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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| De La Rue Plc | LSE:DLAR | London | Ordinary Share | GB00B3DGH821 | ORD 44 152/175P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 3.40 | 4.31% | 82.20 | 81.60 | 83.40 | 83.00 | 79.80 | 80.00 | 294,809 | 13:04:25 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Printing, Nec | 349.7M | -55.9M | -0.2854 | -2.91 | 162.59M |
From Apr 2019 to Apr 2024
TIDMDLAR
RNS Number : 0372X
De La Rue PLC
21 November 2017
DE LA RUE
2017/18 HALF YEAR RESULTS
De La Rue plc (LSE: DLAR) (De La Rue, the "Group" or the "Company") announces its half year results for 27 weeks ended 30 September 2017 (the period or half year). The comparative period was 26 weeks ended 24 September 2016.
FINANCIAL HIGHLIGHTS
-- Revenue +29% and adjusted operating profit*(1) +11%, reported operating profit +7%
-- Currency business delivered strong growth with revenue +36% and adjusted operating profit*(1) +16%, driven by high volumes
- Banknote Paper volume +36% to 7,200 tonnes - Banknote Print volume +6% to 3.5bn notes - Polymer volume +570% to 400 tonnes -- Identity Solutions and Product Authentication revenues +3% and +20%, respectively -- Adjusted basic earnings per share +19% to 16.6p -- Net debt GBP137.4m, up GBP16.5m from the year end due to higher working capital -- Group 12 month order book of GBP363m as at September 2017
STRATEGIC AND OPERATIONAL HIGHLIGHTS
-- Increased investment in product development - R&D investment increased by 33% year on year
- Joint product development and exclusive sales agreement with security features developer and manufacturer Opalux
-- Polymer momentum continues - signed 10 year contract to supply Safeguard(R) substrate for Bank of England new GBP20 notes
-- DLR Analytics(TM) launched in May gaining further traction, with 60 central banks signed up -- Joint development agreement with Note Printing Australia for new Australian passport -- De La Rue Authentication Solutions (previously DuPont Authentication) is performing to plan
KEY FINANCIALS
Hot Features
Premium
HY 2017/18 HY 2016/17 Change
GBPm GBPm %
=== ======================================= =========== =========== =======
Revenue 244.7 189.5 +29%
Currency 185.3 136.4 +36%
Identity Solutions 39.4 38.1 +3%
Product Authentication & Traceability 20.2 16.9 +20%
Adjusted operating profit*(1) 26.6 24.0 +11%
Reported operating profit 24.6 23.0 +7%
============================================ =========== =========== =======
EPS basic adjusted*(2) 16.6p 14.0p +19%
EPS basic reported 14.8p 13.2p +12%
Dividend per share 8.3p 8.3p 0%
============================================ =========== =========== =======
Martin Sutherland, Chief Executive Officer of De La Rue, commented:
"De La Rue has performed well in the first half, driven by strong growth in the Currency business and we have continued to make good progress against our strategic plan.
"Polymer has reached a significant milestone with the award of a 10 year contract to supply our polymer substrate Safeguard(R) for the Bank of England's new GBP20 note. DLR Analytics, our cash cycle management software launched in May this year, has gained more traction. More than 60 central banks have now signed up to the pilot programme, further strengthening De La Rue's position in the industry.
"R&D investment has increased by 33% in the first half as we continue to invest in new products and capabilities. Product Authentication grew by 20%, driven by De La Rue Authentication Solutions which is performing to plan.
"The strong revenue growth in the first half, driven by high volumes of lower margin Banknote Paper and Print orders, reflects the lumpy nature of contracts. Performance in the second half is expected to be broadly in line with the same period last year. Overall, our outlook for the year remains unchanged."
Enquiries:
De La Rue plc +44 (0)1256 605000 Martin Sutherland Chief Executive Officer Jitesh Sodha Chief Financial Officer Lili Huang Head of Investor Relations Brunswick +44 (0)207 404 5959 Katharine Spence Oliver Hughes
A conference call will take place at 9:00 am GMT on 21 November 2017, which is also accessible via webcast on www.delarue.com.
Live conference UK Primary: 0844 800 3850 Passcode: 658 040
call
International: +44 844 800 3850
UK Direct: +44 (0) 20 8996 3900
Archive conference UK free phone: 0800 032 9687 Passcode: 6376 4943
call Available from 22 November until 29 November 2017
For the live webcast, please register at www.delarue.com where a replay will also be available subsequently.
About De La Rue
De La Rue's purpose is to enable every citizen to participate securely in the global economy. As a trusted partner of governments, central banks and commercial organisations, De La Rue provides products and services that underpin the integrity of trade, personal identity and the movement of goods.
As the world's largest designer and commercial printer of banknotes, De La Rue designs, manufactures and delivers banknotes, banknote substrates and security features to customers in a world where currency will continue to be a key part of the developing payments eco-system. De La Rue is the only fully integrated supplier of both paper and polymer banknotes, and creates security features that ensure banknotes are protected against counterfeiting.
De La Rue is the world's largest commercial designer and printer of passports, delivering national and international identity tokens and software solutions for governments in a world that is increasingly focused on the importance of a legal and secure identity for every individual.
De La Rue also creates and delivers secure product identifiers and 'track and trace' software for governments and commercial customers alike to help to tackle the challenge of illicit or counterfeit goods and the collection of revenue and excise duties.
De La Rue is listed on the London Stock Exchange (LSE:DLAR). For further information visit www.delarue.com
Cautionary note regarding forward-looking statements
These results include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout these results and the information incorporated by reference into these results and include statements regarding the intentions, beliefs or current expectations of the directors, De La Rue or the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and dividend policy of De La Rue and the industry in which it operates.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond De La Rue's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition, liquidity, dividend policy and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in these results and/or the information incorporated by reference into these results. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group and the development of the industry in which it operates, are consistent with the forward-looking statements contained in these results and/or the information incorporated by reference into these results, those results or developments may not be indicative of results or developments in subsequent periods.
Other than in accordance with its legal or regulatory obligations, De La Rue does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
* This is a non-IFRS measure. Amortisation of acquired intangible
assets is a non-cash item while exceptional items are non-recurring
in nature. By excluding these items from the adjusted operating
profit and EPS metrics, the Directors are of the opinion that
these measures give a better understanding of the underlying performance
of the business. "Reported" measures are on an IFRS basis. See
page 26 for further explanations and reconciliation to the comparable
IFRS measures
(1) Excludes exceptional item net charges of GBP1.8m (H1 2016/17:
GBP1.0m) and amortisation of acquired intangible assets of GBP0.2m
(H1 2016/17: GBPnil)
(2) Excludes exceptional item charges of GBP1.8m (H1 2016/17: GBP1.0m),
amortisation of acquired intangible assets of GBP0.2m (H1 2016/17:
GBPnil) and related tax credits of GBP0.2m (H1 2016/17: GBP0.2m)
Revenue and adjusted operating profit growth rates for the Identity
Solutions and Product Authentication & Traceability reflect a
change in allocation of results for these segments made in the
year. See more information in Note 2 on pages 19 to 20
OVERVIEW
The Group delivered strong revenue and profit growth in the first half. The strategic plan to transform the business to a technology-led security product and service provider is progressing well.
Group revenue increased by 29% to GBP244.7m, with good performance across all product lines. Adjusted operating profit was up 11% to GBP26.6m. Product mix and increased costs of raw materials such as cotton and ink put pressure on margins. There was also increased investment in R&D, product development and sales, which resulted in a lower operating margin.
Significant volume increases in both Banknote Print and Paper were the main drivers for the strong growth in Currency revenue. Momentum in Polymer continued with the award of a ten year contract to supply polymer substrate for the Bank of England's new GBP20 notes, a significant milestone in growing this business.
Identity Solutions (IDS) and Product Authentication & Traceability (PA&T) performed well, with revenue up 3% and 20%, respectively. Adjusted operating profit remained flat in IDS and grew 7% in PA&T as we continued to invest in product development and sales capabilities to drive future growth. We expect further investments in these two product areas in the second half.
The Group's 12 month order book was GBP363m (H1 2016/17: GBP406m) at the end of the period. The lower order book was primarily due to timing of orders, reflecting the lumpy nature of the business.
