Last checked at 20 May 2009 07:00
DE LA RUE PLC PRELIMINARY STATEMENT
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 | A presentation to analysts will take place at 9:00am today at The London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. |
| 3 | High resolution photographs are available to the media free of charge at http://www.newscast.co.uk/ (+44 (0) 207 608 1000). |
| 4 | 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 | |
| 5 | 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 | |
| 6 | 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 |
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 | 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 | (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 PRELIMINARY STATEMENT
| 1 | BASIS OF PREPARATION AND ACCOUNTING POLICIES |
| The preliminary announcement for the year ended 28 March 2009 has 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 2008. The financial statements presented in this preliminary 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 preliminary announcement 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 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 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 | Cumulative translation adjustment £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 |
| 3 | SEGMENTAL ANALYSIS |
| The Group's primary reporting format is by business segment. Following the disposal of the Cash Systems activities (excluding Cash Processing Solutions (CPS)) the Group comprises the Security Paper and Print division (SPPD) and Cash Processing Solutions (which was previously disclosed within Cash Systems). Within SPPD, the Currency and Security Products businesses are involved in the production of a wide range of national currencies and security documents, including authentication labels, travellers' cheques and fiscal stamps. The Identity Systems business is involved in the production of passports, including ePassports, together with other secure identity products. The CPS business is primarily focused on the production of large sorters for central banks complementing our Currency business. Additional information on Security Paper and Print has been provided on a voluntary basis |
| Analysis by business segment |
| 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 | 2.3 | 3.1 | 3.1 | |
| Depreciation of property, plant and equipment | 12.1 | 4.4 | 0.2 | 2.5 | 19.2 | 2.8 | |
| Amortisation of intangible assets | 1.4 | 0.3 | - | 0.4 | 2.1 | 3.0 | |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
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 |
| 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. Operating Items In 2008/09 Central reorganisation costs of £8.9m relate to the costs associated with downsizing the central functions of the continuing operations following the sale of the Cash Systems activities. Non Operating Items In the prior year, the profit on disposal of continuing operations of £0.9m arose from the disposal of De La Rue Smurfit Limited, one of the Group's Security Printing businesses based in Ireland. The profit on disposal of investments of £1.7m arose from the disposal of the Group's 25 per cent interest in Valora-Servicos de Apoio a Emissao Monitaria SA, a currency printing company based in Portugal. |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| 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 | |
| 10.7 | 3.4 | ||
| 28.5 | 24.7 |
| The tax on the Group's consolidated profit before tax differs from the UK tax rate of 28% 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) | |
| Abolition of Industrial Buildings Allowances | - | 1.0 | 1.0 | - | - | - | |
| Tax charge | 29.4 | (0.9) | 28.5 | 24.7 | - | 24.7 |
| 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. |
* Restated for the disposal of Cash Systems (excluding CPS) - see note 1.
| 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 | 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. |
| 11 | 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. |