Preliminary Statement
De La Rue PLC
25 May 2005
DE LA RUE PLC
PRELIMINARY STATEMENT
Year to 26 March 2005
KEY FINANCIALS
2004/ 2003/ Change
2005 2004
£m £m
Sales 643.2 682.5 -5.8%
Profit before tax, exceptional items and
goodwill amortisation* 66.5 58.7 +13.3%
Profit before tax 49.4 22.5
Headline earnings per share* 26.0p 24.2p +7.4%
Earnings per share 17.9p 6.8p
Net cash flow 65.4 32.9
Net cash at end of period 106.5 41.1
Dividends per share 15.3p 14.2p 7.7%
*before exceptional charges of £15.7m (2003/2004 : £33.7m) and goodwill
amortisation of £1.4m (2003/2004 : £2.5m)
HIGHLIGHTS
* Good trading performance in Currency, underpinned by a strong opening
order book, favourable work mix and high levels of overspill throughout the
year.
* Operational and strategic rationalisation in Cash Systems and Security
Products making good progress.
* Net cash flow of £65.4m (2003/2004 : £32.9m), particularly enhanced by
planned reductions in inventory and debtors.
* Increase in the final dividend of 8.2 per cent to 10.6 pence per share,
bringing the full year dividend to 15.3 pence per share, an increase of 7.7
per cent in the year (2003/2004 : 14.2p).
* Intended return of capital of approximately £70m through a special
dividend, equivalent to 38.0 pence per share accompanied by a corresponding
share consolidation.
Nicholas Brookes, Chairman of De La Rue plc, commented:
'I am pleased to report an excellent full year performance in which management's
focus on improving operational productivity resulted in a strong net cash
inflow. Another strong year in the Currency division, together with the benefits
derived from the reorganisation programmes across the Group, were key features
of the results. We continue to implement our strategy of concentrating resources
on our core activities, addressing under-performing businesses and putting in
place the foundations for delivering improved productivity, competitiveness and
shareholder value.
'The Board has announced its intention to pay a special dividend of
approximately £70m accompanied by a share consolidation. We believe the
combination of immediate reward together with progressive dividend growth is a
clear demonstration of our commitment to shareholder value.
'Our key management focus going forward is to ensure that the operational
changes we have initiated are successfully implemented to yield their full
potential. The Group has good visibility for first half orders, particularly in
the Currency activities although as previously anticipated we do not expect a
repeat in 2005/2006 of all the favourable conditions we saw in Currency during
2004/2005. We remain confident of the outlook for the year.'
For further information, please contact:
Leo Quinn Group Chief Executive +44 (0)1256 605303
Stephen King Group Finance Director +44 (0)1256 605303
Mark Fearon Group Head of Corporate Affairs +44 (0)1256 605303
Richard Mountain Financial Dynamics +44 (0) 207 269 7291
25 May 2005
Summary of Results
De La Rue is pleased to report a strong performance for the year ended 26 March
2005. Underlying profit before tax* increased by £7.8m to £66.5m (2003/2004 :
£58.7m). Overall the Group's trading performance was strong with underlying
operating profits of £54.6m an increase of £5.3m compared with last year (2003/
2004 : £49.3m). This excellent performance was achieved notwithstanding a £9.1m
adverse impact from foreign exchange (translation and transaction effects), in
particular related to the increased weakness of the US Dollar, throughout the
year. After charging exceptional items and goodwill amortisation, profit before
tax was £49.4m (2003/2004 : £22.5m).
Headline earnings per share* increased by 7.4 per cent from 24.2p to 26.0p
reflecting the improved trading performance. Basic earnings per share were 17.9p
compared with 6.8p in 2003/2004 and includes the benefit from the disposal
during the year of discontinued activities.
An excellent performance in both Currency and Security Products activities
contributed to the strong operating result in the Security Paper and Print
division, where underlying operating profits (before exceptional income of £1.2m
and a goodwill amortisation credit of £0.5m) were up 7.5 per cent to £45.6m.
This reflected the benefit of Currency orders delayed from the second half of
the previous year, (when the majority of the Iraq order was processed), an
improved work mix and continued high levels of overspill activity throughout the
year. The successful implementation of the rationalisation programme in the
Security Print business, initiated last year and completed in the second half of
the current year, coupled with strong volumes of authentication labels and
fiscal stamps, also contributed to an improved performance in the Security
Products business.
In Cash Systems, underlying operating profits (before exceptional items of
£25.8m and goodwill amortisation of £1.9m) of £9.2m were slightly ahead of last
year, despite an adverse foreign exchange impact of £4.1m compared to 2003/2004.
In December 2004, we announced a major reorganisation of the division, aimed at
lowering the cost base and establishing a clear focus on improving manufacturing
productivity. We are making good progress in implementing these actions.
Cash generation was again strong with net cash inflow from operating activities
of £96.1m
(2003/2004 : £92.1m). This particularly reflected reductions in inventory and
debtors, partly offset by a reduction from last year's high level, of customer
advance payments. The Group ended the year with net cash on the balance sheet of
£106.5m compared with net cash of £41.1m last year.