FINANCIAL RESULTS
Group revenue grew by 29% to GBP244.7m (H1 2016/17: GBP189.5m) and adjusted operating profit was up 11% at GBP26.6m (H1 2016/17: GBP24.0m). Adjusted profit before tax was 15% higher than last year at GBP20.9m (H1 2016/17: GBP18.2m). Adjusted basic earnings per share were 19% higher at 16.6p (H1 2016/17: 14.0p).
On a reported basis, operating profit was GBP24.6m, a 7% increase on the prior year (H1 2016/17: GBP23.0m). Exceptional charges were GBP1.8m (H1 2016/17: GBP1.0m) and there was GBP0.2m amortisation of acquired intangible assets (H1 2016/17: GBPnil). Profit before tax was GBP18.9m (H1 2016/17: GBP17.2m). Reported basic earnings per share were 12% higher at 14.8p (H1 2016/17: 13.2p).
Cash generated from operating activities was GBP10.0m (H1 2016/17: GBP16.7m) due to an increase in debtors because of timing of shipments. Working capital increased by GBP23.4m. As a result, net debt as at 30 September 2017 increased by GBP16.5m from the year end to GBP137.4m (25 March 2017: GBP120.9m).
STRATEGIC PROGRESS
We are half way though our five year plan and have made good progress against our strategic goals. We continue to invest in R&D, product development and sales whilst driving efficiencies in operations.
Deliver operational excellence
The project to restructure our manufacturing footprint continues into its second year and is progressing well. This programme is expected to deliver annual savings, some of which will be reinvested in R&D and product management.
Following the decommissioning of two banknote print lines in Malta and refurbishment of one line in Gateshead last year, upgrades to the remaining two lines in Kenya and Sri Lanka are now underway. In line with our strategy to create flexibility to deal with demand surges, we outsourced the printing of 110m notes during the period.
The ongoing programme to improve manufacturing efficiency is also progressing well. We have achieved higher throughput in Print, producing 7% more notes with two fewer print lines. We sold 36% more paper than the same period in the prior year.
Our view of the banknote paper market remains unchanged. We continue to engage in discussions with a view to reducing our exposure to this market.
We started to upgrade our finance systems in 2016 as part of a broader efficiency and cost saving programme. Three locations have successfully migrated to the new system with the remaining sites scheduled to migrate in the next 12 months.
Invest for growth
In order to drive growth, we continue to invest in R&D, product development and sales, focusing on areas with potential for attractive profitable growth. R&D investment increased by 33% year on year in the first half, mainly in the Invest and Growth products.
We launched the centre of excellence for security print in Malta in March 2017, with a new polycarbonate line for passport and ID. During the first half, we added a number of security label print and finishing lines, further strengthening our capability in PA&T.
We are also investing more in sales and marketing by setting up a number of regional offices and direct sales representatives. In addition to Dubai and Miami, we are opening offices in China and Kuala Lumpur and assigning sales representatives to multiple locations in Africa to be closer to our customers.
DLR Analytics(TM), our cash cycle management software launched in May 2017, has gained further traction. More than 60 central banks have signed up to the pilot programme. It provides intelligence and insight which help participating banks to manage their cash cycle better.
OPERATING REVIEWS
Currency
HY 2017/18 HY 2016/17 Change
============================================ =========== =========== ==========
Revenue (GBPm) 185.3 136.4 +36%
Adjusted operating profit* (GBPm) 16.6 14.3 +16%
Adjusted operating margin* 9.0% 10.5% (150bpts)
Banknote print volume (bn notes) 3.5 3.3 +6%
Banknote paper volume (tonnes) 7,200 5,300 +36%
Polymer volume (tonnes) 400 60 +570%
============================================ =========== =========== ==========
*Excludes exceptional item charges of
GBP0.1m (H1 2016/17: charges of GBP0.1m).
The Currency business comprises Banknote Print, Banknote Paper, Polymer and Security Features.
The Currency business benefited from strong volumes, notably in Banknote Paper, which partially offset lower volumes in Security Features. Revenue grew by 36% to GBP185.3m (H1 2016/17: GBP136.4m). Increased costs of raw materials and product mix led to lower margins than prior year. Adjusted operating profit increased by 16% to GBP16.6m (H1 2016/17: GBP14.3m). Margins are expected to improve in the second half as product mix changes.
Banknote Print volume in the first half reached 3.5bn notes (H1 2016/17: 3.3bn), produced on two fewer print lines. In September, the Bank of England's new GBP10 note designed and printed by De La Rue successfully went into circulation.
Banknote Paper volume increased by 36% to 7,200 tonnes (H1 2016/17: 5,300 tonnes), reflecting the short term timing of contracts to be delivered. Increased cotton and raw material prices have reduced margin.
Polymer volume increased by 570% to 400 tonnes in the first half. In October, we were awarded a ten year contract to supply polymer substrate for 25% volume of the Bank of England's new GBP20 note due to be issued in 2020. This is for a volume of 520 tonnes over the next two years. This new win represents a significant milestone and will see our polymer substrate Safeguard(R) being used by one of the largest economies. We also successfully launched three new GBP10 polymer notes for three Scottish banks, increasing the number of denominations on Safeguard(R) to 28.
Security Features volumes and revenues were slightly lower due to the timing of orders. To accelerate product development, we formed a strategic partnership with security features developer and manufacturer Opalux in October 2017. This will broaden our product range by leveraging Opalux's leading technology.
At the period end the 12 month order book for Currency including estimated call-off orders for contracts was GBP282m (H1 2016/17: GBP322m).
Identity Solutions
HY 2017/18 HY 2016/17 Change
===================================== ============ =========== =========
Revenue (GBPm) 39.4 38.1 +3%
Adjusted operating profit* (GBPm) 5.4 5.4 +0%
Adjusted operating margin* 13.7% 14.2% (50bpts)
===================================== ============ =========== =========
*Excludes exceptional items charges of GBPnil (H1 2016/17: GBPnil).
Identity Solutions revenue increased by 3% to GBP39.4m (H1 2016/17: GBP38.1m), with profit remaining flat as we continued to invest in R&D and sales to drive future growth. This trend is expected to continue in the second half of the year.
In July, we were selected by Note Printing Australia (NPA) to design and develop Australia's next generation passport. This new contract requires the integrated design of our new polycarbonate product with security features.
Our ten year contract with HMPO to produce the UK passport expires in 2019. The contract was put out to tender by HMPO earlier this year. We have submitted our bid and the outcome is expected to be announced in the first half of 2018.
Product Authentication & Traceability
HY 2017/18 HY 2016/17 Change
===================================== =========== =========== ==========
Revenue (GBPm) 20.2 16.9 +20%
Adjusted operating profit* (GBPm) 4.6 4.3 +7%
Adjusted operating margin* 22.8% 25.4% (260bpts)
===================================== =========== =========== ==========
*Excludes exceptional items charges of GBP0.4m (H1 2016/17: GBPnil)
and amortisation of acquired intangible assets of GBP0.2m (H1
2016/17: GBP1.1m).
Product Authentication & Traceability (PA&T) performed well in the first half. Revenue increased by 20% to GBP20.2m (H1 2016/17: GBP16.9m), driven by De La Rue Authentication Solutions (DAS, previously DuPont Authentication). Adjusted operating profit in the period was up 7% to GBP4.6m (H1 2016/17: GBP4.3m) as we continued to invest in R&D and sales to drive future growth. We will continue to increase investment in the second half.
De La Rue Authentication Solutions is performing to plan.
FINANCE CHARGE
The Group's net interest charge was GBP2.5m (H1 2016/17: GBP2.2m). The IAS 19 related finance cost, which represents the difference between the interest on pension liabilities and assets was GBP3.2m (H1 2016/17: GBP3.6m).
EXCEPTIONAL ITEMS
Exceptional charges amounted to GBP1.8m (H1 2016/17: GBP1.0m), comprising GBP0.8m relating to the manufacturing footprint restructuring programme and GBP1.0m relating to the finance system upgrade programme.
TAXATION
The net tax charge for the year was GBP3.3m (H1 2016/17: GBP2.9m). The effective tax rate before exceptional items was 15.9% (H1 2016/17: 15.8%).
