) | |
| 6.5 | 5.7 | ||
| 17.8 | 21.3 | ||
| Deferred tax | |||
| UK | |||
| Origination and reversal of temporary differences | 10.5 | 2.6 | |
| Overseas | |||
| Origination and reversal of temporary differences | 0.2 | 0.8 | |
| Total deferred tax expense | 10.7 | 3.4 | |
| Income tax expense reported in the consolidated income statement in respect of continuing operations | 28.5 | 24.7 | |
| Income tax expense in respect of discontinued operations | 5.0 | 13.6 | |
| Total income tax expense in the consolidated income statement | 33.5 | 38.3 | |
| Consolidated statement of recognised income and expense | |||
| On pension actuarial adjustments | (21.0) | 22.5 | |
| On share options | (0.7) | - | |
| On cash flow hedges | (3.7) | 0.4 | |
| Income tax (income)/expense reported within equity | (25.4) | 22.9 |
| The tax on the Group's consolidated profit before tax differs from the UK tax rate of 28 per cent as follows: |
| 2009 Before exceptionals | 2009 Exceptional items | 2009 Total | 2008* Before exceptionals | 2008* Exceptionals items | 2008* Total | ||
| £m | £m | £m | £m | £m | £m | ||
| Profit before tax | 105.0 | (8.9) | 96.1 | 88.6 | 2.6 | 91.2 | |
| Tax calculated at UK tax rate at 28% (2008: 30%) | 29.4 | (2.5) | 26.9 | 26.6 | 0.8 | 27.4 | |
| Effect of overseas taxation | (1.5) | - | (1.5) | (2.0) | - | (2.0) | |
| Income not subject to tax | - | - | - | - | (0.8) | (0.8) | |
| Expenses not deductible for tax purposes | 3.6 | 0.6 | 4.2 | 3.7 | - | 3.7 | |
| Adjustment for tax on profits of associate | (2.5) | - | (2.5) | (2.1) | - | (2.1) | |
| Adjustment in respect of prior years | 0.4 | - | 0.4 | (1.5) | - | (1.5) | |
| Industrial Buildings Allowances | - | 1.0 | 1.0 | - | - | - | |
| Tax charge | 29.4 | (0.9) | 28.5 | 24.7 | - | 24.7 |
| The underlying effective tax rate excluding one-off items was 28.0 per cent (2008: 27.9 per cent). A charge of £1.0m related to the impact on deferred tax balances of the phasing out of Industrial Buildings Allowances, included in the Finance Act 2008. |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| 6 | DISCONTINUED OPERATIONS |
| The Group completed the sale of its Cash Systems activities on 1 September 2008. Profit from discontinued operations (after tax) was £296.5m, which included £12.6m (after tax) from the trading profit of the discontinued activities for the five months to 1 September 2008. The profit on the disposal represents the proceeds of Cash Systems on a cash free, debt free basis, less net assets disposed and related transaction costs. |
| 7 | EARNINGS PER SHARE |
| 2009 pence per share | 2008 Restated* pence per share | ||
| Basic earnings per share | 277.7 | 57.8 | |
| Diluted earnings | 275.0 | 56.7 | |
| Basic earnings per share from continuing operations | 50.9 | 43.4 | |
| Diluted earnings from continuing operations | 50.4 | 42.7 | |
| Basic earnings per share from discontinued operations | 226.8 | 14.4 | |
| Diluted earnings from discontinued operations | 224.6 | 14.0 | |
| Headline earnings per share | 57.0 | 41.7 |
| Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held in the employee share trust which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted for the impact of dilutive share options |