*before exceptional charges of £15.7m (2003/2004 : £33.7m) and goodwill
amortisation of £1.4m (2003/2004 : £2.5m)
Returns to Shareholders
Subject to shareholders' approval, the Board is recommending an increased final
dividend of 10.6p per share**, which will be paid on 5 August 2005 to
shareholders on the register on 8 July 2005. Together with the increased interim
dividend paid in January 2005, this will give a total dividend for the year of
15.3p, an overall increase of 7.7 per cent on last year.
The Board has also announced today its intention to return approximately £70m to
shareholders, equivalent to 38.0 pence per share, through a special dividend
accompanied by a share consolidation. The capital return is consistent with the
Board's stated strategy to return surplus cash to shareholders. The Board also
intends to seek shareholder approval for the renewal of its existing general
authority to make market purchases of shares.
**The final dividend will be paid on the issued share capital before any
consolidation arising from the special dividend.
In order to maintain comparability with historic earnings and dividend per share
and with historic share prices, the special dividend will be accompanied by a
share consolidation which will reduce the number of De La Rue shares in issue by
10 per cent, on a basis of 9 new shares for every 10 presently held. The payment
of the special dividend is dependent on the approval of the consolidation at an
Extraordinary General Meeting which will be held immediately after the Annual
General Meeting on 28 July 2005.
We believe this combination of immediate reward and progressive dividend growth
is a clear demonstration of our commitment to shareholder value.
Group Strategy
As we outlined at the interim results, the broad focus of De La Rue's activities
going forward will be on those products and services, for which we can establish
or maintain and build a strong competitive position. Our programme for
operational and strategic rationalisation, announced at the interim results, is
making good progress. We believe that by driving operational efficiency this
provides the best route to deliver improved shareholder value. The Group's
strong cash generative characteristics and ungeared balance sheet also give the
Board scope to return surplus cash flow to shareholders through a combination of
progressive dividends, and where appropriate, capital returns. The key
management focus for 2005/2006 is to ensure that the operational changes we have
initiated are successfully implemented to yield their full potential.
* Security Paper and Print
In Security Paper and Print our focus remains on maintaining our market share in
Currency and sustaining our competitive advantage through an increased
investment in R&D. In addition, we continue to drive productivity within the
division through investment in automation.
During the year, we finalised the restructuring of the Security Products
activities with the closure of the Peterborough and Byfleet sites and the
related exit from low margin businesses, including UK personal cheques, export
stamps and UK vouchers. At the same time we have increased our investment in
sales and marketing for authentication labels, passports and fiscal stamps,
further leveraging our core intellectual property.
* Cash Systems
In Cash Systems, we are implementing the restructuring actions outlined in
December 2004. We have removed the divisional infrastructure and reorganised the
division into focused Strategic Business Units, each with its own budget and
direct accountability to the CEO. These comprise: Branch Teller Automation,
Sorters; Original Equipment Manufacture (OEM) and Desktop Products. The planned
closure of the Portsmouth manufacturing facility and relocation of associated
manufacturing to lower cost economies is progressing well and we are on course
to close the site by the end of 2005/2006. We intend to close the Eskilstuna OEM
manufacturing site in Sweden and outsource assembly to a strategic partner in
China. Consultation with the workforce of 139 has commenced and the site is
planned for closure by the end of 2005/2006.
Action has also been taken to restructure our Portuguese ATM business following
the anticipated loss of a significant portion of service revenue. A new
management team is in place and, as a consequence of the actions taken, we
expect the business to trade profitably in 2005/2006. The costs associated with
these actions are included in the charges below.
It is now anticipated that these actions will result in annualised cost savings
of approximately £9m by the end of 2006/2007, £1.0m more than previously
expected. Total restructuring costs of £17.9m are anticipated, in line with our
previously announced expectations. We have achieved £1.5m savings in the current
year from these initiatives, which is expected to increase to an annualised run
rate of £5m in 2005/2006, increasing to an annualised run rate of £9m in 2006/
2007. Including the proposed closure of Eskilstuna, we are now targeting a total
headcount reduction of 480 from these actions. During the year 180 people left
the business.
* Sale of Sequoia Voting Systems
During the second half, we also successfully completed the sale of the Sequoia
Voting Systems business for a consideration of £8.7m (US$16m) resulting in an
exceptional gain of £6.0m. Trading losses during this final year of ownership
were lower than expected reflecting significantly reduced costs, the unwinding
of stock levels and the earlier than anticipated sale.
* Improving Productivity
Improving operational productivity is central to achieving our strategy. During
the year, we engaged the entire organisation in the Group's objectives, putting
in place clear actions and a methodology to drive improved operational
performance across all our businesses. We believe that in doing so we will
unlock the potential to deliver higher levels of customer satisfaction and,
ultimately, better financial returns.
The Group's strong cash flow is an indication of the benefits of these focused
actions. A working capital reduction of £27.4m, and in particular lower levels
of inventory across all our operating businesses, were a direct result of our
drive for productivity improvement.
Board Changes
As previously announced, Nicholas Brookes succeeded Sir Brandon Gough as
non-executive Chairman after the Annual General Meeting on 22 July 2004. Leo
Quinn was appointed as Group Chief Executive on 31 May 2004. In addition,
Michael Jeffries became Chairman of the Remuneration Committee and the Company's
senior independent non-executive director on 22 July 2004. Sir Jeremy Greenstock
also joined the Board on 1 March 2005 as a non-executive director. Sir Jeremy,
61, is one of Britain's foremost diplomats, with a distinguished career spanning
35 years in a variety of high profile roles. His wealth of experience and high
international standing will prove invaluable to De La Rue.