Net tax credits relating to exceptional items, on continuing operations, arising in the period were GBP0.2m (H1 2016/17 GBP0.2m).
CASH FLOW AND BORROWING
Cash generated from operating activities, which includes discontinued operations, was 40% lower at GBP10.0m (2016/17: GBP16.7m) due to an increase in working capital of GBP23.4m as a result of higher revenue and the timing of shipments towards the end of the period. Cash generated from operating activities also includes approximately GBP1.0m of payments in relation to exceptional items (the net cash cost of exceptional items in 2016/17 was GBP2.4m).
Capital expenditure for the half year was GBP5.9m (H1 2016/17: GBP6.3m). Capital expenditure for the full year is expected to be cGBP30m.
Net debt increased by GBP16.5m to GBP137.4m from the year end (25 March 2017: GBP120.9m), as cash generated from operating activities was more than offset by dividend payments of GBP17.0m, capital expenditure of GBP5.9m, tax payments of GBP5.5m and interest and facility fee payments of GBP3.8m.
The Group increased its revolving credit facility from GBP250m to GBP275m with the introduction of a new lending bank. The facility expires in December 2021. At the period end the specific covenant tests were as follows: EBIT/net interest payable of 15.3 times, net debt/EBITDA of 1.37 times.
PENSION DEFICIT AND FUNDING
The valuation of the Group's UK defined benefit pension scheme (the "Scheme") under IAS 19 indicates a post-tax deficit at 30 September 2017 of GBP157.1m (25 March 2017: GBP196.7m). On a pre-tax basis the net pension deficit was GBP189.1m (25 March 2017: GBP237.0m). The decrease was primarily due to revisions in the long term inflation rate and demographic assumptions, which were partly offset by the decrease in discount rate.
The charge to operating profit in respect of the Scheme in the first half was GBP1.1m (H1 2016/17: GBP0.6m). In addition, under IAS 19 there was a finance charge of GBP3.2m arising from the difference between the interest cost on liabilities and the interest income on scheme assets (H1 2016/17: GBP3.6m).
A change from RPI to CPI indexation in the calculation of future increases for the Scheme, effective from April 2018, was announced today. This change is expected to reduce the Scheme's liabilities and corresponding deficit by approximately GBP70m on an accounting basis, which will be reflected in the 2017/18 full year financial accounts.
The funding plan agreed in June 2016 to eliminate the deficit will remain in place until the conclusion of the next triennial review commencing in April 2018.
Year ended 31 March 2018 2019 2020 2021 2022 2023-2028 Annual cash contribution (GBPm) 13.5 20.5 21.3 22.2 23.1 23.0 p.a. ========================== ===== ===== ===== ===== ===== ==========
SENIOR MANAGEMENT CHANGES
On 19 June 2017, Bryan Gray was appointed Chief Operating Officer, replacing Rupert Middleton who stepped down on 20 July 2017. He is responsible for the operations of all De La Rue's manufacturing facilities. Bryan joined from Johnson Controls International, where he was the Group Vice President for Europe. He brings with him over 20 years' international experience in manufacturing, with a focus on the automotive sector.
DIVID
The Board proposes to leave the dividend unchanged and is recommending an interim dividend of 8.3p per share. The interim dividend will be paid on 3 January 2018 to shareholders on the register on 8 December 2017.
OUTLOOK
The strong revenue growth in the first half, driven by high volumes of lower margin Banknote Paper and Print orders, reflects the lumpy nature of contracts. Performance in the second half is expected to be broadly in line with the same period last year. Overall, our outlook for the year remains unchanged.
- ends - Martin Sutherland Jitesh Sodha
Chief Executive Officer Chief Financial Officer
21 November 2017
DIRECTORS REPORT
Principal risks and uncertainties
Throughout its global operations De La Rue faces various risks, both internal and external, which could have a material impact on the Group's performance. The Group manages the risks inherent in its operations in order to mitigate exposure to all forms of risks, where practical, and to transfer risk to insurers, where cost effective.
The Group analyses the risks that it faces under the following broad headings: strategic risks (technological revolution, strategy implementation, changes to the market environment and economic conditions), operational risks, legal/ regulatory, information risks and financial risks (currency risk, credit risk, liquidity risk, interest rate risk and commodity price risk).
As described in the 2017 Annual Report, the principal risks include breach of legal and regulatory requirements, failure to win or renew a material contract, pension fund deficit, failure to maintain and exploit competitive and technologically advanced products and services, failure to adopt performance driven culture, failure to secure strategic partnerships to address key issues, information security risk, loss of a key site, health safety or environmental failure, quality management failure, supply chain failure, and unpredictability in the timing and size of substantial contract awards. These risks, along with the risk management systems and processes used to manage them remain unchanged since the Annual Report was published.
The main risks and uncertainties faced by the Group for the remaining six months of the year and the risk management systems and processes used to manage them are unchanged from those described further in the 2017 Annual Report, a copy of which is available on request from the Company's registered office at De La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS.
Going Concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 4 to 21 of the strategic report in the 2017 Annual Report. In addition, pages 107 to 109 of the 2017 Annual Report include the Group's objectives, policies and processes for financial risk management, details of its financial instruments and hedging activities and its exposure to credit risk, liquidity risk and commodity pricing risk. The financial position of the Group, its liquidity position and borrowing facilities are described on page 39 of the 2017 Annual Report. As described on page 39 of the 2017 Annual Report, the Group meets its funding requirements through cash generated from operations and a revolving credit facility which expires in December 2021.
The Group's updated forecasts and projections, which cover a period of more than twelve months from the date of the interim statement, taking into account reasonably possible changes in normal trading performance, show that the Group should be able to operate within its currently available facilities. The Group has sufficient financial resources together with assets that are expected to generate cash flow in the normal course of business. As a consequence and notwithstanding the net liability position being reported in the consolidated balance sheet, which has primarily arisen due to the value of the deficit in the retirement benefit obligations, the Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed interim financial statements
A copy of the 2017 Annual Report is available at www.delarue.com or on request from the Company's registered office at De La Rue House, Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS.
Statement of Directors' responsibilities
The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority ("FCA").
The DTR require that the accounting policies and presentation applied to the half yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the Interim report, unless the United Kingdom's FCA agrees otherwise.
The Directors confirm that to the best of their knowledge the condensed set of financial statements, which have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, as required by DTR 4.2.2 and in particular include a fair review of:
-- the important events that have occurred during the first six months of the financial year and their impact on the interim condensed consolidated set of financial statements as required by DTR 4.2.7R;
-- the principal risks and uncertainties for the remaining half of the year as required by DTR 4.2.7R; and
-- related party transactions that have taken place in the first half of the current financial year and changes in the related party transactions described in the previous annual report that have materially affected the financial position or performance of the Group during the first half of the current financial year as required by DTR 4.2.8R.
