22nd May 2007 07:02
De La Rue PLC22 May 2007 DE LA RUE PLC PRELIMINARY STATEMENT YEAR TO 31 MARCH 2007 HIGHLIGHTS • Revenue up 12.6% to £687.5m • Profit before tax and exceptionals up 34.4% to £102.4m • Margins up 1.7 percentage points to 13.1% • Headline earnings per share up 39.8% to 43.9p • Continued strong cash generation at £144.5m, net cash at £137.3m • Dividend increase of 12.4% to 19.1p • Special dividend announced today of 46.5p per share (£75m) • UK Pension Scheme review completed KEY FINANCIALS 2006/2007 2005/2006 Change £m £m %Revenue 687.5 610.8 12.6%Profit before tax and exceptional items* 102.4 76.2 34.4%Profit before tax 102.4 73.7 38.9% Headline earnings per share* 43.9p 31.4p 39.8%Basic earnings per share 43.9p 30.2p 45.4%Operating cash flow 144.5 106.7 35.4%Net cash at end of year 137.3 91.6Dividend per share 19.1p 17.0p 12.4% *before net exceptional charges of £nil (2005/2006 : £2.5m) Nicholas Brookes, Chairman of De La Rue plc, commented: "Ongoing operational and margin improvements, together with buoyant marketdemand, contributed to the Group's excellent results in 2006/2007. "The Group's strong balance sheet and the cash generative nature of the coreoperations provide the opportunity to continue our strategy of returning surpluscash flow to shareholders, while investing appropriately for growth in our corebusinesses. In line with this strategy, the Board has announced today itsintention to return approximately £75m to shareholders, by way of a specialdividend equivalent to 46.5p per share, accompanied by a share consolidation. "We enter 2007/2008 with a strong order backlog in both operating divisionsproviding a solid platform for the year ahead. Cash Systems will continue tobenefit from the supply chain improvements completed last year which should helpus address the increasingly competitive environment in the US market. The strongorder book in Currency is expected to result in the business running throughout2007/2008 at the high levels of capacity experienced in the second half of 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 22 May 2007 SUMMARY OF GROUP RESULTS De La Rue is pleased to report another strong performance for the year ended 31March 2007, with all key performance indicators showing good improvements over2005/2006. This reflected further margin and operational efficiency improvementswhich demonstrate the significant progress the Group continues to make inimplementing its strategy. Furthermore there was continued revenue growth in theCash Systems division during the second half as our investments in new products,sales capability and geographical expansion show through in the results. Sales increased by £76.7m or 12.6 per cent to £687.5m (2005/2006 : £610.8m) andunderlying profit before tax* increased by £26.2m or 34.4 per cent to £102.4m(2005/2006 : £76.2m). Operating profits* of £90.4m represented an increase of£21.0m or 30.3 per cent compared with last year (2005/2006 : £69.4m). Headlineearnings per share* increased by 39.8 per cent to 43.9p (2005/2006 : 31.4p)reflecting the improved trading performance. Basic earnings per share were 43.9pcompared with 30.2p in 2005/2006 representing an increase of 45.4 per cent. In Security Paper and Print, strong banknote volumes (up 19.5 per cent on 2005/2006) and paper volumes (up 3.6 per cent on 2005/2006) produced anotherexcellent full year result with the business operating at near capacity levelsthroughout the second half. In Cash Systems the first full year of benefits ofthe restructuring actions, taken previously, and continued strong growth in USTeller Automation resulted in further margin improvements. Overall Groupoperating margins were 1.7 percentage points higher at 13.1 per cent (2005/2006: 11.4 per cent). Cash generation was again strong with operating cash flow of £144.5mrepresenting the fourth successive year on year increase (2005/2006 : £106.7m).This reflected both higher profits and strong working capital management, thelatter enhanced by an exceptionally high level of customer advance payments of£76.8m, significantly reflecting a large receipt from a single customer in thelast week of the financial year. Following payments in total of £28.3m inrespect of dividends and the ongoing share buy back programme (£29.2m), theGroup ended the year with net cash on the balance sheet of £137.3m (2005/2006net cash : £91.6m). *before net exceptional charges of £nil (2005/2006 : £2.5m) Extracts from the Operational Review SECURITY PAPER AND PRINT 2006/2007 2005/2006 Change £m £m %Sales 354.5 318.4 +11.3%Underlying operating profit* 61.7 51.0 +21.0% * before exceptional income of £nil (2005/2006 : income of £0.9m). A significant driver behind the improved divisional result was the Currencyactivities which had another excellent year, with the banknote businessoperating at near capacity levels in the second half. Overall, banknote volumesincreased by 19.5 per cent (2005/2006 : decrease of 11.4 per cent) over theprior year, attaining a level even higher than that achieved in the Iraqcontract year in 2003/2004. This was partly offset by a less favourable work mixcompared to the corresponding period last year with an average contribution per1000 notes down 12.6 per cent. The higher overall volumes partly reflectedincreased overspill which was 26 per cent of the total compared to 17 per centin the corresponding period last year. In particular, the second half overspilllevels were more than double the comparative period. In addition, banknote papervolumes rose by 3.6 per cent (2005/2006 : increase of 5%) partly driven by thestrong print order book. Looking forward the order book in Currency remainsstrong, providing good visibility for the majority of 2007/2008. The Security Products and Identity Systems businesses also performed well drivenprincipally by strong demand for authentication labels and a strong increase inpassport orders. De La Rue's strength is in machine readable passports and weare now expanding our capability to offer ePassports. As a consequence, we areinvesting in a new dedicated ePassport manufacturing facility in Malta, which isexpected to be completed in the last quarter of 2007/2008. CASH SYSTEMS 2006/2007 2005/2006 Change £m £m %Sales 333.0 292.4 +13.9%Underlying operating profit* 28.7 18.4 +56.0% *before net exceptional charges of £nil (2005/2006: £3.4m) In Cash Systems, revenues of £333.0m grew by 13.9 per cent (2005/2006 : £292.4m)and underlying operating profits of £28.7m were strongly ahead of last year(2005/2006 : £18.4m) reflecting both the full benefits of restructuring actionsand increased sales volumes through the fixed cost base. The adverse impact offoreign exchange during the year of £1.5m was significantly mitigated by theoutsourcing of component parts to US$ based Chinese manufacturing. Tradingmargins improved by 2.3 percentage points, to 8.6 per cent, compared with 6.3per cent last year. Teller automation volumes were significantly up on the same period last yeardriven principally by continued growth in North America, now the largest singlemarket for our products. However, competition is increasing in the TellerAutomation segment. Over the past two years we have invested in expanding thesales force in our growth regions and training our sales force in all regions.In October, De La Rue launched its new teller cash recycling solution, theVERTERATM. Building directly on De La Rue's leading cash recycler, the highlyacclaimed TCR Twin Safe(R), VERTERATM offers significantly enhanced detectionfeatures, including fitness sorting capabilities, increased performance andreliability - meeting the increasing demand for a smaller footprint machine. The Sorter business had an improved year with double digit volume growth in bothlarge and medium sized sorters. The OEM (ATM mechanisms) and Desktop Productsshowed strong volume growth in products partially offset by some price erosion.Both businesses benefited from a lower manufacturing cost base during the secondhalf, reflecting the benefits of our continued outsourcing of productioncapacity to China. During the year the DTP business also launched the EV86-Series which is the next generation banknote counter to the 2600 series. Theproduct has been well received by our customers. RETURNS TO SHAREHOLDERS Final Dividend The Board is recommending an increased final dividend of 13.27p per share,subject to shareholders' approval. This will be paid on 3 August 2007 toshareholders on the register on 13 July 2007. Together with the increasedinterim dividend paid in January 2007, this will give a total dividend for theyear of 19.1p, an overall increase of 12.4 per cent on last year. Share Buy Back The Board announced at the interim results in November 2005 its intention to usethe existing 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. During the year Company acquired 4.9 million shares under the share buyback programme at a cost of £29.2m, bringing the total number of shares acquiredsince the commencement of the programme, in December 2005, to 6.5 million at acost of £37.0m. The