Associates
Profit from associates before interest and tax were lower at £9.4m (2003/2004 :
£10m). The main associated company is Camelot, the UK lottery operator which
reported an improved sales performance on the previous year, reflecting the
introduction of new games and sales channels. Dividends received from associates
of £5.6m were lower than last year's income of £7.2m. Profits and dividends were
lower as a result of one-off income in the previous year.
Interest Charge
The Group's net interest income was £2.5m which was £3.1m higher than the
previous year and reflected the Group's strong cash generation throughout the
year.
Taxation
Excluding exceptional items and goodwill amortisation, the underlying effective
tax rate was
28.0 per cent (2003/2004 : 26.2 per cent).
Exceptional Items
A summary of the main cash costs and non cash charges are set out below:
Cash Non Cash Total
£m £m £m
Reorganisation costs - Cash Systems 14.3 - 14.3
Reorganisation costs - Security Products - (0.8) (0.8)
Income from investment previously impaired (0.4) - (0.4)
Portuguese ATM business goodwill impairment - 11.5 11.5
Profit on disposal of discontinued operations (6.0) (2.9) (8.9)
------- ------- -------
Exceptional pre-tax costs 7.9 7.8 15.7
------- ------- -------
Reorganisation costs in Cash Systems relate to the restructuring announced at
the interim results.
A charge of £14.3m has been taken in 2004/2005 with the final element of £3.6m
to be charged in 2005/2006 in line with the requirements of accounting
standards.
The goodwill impairment of £11.5m relates to the Portuguese ATM business,
acquired from Papelaco in 2002, which was written off in the first half. This
arose from the loss of a significant amount of business from a key customer.
Steps have now been taken to return the business to profitable trading in 2005/
2006 and the costs associated with these actions are included in the
restructuring costs outlined above.
Profit on disposal relates primarily to the disposal of Sequoia Voting Systems
in March 2005.
Cash Flow and Borrowings
During the year net cash inflow from operating activities was £96.1m compared
with £92.1m in 2003/2004. This included a significant cash inflow from inventory
and debtors, partially offset by a reduction in advance payments. Capital
expenditure of £20.5m was lower than last year due to phasing of expenditure
between periods with the average of the last two years in line with depreciation
and our expectations.
During the first half the Company completed the disposal of the freehold of its
High Wycombe facility in the UK. This follows the previously announced
restructuring of manufacturing facilities in Security Products, after which the
company ceased production at the site last year. The sale of the Sequoia Voting
business was completed in the second half for proceeds of US$16m (£8.7m) of
which US$2m (£1.1m) is deferred until 30 June 2006. Total proceeds from asset
disposals were £12.1m in cash.
The overall net cash flow was positive at £65.4m (2003/2004 : £32.9m), resulting
in closing net cash of £106.5m at the year end compared with net cash of £41.1m
at the start of the year.
Foreign Exchange
Principal exchange rates used in translating the Group's results
------------- --------- -------- -------- -------- -------- --------
£ 2004/ 2005 2003/ 2004 2002/ 2003
2005 2004 2003
Average Year end Average Year end Average Year End
------------- --------- -------- -------- -------- -------- --------
US dollar 1.84 1.87 1.69 1.81 1.54 1.57
Euro 1.47 1.44 1.44 1.50 1.56 1.46
Swedish Krona 13.35 13.13 13.19 13.87 14.26 13.43
------------- --------- -------- -------- -------- -------- --------
$
Swedish Krona 7.26 7.02 7.80 7.66 9.26 8.55
------------- --------- -------- -------- -------- -------- --------
When managing foreign exchange transactional risk, protection is taken in the
foreign exchange markets whenever a business has a firm expectation of
confirming a sale or purchase in a non-domestic currency unless it is
impractical or uneconomical to do so. Translation of overseas earnings is not
hedged. For the year ended 26 March 2005 adverse foreign exchange impacted the
Group profits by £9.1m. Based on our budgeted exchange rates we expect further
adverse impacts on 2005/2006 of approximately £7.0m.
UK Pension Scheme
The Group accounts for pensions in accordance with SSAP24, having deferred the
introduction of FRS17 (Retirement Benefits) in accordance with the transitional
measures set out by the Accounting Standards Board. The charge to the profit and
loss account in respect of the UK pension scheme for 2004/2005 was £10.4m (2003/
2004 : £9.9m).
Extracts from the Operational Reviews
SECURITY PAPER AND PRINT 2004/2005 2003/2004 Change
£m £m £m
Sales 317.9 340.3 (22.4)
Underlying operating profit* 45.6 42.4 3.2
*before exceptional income of £1.2m (2003/2004 : £10.0m charge) and amortisation
of negative goodwill of £0.5m (2003/2004 : £0.5m)
Currency
The Currency business had another excellent year, despite reduced volumes in
both banknote printing and paper, following the completion of the exceptional
Iraq order in 2003/04. Banknote printing volumes were down 8 per cent (2003/2004
: increase of 14%), the reduction having been significantly mitigated by the
benefit of high backlog orders, improved work mix and a high level of overspill.