The Board
The Board of Directors of De La Rue plc at 25 March 2017 and their respective responsibilities can be found on pages 50 and 73 of the De La Rue plc Annual Report 2017. Since that date the following changes have taken place:
-- On 11 April 2017, the Company announced that Rupert Middleton, Chief Operating Officer and Executive Director would be stepping down from the Board with effect from the close of the AGM on 20 July 2017
For and on behalf of the Board
Philip Rogerson
Chairman
21 November 2017
INDEPENT REVIEW REPORT TO DE LA RUE PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the period ending 30 September 2017 which comprises the Group condensed consolidated interim income statement, the Group condensed consolidated interim statement of comprehensive income, the Group condensed consolidated interim balance sheet, the Group condensed consolidated interim statement of cash flows, the Group condensed consolidated interim statement of changes in equity and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the period ending 30 September 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Reading, UK
21 November 2017
GROUP CONDENSED CONSOLIDATED INTERIM
INCOME STATEMENT - UNAUDITED
FOR THE HALF YEARED 30 SEPTEMBER 2017
-------------------------------------------------------------------------------------------------------------
2017/18 2016/17 2016/17
Half Year Half Year Full Year
Notes GBPm GBPm GBPm
Revenue 2 244.7 189.5 461.7
---------- -------------- ------------
Operating expenses - ordinary (218.3) (165.5) (391.1)
Operating (expenses)/income - exceptional 4 (1.8) (1.0) (0.4)
---------- -------------- ------------
Total operating expenses (220.1) (166.5) (391.5)
Operating profit 24.6 23.0 70.2
Comprising:
---------- -------------- ------------
Adjusted operating profit 2 26.6 24.0 70.7
Amortisation of acquired intangible assets (0.2) - (0.1)
Exceptional items 4 (1.8) (1.0) (0.4)
---------- -------------- ------------
Profit before interest and taxation 24.6 23.0 70.2
Interest income - - -
------------------------------------------------------ ------ ---------- -------------- ------------
Interest expense (2.5) (2.2) (4.6)
Net retirement benefit obligation finance
cost (3.2) (3.6) (7.4)
------------------------------------------------------ ------ ---------- -------------- ------------
Net finance expense (5.7) (5.8) (12.0)
------------------------------------------------------ ------ ---------- -------------- ------------
Profit before taxation 18.9 17.2 58.2
Comprising:
---------- -------------- ------------
Adjusted profit before tax 20.9 18.2 58.7
Amortisation of acquired intangible assets (0.2) - (0.1)
Exceptional items 4 (1.8) (1.0) (0.4)
---------- -------------- ------------
Taxation - UK (1.8) (1.0) (6.3)
- Overseas (1.3) (1.7) (2.4)
---------- -------------- ------------
Total taxation (3.1) (2.7) (8.7)
Profit for the period from continuing
operations 15.8 14.5 49.5
------------------------------------------------------ ------ ---------- -------------- ------------
Comprising:
---------- -------------- ------------
Adjusted profit for the period 17.6 15.3 49.4
Amortisation of acquired intangible assets (0.2) - (0.1)
Expense from the period on exceptional
items - net of tax 4 (1.6) (0.8) 0.2
---------- -------------- ------------
Loss from discontinued operations 3 (0.4) (6.2) (8.0)
------------------------------------------------------ ------ ---------- -------------- ------------
Profit for the period 15.4 8.3 41.5
------------------------------------------------------ ------ ---------- -------------- ------------
Profit attributed to equity shareholders
of the company
Profit for the period from continuing 15.1 13.4 47.9
operations
Loss for the period from discontinued (0.4) (6.2) (8.0)
operations
Total profit attributable to equity shareholders 14.7 7.2 39.9
of the company
------------------------------------------------------ ------ ---------- -------------- ------------
Profit attributed to non-controlling
interests
Profit for the period from continuing 0.7 1.1 1.6
operations
Total profit attributable to non-controlling 0.7 1.1 1.6
interests
------------------------------------------------------ ------ ---------- -------------- ------------
Profit for the period 15.4 8.3 41.5
------------------------------------------------------ ------ ---------- -------------- ------------
Profit for the period attributable to
the Company's equity holders
Earnings per ordinary share
Basic
Basic EPS continuing operations 14.8p 13.2p 47.2p
Basic EPS discontinued operations (0.4p) (6.1p) (7.9p)
Total Basic Earnings per share 14.4p 7.1p 39.3p
Diluted
Diluted EPS continuing operations 14.7p 12.9p 46.6p
Diluted EPS discontinued operations (0.4p) (6.0p) (7.8p)
Total Diluted Earnings per share 14.3p 6.9p 38.8p
GROUP CONDENSED CONSOLIDATED INTERIM
STATEMENT OF COMPREHENSIVE (LOSS)/INCOME - UNAUDITED
FOR THE HALF YEARED 30 SEPTEMBER 2017
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Profit for the financial period 15.4 8.3 41.5
---------------------------------------------------------- ---------- ---------- ----------
Other comprehensive income
Items that are not reclassified subsequently
to income statement:
Re-measurement gains/(losses) on retirement
benefit obligations 47.7 (141.0) (25.2)
Tax related to remeasurement of net defined
benefit liability (8.2) 21.8 2.3
Items that may be reclassified subsequently
to income statement:
Foreign currency translation difference for
foreign operations 1.1 (4.6) 2.6
Foreign currency translation recycled on disposal - 4.5 -
of discontinued operations
Change in fair value of cash flow hedges (1.3) 7.1 7.8
Change in fair value of cash flow hedges transferred
to income statement (2.6) (3.2) (8.0)
Change in fair value of cash flow hedges transferred 0.1 (0.3) (0.2)
to non-current assets
Income tax relating to components of other 0.6 1.6 0.2
comprehensive income
Other comprehensive (loss)/income for the
period, net of tax 37.4 (114.1) (20.5)
---------------------------------------------------------- ---------- ---------- ----------
Total comprehensive (loss)/income for the
period 52.8 (105.8) 21.0
---------------------------------------------------------- ---------- ---------- ----------
Total comprehensive income for the period
attributable to:
Equity shareholders of the Company 52.1 (106.9) 19.4
Non-controlling interests 0.7 1.1 1.6
---------------------------------------------------------- ---------- ---------- ----------
52.8 (105.8) 21.0
---------------------------------------------------------- ---------- ---------- ----------
GROUP CONDENSED CONSOLIDATED INTERIM
BALANCE SHEET - UNAUDITED
AT 30 SEPTEMBER 2017
----------------------------------------------------------------------------------------
2017/18 2016/17 2016/17
Half Year Half Year Full Year
Notes GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 164.5 162.7 167.2
Intangible assets 28.1 14.4 30.9
Investments in associates 0.1 0.1 0.1
Deferred tax assets 36.3 67.9 43.7
Derivative financial instruments 8 0.2 0.6 0.6
229.2 245.7 242.5
------------------------------------------- ------ ---------- ---------- ----------
Current assets
Inventories 73.2 75.2 67.8
Trade and other receivables 133.9 91.1 109.7
Current tax assets - 0.2 -
Derivative financial instruments 8 7.6 31.0 15.3
Cash and cash equivalents 9.0 11.6 15.4
223.7 209.1 208.2
------------------------------------------- ------ ---------- ---------- ----------
Total assets 452.9 454.8 450.7
------------------------------------------- ------ ---------- ---------- ----------
LIABILITIES
Current Liabilities
Borrowings (144.7) (127.1) (136.3)
Trade and other payables (181.6) (163.0) (175.1)
Current tax liabilities (17.0) (20.9) (19.6)
Derivative financial instruments 8 (6.2) (22.6) (7.7)
Provisions for liabilities and charges (11.8) (14.7) (10.4)
(361.3) (348.3) (349.1)
------------------------------------------- ------ ---------- ---------- ----------
Non-current liabilities
Retirement benefit obligations 10 (191.4) (361.1) (239.4)
Deferred tax liabilities (4.9) (2.9) (4.9)
Derivative financial instruments 8 (0.1) (1.0) (0.6)
Provisions for liabilities and charges (1.3) (1.8) (2.0)
Other non-current liabilities (3.7) (7.0) (1.3)
------------------------------------------- ------ ---------- ---------- ----------
(201.4) (373.8) (248.2)
------------------------------------------- ------ ---------- ---------- ----------
Total liabilities (562.7) (722.1) (597.3)
------------------------------------------- ------ ---------- ---------- ----------
Net liabilities (109.8) (267.3) (146.6)
------------------------------------------- ------ ---------- ---------- ----------
EQUITY
Ordinary share capital 46.9 46.7 46.8
Share premium account 36.8 36.6 36.7
Capital redemption reserve 5.9 5.9 5.9
Hedge reserve 8 (1.2) 5.3 2.0
Cumulative translation adjustment (8.6) (12.4) (9.7)
Other reserves (83.8) (83.8) (83.8)
Retained earnings (114.4) (273.0) (152.4)
