24th May 2006 07:02
De La Rue PLC24 May 2006 DE LA RUE PLC PRELIMINARY STATEMENT YEAR TO 25 MARCH 2006 KEY FINANCIALS Continuing Operations 2005/2006 2004/2005 Change £m £m %Sales 610.8 620.1 -1.5Profit before tax and exceptional items* 76.2 65.2 +16.9Profit before tax 73.7 40.6 +81.5 Headline earnings per share* 31.4p 25.9p +21.2Basic earnings per share 30.2p 18.5p +63.2Operating cash flow 106.7 98.7 +8.1Net cash at end of year 91.6 106.5Dividends per share 17.0p 15.3p +11.1 * before net exceptional charges of £2.5m (2004/2005 : £24.6m) HIGHLIGHTS • Profit before tax and exceptional items* from continuing operations up 16.9 per cent to £76.2m (2004/2005 : £65.2m). • Operating margins* improved by 2.6 percentage points to 11.4 per cent (2004/2005 : 8.8 per cent). • Strong cash generation. Operating cash flow was up 8.1 per cent to £106.7m (2004/2005 : £98.7m). • Closing net cash of £91.6m after capital returns of £103.6m through ordinary and special dividends and the share buy back programme. • Increase in the final dividend of 11.3 per cent to 11.8 pence per share, bringing the full year dividend to 17.0 pence per share, an increase of 11.1 per cent in the year (2004/2005 : 15.3p). • Intention to continue the share buy back programme. Nicholas Brookes, Chairman of De La Rue plc, commented: "This is an excellent set of results that demonstrates the significant progressthat the Group has made in implementing its strategy of concentrating on coreactivities, addressing underperforming businesses and improving operationalproductivity. "Continued margin improvement from the restructuring actions in Cash Systemstogether with another strong year in Security Paper and Print division were thekey drivers of the performance. As a result during the year we were able toreturn £103.6m to our shareholders through a combination of a special dividend,an ongoing share repurchase scheme and ordinary dividends. This demonstrates ourcontinuing commitment to enhance total returns by distributing surplus cash flowto our shareholders. "Looking ahead, the Group's order book provides excellent visibility for thefirst half of 2006/2007, particularly in the Currency activities where firsthalf banknote and paper volumes are expected to be ahead of last year. This,combined with the ongoing benefits of restructuring and productivityimprovements, provides a sound platform for 2006/2007." For further information, please contact: Leo Quinn Chief Executive +44 (0)1256 605303Stephen King Finance Director +44 (0)1256 605303Mark Fearon Head of Corporate Affairs +44 (0)1256 605303Richard Mountain Financial Dynamics +44 (0) 207 269 7121 24 May 2006 SUMMARY OF GROUP RESULTS De La Rue is pleased to report a strong performance for the year ended 25 March2006, with all key performance indicators showing good improvements over 2004/2005. This reflected primarily margin and operational efficiency improvementswhich demonstrate the significant progress the Group has made this year inimplementing its strategy. Underlying profit before tax* increased by £11.0m or16.9 per cent to £76.2m (2004/2005 : £65.2m) and operating profits* of £69.4mrepresented an increase of £14.6m or 26.6 per cent compared with last year (2004/2005 : £54.8m). After charging exceptional items, profit on continuingactivities before tax was £73.7m (2004/2005 : £40.6m), an increase of 81.5 percent on 2004/2005. Headline basic earnings per share* increased by 21.2 per centto 31.4p (2004/2005 : 25.9p) reflecting the improved trading performance. Basicearnings per share were 30.2p compared with 18.5p in 2004/2005 representing anincrease of 63.2 per cent. The main drivers behind the improved results were another excellent performancein the Security Paper and Print activities and significant margin improvement inCash Systems as the benefits of the restructuring actions commenced in December2004 began to come through. Overall, Group margins improved by 2.6 percentagepoints to 11.4 per cent. Cash generation was again strong with operating cash flow of £106.7mrepresenting the third successive year on year increase (2004/2005 : £98.7m).This reflected both higher profits and working capital management, the latterenhanced by an exceptionally high level of customer advance payments. Followingpayments of the special dividend, 2004/2005 final dividend and 2005/2006 interimdividend (total £95.8m) and the ongoing share buy back programme (£7.8m), theGroup ended the year with net cash on the balance sheet of £91.6m (2004/2005 netcash : £106.5m). *before net exceptional charges of £2.5m (2004/2005 : £24.6m) Extracts from the Operational Review SECURITY PAPER AND PRINT 2005/2006 2004/2005 Change £m £m % Sales 318.4 317.9 +0.2Underlying operating profit* 51.0 45.4 +12.3 *before exceptional income of £0.9m (2004/2005 : income of £1.2m). Underlying operating profit* for the Security Paper and Print division of £51.0mwere ahead of last year (2004/2005: £45.4m). The main driver behind the improved