Banknote paper volumes were down 15 per cent (2003/20004 : increase of 38%), but
benefited from both improved manufacturing efficiency and increased orders for
high specification paper, requiring more sophisticated banknote threads. The
former Bank of England works at Debden continued to perform in line with our
expectations.
The Currency business ended the year with a strong order book which provides
good visibility for the first half year.
Security Products
The Security Products business, in particular, performed well. Completion of its
manufacturing rationalisation in the second half, the exit from unprofitable
activities and the volume benefits of increased sales and marketing investment
in authentication labels, fiscal stamps and passports all contributed to
improved results.
CASH SYSTEMS 2004/2005 2003/2004 Change
£m £m £m
Sales 302.2 302.6 (0.4)
Underlying operating profit* 9.2 8.8 0.4
* before exceptional items of £25.8m (2003/2004 : £11.3m) and goodwill
amortisation of £1.9m (2003/2004 : £2.6m)
Cash Systems' full year revenues of £302.2m were ahead of last year, excluding
adverse translational exchange differences of £10.7m. Underlying operating
profits of £9.2m were in line with our expectations and 4.5 per cent ahead of
last year's result, primarily driven by savings from the ongoing cost reduction
programmes. This was achieved despite significantly adverse foreign exchange
impacts, in particular relating to transaction differences between the US$ and
the Swedish Krona, of approximately £4.1m. Operating cash flow was strong and
substantially ahead of last year, driven by favourable working capital
management.
Teller automation revenues continue to be the major driver of product sales and
service revenues in the division. Volumes for Teller Cash Dispensers declined
throughout the mature continental European markets. However, we saw volume
growth in the Teller Cash Recycler markets in both Europe and North America,
despite increased competition from new entrants. The North American market,
where our products are well suited, continues to be the principal focus for
growth. During the year both the USA and Canada grew in line with our
expectations, and as we continue to see potential for further penetration in
these markets going forward, we will be increasing our marketing investment.
Sorter volumes were significantly down on last year in what is becoming an
increasingly competitive environment. The unit's new management team is actively
working to reduce the cost base of the business, while maintaining product
development, in order to capitalise particularly on growth from emerging markets
such as India, Russia and Brazil. The business remains a core part of our
Currency offering to Central Banks.
The OEM and Desktop Products businesses performed in line with our expectations
for these mature businesses. Our focus continues to be to drive productivity
improvements and lower our structural cost base in order to deliver products at
competitive prices.
Sequoia Voting Systems
Following the strategic review in December 2004, we announced our intention to
exit the business by the year end and this was done through the sale of the
business to Smartmatic Corporation, a US based device networking and election
systems company. The business had revenues of £23.1m (2003/2004 : £44.2m) and
made an operating loss of £0.2m in the year (2003/2004 : £(1.9)m).
International Financial Reporting Standards (IFRS)
These are the final set of results which the Group will report under UK GAAP.
The Group will be reporting under IFRS for the year ended 25 March 2006,
starting with the interim results to September 2005. A thorough review of all
relevant standards has been undertaken in order to assess the likely impact, and
the restatement of the results for 2004/2005 is nearing completion. A full
communication of this restatement will be presented in July.
To aid understanding of the transition to IFRS, a summary of the key areas of
impact are set out below. These IFRS adjustments are unaudited and may change as
the Group finalises its analysis of the effect of IFRS.
The adoption of IFRS in the Group accounts represents an accounting change only
and will not affect the operations or cash flows of the Group.
The Group has adopted IAS39 (Financial Instruments : Recognition and
Measurement) from 27 March 2005 and adjustments to prior periods will not
include any effects of that standard.
The principal areas of impact are:
Profit and Loss Account
* Accounting for share options (IFRS2) - requires a charge to be
recognised based on the fair value of each share option grant, which is likely
to lead to an additional charge of approximately £1.8m to operating profits.
* Research and development costs (IAS38) - development costs will be
capitalised provided certain criteria are met leading to a small net credit to
operating profits, after increased amortisation.
* Pensions (IAS 19) - no significant change to the operating profit
charge. The total charge will now include an operating charge and a finance
charge (within interest) the latter representing the difference between the
expected return on assets and the interest on scheme liabilities. This element
will be hard to predict. Experience gains and losses will be charged or credited
to SORIE (Statement of Recognised Income & Expenses).
* Goodwill (IAS38) - goodwill will no longer be amortised through the
Profit and Loss account but an annual impairment review needs to be carried out.
Amortisation of goodwill included in the results for 2004/2005 was £1.4m.
* Associates (IAS28) - the Group's share of profits from associates
must now be shown after tax within the Group's profit before tax, rather than
showing the tax charge of associates within the Group's overall taxation charge.
The tax charge on associate profits in 2004/2005 was £3.0m The impact will be to
reduce the disclosed profit before tax, with no change to profit after tax.
Balance Sheet
* Pensions (IAS19) - the deficit will be recognised on the balance
sheet leading to a reduction in net assets of approximately £65m.
* Dividends (IAS10) - dividends proposed after the balance sheet date
are not accrued under IFRS but accounted for when declared. This has a one-off
impact of increasing net assets by the final dividend of approximately £19m.
* Financial Instruments (IAS 39) - our internal procedures have been
changed and we expect to account for all significant currency hedges under
'hedge accounting'. There are some embedded derivatives within Currency division
and some increased volatility potential, but these are not expected to have a
material impact on results or net assets.