------------------------------------------- ------ ---------- ---------- ----------
Total equity attributable to shareholders
of the Company (118.4) (274.7) (154.5)
Non-controlling interests 8.6 7.4 7.9
------------------------------------------- ------ ---------- ---------- ----------
Total equity (109.8) (267.3) (146.6)
------------------------------------------- ------ ---------- ---------- ----------
GROUP CONDENSED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE HALF YEARED 30 SEPTEMBER 2017
2017/18 2016/17 2016/17
Half Year Half Year Full Year
Notes GBPm GBPm GBPm
Cash flows from operating activities
Profit before tax* 18.5 11.8 51.8
Adjustments for:
Finance income and expense 5.7 5.8 12.0
Depreciation 11.9 12.0 24.3
Amortisation 1.5 1.5 2.5
(Increase)/decrease in inventories (5.6) (6.6) 3.4
(Increase) in trade and other receivables (26.1) (2.5) (4.6)
Increase/(decrease) in trade and other
payables 7.5 (1.8) (11.9)
(Decrease) in reorganisation provisions 0.8 (0.9) (3.6)
Special pension fund contribution (4.2) (4.2) (14.6)
Loss on disposal of property, plant and
equipment and software intangibles - 0.8 1.4
Loss on disposal of discontinued operations - - 4.1
Other non-cash movements - 0.8 (0.5)
----------------------------------------------- ------ ---------- ---------- -----------
Cash generated from operations 10.0 16.7 64.3
Tax paid (5.5) (0.8) (5.7)
Net cash flows from operating activities 4.5 15.9 58.6
----------------------------------------------- ------ ---------- ---------- -----------
Cash flows from investing activities
Proceeds from sale of discontinued operation 1.6 2.1 2.1
Transaction costs relating to the sale
of discontinued operations - - (2.5)
Purchases of property, plant and equipment
and software intangibles (5.9) (6.3) (24.0)
Advanced payment - non trading 5.0 - -
Development expenditure capitalised - (2.5) (2.1)
Proceeds from sale of property, plant and
equipment - - 0.2
Acquisition of subsidiary (1.0) - (17.9)
Net cash flows from investing activities (0.3) (6.7) (44.2)
Net cash flows before financing activities 4.2 9.2 14.4
----------------------------------------------- ------ ---------- ---------- -----------
Cash flows from financing activities
Proceeds from issue of share capital 0.2 1.0 1.2
Net drawdown/(repayment) of borrowings 14.0 (17.3) (12.4)
Payment of facility fees (1.1) - -
Interest paid (2.7) (2.0) (4.2)
Dividends paid to shareholders (17.0) (16.9) (25.4)
Dividends paid to non-controlling interests - (0.3) (0.3)
----------------------------------------------- ------ ---------- ---------- -----------
Net cash flows from financing activities (6.6) (35.5) (41.1)
----------------------------------------------- ------ ---------- ---------- -----------
Net (decrease)/increase in cash and cash
equivalents in the period (2.4) (26.3) (26.7)
Cash and cash equivalents at the beginning
of the period 11.2 37.9 37.9
Exchange rate effects (0.1) (0.1) -
----------------------------------------------- ------ ---------- ---------- -----------
Cash and cash equivalents at the end of
the period 9 8.7 11.5 11.2
----------------------------------------------- ------ ---------- ---------- -----------
Cash and cash equivalents consist of:
Cash at bank and in hand 9.0 9.4 13.2
Short term deposits 4 - 2.2 2.2
Bank overdrafts (0.3) (0.1) (4.2)
----------------------------------------------- ------ ---------- ---------- -----------
9 8.7 11.5 11.2
----------------------------------------------- ------ ---------- ---------- -----------
*Profit before tax includes continuing and discontinued operations. The cash flows relating to discontinued operations are included within Note 3
GROUP CONDENSED CONSOLIDATED INTERIM
STATEMENT OF CHANGES IN EQUITY - UNAUDITED
FOR THE HALF YEARED 30 SEPTEMBER 2017
----------------------------------------------------------------------------------------------------------------------------
Attributable to equity shareholders Non-controlling
interest Total
equity
------------------------------------------------------------------------------
Share Capital Cumulative
Share premium redemption Hedge translation Other Retained
capital account reserve reserve adjustment reserve earnings
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 28
March
2016 46.6 35.7 5.9 2.3 (12.3) (83.8) (146.6) 6.6 (145.6)
Profit for the
period - - - - - - 7.2 1.1 8.3
Other
comprehensive
income, net
of tax - - - 3.0 (0.1) - (117.0) - (114.1)
--------------- -------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Total
comprehensive
income - - - 3.0 (0.1) - (109.8) 1.1 (105.8)
Transactions
with owners
of the company
recognised
directly in
equity:
Share capital
issued 0.1 0.9 - - - - - - 1.0
Employee share
scheme:
- value of
services
provided - - - - - - (0.5) - (0.5)
Income tax on
income
and expenses
recognised
directly in
equity - - - - - - 0.8 - 0.8
Dividends paid - - - - - - (16.9) (0.3) (17.2)
Balance at 24
September
2016 46.7 36.6 5.9 5.3 (12.4) (83.8) (273.0) 7.4 (267.3)
Profit for the
period - - - - - - 32.7 0.5 33.2
Other
comprehensive
income, net
of tax - - - (3.3) 2.7 - 94.2 - 93.6
--------------- -------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Total
comprehensive
income - - - (3.3) 2.7 - 126.9 0.5 126.8
Transactions
with owners
of the company
recognised
directly in
equity:
Share capital
issued 0.1 0.1 - - - - - - 0.2
Employee share
scheme:
- value of
services
provided - - - - - - 2.0 - 2.0
Income tax on
income
and expenses
recognised
directly in
equity - - - - - - 0.2 - 0.2
Dividends paid - - - - - - (8.5) - (8.5)
--------------- -------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Balance at 25
March
2017 46.8 36.7 5.9 2.0 (9.7) (83.8) (152.4) 7.9 (146.6)
Profit for the
period - - - 14.7 0.7 15.4
Other
comprehensive
income, net
of tax - - - (3.2) 1.1 - 39.5 - 37.4
--------------- -------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Total
comprehensive
income - - - (3.2) 1.1 - 54.2 0.7 52.8
Transactions - -
with owners
of the company
recognised
directly in
equity:
Share capital
issued 0.1 0.1 - - - - - - 0.2
Employee share - - - - - - - - -
scheme:
- value of
services
provided - - - - - - 0.9 - 0.9
Income tax on
income
and expenses
recognised
directly in
equity - - - - - - (0.1) - (0.1)
Dividends paid - - - - - - (17.0) - (17.0)
--------------- -------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Balance at 30
September
2017 46.9 36.8 5.9 (1.2) (8.6) (83.8) (114.4) 8.6 (109.8)
-------- -------- ------------ -------- ------------ -------- ---------- ---------------- ---------
Other reserve:
On 1 February 2000, the company issued and credited as fully paid 191,646,873 ordinary shares of 25p each and paid cash of GBP103.7m to acquire the issued share capital of De La Rue plc (now De La Rue Holdings Limited), following the approval of a High Court Scheme of Arrangement. In exchange for every 20 ordinary shares in De La Rue plc, the shareholders received 17 ordinary shares plus 920p in cash. The other reserve of GBP83.8m arose as a result of this transaction and is a permanent adjustment to the consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
1 Statement of compliance
These consolidated financial statements have been prepared on the
going concern basis and using the historical cost convention, modified
for certain items carried at fair value, as stated in the Group's
accounting policies.
The financial information set out above does not constitute the Group's
statutory accounts for the periods ended 30 September 2017 or 24
September 2016. The financial information for the period ended 30
September 2017 is derived from the statutory accounts for the period
ended 30 September 2017 which will be delivered to the registrar
of companies. The auditor has reported on the accounts for the period
ended 25 March 2017; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying their report and (iii) did
not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Significant accounting policies
The preliminary announcement for the period ended 30 September 2017
has been prepared consistently with International Accounting Standards
and International Financial Reporting Standards (collectively "IFRS")
as adopted by the European Union (EU) at 30 September 2017. Details
of the accounting policies applied are those set out in De La Rue
plc's annual report 2017.
In applying the accounting policies, management has made appropriate
estimates in many areas, and the actual outcome may differ from those
calculated. The key sources of estimation uncertainty at the balance
sheet date were the same as those that applied to the consolidated
financial statements of the Group for the period ended 30 September
2017.
During the period a number of amendments to IFRS became effective
and were adopted by the Group, none of which had a material impact
on the Group's net cash flows, financial position, total comprehensive
income or earnings per share.