Board expects to continue this programme, funded withsurplus cash and will seek shareholder approval to renew its existing authorityat the AGM. The exact amount and timing of future purchases will be dependent onmarket conditions and ongoing cash generation. Special Dividend The Board has also announced today its intention to return approximately £75m toshareholders, equivalent to 46.5 pence per share, through a special dividendaccompanied by a share consolidation. The capital return is consistent with theBoard's strategy to return surplus cash to shareholders and follows the specialdividend paid in August 2005 of £68.3m, equivalent to 38.0p per share. The Boardalso intends to seek shareholder approval for the renewal of its existinggeneral authority to make market purchases of shares. The special dividend will be accompanied by a share consolidation which willreduce the number of De La Rue shares in issue by approximately 6.7 per cent, ona basis of 14 new shares for every 15 presently held and assist in maintainingthe comparability with historic earnings and dividend per share and withhistoric share prices. The payment of the special dividend is dependent on theapproval of the consolidation at the AGM on 26 July 2007. UK PENSION SCHEME Funding The Group's last formal (triennial) funding valuation of the Company's definedbenefit pension Scheme took place on 6 April 2006 and identified the Scheme tohave a funding deficit of £56m (6 April 2003 : £(39)m). The deficit has arisenprimarily as a result of significant increases in life expectancy and reduceddiscount rates on liabilities. In April 2004, the Final Salary Section was closed to new entrants with newemployees joining the De La Rue Retirement Plan which is a combination of a 1/100ths accrual Final Salary section and a defined contribution arrangement. Coincident with this valuation, De La Rue entered into consultation with memberswith a view to making changes to the structure of the Scheme and benefits goingforward from April 2007. This consultation has now been completed and thefollowing changes have now been agreed and will be implemented from 1 June 2007. • Normal Retirement Age An increase in the Normal Retirement Age (NRA) of members from 62 to 65 and a removal of the discretionary right to retire at 60 without actuarial reduction. Retirement before the new NRA will now result in a 5% per annum reduction in members' pension. • Contribution Rates An increase in member contributions of 1.0% per annum equivalent to £0.4m, achieved through two 0.5% increases, effective 1 June 2007 and 1 June 2008. • Mortality Risk Members to fund 100% of future cost of increases in life expectancy of active members. This will be implemented through an ongoing adjustment to the pension accrual rate to adjust for any additional life expectancy increase. The Group has also agreed with the Trustee to pay down this deficit over aperiod of six years, subject to reassessment of the existence of the deficit atthe next triennial valuation, and the first payment of £7.0m was made into theScheme in March 2007. Overall, the Group feels these changes fairly reflect a more appropriate sharingof the costs and risks associated with the continued provision of a Final Salary(Defined Benefit) Section. IAS 19 Accounting The valuation under IAS 19 principles indicates a scheme deficit after tax at 31March 2007 of £72.7m (March 2006 : £80.5m). The charge to operating profits inrespect of the UK Pension Scheme for 2006/2007 was £9.8m (2005/2006 : £9.1m). Inaddition, under IAS 19 there is a finance credit of £1.8m arising from thedifference between the expected return on assets and the interest on liabilities(2005/2006 : £1.8m charge). This amount is included with the Group interestincome in the profit and loss account. Associates The main associated company is Camelot, the UK lottery operator. Profit fromassociates after tax was lower at £6.6m (2005/2006 : £6.8m) reflecting bidpreparation costs for the third lottery licence running from 2009 to 2019.Dividends received from associates of £6.2m were lower than last year's incomeof £8.1m, due to a one-off payment in the prior year. The successful bidder forthe third lottery licence is expected to be announced by the National LotteryCommission in Summer 2007. Interest The Group's net interest income was £3.6m, which was £1.8m higher than theprevious year. In addition the IAS 19 related finance item, arising from thedifference between the expected return on assets and the interest onliabilities, is included