Overall, the transition to IFRS is not expected to have a material impact on
Group earnings.
Outlook
The Group has good visibility for first half orders, particularly in the
Currency activities although as previously anticipated we do not expect a repeat
in 2005/2006 of all the favourable conditions we saw in Currency during 2004/
2005. We remain confident of the outlook for the 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, fiscal stamps, travellers cheques and
authentication labels. The Company is a leading provider of cash handling
equipment and software solutions to banks and retailers worldwide, helping them
to reduce the cost of handling cash. De La Rue employs over 6,200 people across
31 countries and has an ongoing turnover of approximately £650m. De La Rue is a
member of the FTSE 250. Its ordinary shares are listed with the UK Listing
Authority and trade on the market for listed securities on the London Stock
Exchange under the symbol DLAR. 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. De La Rue Financial Calendar:
2005/2006
Ex-dividend date 6 July 2005
Record date 8 July 2005
Annual Report issued 17 June 2005
IFRS Announcement 13 July 2005
Annual General Meeting 28 July 2005
Payment of 2004 final dividend 5 August 2005
2005 Interim Results 29 November 2005
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 26 MARCH 2005
Notes 2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
Before Exceptional Before Exceptional
Exceptionals Items Total Exceptionals Items Total
Turnover
Continuing 620.1 620.1 638.3 638.3
operations
Discontinued operations 23.1 23.1 44.2 44.2
------------------ -------- ------- ------ -------- ------- -------
1 643.2 643.2 682.5 682.5
------------------ -------- ------- ------ -------- ------- -------
Operating profit
Continuing operations 54.8 54.8 51.2 51.2
Reorganisation costs (13.5) (13.5) (15.2) (15.2)
-------- ------- ------ -------- ------- -------
Income from investments
previously impaired 0.4 0.4 - -
-------- ------- ------ -------- ------- -------
54.8 (13.1) 41.7 51.2 (15.2) 36.0
Discontinued operations (0.2) (0.2) (1.9) (1.9)
------------------ -------- ------- ------ -------- ------- -------
Operating profit 54.6 (13.1) 41.5 49.3 (15.2) 34.1
before goodwill
amortisation
Goodwill amortisation (1.4) (11.5) (12.9) (2.5) (18.7) (21.2)
------------------ -------- ------- ------ -------- ------- -------
1,2 Group operating 53.2 (24.6) 28.6 46.8 (33.9) 12.9
profit
Share of operating 9.4 9.4 10.0 10.0
profits of associated
companies
----------------- -------- ------- ------ -------- ------- -------
Total operating profit 62.6 (24.6) 38.0 56.8 (33.9) 22.9
-------- ------- ------ -------- ------- -------
Profit on the disposal - 8.9 8.9 - - -
of discontinued operations
Profit on disposal - - - 0.2 0.2
of fixed assets -------- ------- ------ -------- ------- -------
Non-operating items - 8.9 8.9 - 0.2 0.2
----------------- -------- ------- ------ -------- ------- -------
Profit on ordinary 62.6 (15.7) 46.9 56.8 (33.7) 23.1
activities before
interest
Net interest: Group 2.5 2.5 (0.6) (0.6)
----------------- -------- ------- ------ -------- ------- -------
Profit on ordinary 65.1 (15.7) 49.4 56.2 (33.7) 22.5
activities before
taxation
3 Tax on profit on (18.4) 2.5 (15.9) (15.0) 5.0 (10.0)
ordinary -------- ------- ------ -------- ------- -------
activities
-----------------
Profit on ordinary 46.7 (13.2) 33.5 41.2 (28.7) 12.5
activities after
taxation
Equity minority interests (1.6) (1.6) (0.4) (0.4)
----------------- -------- ------- ------ -------- ------- -------
Profit for the 45.1 (13.2) 31.9 40.8 (28.7) 12.1
financial year
Dividends (27.4) (27.4) (24.8) (24.8)
----------------- -------- ------- ------ -------- ------- -------
Transferred to/
(from) reserves 17.7 (13.2) 4.5 16.0 (28.7) (12.7)
----------------- -------- ------- ------ -------- ------- -------
4 Earnings per 25.3p (7.4)p 17.9p 23.0p (16.2)p 6.8p
ordinary share
4 Diluted earnings 25.2p (7.4)p 17.8p 23.0p (16.2)p 6.8p
per ordinary share
4 Headline earnings 26.0p (6.2)p 19.8p 24.2p (5.8)p 18.4p
per ordinary share
Dividends per
ordinary share 15.3p 14.2p
----------------- -------- ------- ------ -------- ------- -------
A reconciliation between earnings per share, as calculated according to
Financial Reporting Standard No 14 'Earnings per Share' (FRS 14) issued by the
Accounting Standards Board, earnings per share, as calculated according to the
definition of headline earnings in Statement of Investment practice No 1 'The
Definition of Headline Earnings' issued by the Institute of Investment
Management and Research, and headline earnings per share as disclosed above is
shown in note 4.