Forthcoming accounting standards
IFRS 15 "Revenue from Contracts with Customers" will be effective
for accounting periods beginning on or after 1 January 2018 (year-ended
31 March 2019 for De La Rue). It supersedes IAS 18 "Revenue" and
establishes a principles-based approach to revenue recognition and
measurement based on the concept of recognizing revenue when performance
obligations are satisfied. The Group has an ongoing project to assess
the impact to its financial statements. This project involves reviews
of the Group's key contracts and the use of questionnaires and detailed
contract discussions with finance and business teams to identify
the most likely areas of change across the Group's segments and different
revenue streams. Based on the Group's preliminary assessment from
work performed to date, the Group believes that areas such as multiple
element arrangements and non valued performance obligations in certain
contracts, are areas where there is an anticipated impact from IFRS
15. Once this diagnostic phase is complete, any relevant transition
differences will be calculated and transitional disclosures drafted.
Detailed quantitative analysis of any impact will be provided in
the 2017/18 annual report.
IFRS 16 Leases was issued by the IASB in January 2016 (effective
for the year ending 28 March 2020) replaces IAS 17. Under the new
standard all it requires lessees to recognise a lease liability and
a right of use asset for all leases unless the lease term is 12 months
or less or the underlying asset has a low value. Interest expense
on the lease liability and depreciation on the right of use asset
will be recognised in the income statement, resulting in a higher
total charge to the income statement in the initial years of a lease.
IFRS 16 is not expected at the current time to have a significant
impact on the results of the group. The Group continues to assess
the impact of the new standard.
IFRS 9 Financial Instruments was issued by the IASB in July 2014.
IFRS 9 introduces new requirements for the classification, measurement
and impairment of financial instruments and hedge accounting, and
is required to be adopted by 29 March 2019. The Group continues to
assess the impact of the new standard.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
2 Segmental analysis
The continuing operations of the Group have three main operating units:
Currency, Identity Solutions and Product Authentication and Traceability.
The Board, which is the Group's Chief Operating Decision Maker, monitors
the performance of the Group at this level and there are therefore
three reportable segments. The principal financial information reviewed
by the Board is revenue and adjusted operating profit, measured on
an IFRS basis.
The Group's segments are:
-- Currency - provides printed banknotes, banknote paper and polymer
substrates and banknote security features
-- Identity Solutions - involved in the provision of passport, ePassport,
national ID and eID, driving licence and voter registration schemes
-- Product Authentication and Traceability - produces security documents,
including authentication labels, brand licensing products, government
documents, cheques and postage stamps
Inter-segmental transactions are eliminated upon consolidation.
Reclassification of results between Product Authentication & Traceability and Identity Solutions
Historically the results of one of the Group's sites have been included in the PA&T segment as this segment represented the majority of its business. However, due to growth in IDS business within this site, the Chief Decision Maker has started reviewing information including its numbers split between IDS and PA&T. Therefore, in order to align the Group's external reporting segments to the information reviewed internally the results of this site have been split since the Full Year 2016/17 between the IDS and PA&T segment. The Half Year 2016/17 figures have also been adjusted for comparability.
Prior to restatement amounts reported in Half Year 2016/17 were as follows: Identity Systems: Revenue (GBP33.5m), Operating profit (GBP3.4m), Assets (GBP35.8m) and Liabilities (GBP25.8m). Product Authentication and Traceability: Revenue (GBP21.5m), Operating profit (GBP6.3m), Assets (GBP22.3m) and Liabilities (GBP9.6m). All other amounts are as originally reported.
Analysis by operating segment
2017/18 2016/17 2016/17
Restated
Half Year Half Year Full Year
GBPm GBPm GBPm
Revenue by operating segment
Currency 185.3 136.4 350.6
Identity Solutions 39.4 38.1 80.6
Product Authentication and Traceability 20.2 16.9 34.6
Eliminations (0.2) (1.9) (4.1)
Total of Continuing operations 244.7 189.5 461.7
Discontinued operations - 4.9 4.9
Unallocated - discontinued operations - - -
--------------------------------------------- ---------- ---------- ------------
244.7 194.4 466.6
--------------------------------------------- ---------- ---------- ------------
Operating profit by operating segment
Currency 16.6 14.3 50.3
Identity Solutions 5.4 5.4 11.4
Product Authentication and Traceability 4.6 4.3 9.0
Adjusted operating profit 26.6 24.0 70.7
Discontinued operations (0.4) (2.3) (2.3)
Adjusted operating profit (before
exceptional items) 26.2 21.7 68.4
Exceptional items - Currency (0.1) 0.1 1.9
Exceptional items - Identity Solutions - - -
Exceptional items - Product Authentication
and Traceability (0.4) - (0.9)
Exceptional items - Discontinued operations (3.1) (4.1)
Exceptional items - unallocated (1.3) (1.1) (1.4)
Amortisation of acquired intangibles (0.2) - (0.1)
--------------------------------------------- ---------- ---------- ------------
Operating profit 24.2 17.6 63.8
Net finance expense (2.5) (2.2) (4.6)
Retirement benefit obligations net
finance expense (3.2) (3.6) (7.4)
--------------------------------------------- ---------- ---------- ------------
Profit before taxation 18.5 11.8 51.8
--------------------------------------------- ---------- ---------- ------------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
Analysis by operating segment (continued)
2017/18 2016/17 2016/17
Restated
Half Year Half Year Full Year
GBPm GBPm GBPm
Assets by operating segment
Currency 256.8 240.0 243.4
Identity Solutions 48.3 40.3 46.3
Product Authentication and Traceability 24.8 17.8 23.1
Unallocated assets 123.0 156.7 137.9
---------------------------------------------- ---------- ---------- ---------------
Total Continuing operations 452.9 454.8 450.7
Discontinued operations - - -
------------------------------------------- ---------- ---------- ---------------
452.9 454.8 450.7
---------------------------------------------- ---------- ---------- ---------------
Liabilities by operating segment
Currency (109.6) (123.4) (113.0)
Identity Solutions (37.4) (27.4) (30.3)
Product Authentication and Traceability (9.6) (8.0) (10.4)
Unallocated liabilities (406.1) (563.3) (443.6)
---------------------------------------------- ---------- ---------- ---------------
Total Continuing operations (562.7) (722.1) (597.3)
Discontinued operations - - -
(562.7) (722.1) (597.3)
---------------------------------------------- ---------- ---------- ---------------
3 Discontinued operations
The Group completed the sale of the entire issued share capital of Cash Processing Solutions Limited and related subsidiaries (together 'CPS') to CPS Topco Limited, a company owned by Privet Capital on 22 May 2016.
Under the terms of the agreement, De La Rue received GBP2.1m upon completion of the transaction. During the half year 2017/18 a contingent consideration payment of GBP0.8m has been received which was payable on the first anniversary of the transaction in addition to GBP0.8m relating to a closing working capital adjustment. A further contingent consideration amount of GBP0.8m is payable on the second anniversary of the transaction. The Group is entitled to further contingent consideration following the sale of up to GBP6m if certain performance related and event driven milestones are achieved by CPS.
The loss in the period from discontinued operations relates to remaining costs associated with the closure of the business.