divisional result was the Currencyactivities which had another excellent year. This was achieved despite theanticipated reduction in volumes in banknote printing, in part reflecting loweroverspill levels at 17 per cent compared to 31 per cent last year. Banknoteprinting volumes overall were down 11.4 per cent compared with 2004/2005, butthis reduction was significantly mitigated by the benefit of improved work mix.Banknote paper volumes were up 4.6 per cent on 2004/2005, which, together withimproved manufacturing efficiency and increased orders for high specificationpaper that require more sophisticated banknote threads, contributedsignificantly to the overall operating result. The Currency business ended theyear with a strong order book providing excellent visibility for the first halfof 2006/2007. Looking further forward the outlook as in previous years willcontinue to be dependent on order volume and the work mix. The Security Products and Identity Systems businesses also performed strongly.Volume benefits of increased sales in authentication labels, fiscal stamps andpassports all contributed to improved results. CASH SYSTEMS 2005/2006 2004/2005 Change £m £m % Sales 292.4 302.2 -3.2Underlying operating profit* 18.4 9.4 +95.7 *before net exceptional charges of £3.4m (2004/2005: £25.8m) Divisional sales were down overall due to the continued decline of the matureEuropean Teller Cash Dispensers (TCD) markets. This was partially offset bycontinued growth of Teller Cash Recycler (TCR) volumes in the USA. Theperformance of the Cash Processing Solutions (Sorter) business improved over theprior year in a competitive environment. The OEM (ATM mechanisms) and DesktopProducts businesses performed strongly principally driven by volume growth inthe European and Asian markets. Underlying operating profits* of £18.4m were strongly ahead of last year, drivenby continued margin improvements, reflecting the benefits of restructuring andreducing fixed costs in the mature European markets. In addition, the adverseimpact of foreign exchange rates was significantly reduced this year,particularly aided by the strength of the US Dollar. During the year we continued to focus our attention on relocating productioncapacity to lower cost facilities in China and Russia to improve the operationalproductivity and competitiveness of the division. Overall divisional marginsmore than doubled from 3.1 to 6.3 per cent which included £5m savings fromrestructuring and a one-off benefit of £0.6m from the settlement of anoutstanding customer dispute, previously fully provided. The business remainsstrongly cash generative with operating cash flow well ahead of operatingprofits, together with good working capital management, the main drivers. Ourfocus for the division remains on achieving operational improvements andtargeting emerging markets where we can generate growth. RETURNS TO SHAREHOLDERS Final Dividend In line with our continued confidence in the cash generative characteristics ofthe business, the Board is recommending an increased final dividend of 11.8p pershare, subject to shareholders' approval. This will be paid on 4 August 2006 toshareholders on the register on 7 July 2006. Together with the increased interimdividend paid in January 2006, this will give a total dividend for the year of17.0p, an overall increase of 11.1 per cent on last year. Share Buy Back The Board announced at the interim results in November its intention to use theexisting authorities granted to it at the 2005 Extraordinary General Meeting(EGM) to use surplus cash to purchase the Company's own shares for cancellation.The upper limit of the Board's existing authority is 14.99 per cent of issuedcapital. In the year, the Company acquired 1.6 million shares under the sharebuy back programme at a cost of £7.8m. The Board expects to continue thisprogramme, funded with surplus cash and will seek shareholder approval to renewits existing authority at the AGM. The exact amount and timing of futurepurchases will be dependent on market conditions and ongoing cash generation. Special Dividend De La Rue completed the return of £68.3m to shareholders on 5 August 2005,equivalent to 38.0p per share, through a special dividend accompanied by acorresponding share consolidation. The capital return was consistent with theBoard's strategy to return surplus cash to shareholders. GROUP STRATEGY In December 2004, we focused the De La Rue organisation on improving theoperational performance and financial returns of the Group. During 2005/2006,the Group made significant progress against its financial and operationalobjectives. We believe that driving operational efficiency and focusing ourinvestment in our core businesses provides the best opportunity to deliverimproved shareholder value. The Group's strong cash generative characteristicsand ungeared balance sheet also give the Board scope to return surplus cash flowto shareholders through a combination of progressive