GROUP BALANCE SHEET
AT 26 MARCH 2005
2005 2004
£m £m
Fixed assets
Intangible assets 15.4 28.2
Tangible assets 154.6 164.4
Investments: Associates 14.0 13.2
Other investments 0.3 0.2
------------------------------------------ ------- --------
184.3 206.0
------------------------------------------ ------- --------
Current assets
Stocks 73.8 99.7
Debtors 89.8 116.6
Deferred taxation 30.8 33.1
Cash at bank and in hand 140.7 85.5
------------------------------------------ ------- --------
335.1 334.9
Creditors: amounts falling due within one year
Short term borrowings (17.8) (8.3)
Other creditors (194.2) (214.5)
------------------------------------------ ------- --------
Net current assets 123.1 112.1
------------------------------------------ ------- --------
Total assets less current liabilities 307.4 318.1
Creditors: amounts falling due after more than one year
Long term borrowings (16.4) (36.1)
Other creditors (12.8) (13.6)
Provisions for liabilities and charges (49.8) (50.8)
------------------------------------------ ------- --------
228.4 217.6
------------------------------------------ ------- --------
Capital and reserves
Called up share capital 46.1 45.8
Share Premium 17.0 14.6
Revaluation reserve 1.8 1.8
Capital redemption reserve 3.5 3.5
Other reserve (83.8) (83.8)
Profit and loss account 240.1 232.2
------------------------------------------ ------- --------
Equity Shareholders' funds 224.7 214.1
Equity minority interests 3.7 3.5
------------------------------------------ ------- --------
228.4 217.6
------------------------------------------ ------- --------
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 26 MARCH 2005
Notes 2005 2004
£m £m
-------------------------------------- -------- -------
5a Net cash inflow from operating activities 96.1 92.1
Dividends received from associated companies 5.6 7.2
5b Returns on investments and servicing of finance 2.1 (1.5)
Taxation (7.6) (11.2)
5c Capital expenditure and financial investment (13.0) (31.8)
5d Acquisitions and disposals 5.0 (5.1)
Equity dividends paid (25.8) (24.1)
-------------------------------------- -------- -------
Net cash inflow before use of liquid resources and 62.4 25.6
financing
5e Management of liquid resources (42.9) (30.3)
5f Financing (21.6) 7.6
-------------------------------------- -------- -------
(Decrease)/increase in cash in the period (2.1) 2.9
-------------------------------------- -------- -------
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in the period (2.1) 2.9
Cash outflow from increase in liquid resources 42.9 30.3
Cash outflow/(inflow) from decrease/(increase) in debt 24.3 (5.1)
-------------------------------------- -------- -------
Change in net funds resulting from cash flows 65.1 28.1
Translation difference 0.3 4.8
-------------------------------------- -------- -------
Movement in net funds in the period 65.4 32.9
Net funds at start of period 41.1 8.2
-------------------------------------- -------- -------
Net funds at end of period 106.5 41.1
-------------------------------------- -------- -------
Analysis of net funds
Cash 40.3 28.0
Liquid resources 100.4 57.5
Overdrafts (14.4) (1.0)
Other debt due within one year (3.4) (7.3)
Other debt due after one year (16.4) (36.1)
-------------------------------------- -------- -------
Net funds at end of period 106.5 41.1
-------------------------------------- -------- -------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 26 MARCH 2005
2005 2004
£m £m
Profit for the financial year: Group 25.5 5.0
Associates 6.4 7.1
-------- --------
31.9 12.1
Currency translation differences on foreign currency
net investments 3.4 (0.5)
------------------------------------------ -------- --------
Total recognised gains for the year 35.3 11.6
------------------------------------------ -------- --------
There is no material difference between the reported profit shown in the
consolidated profit and loss account and the profit for the relevant periods
restated on an historical cost basis.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 26 MARCH 2005
2005 2004
£m £m
Profit for the financial year 31.9 12.1
Dividends (27.4) (24.8)
---------------------------------------- -------- --------
4.5 (12.7)
Share capital issued 2.7 2.5
Currency translation differences on foreign currency net
investments 3.4 (0.5)
---------------------------------------- -------- --------
Net increase/(decrease) in shareholders' funds 10.6 (10.7)
Opening shareholders' funds 214.1 224.8
---------------------------------------- -------- --------
Closing shareholders' funds 224.7 214.1
---------------------------------------- -------- --------
NOTES TO THE PRELIMINARY STATEMENT
1 SEGMENTAL ANALYSIS 2005 2005 2005 2004 2004 2004
Turnover Profit Net Turnover Profit Net
before tax assets before tax assets
Continuing £m £m £m £m £m £m
operations - before
exceptionals
Cash Systems 302.2 9.2 19.0 302.6 8.8 72.1
Security Paper & 317.9 45.6 91.7 340.3 42.4 94.6
Print
Less inter-segment - (4.6)
sales -------- ------- ------- -------- ------- ------