here and was a credit of £1.8m compared with a chargeof £1.8m the previous year. Taxation The underlying effective tax rate excluding exceptional items was 29.9 per cent(2005/2006 : 29.4 per cent), the increase reflecting the mix of taxable profitsfrom overseas activities and the elimination of tax losses in the USA. Cash Flow and Borrowings During the year operating cash flow was £144.5m compared with £106.7m in 2005/2006 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, which totalled £76.8m at March 2007. Capitalexpenditure of £29.7m was higher than depreciation reflecting the investment ina new banknote printing press in Malta. After payment of the 2005/2006 final dividend (£19.0m), the 2006/2007 interimdividend (£9.3m) and £29.2m in respect of the ongoing share buy back programme,closing net cash was £137.3m compared with £91.6m at last year end. Foreign Exchange Principal exchange rates used in translating the Group's results: ------------- -------- -------- -------- --------£ 2006/2007 2007 2005/2006 2006 Average Year End Average Year end------------- -------- -------- -------- --------US dollar 1.89 1.96 1.79 1.74Euro 1.47 1.47 1.46 1.45Swedish Krona 13.59 13.76 13.69 13.58------------- -------- -------- -------- --------$Swedish Krona 7.19 7.02 7.65 7.80------------- -------- -------- -------- -------- 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 31 March 2007 adverse foreign exchange impacted theGroup profits by £4.2m mostly arising from transaction exposure. CHANGES TO THE BOARD Michael Jeffries will resign as a non-executive Director with effect from theend of the Annual General Meeting on 26 July 2007. He will be succeeded assenior independent non-executive Director by Keith Hodgkinson, the Chairman ofthe Audit Committee and by Gill Rider as Chairman of the Remuneration Committee.The Board would like to thank Mike for his significant contribution over thepast seven years. Gill Rider was appointed to the Board on 22 June 2006 as a non-executiveDirector. Gill is Director General, Leadership and People Strategy in theCabinet Office. She started her career with Accenture in 1979 in various rolesbefore being appointed global Chief Leadership Officer in 2002. Warren East was appointed to the Board on 9 January 2007 as a non-executiveDirector. Warren is Chief Executive of ARM Holdings plc, the developer andlicensor of microprocessors, having joined in 1994. Mr East previously workedfor Texas Instruments Inc in a variety of roles in the semiconductor and telecomproducts divisions. Outlook We enter 2007/2008 with a strong order backlog in both operating divisionsproviding a solid platform for the year ahead. Cash Systems will continue tobenefit from the supply chain improvements completed last year which will helpus address the increasingly competitive environment in the US market. The strongorder book in Currency is expected to result in the business running throughout2007/2008 at the high levels of capacity experienced in the second half of 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 ofsecurity documents such as passports, authentication labels and fiscal stamps.The Company is also pioneering new technologies worldwide in government identitysolutions for national identification, drivers licence and passport issuingschemes. Employing over 6,000 people across 31 countries, it is also a leadingprovider of cash handling equipment and software solutions to banks andretailers 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 athttp://www.newscast.co.uk/ (+44 (0) 207 608 1000). 4. De La Rue Financial Calendar: 2007/2008Ex-dividend date 11 July 2007Record date (Ordinary Dividend) 13 July 2007Annual General Meeting 26 July 2007Payment of 2006/7 final dividend and Special Dividend 3 August 20072007/8 Interim Results 27 November 2007 GROUP INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 2007 2007 2007 2007 2006 2006 2006 £m £m £m £m £m £m Before Exceptional Before ExceptionalNotes Note Exceptionals Items Total Exceptionals Items Total Continuing Operations Sales 2 687.5 - 687.5 610.8 - 610.8 Operating expenses (597.1) - (597.1) (541.4) (3.7) (545.1)Other income - - - - 1.2 1.2 Operating profit 90.4 - 90.4 69.4 (2.5) 66.9 Share of profits of associated companies after taxation 2 6.6 - 6.6 6.8 - 6.8Interest income 5.1 - 5.1 3.8 - 3.8Interest expense (1.5) - (1.5) (2.0) - (2.0)Retirement benefit obligation financeincome 32.4 - 32.4 29.1 - 29.1Retirement benefit obligation financecost (30.6) - (30.6) (30.9) - (30.9)-------------------------------------- ------ ------- ------- ------- ------- ------- -------Profit before taxation 102.4 - 102.4 76.2 (2.5) 73.7Taxation 3 (30.6) (30.6) (22.4) 0.5 (21.9)-------------------------------------- ------ ------- ------- ------- ------- ------- --------------------------------------------- ------ ------- ------- ------- ------- ------- -------Profit for the financial year 71.8 - 71.8 53.8 (2.0) 51.8-------------------------------------- ------ ------- ------- ------- ------- ------- -------Profit attributable to equityshareholders of the Company 70.2 50.9Profit attributable to minority interests 1.6 0.9-------------------------------------- ------ ------- ------- ------- ------- ------- ------- 71.8 51.8-------------------------------------- ------ ------- ------- ------- ------- ------- --------------------------------------------- ------ ------- ------- ------- ------- ------- -------Basic earnings per ordinary share - continuing operations 4 43.9p 30.2pDiluted earnings per ordinary share- continuing operations 4 42.9p 29.4p-------------------------------------- ------ ------- ------- ------- ------- ------- ------- GROUP BALANCE SHEETAT 31 MARCH 2007 2007 2006 Note Group Group £m £m ASSETSNon-current assetsProperty, plant and equipment 139.4 139.3Intangible assets 30.3 28.9Investments in associates and joint ventures 13.1 12.7Available for sale financial assets 0.4 0.5Deferred tax assets 51.4 53.9Other receivables 0.2 0.2Derivative financial instruments 0.3 --------------------------------------- ------ ------- ------- 235.1 235.5-------------------------------------- ------ ------- -------Current assetsInventories 87.5 71.6Trade and other receivables 97.0 92.2Current tax assets 1.4 1.3Derivative financial instruments 1.0 1.3Cash and cash equivalents 149.1 388.8-------------------------------------- ------ ------- ------- 336.0 555.2-------------------------------------- ------ ------- -------Total assets 571.1 790.7-------------------------------------- ------ ------- ------- LIABILITIESCurrent liabilitiesBorrowings (1.7) (284.6)Trade and other payables (238.7) (182.5)Current tax liabilities (24.9) (29.8)Derivative financial instruments (1.5) (1.2)Provisions for other liabilities and charges (17.8) (22.3)-------------------------------------- ------ ------- ------- (284.6) (520.4) Non-current liabilitiesBorrowings (10.1) (12.6)Retirement benefit obligations (108.1) (119.6)Deferred tax liabilities (2.1) (0.8)Derivative financial instruments (0.3) (0.5)Other non-current liabilities (1.0) (0.5)-------------------------------------- ------ ------- ------- (121.6) (134.0)Total liabilities (406.2) (654.4)-------------------------------------- ------ ------- --------------------------------------------- ------ ------- -------Net assets 164.9 136.3-------------------------------------- ------ ------- ------- EQUITYOrdinary share capital 1 44.7 45.9Share premium account 1 21.4 20.6Capital redemption reserve 1 5.3 3.9Fair value reserve 1 (0.6) (0.5)Cumulative translation adjustment 1 (0.7) 2.2Other reserve 1 (83.8) (83.8)Retained earnings 1 173.6 144.2-------------------------------------- ------ ------- -------Total equity attributable to shareholders of the 159.9 132.5CompanyEquity minority interests 1 5.0 3.8-------------------------------------- ------ ------- -------Total equity 164.9 136.3-------------------------------------- ------ ------- ------- GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 Notes £m £m Cash generated from operating activitiesProfit before tax 102.4 73.7Adjustments for:Finance income and expense (5.4) -Depreciation and amortisation 26.9 27.0(Increase)/decrease in inventory (18.6) 3.5Increase in trade and other receivables (9.3) (5.6)Increase in trade and other payables 54.7 16.6Decrease in reorganisation provisions (3.6) (3.4)Loss on disposal of fixed assets 1.0 1.2Share of income from associates after tax (6.6) (6.8)Income from investments - (1.2)Other non-cash movements 3.0 1.7-------------------------------------- ------ ------- -------Cash generated from operations 144.5 106.7Tax paid (28.2) (10.1)-------------------------------------- ------ ------- -------Net cash flows from operating activities 116.3 96.6-------------------------------------- ------ ------- ------- Cash flows from investing activitiesDisposal of subsidiary undertaking 1.0 -Proceeds from sale of investment - 0.8Purchases of property, plant and equipment (PPE) &software intangibles (29.7) (19.6)Development assets capitalised (4.1) (3.7)Proceeds from sale of PPE 0.7 