dividends, share buy backsand where appropriate, other forms of capital return. During the year we made the following progress on our key strategic initiatives: Cash Systems restructuring In Cash Systems, we are making good progress in implementing the restructuringactions outlined in December 2004. The division is now benefiting from itsreorganisation into focused Strategic Business Units. As expected, we completed the closure of the Eskilstuna (Sweden) and Portsmouth(UK) factories during the second half of the year. The subsequent relocation ofassociated manufacturing to lower cost facilities in China and Russiarespectively has reached its critical phase with the manufacturing of allproduct variants now underway. The new supply chain is in the process of beingfully established and will be optimised over the next 12 months. Consequently, we continue to adopt a cautious approach in the execution of the programme toensure continuity of supply of products to our customers. As expected, higherfirst half inventory levels in the division, arising from our supply chainstrategy to build up buffer stocks as a consequence of the restructuring, arenow starting to unwind as we complete the transition to the new productionarrangements. We are delivering our cost saving programme ahead of schedule, cumulative costsavings of £6.5m have been achieved at the end of 2005/2006. We remain on targetto achieve annualised savings of £9.0m by the end of 2006/2007. Total headcountreductions of 468 have been completed, of which 287 people left the businessduring 2005/2006. Improving Productivity Improving operational productivity across the Group is central to achieving ourstrategy. We continue to engage the entire organisation in the Group'sobjectives through clear actions and a methodology to drive improved operationalperformance across all businesses. The Group's strong cash flow is an indicationof the benefits of these focused actions. A working capital reduction of £14.5m,although significantly enhanced by a high level of customer advance payments,was also driven by lower levels of inventory and improved trade creditormanagement. The key areas of management focus in 2006/2007 will be to ensure the successfulcompletion of our restructuring plans and to continue to seek out and driveoperational improvements in all of our core businesses. Associates Profit from associates after interest and tax was higher at £6.8m (2004/2005 :£6.4m). The main associated company is Camelot, the UK lottery operator whichreported an improved sales performance on the previous year. Dividends receivedfrom associates of £8.1m were higher than last year's income of £5.6m, due to aone-off payment in the year. Interest Charge The Group's net interest income was £1.8m, which was £0.7m lower than theprevious year. In addition the IAS 19 related finance item, arising from thedifference between the interest on liabilities and the expected return onassets, is included here and was a charge of £1.8m compared with a credit of£1.5m the previous year. Taxation The underlying effective tax rate excluding exceptional items was 29.4 per cent(2004/2005 : 26.4 per cent), the increase reflecting the mix of taxable profitsfrom overseas activities and the elimination of tax losses in the USA. Theeffective tax rate after exceptional items was 29.7 per cent (2004/2005 : 31.8per cent). Exceptional Items A summary of the main exceptional items is set out below: 2005/2006 2004/2005 £m £m Reorganisation costs - Cash Systems 4.2 14.3Reorganisation costs - Security Products (0.5) (0.8)Income from investment previously impaired (0.4) (0.4)Profit from disposal of investment (0.8) -Portuguese ATM business goodwill impairment - 11.5 --------- ---------Exceptional items - continuing operations 2.5 24.6 --------- --------- --------- ---------Profit on disposal of discontinued operations - (8.9) --------- --------- Reorganisation costs charged in the year in Cash Systems relate to final elementof the restructuring of the business which commenced during 2004/2005. The totalprogramme cost of £18.5m is in line with that initially indicated. Income from investments relates to a £0.4m loan repayment from the Group'sassociate holding in Valora. Profit from disposal of investments arises from the sale of the Group's stake ina small distributor in South Africa. Cash Flow and Borrowings During the year operating cash flow was £106.7m compared with £98.7m in 2004/2005 reflecting the rise in operating profits and the continued drive to reduceworking capital across the Group. This was also further enhanced by continuedhigh levels of advance payments. Capital expenditure of £19.6m was lower thandepreciation and reflected the phasing of expenditure in Security Paper andPrint. After payment in the first half of the special dividend (£68.3m), the 2004/2005final dividend (£19.1m), the 2005/2006 interim dividend (£8.4m) and £7.8m inrespect of the ongoing share buy back programme closing net