620.1 54.8 110.7 638.3 51.2 166.7
-------- ------- ------- -------- ------- ------
Discontinued
operations
Voting Systems 23.1 (0.2) - 44.2 (1.9) (0.6)
-------- ------- ------- -------- ------- ------
643.2 54.6 110.7 682.5 49.3 166.1
Exceptional costs
Cash Systems (14.3) (5.2)
Security Paper & 1.2 (10.0)
Print -------- ------- ------- -------- ------- ------
- (13.1) - (15.2) -
-------- ------- ------- -------- ------- ------
Goodwill
amortisation
Cash Systems (13.4) (8.7)
Security Paper & Print 0.5 0.5
-------- ------- ------- -------- ------- ------
Voting Systems - (13.0)
-------- ------- ------- -------- ------- ------
- (12.9) - - (21.2) -
-------- ------- ------- -------- ------- ------
643.2 28.6 110.7 682.5 12.9 166.1
-------- ------- ------- -------- ------- ------
Associated companies 9.4 14.1 10.0 13.2
(analysed below)
Non-operating 8.9 0.2
items
Net interest 2.5 (0.6)
including ------- -------
associates
Profit before 49.4 22.5
taxation ------- -------
Unallocated net (2.9) (2.8)
assets ------- ------
Capital employed 121.9 176.5
Net funds 106.5 41.1
------- ------
Net assets 228.4 217.6
-------------------- -------- ------- ------- -------- ------- ------
Geographical area by
operation
United Kingdom and 380.4 13.5 43.5 406.1 9.7 58.1
Ireland
Rest of Europe 247.9 7.3 31.9 232.8 20.7 61.7
The Americas 142.5 3.2 21.8 161.8 (18.3) 30.8
Rest of world 47.3 4.6 13.5 39.3 0.8 15.5
Less inter-area (174.9) (157.5)
sales -------- ------- ------- -------- ------- ------
643.2 28.6 110.7 682.5 12.9 166.1
-------------------- -------- ------- ------- -------- ------- ------
The profit before tax in 2005 is shown after exceptional costs of £13.1m (2004:
£15.2m) comprising UK and Ireland £6.1m (2004: £9.5m), Rest of Europe £5.1m
(2004: £4.3m), Americas £1.9m (2004: £1.4m), Rest of World £Nil (2004: £Nil).
Inter-area sales of £174.9m (2004: £157.5m) comprise: UK & Ireland £59.9m (2004:
£53.1m), Rest of Europe £90.2m (2004: £67.7m), Americas £11.7m (2004: £19.3m),
Rest of World £13.1m (2004: £17.4m).
------------------- -------- ------- ------- -------- ------- ------
Geographical area by
destination
United Kingdom and Ireland 70.0 83.1
Rest of Europe 182.2 179.0
The Americas 176.7 178.9
Rest of world 214.3 241.5
-------- --------
643.2 682.5
------------------- -------- ------- ------- -------- ------- ------
Associated companies are analysed as
follows:
Security Paper and Print - 0.1 - -
UK lottery 9.4 14.0 10.0 13.2
------- ------- ------- ------
9.4 14.1 10.0 13.2
------- ------- ------- ------
Geographical area by operation
United Kingdom and Ireland 9.4 14.0 10.0 13.2
Rest of Europe - (0.1) - (0.1)
Rest of world - 0.2 - 0.1
------- ------- ------- ------
9.4 14.1 10.0 13.2
------------------- -------- ------- ------- -------- ------- ------
The Group's cash and borrowings are managed centrally and therefore interest is
not attributable to individual classes of business or geographical segments.
Unallocated net assets and liabilities, which consist of assets and liabilities
relating to non-divisional operations, are controlled centrally and cannot be
allocated meaningfully to individual classes of business or geographical
segments.
2 OPERATING COSTS EXCLUDING AMORTISATION OF GOODWILL 2005 2004
£m £m
Cost of sales
Continuing operations 419.2 428.4
Reorganisation costs 13.5 13.0
---------- ----------
432.7 441.4
Discontinued operations 12.6 31.5
---------- ----------
445.3 472.9
---------- ----------
Distribution costs
Continuing operations 29.4 21.4
Discontinued operations 0.2
---------- ----------
29.4 21.6
---------- ----------
Administration and other expenses
Continuing operations 116.7 137.3
Reorganisation costs - 2.2
Income from investments previously impaired (0.4) -
---------- ----------
116.3 139.5
Discontinued operations 10.7 14.4
---------- ----------
127.0 153.9
----------------------------------- ---------- ----------
601.7 648.4
----------------------------------- ---------- ----------
3 TAXATION 2005 2004
£m £m
Tax on profit on ordinary activities
United Kingdom
Current tax
Corporation tax at 30% (2004: 30%) 5.0 6.5
Adjustments in respect of prior years - (4.0)
---------- ----------
5.0 2.5
Double taxation relief (0.2) (0.5)
---------- ----------
4.8 2.0
---------- ----------
Overseas tax 5.1 3.2
Adjustments in respect of prior years 1.3 0.3
---------- ----------
6.4 3.5
---------- ----------
Tax on share of associates 2.6 2.9
---------- ----------
13.8 8.4
---------- ----------
Deferred tax
Origination and reversal of timing difference 4.2 0.4
Adjustments in respect of prior years (2.5) 1.2
Tax on share of associates 0.4 -
---------- ----------
2.1 1.6
---------- ----------
Total tax charge 15.9 10.0
---------- ----------
The net exceptional tax credit included within the above totalled £2.5m of which
£2.5m is included within deferred tax (2004: £5.0m credit, of which £2.3m was
included within deferred tax).
The current tax charge for the year is lower than the standard rate of taxation
in the UK of 30% (2004: higher). A summary reconciliation is shown below.