1.6Proceeds from investments previously impaired - 0.4Interest received 5.2 3.8Interest paid (1.0) (1.5)Dividends received from associates 6.2 8.1-------------------------------------- ------ ------- -------Net cash flows from investing activities (21.7) (10.1)-------------------------------------- ------ ------- -------Net cash inflow before financing activities 94.6 86.5Cash flows from financing activitiesProceeds from issue of share capital 7.1 6.3Own share purchase (29.2) (7.8)Proceeds from borrowing - 2.4Repayment of borrowings (1.5) (2.4)Finance lease principal payments (3.6) (4.3)Dividends paid to shareholders (28.3) (95.8)Dividends paid to minority interests (0.4) (0.9)-------------------------------------- ------ ------- -------Net cash flows from financing activities (55.9) (102.5)-------------------------------------- ------ ------- -------Net increase/(decrease) in cash and cash equivalentsin 38.7 (16.0)the yearCash and cash equivalents at the beginning of the year 107.8 126.3Exchange rate effects 2.5 (2.5)-------------------------------------- ------ ------- -------Cash and cash equivalents at the end of the year 149.0 107.8-------------------------------------- ------ ------- -------Cash and cash equivalents consist of:Cash at bank and in hand 40.3 318.6Short term bank deposits 108.8 70.2Bank overdrafts (0.1) (281.0)-------------------------------------- ------ ------- ------- 6 149.0 107.8-------------------------------------- ------ ------- ------- GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 £m £m Exchange differences (2.9) (1.1)Actuarial gain on retirement benefit obligations 3.5 2.3Tax on actuarial gain on retirement benefit obligations (1.0) (0.7)Cash flow hedges recognised - (1.5)Tax on cash flow hedges - 0.1Net investment hedge (0.1) 0.5Current tax on share options 0.7 0.8Deferred tax on share options 4.3 1.2------------------------------------------ ------- -------Net gains recognised directly in equity 4.5 1.6Profit for the financial year 71.8 51.8------------------------------------------ ------- -------Total recognised income and expense for the year 76.3 53.4------------------------------------------ ------- ------- Total recognised income and expense for the year attributableto:Equity shareholders 74.7 52.4Minority interests 1.6 1.0------------------------------------------ ------- ------- 76.3 53.4------------------------------------------ ------- ------- NOTES TO THE PRELIMINARY STATEMENT 1 RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVES Attributable to equity shareholders Minority Total interest equity Share Share Capital Fair Cumulative Other Retained capital premium redemption value translation reserve earnings account reserve reserve adjustment £m £m £m £m £m £m £m £m £m Balances at 27 March 2005 46.1 17.0 3.5 0.4 3.4 (83.8) 188.6 3.7 178.9 ----- ------- ------- ------ -------- ------ ------ ------ -----Exchange differences - - - - (1.2) - - 0.1 (1.1)Actuarial gain on retirement benefit obligations - - - - - - 2.3 - 2.3Tax on actuarial gain on retirementbenefit obligations - - - - - - (0.7) - (0.7)Tax on share options - - - - - - 0.8 - 0.8Deferred tax on share options - - - - - - 1.2 - 1.2Cash flow hedges recognised - - - (1.5) - - - - (1.5)Tax on cash flow hedges - - - 0.1 - - - - 0.1Net investment hedge - - - 0.5 - - - - 0.5 ----- ------- ------- ------ -------- ------ ------ ------ -----Net gain recognised directly inequity - - - (0.9) (1.2) - 3.6 0.1 1.6Profit for the financial year - - - - - - 50.9 0.9 51.8 ----- ------- ------- ------ -------- ------ ------ ------ -----Total income recognised forthe year - - - (0.9) (1.2) - 54.5 1.0 53.4Share capital issued 0.2 3.6 - - - - - - 3.8Purchase of shares forcancellation (0.4) - 0.4 - - - (7.8) - (7.8)Allocation of shares forcancellation - - - - - - 2.5 - 2.5Employee share scheme: - value of services provided - - - - - - 2.2 - 2.2Dividends paid - - - - - - (95.8) (0.9) (96.7) ----- ------- ------- ------ -------- ------ ------ ------ -----Balance at 25 March 2006 45.9 20.6 3.9 (0.5) 2.2 (83.8) 144.2 3.8 136.3 ----- ------- ------- ------ -------- ------ ------ ------ ----- ----- ------- ------- ------ -------- ------ ------ ------ -----Exchange differences - - - - (2.9) - - - (2.9)Actuarial gain on retirement benefitobligations - - - - - - 3.5 - 3.5Tax on actuarial gain on retirementbenefit obligations - - - - - - (1.0) - (1.0)Tax on share options - - - - - - 0.7 - 0.7Deferred tax on share options - - - - - - 4.3 - 4.3Cash flow hedges recognised - - - - - - - - -Tax