cash was £91.6mcompared with £106.5m at last year end. Foreign Exchange Principal exchange rates used in translating the Group's results £ 2005/2006 2006 2004/2005 2005 Average Year end Average Year end------------- -------- -------- -------- --------US dollar 1.79 1.74 1.84 1.87Euro 1.46 1.45 1.47 1.44Swedish Krona 13.69 13.58 13.35 13.13------------- -------- -------- -------- --------$Swedish Krona 7.65 7.80 7.26 7.02------------- -------- -------- -------- -------- When managing foreign exchange transactional risk, protection is taken in theforeign exchange markets whenever a business has a firm expectation ofconfirming a sale or purchase in a non-domestic currency unless it isimpractical or uneconomical to do so. Translation of overseas earnings is nothedged. For the year ended 25 March 2006 adverse foreign exchange impacted theGroup profits by £1.8m mostly arising from transaction exposure. UK Pension Scheme The Group's last formal (triennial) valuation of the Company's defined benefitpension Scheme took place on 6 April 2003. The Group is currently in the processof completing the latest triennial valuation as at 6 April 2006. The results ofthis valuation will be available later this year. The Group has adopted IAS 19 during the year and the pension deficit has beenincorporated onto the balance sheet. The valuation under IAS 19 principlesindicates a scheme deficit of approximately £80.5m after tax at 25 March 2006(March 2005 : £81.1m). The charge to operating profits in respect of the UKpension scheme for 2005/2006 was £9.1m (2004/2005 : £10.1m). In addition, underIAS 19 there is a finance charge of £1.8m arising from the difference betweenthe interest on liabilities and the expected return on assets (2004/2005 : £1.5mcredit). This charge is included with the Group interest charge in the profitand loss account. The table below summarises the key assumptions over the past three years for theUK defined benefit scheme. It can be seen that AA bond interest rates havedecreased significantly over the period while inflation and salary growth haveremained largely stable. Overall the lower the interest rates the higher theliabilities derived from a discounting of the estimated future cash liabilityprofile. This, coupled with rises in mortality assumptions, have been the mainfactors which have led to the adverse impact on scheme liabilities and theoverall scheme funding position. 2005/2006 2004/2005 2003/2004Key AssumptionsInterest Rate (AA bond rate) 4.9 5.5 5.5Salary Growth 3.9 4.25 4.25Inflation 2.9 3.0 3.0UK Pension Scheme Assets £510.0m £438.1m £409.4mLiabilities £625.0m £554.0m £504.8m(Deficit) - gross (£115.0m) (£115.9m) (£95.4m) - after tax (£80.5m) (£81.1m) (£66.8m) As part of the current (triennial) valuation, the Group will be consulting withthe Trustee and all stakeholders on the development of the UK defined benefitpension scheme. Outlook Looking ahead, the Group's order book provides excellent visibility for thefirst half of 2006/2007, particularly in the Currency activities where firsthalf banknote and paper volumes are expected to be ahead of last year. This,combined with the ongoing benefits of restructuring and productivityimprovements, provides a sound platform for 2006/2007. -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 pioneering new technologies worldwide in government identity solutions for national identification, drivers licence and passport issuing schemes. Employing over 6,000 people across 31 countries, it is also a leading provider of cash handling equipment and software solutions to banks and retailers worldwide, helping them to reduce the cost of handling cash. 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: 2006/2007 Ex-dividend date 5 July 2006 Record date 7 July 2006 Annual Report issued 16 June 2006 Annual General Meeting 27 July 2006 Payment of 2005 final dividend 4 August 2006 2006 Interim Results 28 November 2006 GROUP INCOME STATEMENTFOR THE YEAR ENDED 25 MARCH 2006 2006 2006 2006 2005 2005 2005 £m £m £m £m £m £m Before Exceptional Before ExceptionalNotes Note Exceptionals Items Total Exceptionals Items Total Continuing Operations Sales 2 610.8 610.8 620.1 620.1Operating expenses (541.4) (3.7) (545.1) (565.3) (25.0) (590.3)Other income 1.2 1.2 - 0.4 0.4 --------- --------- -------- --------- --------- -------Operating profit 2 69.4 (2.5) 66.9 54.8 (24.6) 30.2 --------- --------- -------- --------- --------- -------Share of profits ofassociated companiesafter taxation 6.8 6.8 6.4 6.4Interest income 3.8 3.8 5.7 5.7Interest expense (2.0) (2.0) (3.2) (3.2)Retirement benefit obligationnet finance (cost)/income (1.8) (1.8) 1.5 1.5 --------- --------- -------- --------- --------- -------Profit before taxation 76.2 (2.5) 73.7 65.2 (24.6) 40.6Taxation 3 (22.4) 0.5 (21.9) (17.2) 4.3 (12.9) --------- --------- -------- --------- --------- -------Profit after taxation 53.8 (2.0) 51.8 48.0 (20.3) 27.7 --------- --------- -------- --------- --------- -------Discontinued