2005 2004
£m £m
Profit on ordinary activities before tax 49.4 22.5
----------------------------------- ---------- ----------
Expected tax charge at 30% 14.8 6.8
Rate adjustments relating to overseas profits (2.3) (1.6)
Overseas dividends 0.1 1.5
Disallowables & other items (0.1) 5.4
Adjustments in respect of prior years 1.3 (3.7)
----------------------------------- ---------- ----------
Current tax charge 13.8 8.4
----------------------------------- ---------- ----------
4 EARNINGS PER SHARE 2005 2004
----------------------------------- ---------- ----------
Basic 17.9p 6.8p
Diluted 17.8p 6.8p
----------------------------------- ---------- ----------
Earnings per share are based on the profit for the year attributable to ordinary
shareholders of £31.9m (2004: profit of £12.1m) as shown in the Group profit and
loss account. The weighted average number of ordinary shares used in the
calculations is 178,325,990 (2004: 177,032,098) for basic earnings per share and
179,400,038 (2004: 177,453,669) for diluted earnings per share after adjusting
for share options.
-------------------------------------- -------- ----------
pence pence
per per
Reconciliation of earnings per share share share
-------------------------------------- -------- ----------
As calculated under FRS 14 17.9 6.8
Income from investments previously impaired (0.2) -
Profit on the disposal of discontinued operations (5.0) -
Profit on the disposal of fixed assets and assets held for
resale - (0.1)
Amortisation of goodwill 7.1 11.7
-------------------------------------- -------- ----------
Earnings per share as defined by the IIMR 19.8 18.4
Reorganisation costs 6.2 5.8
-------------------------------------- -------- ----------
Headline earnings per share before items shown above 26.0 24.2
-------------------------------------- -------- ----------
The Institute of Investment Management and Research (IIMR) has published
Statement of Investment Practice No. 1 entitled 'The Definition of Headline
Earnings'. The IIMR earnings per share shown above have been calculated
according to the definition set out in the IIMR's statement. The reconciling
items between earnings per share as calculated according to FRS 14 and headline
earnings per share include the underlying tax effects.
The directors are of the opinion that the publication of the IIMR's earnings
figure and the headline earnings is useful to readers of interim statements and
annual accounts as they give a more meaningful indication of underlying business
performance.
5 NOTES TO GROUP CASH FLOW STATEMENT 2005 2004
£m £m
a Reconciliation of operating profit to net cash inflow from operating
activities
Operating profit 28.6 12.9
Depreciation and amortisation 40.0 45.3
Decrease/(increase) in stocks 25.5 (3.8)
Decrease in debtors 22.7 10.2
(Decrease)/increase in creditors (20.8) 30.0
Decrease in reorganisation provisions (0.9) (2.5)
Other items 1.0 -
------------------------------------- -------- ----------
Net cash inflow from operating activities 96.1 92.1
------------------------------------- -------- ----------
b Returns on investments and servicing of finance
Interest received 5.7 2.0
Interest paid (3.1) (2.4)
Dividends paid to minority shareholders (0.5) (1.1)
------------------------------------- -------- ----------
Net cash inflow/(outflow) from returns on investments 2.1 (1.5)
and servicing of finance -------- ----------
-------------------------------------
c Capital expenditure and financial investment
Purchase of tangible fixed assets (20.5) (33.3)
Sale of tangible fixed assets 7.1 1.5
Income from investments 0.4 -
------------------------------------- -------- ----------
Net cash outflow for capital expenditure and financial (13.0) (31.8)
investment -------- ----------
-------------------------------------
d Acquisitions and disposals
Purchase of minority interests (2.2) (0.9)
Net (overdraft)/cash acquired with subsidiary - (9.8)
undertakings
Sale of subsidiary undertakings 7.2 6.4
Net cash sold with subsidiary undertakings - (0.8)
------------------------------------- -------- ----------
Net cash inflow/(outflow) from acquisitions and 5.0 (5.1)
disposals -------- ----------
-------------------------------------
e Management of liquid resources
Net increase in short term deposits (42.9) (30.3)
------------------------------------- -------- ----------
f Financing
Debt due within one year:
Loans raised 1.1 7.9
Loans repaid (3.8) -
Debt due beyond one year:
Loans raised 2.0 17.1
Loans repaid (19.3) (19.0)
Capital element of finance lease rental repayments (4.3) (0.9)
Share capital issued 2.7 2.5
------------------------------------- -------- ----------
Net cash (outflow)/inflow from financing (21.6) 7.6
------------------------------------- -------- ----------
6 The consolidated accounts have been prepared as at 26 March
2005, being the last Saturday in March. The comparatives for the 2004 financial
year are for the year ended 27 March 2004.
7 This statement has been prepared in accordance with the
guidelines published by the Accounting Standards Board.
8 The financial information set out above (Group profit and
loss account, Group balance sheet, Group cash flow statement, Group statement of
total recognised gains and losses and notes thereto) and extracts from the
financial review do not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 26 March 2005 will be posted to
shareholders on 22 June 2005 for subsequent approval at the annual general
meeting and copies will be available from the Company Secretary at De La Rue
plc, De La Rue House, Jays Close, Viables, Hampshire, RG22 4BS. The report of
the auditors on these accounts is unqualified and does not contain a statement
under either section 237(2) or 237(3) of the Companies Act 1985. Statutory
accounts for the year ended 27 March 2004 have been delivered to the Registrar
of Companies.
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