on cash flow hedges - - - - - - - - -Net investment hedge - - - (0.1) - - - - (0.1) ----- ------- ------- ------ -------- ------ ------ ------ -----Net gain recognised directly inequity - - - (0.1) (2.9) - 7.5 - 4.5Profit for the financial year - - - - - - 70.2 1.6 71.8 ----- ------- ------- ------ -------- ------ ------ ------ -----Total income recognised forthe year - - - (0.1) (2.9) - 77.7 1.6 76.3Share capital issued 0.2 0.8 - - - - - - 1.0Purchase of shares for cancellation (1.4) - 1.4 - - - (29.2) - (29.2)Allocation of shares for cancellation - - - - - - 6.1 - 6.1Employee share scheme - value of services provided - - - - - - 3.1 - 3.1Dividends paid - - - - - - (28.3) (0.4) (28.7) ----- ------- ------- ------ -------- ------ ------ ------ -----Balance at 31 March 2007 44.7 21.4 5.3 (0.6) (0.7) (83.8) 173.6 5.0 164.9 ----- ------- ------- ------ -------- ------ ------ ------ ----- 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 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 2007 2007 2007 2006 2006 2006 Cash Security Group Cash Security Group Systems Paper and Systems Paper and Print PrintContinuing operations £m £m £m £m £m £m Sales 333.0 354.5 687.5 292.4 318.4 610.8 ------- ------- ------ ------- --------- ------Underlying operating profit -segment result 28.7 61.7 90.4 18.4 51.0 69.4Exceptional items - - - (3.4) 0.9 (2.5) ------- ------- ------ ------- --------- ------Operating profit 28.7 61.7 90.4 15.0 51.9 66.9Share of post tax profits of associates 6.6 6.8Net interest income 3.6 1.8Retirement obligations net financeincome/(cost) 1.8 (1.8) ------ ------Profit before taxation 102.4 73.7Taxation (30.6) (21.9)------------------- ------- ------- ------ ------- --------- ------Profit for the financial year 71.8 51.8------------------- ------- ------- ------ ------- --------- ------Segment assets 129.4 187.4 316.8 118.6 176.6 295.2Unallocated assets 254.3 495.5------------------- ------- ------- ------ ------- --------- ------Total assets 571.1 790.7------------------- ------- ------- ------ ------- --------- ------Segment liabilities (107.8) (128.4) (236.2) (99.8) (83.9) (183.7)Unallocated liabilities (170.0) (470.7)------------------- ------- ------- ------ ------ ------- --------- ------Total liabilities (406.2) (654.4)------------------- ------- ------- ------ ------ ------- --------- ------Capital expenditure on property,plant and equipment 3.0 23.3 26.3 4.7 10.4 15.1Capital expenditure onintangible assets 6.7 1.1 7.8 5.1 3.2 8.3Depreciation of property,plant and equipment 5.5 16.8 22.3 6.0 17.6 23.6Amortisation of intangible assets 3.7 0.9 4.6 2.3 1.1 3.4------------------- ------- ------- ------ ------ ------- --------- ------ Analysis by geographical UK & Rest of The Rest of Groupsegment 2007 Ireland Europe Americas World £m £m £m £m £mSales by destination 72.1 206.6 160.4 248.4 687.5 ------ ------ ------- --------- ------Segment assets 148.8 98.3 47.9 21.8 316.8Unallocated assets 254.3 ------Total assets 571.1 ------Capital expenditure on property,plant and equipment 10.0 14.2 1.2 0.9 26.3Capital expenditure on intangibleassets 3.5 3.0 1.3 - 7.8 ------ ------ ------- --------- ------ Analysis by geographical UK & Rest of The Rest of Groupsegment 2006 Ireland Europe Americas World £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 on property,plant and equipment 8.3 3.9 1.8 1.1 15.1Capital expenditure onintangible assets 5.3 2.6 0.4 - 8.3 ------ ------ ------- --------- ------ 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, current taxassets, derivative financial instrument assets and cash and cash equivalentswhich are used as part of the Group's financing offset arrangements. Unallocatedliabilities comprise borrowings, derivative financial instrument liabilities,current and non-current tax liabilities, deferred tax liabilities, retirementbenefit obligations, and centrally held accruals and provisions. 