operations - - - - - 6.9 --------- --------- -------- --------- --------- -------Profit for the financial year 51.8 34.6 --------- --------- -------- --------- --------- -------Profit attributable to equityshareholders 50.9 33.0Profit attributable to minority interests 0.9 1.6 --------- --------- -------- --------- --------- ------- 51.8 34.6 --------- --------- -------- --------- --------- -------Basic earnings per ordinaryshare - continuing operations 4 30.2p 14.6p Diluted earnings per ordinaryshare - continuing operations 4 29.4p 14.5p --------- --------- -------- --------- --------- -------Basic earnings per ordinaryshare - discontinued operations - 3.9p Diluted earnings per ordinaryshare - discontinued operations - 3.9p --------- --------- -------- --------- --------- ------- GROUP BALANCE SHEETAT 25 MARCH 2006 2006 2005 Note £m £m ASSETSNon-current assetsProperty, plant and equipment 139.3 148.9Intangible assets 28.9 23.8Investments in associates and joint ventures 12.7 14.0Other investments - 0.3Available for sale financial assets 0.5 -Deferred tax assets 53.9 57.1Trade and other receivables 0.2 1.1-------------------------------------- ------ ------- ------- 235.5 245.2-------------------------------------- ------ ------- -------Current assetsInventories 71.6 73.8Trade and other receivables 92.2 86.0Current tax assets 1.3 2.7Derivative financial instruments 1.3 -Cash and cash equivalents 388.8 140.7-------------------------------------- ------ ------- ------- 555.2 303.2-------------------------------------- ------ ------- -------Total assets 790.7 548.4-------------------------------------- ------ ------- -------LIABILITIESCurrent liabilitiesBorrowings (284.6) (17.8)Trade and other payables (182.5) (166.3)Current tax liabilities (29.8) (23.1)Derivative financial instruments (1.2) -Provisions for other liabilities and charges (22.3) (24.0)-------------------------------------- ------ ------- ------- (520.4) (231.2) Non-current liabilitiesBorrowings (12.6) (16.4)Retirement benefit obligations (119.6) (119.9)Deferred tax liabilities (0.8) (1.4)Derivative financial instruments (0.5) -Other non-current liabilities (0.5) (0.4)-------------------------------------- ------ ------- ------- (134.0) (138.1)Total liabilities (654.4) (369.3)-------------------------------------- ------ ------- -------Net assets 136.3 179.1-------------------------------------- ------ ------- -------EQUITYOrdinary share capital 1 45.9 46.1Share premium account 1 20.6 17.0Revaluation reserve 1 1.8 1.8Capital redemption reserve 1 3.9 3.5Fair value and other reserves 1 (0.5) -Cumulative translation adjustment 1 2.2 3.4Other reserve 1 (83.8) (83.8)Retained earnings 1 142.4 187.4-------------------------------------- ------ ------- -------Total shareholders' funds 132.5 175.4Equity minority interests 3.8 3.7-------------------------------------- ------ ------- -------Total equity 136.3 179.1-------------------------------------- ------ ------- ------- GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED 25 MARCH 2006 2006 2005 Notes £m £m Cash flows from operating activitiesCash generated from operations 6a 106.7 98.7Tax paid (10.1) (7.6)-------------------------------------- ------ ------- -------Net cash flows from operating activities 96.6 91.1-------------------------------------- ------ ------- ------- Cash flows from investing activitiesDisposal of subsidiary undertaking - 7.2Proceeds from sale of investment 0.8 -Acquisition of minority interests - (2.2)Purchases of property, plant and equipment (PPE) &software intangibles (19.6) (20.5)Development assets capitalised (3.7) (2.6)Proceeds from sale of PPE 1.6 7.1Income from investments 0.4 0.4Interest received 3.8 5.7Interest paid (1.5) (3.1)Dividends received from associates 8.1 5.6-------------------------------------- ------ ------- -------Net cash flows from investing activities (10.1) (2.4)-------------------------------------- ------ ------- -------Net cash inflow before financing activities 86.5 88.7Cash flows from financing activitiesProceeds from issue of share capital 6.3 2.7Own share purchase (7.8) -Proceeds from borrowing 2.4 3.1Repayment of borrowings (2.4) (23.1)Finance lease principal payments (4.3) (4.3)Dividends paid to shareholders (95.8) (25.8)Dividends paid to minority interests (0.9) (0.5)-------------------------------------- ------ ------- -------Net cash flows from financing activities (102.5) (47.9)-------------------------------------- ------ ------- -------Net increase in cash and cash equivalents in the year (16.0) 40.8Cash and cash equivalents at the beginning of the year 126.3 84.5Exchange rate effects (2.5) 1.0-------------------------------------- ------ ------- -------Cash and cash equivalents at the end of the year 107.8 126.3-------------------------------------- ------ ------- -------Cash and cash equivalents consist of: 6bCash at bank and in hand 318.6 40.3Short term bank deposits 70.2 100.4Bank overdrafts (281.0) (14.4)-------------------------------------- ------ ------- ------- 107.8 126.3-------------------------------------- ------ ------- ------- GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 25 MARCH 2006 2006 2005 £m £m Exchange differences (1.1) 3.4Actuarial gains on retirement benefit obligations 2.3 (22.1)Tax on actuarial gain on retirement benefit obligations (0.7) 6.7Cash flow hedges recognised (1.5) -Tax on cash flow hedges 0.1 -Net investment hedge 0.5 -Current tax on share options 0.8 -Deferred tax on share options 1.2 0.2Purchase of Treasury shares (7.8) -Allocation of Treasury shares 2.5 ------------------------------------------- ------- -------Net loss recognised directly in equity (3.7) (11.8)Profit for the financial year 51.8 34.6------------------------------------------ ------- -------Total recognised income and expense for the year 48.1 22.8Restatement for the effects of IAS32 and IAS39 (0.2) ------------------------------------------- ------- -------Total recognised income and expense for the year 47.9 22.8------------------------------------------ ------- ------- Total recognised income and expense for the year attributableto:Equity shareholders of De La Rue plc 47.9 22.7Minority interests - 0.1------------------------------------------ ------- ------- 47.9 22.8------------------------------------------ ------- ------- NOTES TO THE PRELIMINARY STATEMENT 1 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Attributable to equity shareholders Minority Total ------------------------------- interest equity Share Share Revaluation Capital Fair Cumulative Other Retained £m £m capital premium reserve redemption value translation reserve earnings account reserve and adjustment other reserve £m £m £m £m £m £m £m £m Balances at28 March 2004 45.8 14.6 1.8 3.5 - - (83.8) 194.0 3.8 179.7 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Exchangedifferences - - - - - 3.4 - - - 3.4Actuarialloss onretirement benefitobligations - - - - - - - (22.1) - (22.1)Tax onactuarialloss onretirement benefitobligations - - - - - - - 6.7 - 6.7Tax onshare options - - - - - - - 0.2 - 0.2 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Net lossrecogniseddirectly inequity - - - - - 3.4 - (15.2) - (11.8)Profit forthe financial year - - - - - - - 33.0 1.6 34.6 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Totalincomerecognisedfor the financialyear - - - - - 3.4 - 17.8 1.6 22.8Sharecapital issued 0.3 2.4 - - - - - - - 2.7Employeesharescheme: - value of services provided - - - - - - - 1.4 - 1.4Dividends - - - - - - - (25.8) (1.7) (27.5) ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Balance at26 March 2005 46.1 17.0 1.8 3.5 - 3.4 (83.8) 187.4 3.7 179.1Adoption ofIAS32 andIAS39 - - - - 0.4 (0.6) (0.2) ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Balance at27 March 2005 46.1 17.0 1.8 3.5 0.4 3.4 (83.8) 186.8 3.7 178.9 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Exchangedifferences - - - - - (1.2) - - 0.1 (1.1)Actuarialgain onretirement benefitobligations - - - - - - - 2.3 - 2.3Tax onactuarialloss onretirement benefitobligations - - - - - - - (0.7) - (0.7)Current taxon share options - - - - - - - 0.8 - 0.8Deferredtaxon share options - - - - - - - 1.2 - 1.2Cash flowhedgesrecognised - - - - (1.5) - - - - (1.5)Tax on cashflow hedges - - - - 0.1 - - - - 0.1Netinvestment hedge - - - - 0.5 - - - - 0.5Purchase ofTreasuryshares (0.4) - - 0.4 - - - (7.8) - (7.8)AllocationofTreasury shares - - - - - - - 2.5 - 2.5 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Net lossrecogniseddirectly inequity (0.4) - - 0.4 (0.9) (1.2) - (1.7) 0.1 (3.7)Profit forthe financial year - - - - - - - 50.9 0.9 51.8 ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Totalincomerecognised forthe year (0.4) - - 0.4 (0.9) (1.2) - 49.2 1.0 48.1Sharecapital issued 0.2 3.6 - - - - - - - 3.8Employeesharescheme - value of services provided - - - - - - - 2.2 - 2.2Dividendspaid (note 5) - - - - - - - (95.8) (0.9) (96.7) ----- ----- ------ ------ ------ ------ ----- ------ ----- -----Balance at25 March 2006 45.9 20.6 1.8 3.9 (0.5) 2.2 (83.8) 142.4 3.8 136.3 ----- ----- ------ ------ ------ ------ ----- ------ ----- ----- 2 SEGMENTAL ANALYSIS The Group's primary reporting format is by business segment. The Group isorganised on a worldwide basis into two business segments: Cash Systems andSecurity Paper and Print. The Group disposed of its investment in Sequoia VotingSystems during the prior year. The secondary reporting format is by geographicalsegment. The Cash Systems division is predominantly involved in the provision ofcash handling equipment and software solutions to banks and retailers worldwide.Security Paper and Print is involved in the production of national currenciesand a wide range of security documents such as authentication labels andidentity documents. Analysis by business segment 2006 2006 2006 2005 2005 2005 Cash Security Group Cash Security Group Systems Paper Systems Paper and and