| During the year the Company paid a special dividend of £460m and at the same time carried out a consolidation of its share capital. These transactions were conditional on each other. They were specifically designed to achieve the same overall effect on the Company's capital structure as a buy back of shares in a way in which all shareholders could participate. Accordingly, earnings per share is presented on the basis that in substance a share buy back has occurred. 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. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| 2009 £m | 2008 Restated* £m | ||
| Earnings for basic earnings per share | 363.0 | 88.1 | |
| Deduct: Profit from the year from discontinued operations | (296.5) | (21.9) | |
| Earnings for basic earnings per share from continuing operations | 66.5 | 66.2 | |
| Add: Exceptional items | 8.9 | - | |
| Deduct: Tax on Exceptional Items | (1.9) | - | |
| Deduct: Phasing out of Industrial Buildings allowance | 1.0 | - | |
| Deduct: Non-operating items | - | (2.6) | |
| Earnings for headline earnings per share | 74.5 | 63.6 | |
| Weighted average number of shares | 2009 | 2008 | |
| Number m | Number m | ||
| For basic earnings per share | 130.7 | 152.5 | |
| Effect of dilutive options | 1.3 | 2.8 | |
| For diluted earnings per share | 132.0 | 155.3 |
| 8 | EQUITY DIVIDENDS | ||
| 2009 £m | 2008 £m | ||
| Final dividend for the year ended 29 March 2008 of 14.87p paid on 1 August 2008 | 22.3 | - | |
| Special dividend of 30.5p paid on 28 November 2008 | 340.6 | - | |
| Interim dividend for the period ended 27 September 2008 of 13.7 paid on 14 January 2009 | 13.8 | - | |
| Final dividend for the year ended 31 March 2007 of 13.27p paid on 3 August 2007 | - | 21.2 | |
| Special dividend of 46.5p paid on 3 August 2007 | - | 74.4 | |
| Interim dividend for the period ended 29 September 2007 of 6.53p paid on 16 January 2008 | - | 9.8 | |
| 376.7 | 105.4 | ||
| A final dividend per share of 27.4 pence has been proposed for the year ended 28 March 2009, payable on 31 July 2009. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements. |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| 9 | GROUP CASHFLOW STATEMENT | ||
| 2009 £m | 2008 £m | ||
| Analysis of net cash | |||
| Cash at bank and in hand | 43.4 | 49.9 | |
| Short-term bank deposits | 15.1 | 70.4 | |
| Bank overdrafts | (8.4) | (3.6) | |
| Total cash and cash equivalents | 50.1 | 116.7 | |
| Other debt due within one year | (31.7) | (5.0) | |
| Borrowings due after one year | (51.5) | (5.0) | |
| Net (debt)/cash at end of period | (33.1) | 106.7 |
| 10 | PROPERTY, PLANT AND EQUIPMENT |
| Year ended 28 March 2009 | Land | Plant | Fixtures | In course | |
| and | and | and | of | ||
| buildings | machinery | fittings | construction | Total | |
| Group | £m | £m | £m | £m | £m |
| Cost or valuation | |||||
| At 29 March 2008 | 58.1 | 256.6 | 44.1 | 13.6 | 372.4 |
| Exchange differences | 1.6 | 13.3 | 1.0 | 0.1 | 16.0 |
| Additions | - | 10.7 | 1.1 | 17.1 | 28.9 |
| Disposal of business | (6.1) | (5.0) | (31.3) | (1.7) | (44.1) |
| Transfers from assets in the course of construction | - | 13.2 | 1.4 | (14.6) | - |
| Disposals | - | (6.8) | (0.3) | - | (7.1) |
|
|
|
|
|
|
|
| At 28 March 2009 | 53.6 | 282.0 | 16.0 | 14.5 | 366.1 |
| Accumulated depreciation | |||||
| At 29 March 2008 | 21.2 | 171.9 | 36.1 | - | 229.2 |
| Exchange differences | 0.6 | 6.7 | 0.8 | - | 8.1 |
| Depreciation charge for the year | 1.3 | 17.3 | 2.3 | - | 20.9 |
| Disposal of business | (3.1) | (3.2) | (27.3) | - | (33.6) |
| Disposals | - | (6.5) | (0.3) | - | (6.8) |