No pension liability was transferred as part of the disposal.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
3 Discontinued operations (continued)
Results of the discontinued operation:
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Revenue 2 - 4.9 4.9
---------- ---------- ----------
Operating expenses - ordinary (0.4) (7.2) (7.2)
Operating expenses - exceptional - (3.1) (4.1)
---------- ---------- ----------
Total operating expenses (0.4) (10.3) (11.3)
Operating loss (0.4) (5.4) (6.4)
Comprising:
---------- ---------- ----------
Adjusted operating profit 2 (0.4) (2.3) (2.3)
Exceptional items - (3.1) (4.1)
---------- ---------- ----------
Loss before interest and taxation (0.4) (5.4) (6.4)
Interest income - - -
Interest expense - - -
Net finance expense - - -
----------------------------------------------------- ---------- ---------- ----------
Loss before taxation (0.4) (5.4) (6.4)
Comprising:
---------- ---------- ----------
Adjusted profit before tax (0.4) (2.3) (2.3)
Exceptional items - (3.1) (4.1)
---------- ---------- ----------
Taxation - (0.8) (1.6)
Loss for the period from discontinued operations (0.4) (6.2) (8.0)
----------------------------------------------------- ---------- ---------- ----------
Comprising:
---------- ---------- ----------
Adjusted profit for the period (0.4) (2.3) (2.2)
Loss for the period on exceptional items - (3.9) (5.8)
---------- ---------- ----------
Cash flows from discontinued operations
--------------------------------------------------------------------------------------
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Net cash from/(used in) operating activities (0.4) 5.1 5.1
Net cash used in investing activities 1.6 - -
Net cash used in financing activities - (0.1) (0.1)
Net cash from/(used in) discontinued operations 1.2 5.0 5.0
------------------------------------------------- ---------- ---------- -----------
Exceptional items on discontinued operations
----------------------------------------------------------------------------------
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Loss on disposal of discontinued operations - (3.1) (4.1)
Total exceptional items - (3.1) (4.1)
--------------------------------------------- ----------- ---------- ----------
Exceptional items - tax (charge)/credit - (0.8) (1.7)
--------------------------------------------- ----------- ---------- ----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
4 Exceptional Items
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Site relocation and restructuring (1.8) (1.6) (0.2)
Warranty provisions - 0.5 0.5
Sale of land - 0.1 0.2
Asset impairment - - -
Acquisition related - - (0.9)
-------------------------------------------- ------------- ----------- --------------
Total exceptional items (1.8) (1.0) (0.4)
-------------------------------------------- ------------- ----------- --------------
Exceptional items - tax credit 0.2 0.2 0.6
-------------------------------------------- ------------- ----------- --------------
Site relocation and restructuring costs
Net exceptional charge in the period was GBP1.8m (H1 2016/17: GBP1.0m
charge, Full Year 2016/17: GBP0.4m charge) and related to restructuring
costs as part of the continuing redesign of the organisational structure,
including investment on our finance system upgrade, and the optimisation
of our manufacturing capabilities.
Warranty provisions
Surplus warranty provisions were credited to exceptional items in Half
Year 2016/17 and Full Year 2016/17 of GBP0.5m in each period consistent
with where the cost of the original provisions was recorded in the financial
statements. No such releases have been made in Half Year 2017/18.
Sale of land
The gains on land sales in Half Year 2016/17 and Full Year 2016/17 relate
to several individual small land sales. No such sales have been made
in Half Year 2017/18.
Tax credit on exceptionals
Tax credit relating to exceptional items arising in the period were
GBP0.2m (H1 2016/17: GBP0.2m, Full Year 2016/17: GBP0.6m).
Net cash cost of exceptionals
The cash cost of exceptional items in the period was GBP1.0m (H1 2016/17:
GBP2.4m) predominantly reflecting site relocation and restructuring
costs from the current and prior periods.
5 Taxation
A tax charge of 15.9% (H1 2016/17: 15.8%, Full Year 2016/17: 15.8%)
has been provided based on management's best estimate of the effective
rate of tax for the year arising on the profits before exceptional
items giving rise to tax for the period of GBP3.3m. This is offset
by tax credits of GBP0.2m on exceptional items recognised in the
period as described in note 4, resulting in an overall tax charge
for the period of GBP3.1m.
Reductions in the UK corporation tax rate from 20% to 19% (effective
from 1 April 2017) and to 17% (effective 1 April 2020) were substantively
enacted as at 6 September 2016. This will reduce the company's future
current tax charge accordingly. The UK deferred tax asset at 30 September
2017 has been calculated based on the rate of 17% substantively enacted
at the balance sheet date.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
6 Earnings per share
2017/18 2016/17 2016/17
Half Year Half Year Full Year
pence per pence per pence per
share share share
Earnings per share
Basic earnings per share from continuing
operations 14.8 13.2 47.2
Diluted earnings per share from continuing
operations 14.7 12.9 46.6
Basic earnings per share from discontinued
operations (0.4) (6.1) (7.9)
Diluted earnings per share from discontinued
operations (0.4) (6.0) (7.8)
Basic earnings per share 14.4 7.1 39.3
Diluted earnings per share 14.3 6.9 38.8
Adjusted earnings per share
Basic earnings per share from continuing
operations 16.6 14.0 47.1
Diluted earnings per share from continuing
operations 16.4 13.7 46.5
Basic earnings per share from discontinued
operations (0.4) (2.3) (2.3)
Diluted earnings per share from discontinued
operations (0.4) (2.2) (2.2)
Basic earnings per share 16.2 11.7 44.8
Diluted earnings per share 16.0 11.5 44.3
------------------------------------------------------ ------------ ------------ ------------
Earnings per share are based on the profit for the period attributable
to equity shareholders as shown in the Group condensed consolidated
income statement. The weighted average number of ordinary shares used
in the calculations is 101,839,970 (H1 2016/17: 101,462,770; FY 2016/17:
101,582,354) for basic earnings per share and 102,883,099 (H1 2016/17:
103,725,369; FY 2016/17: 102,829,946) for diluted earnings per share
after adjusting for dilutive share options.
The Directors are of the opinion that the publication of the adjusted
earnings per share is useful as it gives a better indication of adjusted
business performance.
Reconciliations of the earnings used in the calculations are set out
below.
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Earnings for basic earnings per share -
continuing operations 15.1 13.4 47.9
Earnings for basic earnings per share -
discontinued operations (0.4) (6.2) (8.0)
------------------------------------------------------ ------------ ------------ ------------
Earnings for basic earnings per share 14.7 7.2 39.9
Add: Amortisation of acquired intangibles 0.2 - 0.1
Add: Exceptional items (excluding non-controlling
interests) 1.8 4.1 4.4
Less: Tax on exceptional items (0.2) 0.6 1.1
Earnings for adjusted earnings per share 16.5 11.9 45.5
------------------------------------------------------ ------------ ------------ ------------
7 Equity dividends
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Final dividend for the year ended 26 March
2016 of 16.7p paid on
3 August 2016 - 16.9 16.9
Interim dividend for the period ended 24
September 2016 of 8.3p paid on 11 January
2017 - - 8.5
Final dividend for the year ended 25 March 17.0 - -
2017 of
16.7p paid on 30 June 2017
-------------------------------------------- ---------- ---------- ----------
17.0 16.9 25.4
------------------------------------------------ ---------- ---------- ----------
The Directors declared a dividend of 8.3p per share for the half year
ended 30 September 2017 which will be paid on 3 January 2018 and will
utilise GBP8.5m of shareholders' funds.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
8 Financial Instruments
Carrying amounts versus the fair values
Total fair Carrying Restated Restated
value amount total fair carrying
Sep 2017 GBPm Sep 2017 value amount
Financial assets GBPm Mar 2017 Mar 2017
GBPm GBPm
Trade and other receivables(1) 120.5 120.5 102.6 102.6
Cash and cash equivalents 9.0 9.0 15.4 15.4
Derivative financial instruments:
- Forward exchange contracts
designated as cash flow
hedges(3) 1.6 1.6 4.5 4.5
- Short duration swap contracts
designated as fair value
hedges(3) 0.2 0.2 0.2 0.2
- Foreign exchange fair
value hedges - other economic
hedges(3) 1.9 1.9 0.9 0.9
- Embedded derivatives(3) 4.1 4.1 10.3 10.3
- Interest rate swaps(3) - - - -
-------------------------------------- ---- --------------- ---------- ------------ ----------------
Total financial assets 137.3 137.3 133.9 133.9
-------------------------------------- -------- --------------- ---------- ------------ ----------------
Financial liabilities
Unsecured bank loans and
overdraft (146.4) (146.4) (136.3) (136.3)
Trade and other payables(2) (168.3) (168.3) (174.7) (174.7)
Derivative financial instruments:
- Forward exchange contracts
designated as cash flow
hedges(3) (2.9) (2.9) (1.6) (1.6)
- Short duration swap contracts
designated as fair value
hedges(3) (0.1) (0.1) (0.1) (0.1)
- Foreign exchange fair
value hedges - other economic
hedges(3) (2.3) (2.3) (5.5) (5.5)
- Embedded derivatives(3) (0.9) (0.9) (0.7) (0.7)
- Interest rate swaps(3) (0.1) (0.1) (0.4) (0.4)
Total financial liabilities (321.0) (321.0) (319.3) (319.3)
-------------------------------------- -------- --------------- ---------- ------------ ----------------
(1) Excludes prepayments
(2) Excludes deferred income. The prior period comparatives have been
restated to include accrued expenses, and payments received on account
(3) Level 2 valuation
Fair Value measurement for derivative financial instruments
Fair value is calculated based on the future principal and interest cash flows, discontinued at the market rate of interest at the reporting date. The valuation bases are classified according to the degree of estimation according to the degree of estimation required in arriving at the fair values. Level 1 valuation are derived from unadjusted quoted prices for identical assets or liabilities in active markets, level 2 valuations use observable inputs for the assets or liabilities other than quoted prices, while level 3 valuations are not based on observable market data and are subject to management estimates. There has been no movement between levels during the current or prior periods.