Print PrintContinuing operations £m £m £m £m £m £m Sales 292.4 318.4 610.8 302.2 317.9 620.1 ------- ------- ------ ------- ------- ------Underlying operating profit - segment result 18.4 51.0 69.4 9.4 45.4 54.8Exceptional items (3.4) 0.9 (2.5) (25.8) 1.2 (24.6) ------- ------- ------ ------- ------- ------Operating profit/(loss) 15.0 51.9 66.9 (16.4) 46.6 30.2Share of post tax profits ofassociates 6.8 6.4Net interest income 1.8 2.5Retirement obligationsnet finance (cost)/income (1.8) 1.5 ------ ------Profit before taxation 73.7 40.6Taxation (21.9) (12.9) ------ ------Profit after taxation 51.8 27.7 ------- ------- ------ ------- ------- ------Discontinued activitiesProfit from discontinuedoperations - 6.9 ------- ------- ------ ------- ------- ------Profit for the year 51.8 34.6 ------- ------- ------ ------- ------- ------Segment assets 118.6 176.6 295.2 110.6 186.6 297.2Unallocated assets 495.5 251.2 ------- ------- ------ ------- ------- ------Total assets 790.7 548.4 ------- ------- ------ ------- ------- ------Segment liabilities (99.8) (83.9) (183.7) (88.8) (79.8) (168.6)Unallocated liabilities (470.7) (200.7) ------- ------- ------ ------- ------- ------Total liabilities (654.4) (369.3) ------- ------- ------ ------- ------- ------Capital expenditure onproperty, plant andequipment 4.7 10.4 15.1 7.4 11.9 19.3Capital expenditure onintangible assets 5.1 3.2 8.3 3.0 1.4 4.4Depreciation of property,plant and equipment 6.0 17.6 23.6 6.6 19.8 26.4Amortisation of intangibleassets 2.3 1.1 3.4 1.9 0.3 2.2Impairment of goodwill - - - 11.5 - 11.5 ------- ------- ------ ------- ------- ------Analysis by UK & Rest of The Rest of Groupgeographical Ireland Europe Americas Worldsegment 2006 £m £m £m £m £m Sales by destination 76.8 190.9 129.8 213.3 610.8 ------ ------ ------- ------- ------Segment assets 146.3 79.9 49.5 19.5 295.2Unallocated assets 495.5 ------Total assets 790.7 ------Capital expenditure onproperty, plant andequipment 8.3 3.9 1.8 1.1 15.1Capital expenditure onintangible assets 5.3 2.6 0.4 - 8.3 ------ ------ ------- ------- ------Analysis by geographicalsegment 2005Sales by destination 70.0 182.2 153.6 214.3 620.1 ------ ------ ------- ------- ------Segment assets 147.0 79.7 47.8 22.7 297.2Unallocated assets 251.2 ------Total assets 548.4 ------Capital expenditure onproperty, plant andequipment 9.3 3.6 5.1 1.3 19.3Capital expenditure onintangible assets 1.8 1.8 0.8 - 4.4 ------ ------ ------- ------- ------ Underlying operating profit comprises operating profit before exceptional items.Unallocated assets principally comprise centrally managed property, plant andequipment, associates and other investments, deferred tax assets, derivativefinancial instrument assets and cash and cash equivalents which are used as partof the Group's financing offset arrangements. Unallocated liabilities compriseborrowings, derivative financial instrument liabilities, current and non-currenttax, deferred tax liabilities, retirement benefit obligations, and centrallyheld accruals and provisions. 3 TAXATION 2006 2006 2006 2005 2005 2005 Before Exceptional Total Before Exceptional Total exceptionals items exceptionals items £m £m £m £m £m £m Current tax 19.0 (0.6) 18.4 11.6 11.6Deferred tax 3.4 0.1 3.5 5.6 (4.3) 1.3 -------- -------- ------ -------- -------- ------ 22.4 (0.5) 21.9 17.2 (4.3) 12.9 -------- -------- ------ -------- -------- ------ The tax on the Group's consolidated profit before tax differs from the UK taxrate of 30% as follows: 2006 2006 2006 2005 2005 2005 Before Exceptional Total Before Exceptional Total exceptionals items exceptionals items £m £m £m £m £m £mProfit before tax 76.2 (2.5) 73.7 65.2 (24.6) 40.6 -------- -------- ------ -------- -------- ------Tax calculatedat UK tax rate at 30% 22.9 (0.7) 22.2 19.6 (7.4) 12.2Rate adjustmentrelating to overseasprofits (1.3) (1.3) (2.3) (2.3)Overseas dividends 1.9 1.9 0.6 0.6Income not subject to tax (0.1) (0.1) (2.0) (2.0)Expenses not deductiblefor tax purposes 2.4 0.3 2.7 1.3 5.1 6.4Adjustment for tax on profits of associate (2.1) (2.1) (1.9) (1.9)Prior year adjustments (1.1) (1.1) (1.2) (1.2)Utilisation ofpreviously unrecognised tax losses (0.3) (0.3)Tax losses for which nodeferred income taxasset was recognised - - 1.1 1.1 -------- -------- ------ -------- -------- ------Tax charge 22.4 (0.5) 21.9 17.2 (4.3) 12.9 -------- -------- ------ -------- -------- ------ Deferred income tax assets are recognised for tax loss carry-forwards to theextent that the realisation of the related tax benefit through future taxableprofits is probable. The Group did not recognise deferred income tax assets of £6.9m (2005: £7.2m) inrespect of losses amounting to £18.2m (2005: £21.3m) that can be carried forwardagainst future taxable income. 