| At 28 March 2009 | 20.0 | 186.2 | 11.6 | - | 217.8 |
|
|
|
|
|
| |
| Net book value |
| ||||
| At 28 March 2009 | 33.6 | 95.8 | 4.4 | 14.5 | 148.3 |
| Year ended 29 March 2008 | Land | Plant | Fixtures | In course | |
| and | and | and | of | ||
| buildings | machinery | fittings | construction | Total | |
| Group | £m | £m | £m | £m | £m |
| Cost or valuation | |||||
| At 31 March 2007 | 57.4 | 240.0 | 39.5 | 19.7 | 356.6 |
| Exchange differences | 0.8 | 8.5 | 3.4 | 0.7 | 13.4 |
| Additions | 0.1 | 6.2 | 2.9 | 15.0 | 24.2 |
| Transfers from assets in the course of construction | 1.3 | 19.8 | 0.4 | (21.5) | - |
| Disposals | (1.5) | (17.9) | (2.1) | (0.3) | (21.8) |
| At 29 March 2008 | 58.1 | 256.6 | 44.1 | 13.6 | 372.4 |
| Accumulated depreciation | |||||
| At 31 March 2007 | 20.0 | 165.3 | 31.9 | - | 217.2 |
| Exchange differences | 0.4 | 4.4 | 2.8 | - | 7.6 |
| Depreciation charge for the year | 1.8 | 17.5 | 2.7 | - | 22.0 |
| Disposals | (1.0) | (15.3) | (1.3) | - | (17.6) |
| At 29 March 2008 | 21.2 | 171.9 | 36.1 | - | 229.2 |
|
|
|
|
|
| |
| Net book value |
| ||||
| At 29 March 2008 | 36.9 | 84.7 | 8.0 | 13.6 | 143.2 |
| 11 | 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 | ||||
| £m | £m | ||||
| UK retirement benefit obligations | (67.5) | (20.7) | |||
| Overseas retirement benefit obligations | (2.2) | (4.6) | |||
| Retirement benefit obligations | (69.7) | (25.3) | |||
| Deferred tax | 19.4 | 7.0 | |||
| Net retirement benefit obligations | (13.2) | (18.3) | |||
| The majority of the Group's retirement benefit obligations are in the UK: | |||||
| UK | UK | ||||
| £m | £m | ||||
| At 30 March 2008 / 1 April 2007 | (20.7) | (104.3) | |||
| Current service cost included in operating profit | (5.8) | (10.0) | |||
| Curtailments | 0.8 | - | |||
| Net finance cost | (1.8) | 0.4 | |||
| Actuarial gains and losses arising over the year | (75.1) | 73.4 | |||
| Cash contributions and benefits paid | 35.5 | 20.5 | |||
| Transfers | (0.4) | (0.7) | |||
| At 28 March 2009 / 29 March 2008 | (67.5) | (20.7) | |||
| Amounts recognised in the consolidated balance sheet: | |||||
| Fair value of plan assets | 427.3 | 507.4 | |||
| Present value of funded obligations | (489.3) | (522.4) | |||
| Funded defined benefit pension plans | (62.0) | (15.0) | |||
| Present value of unfunded obligations | (5.5) | (5.7) | |||
| Net liability | (67.5) | (20.7) | |||
| Amounts recognised in the consolidated income statement: | |||||
| Included in employee benefits expense: | |||||
| Current service cost | (5.8) | (10.0) | |||
| Included in profit from discontinued operations: | |||||
| Curtailments | 0.8 | - | |||
| Included in net finance cost: | |||||
| Expected return on plan assets | 33.2 | 33.7 | |||
| Interest cost | (35.0) | (33.3) | |||
| (1.8) | 0.4 | ||||
| Total recognised in the consolidated income statement | (6.8) | (9.6) | |||
| Actual return on plan assets | (90.5) | (9.9) | |||
| Amounts recognised in the statement of recognised income and expense: | |||||
| Actuarial losses on plan assets | (123.7) | (43.6) | |||
| Actuarial gains on defined benefit pension obligations | 48.6 | 117.0 | |||
| Amounts recognised in the statement of recognised income and expense | (75.1) | 73.4 | |||
| Principal actuarial assumptions: | 2008/09 | 2007/08 | |
| UK | UK | ||
| % | % | ||
| Future salary increases | 3.50 | 4.10 | |