9 Analysis of net debt
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Cash at bank and in hand 9.0 9.4 13.2
Short term bank deposits - 2.2 2.2
Bank overdrafts (0.3) (0.1) (4.2)
------------------------------------------- ------------ ------------ ------------
Cash and cash equivalents 8.7 11.5 11.2
Other debt due within one year (146.1) (127.0) (132.1)
Net debt at end of period (137.4) (115.5) (120.9)
------------------------------------------- ------------ ------------ ------------
The Group has a revolving credit facility of GBP275m. As the draw downs
on this facility are typically rolled over on terms of between one
and three months the borrowings are disclosed as a current liability.
This is notwithstanding the long term nature of this facility which
expires in December 2021.
As at 30 September 2017, the Group has a total of undrawn committed
borrowing facilities, all maturing in more than one year, of GBP129m
(24 September 2016: GBP123m, 25 March 2017: GBP118m, all maturing in
more than one year). The amount of loans drawn on the GBP275m facility
is GBP146m.
Net debt above is presented excluding unamortised pre-paid borrowing
fees of GBP1.7m.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
10 Retirement benefit obligations
The Group has pension plans, devised in accordance with local conditions
and practices in the country concerned, covering the majority of employees.
The assets of the Group's plans are generally held in separately administered
trusts or are insured.
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
UK retirement benefit obligations (189.1) (358.7) (237.0)
Overseas retirement benefit obligations (2.3) (2.4) (2.4)
----------------------------------------------------- ----------- ----------- ----------
Retirement benefit obligations (191.4) (361.1) (239.4)
The majority of the Group's retirement benefit obligations are in
the UK:
Amounts recognised in the consolidated
Balance Sheet:
Fair value of plan assets 964.7 1,007.8 974.5
Present value of funded obligations (1,147.2) (1,357.9) (1,204.7)
----------------------------------------------------- ----------- ----------- ----------
Funded defined benefit pension plans (182.5) (350.1) (230.2)
Present value of unfunded obligations (6.6) (8.6) (6.8)
----------------------------------------------------- ----------- ----------- ----------
Net liability (189.1) (358.7) (237.0)
----------------------------------------------------- ----------- ----------- ----------
Amounts recognised in the consolidated
Income Statement:
Included in employee benefits expense:
Administrative expenses (1.1) (0.6) (1.5)
Included in net finance cost:
Net retirement benefit obligation finance
cost (3.2) (3.6) (7.4)
Total recognised in the consolidated Income
Statement (4.3) (4.2) (8.9)
----------------------------------------------------- ----------- ----------- ----------
Principal actuarial assumptions: 2017/18 2016/17 2016/17
Half Year Half Year Full Year
UK UK UK
% % %
Future pension increases - past service 3.60 3.60 3.65
Discount rate 2.70 2.10 2.75
Inflation rate 3.10 3.10 3.30
-------------------------------------------- ----------- ----------- ----------
At 30 September 2017 mortality assumptions were based on tables issued
by Club Vita, with future improvements in line with the CMI model,
CMI_2016 and a long term rate of 1.25 per cent per annum.
Recognition of the deficit in accordance with IFRS results in the
negative net assets shown on the balance sheet. The Group announced
on 1 July 2016 that it has agreed a revised funding plan with the
Trustee to eliminate the deficit over a period of 12 years from 31
March 2016. The plan will see the existing funding payment schedule
extended from 2022 to 2028.
The cash contributions to the Scheme will be GBP13.5m in 2018, increasing
to GBP20.5m in 2019 and increasing by 4% a year to 2022. The amount
of contributions will be frozen at GBP23.0m per year between 2023
and 2028. The Group will continue to pay annual fees of GBP1.6m for
managing the Scheme, (excluding the PPF levy) in addition to the cash
contributions. In the year ended 25 March 2017, the Group made funding
payments and management fees totalling GBP14.8m.The next triennial
funding valuation is due in April 2018.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
11 Related party transactions
During the year the Group traded on an arms length basis with the
associated company Fidink (33.3% owned).
The Group's trading activities with Fidink in the period comprise
GBP17.0m (H1 2016/17: GBP10.2m) for the purchase of ink and other
consumables on an arms length basis. At the balance sheet date there
was GBP5.1m (H1 2016/17: GBP2.5m) owing to this company.
12 Contingent assets and liabilities
De La Rue has extensive international operations and is subject to
various legal and regulatory regimes, including those covering taxation
matters from which, in the ordinary course of business, contingent
liabilities can arise. While the outcome of litigation, disputes
and investigations by regulatory authorities can never be predicted
with certainty, having regard to legal advice received and the insurance
arrangements of the Company and its subsidiaries, the Directors believe
that adequate provision has been made to cover these matters. The
Group also provides guarantees and performance bonds which are issued
in the ordinary course of business. In the event that a guarantee
or bond is called, provision may be required subject to the particular
circumstances, including an assessment of its recoverability.
Contingent assets and liabilities exist in relation to the sale of
the CPS business - see Note 3 for further information.
13 Capital commitments
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
The following commitments existed at the
balance sheet date:
Contracted but not provided for in the
accounts 10.5 16.3 6.5
14 De La Rue financial calendar: 2017/18
Ex dividend date for interim dividend 7 December 2017
Record date for interim dividend 8 December 2017
Payment of interim dividend 3 January 2018
Financial year end 31 March 2018
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
15 Non-IFRS Financial measures
De La Rue plc publishes certain additional information in a non-statutory format in order to provide readers with an increased insight into the underlying performance of the business. The Directors are of the opinion that these measures give a better understanding of the underlying performance of the business. Amortisation of acquired intangible assets is a non-cash item and by excluding this from the adjusted operating profit metrics this is deemed to be a more meaningful metric of the contribution from the underlying business. The measures the Group uses along with appropriate reconciliations where applicable are shown below.
Adjusted operating profit
Adjusted operating profit represents earnings from continuing operations adjusted to exclude exceptional items and amortisation of acquired intangible assets.
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Operating profit from continuing operations on an
IFRS basis 24.6 23.0 70.2
------------------------------------------------------ ---------- ---------- ----------
- Amortisation of intangible assets 0.2 - 0.1
- Exceptional items - operating 1.8 1.0 0.4
------------------------------------------------------ ---------- ---------- ----------
Adjusted operating profit from continuing operations 26.6 24.0 70.7
------------------------------------------------------ ---------- ---------- ----------
Adjusted basic earnings per share
2017/18 2016/17 2016/17
Half Year Half Year Full Year
GBPm GBPm GBPm
Profit attributable to equity shareholders of the
Company from continuing operations on an IFRS basis 15.1 13.4 47.9
------------------------------------------------------ ---------- ---------- ----------
- Amortisation of intangible assets 0.2 - 0.1
- Exceptional items - operating 1.8 1.0 0.4
- Tax on exceptional items (0.2) (0.2) (0.6)
------------------------------------------------------ ---------- ---------- ----------
Adjusted profit attributable to equity shareholders
of the Company from continuing operations 16.9 14.2 47.8
------------------------------------------------------ ---------- ---------- ----------
Weighted average number of ordinary shares for basic
earnings 101.8 101.5 101.6
------------------------------------------------------ ---------- ---------- ----------
2017/18 2016/17 2016/17
Half Year Half Year Full Year
Pence per Pence per Pence per
share share share
Basic earnings per ordinary share continuing operations
on an IFRS basis 14.8 13.2 47.2
--------------------------------------------------------- ---------- ---------- ----------
Adjusted basic per ordinary share for continuing
operations 16.6 14.0 47.1
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGGAUGUPMPGU
(END) Dow Jones Newswires
November 21, 2017 02:01 ET (07:01 GMT)
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