4 EARNINGS PER SHARE 2006 2005 pence per pence per share share------------------------------- -------- --------Basic earnings per share 30.2 18.5Diluted earnings per share 29.4 18.4Headline earnings per share 31.4 25.9------------------------------- -------- -------- Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year, excluding those held in the employee share trustwhich are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted for the impact of dilutive share options. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below. 2006 2005 Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share £m m pence £m m pence ---------------- -------- -------- --------- -------- -------- --------Basic EPS 50.9 168.6 30.2 33.0 178.3 18.5Effect ofdilutiveoptions 4.5 (0.8) - 1.1 (0.1)---------------- -------- -------- --------- -------- -------- --------Diluted EPS 50.9 173.1 29.4 33.0 179.4 18.4---------------- -------- -------- --------- -------- -------- -------- The Directors are of the opinion that the publication of the headline earningsper share is useful to readers of interim statements and annual accounts as theygive an indication of underlying business performance. Reconciliation of headline earnings per share 2006 2005 pence per pence per share shareBasic earnings per share 30.2 18.5Income from investment previously impaired (0.2) (0.2)Profit on disposal of investments (0.5) -Profit on disposal of discontinued operations - (5.0)Impairment of goodwill - 6.4Reorganisation costs 1.9 6.2---------------------------- -------- --------Headline earnings per share 31.4 25.9---------------------------- -------- -------- 5 EQUITY DIVIDENDS 2006 2005 £m £mFinal dividend for 2004/05 of 10.6p paid on 5.8.2005 19.1 -Special dividend of 38.0p paid on 5.8.2005 68.3 -Interim dividend for 2005/06 of 5.2p paid on 18.1.2006 8.4 -Final dividend for 2003/04 of 9.8p paid on 6.8.2004 - 17.5Interim dividend for 2004/05 of 4.7p paid on 19.1.2005 - 8.3--------------------------------- -------- -------- 95.8 25.8--------------------------------- -------- -------- A final dividend per equity share of 11.8 pence has been proposed for the yearended 25 March 2006, payable on 4 August 2006. In accordance with IFRSaccounting requirements this dividend has not been accrued in these consolidatedfinancial statements. 6 NOTES TO GROUP CASH FLOW STATEMENT 2006 2005 £m £ma Cash generated from operating activities Profit before tax 73.7 49.3* Adjustments for: Finance income and expense - (4.0) Depreciation and amortisation 27.0 28.6 Goodwill impairment - 11.5 Decrease in inventories 3.5 25.5 (Increase)/decrease in trade and other receivables (5.6) 22.7 Increase/(decrease) in trade and other payables 16.6 (20.7) Decrease in reorganisation provisions (3.4) (0.9) Profit on the disposal of discontinued operations - (8.9) Loss on disposal of fixed assets 1.2 - Share of income from associates after tax (6.8) (6.4) Income from investments (1.2) (0.4) Other non-cash movements 1.7 2.4 --------------------------- ------- ------ Cash generated from operations 106.7 98.7 --------------------------- ------- ------ b Analysis of net cash Cash at bank and in hand 318.6 40.3 Short-term bank deposits 70.2 100.4 Bank overdrafts (281.0) (14.4) --------------------------- ------- ------ Total cash and cash equivalents 107.8 126.3 Other debt due within one year (3.6) (3.4) Borrowings due after one year (12.6) (16.4) --------------------------- ------- ------ Net cash at end of period 91.6 106.5 --------------------------- ------- ------ * Profit before tax includes pretax result of discontinued operations of £8.7m,consisting of £8.9m profit on disposal and loss before tax of £0.2m 7 The consolidated accounts have been prepared as at 25 March 2006, being thelast Saturday in March. The comparatives for the 2005 financial year are for theyear ended 26 March 2005. 8 This statement has been prepared in accordance with the guidelines publishedby the Accounting Standards Board. 9 The financial information set out above (Group profit and loss account, Groupbalance sheet, Group cash flow statement, Group statement of total recognisedgains and losses and notes thereto) and extracts from the financial review donot constitute statutory accounts for those years within the meaning of Section240 of the Companies Act 1985. Statutory accounts for the year ended 25 March 2006 will be posted toshareholders on 16 June 2006 for subsequent approval at the Annual GeneralMeeting and copies will be available from the Company Secretary at De La Rueplc, De La Rue House, Jays Close, Viables, Hampshire, RG22 4BS. The report ofthe auditors on these accounts is unqualified and does not contain a statementunder either Section 237(2) or 237(3) of the Companies Act 1985. Financialstatements for 2004/05 have been delivered to the Registrar and included theauditors' report which was unqualified and did not contain a statement eitherunder Section 237(2) of the Companies Act 1985 (accounting records or returnsinadequate or accounts not agreeing with records and returns), or Section 237(3)(failure to obtain necessary information and explanations). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
De La Rue