| Future pension increases - past service | 3.30 | 3.60 | |
| Future pension increases - future service | 2.90 | 3.40 | |
| Discount rate | 6.80 | 6.80 | |
| Inflation rate | 2.90 | 3.50 | |
| Expected return on plan assets | |||
| Equities | 8.30 | 7.75 | |
| Bonds | 6.80 | 6.30 | |
| Gilts | 4.00 | 4.60 | |
| Other | - | 5.25 | |
| 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 28 March 2009 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 (2008: 20.2 years) | |||
| 12 | RELATED PARTY TRANSACTIONS |
| During the year the Group traded with Fidink (33.3%). The Group's trading activities with this company included £9.2m (2008: £9.9m) for the purchase of ink and other consumables At the balance sheet date there were creditor balances of £1.6m (2008: £0.6m) with Fidink. |
| Key management compensation | ||||
| 2008/09 | 2007/08 | |||
| £'000 | £'000 | |||
| Salaries and other short-term employee benefits | 5,457.4 | 4,005.0 | ||
| Termination benefits | 114.2 | 75.7 | ||
| Retirement benefits: | ||||
|
| Defined contribution | 11.2 | 6.0 | |
|
| Defined benefit | 410.1 | 367.3 | |
| Share-based payments | 2,209.0 | 2,223.0 | ||
| 8,201.9 | 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. | ||||
| 13 | SHARE BASED PAYMENTS | |||||
| At 28 March 2009, De La Rue plc have a number of share based payment plans, which are listed below. These plans have been accounted for in accordance with the fair value recognition provisions of IFRS 2, 'Share Based Payments', which means that IFRS 2 has been applied to all grants of employee share based payments granted after 7 November 2002 that had not vested at 1 January 2005 and cash settled awards outstanding at 1 January 2005. The compensation cost and related liability that have been recognised for De La Rue's share based compensation plans are set out in the table below: | ||||||
| Expense recognised for the year | Liability at the end of the year | |||||
| 2008/09 | 2007/08 | 2008/09 | 2007/08 | |||
| £m | £m | £m | £m | |||
| Employee share option plan | - | 0.7 | - | - | ||
| Deferred bonus and matching plan | 2.5 | 3.1 | - | - | ||
| Savings related share option plan | 0.6 | 0.5 | - | - | ||
| US employee share plan | 0.1 | 0.1 | - | - | ||
| Phantom share option plan | - | - | - | 0.4 | ||
| 3.2 | 4.4 | - | 0.4 | |||
| 14 | CONTINGENT LIABILITIES |
| There are contingent liabilities, arising in the ordinary course of business, in respect of litigation and guarantees in various countries, for which the directors believe adequate provisions have been made in the accounts. Pursuant to the provisions of Section 17 Companies (Amendment) Act 1986 of the Republic of Ireland, the Company has guaranteed the liabilities of certain of its Irish subsidiaries and as a result such subsidiaries have been exempted from the provisions of Section 17 Companies (Amendment) Act 1986 of the Republic of Ireland. | |
| 15 | CAPITAL COMMITMENTS | ||
| 2009 £m | 2008 £m | ||
| The following commitments existed at the balance sheet date | |||
| Contracted but not provided for in the accounts | - | 5.0 |
| 16 | The consolidated accounts have been prepared as at 28 March 2009, being the last Saturday in March. The comparatives for the 2007/2008 financial year are for the year ended 29 March 2008. |
| 17 | Statutory accounts for the year ended 28 March 2009 will be posted to shareholders on 16 June 2009 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. |