3 TAXATION 2007 2007 2007 2006 2006 2006 Before Exceptional Total Before Exceptional Total exceptionals items exceptionals items £m £m £m £m £m £mCurrent UK 7.9 - 7.9 7.8 (0.3) 7.5tax Overseas 16.2 - 16.2 11.2 (0.3) 10.9 -------- -------- ------ -------- -------- ------ 24.1 - 24.1 19.0 (0.6) 18.4 -------- -------- ------ -------- -------- ------Deferred UK 3.2 - 3.2 (0.3) (0.3)tax Overseas 3.3 - 3.3 3.7 0.1 3.8 -------- -------- ------ -------- -------- ------ 6.5 - 6.5 3.4 0.1 3.5 -------- -------- ------ -------- -------- ------ 30.6 - 30.6 22.4 (0.5) 21.9 -------- -------- ------ -------- -------- ------ The tax on the Group's consolidated profit before tax differs from the UK taxrate of 30% as follows: 2007 2007 2007 2006 2006 2006 Before Exceptional Total Before Exceptional Total exceptionals items exceptionals items £m £m £m £m £m £mProfit before tax 102.4 - 102.4 76.2 (2.5) 73.7 -------- -------- ------ -------- -------- ------Tax calculated at UK tax rate at 30% 30.7 - 30.7 22.9 (0.7) 22.2 Rate adjustment relating to overseasprofits (1.6) - (1.6) (1.3) - (1.3)Overseas dividends 1.7 - 1.7 1.9 - 1.9Income not subject to tax (0.1) (0.1)Expenses not deductible for tax purposes 1.0 - 1.0 2.4 0.3 2.7Adjustment for tax on profits (2.0) - (2.0) (2.1) - (2.1)of associatePrior year adjustments 0.6 - 0.6 (1.1) - (1.1)Utilisation of previously unrecognised (0.7) - (0.7) (0.3) - (0.3)tax lossesTax losses for which no deferred income tax asset was recognised 0.9 - 0.9 - - - -------- -------- ------ -------- -------- ------Tax charge 30.6 - 30.6 22.4 (0.5) 21.9 -------- -------- ------ -------- -------- ------ £0.7m of current tax in respect of share option has been recognised directly inreserves (2006: £0.8m). 4 EARNINGS PER SHARE ---------------------- -------- -------- 2007 2006 pence per pence per share share---------------------- -------- --------Basic earnings per share 43.9 30.2Diluted earnings 42.9 29.4Headline earnings per share 43.9 31.4---------------------- -------- -------- 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. 2007 2006 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 70.2 160.0 43.9 50.9 168.6 30.2Effect of dilutive options - 3.7 (1.0) - 4.5 (0.8)----------------- --------- -------- -------- ------- -------- --------Diluted EPS 70.2 163.7 42.9 50.9 173.1 29.4----------------- --------- -------- -------- ------- -------- -------- The Directors are of the opinion that the publication of the headline earningsis useful to readers of interim statements and annual accounts as they give anindication of underlying business performance. Reconciliation of headline earnings per share 2007 2006 pence per pence per share shareBasic earnings per share 43.9 30.2Income from investment previously impaired - (0.2)Profit on disposal of investments - (0.5)Reorganisation costs - 1.9---------------------------- -------- --------Headline earnings per share 43.9 31.4---------------------------- -------- -------- 5 EQUITY DIVIDENDS 2007 2006 £m £mFinal dividend for the year ended 25 March 2006 of 11.8ppaid on 4 August 2006 19.0 Interim dividend for the period ended 30 September 2006 of5.83p paid on 17 January 2007 9.3 Final dividend for the year ended 26 March 2005 of 10.6ppaid on 5 August 2005 19.1 Special dividend of 38.0p paid on 5 August 2005 68.3 Interim dividend for the period ended 24 September 2005 of5.2p paid on 18 January 2006 8.4--------------------------------- -------- -------- 28.3 95.8--------------------------------- -------- -------- A final dividend per equity share of 13.27 pence has been proposed for the yearended 31 March 2007, payable on 3 August 2007. In accordance with IFRSaccounting requirements this dividend has not been accrued in these consolidatedfinancial statements. 6 NOTES TO GROUP CASH FLOW STATEMENT 2007 2006 £m £mAnalysis of net cashCash at bank and in hand 40.3 318.6Short-term bank deposits 108.8 70.2Bank overdrafts (0.1) (281.0)--------------------------- ------- -------Total cash and cash equivalents 149.0 107.8Other debt due within one year (1.6) (3.6)Borrowings due after one year (10.1) (12.6)--------------------------- ------- -------Net cash at end of period 137.3 91.6--------------------------- ------- ------- 7 The consolidated accounts have been prepared as at 31 March 2007, being thelast Saturday in March. The comparatives for the 2006 financial year are for theyear ended 25 March 2006. 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 recognised incomeand expense and notes thereto) and extracts from the financial review do notconstitute statutory accounts for those years within the meaning of Section 240of the Companies Act 1985. Statutory accounts for the year ended 31 March 2007 will be posted toshareholders on 15 June 2007 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) (accounting records or returns inadequate oraccounts not agreeing with records and returns), or 237(3) (failure to obtainnecessary information and explanations) of the Companies Act 1985. Financialstatements for 2005/06 have been delivered to the Registrar. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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