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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.60 | 2.99% | 89.60 | 89.20 | 93.60 | 95.00 | 87.40 | 87.40 | 322,665 | 16:35:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Printing, Nec | 349.7M | -55.9M | -0.2854 | -3.29 | 183.74M |
From Apr 2019 to Apr 2024
TIDMDLAR
RNS Number : 7604P
De La Rue PLC
22 November 2016
DE LA RUE PLC
22 November 2016
Solid performance underpinned by strong order book and good strategic progress
De La Rue plc (LSE: DLAR) (De La Rue, the "Group" or the "Company") announces its half year results for the six months ended 24 September 2016 (the period or half year).
KEY FINANCIALS
The figures below show continuing operations, excluding the Cash Processing Solutions business which was sold on 22 May 2016.
Hot Features
Premium
Half year Half year
2016/17 2015/16 Change
GBPm GBPm %
Revenue 189.5 188.7 0%
Underlying operating
profit* 24.0 23.6 2%
Underlying operating
margin* 12.7% 12.5% 20bpts
Underlying profit before
tax* 18.2 17.6 3%
Reported profit before
tax 17.2 25.1 (31%)
Underlying earnings
per share** 14.0p 14.6p (4%)
Reported earnings per
share 13.2p 25.0p (47%)
Dividend per share 8.3p 8.3p 0%
* Before net exceptional charge of GBP1.0m (H1 2015/16: GBP7.5m
income).
** Underlying EPS is calculated before exceptional charge and income,
and exceptional tax credits of GBP0.2m (H1 2015/16: GBP3.0m).
The Directors are of the opinion that these measures give a better
indication of underlying performance.
FINANCIAL HIGHLIGHTS
-- Half year performance in line with expectations, full year outlook unchanged
-- Year on year revenue flat and underlying operating profit up 2% despite the impact of a cGBP30m contract which concluded in H2 2015/16
-- Currency revenue down 2%, underlying operating profit up 3%
-- Product Authentication and Traceability revenue up 10% and underlying operating profit up 24%
-- Net debt increased by GBP9.4m to GBP115.5m
-- Group 12 month order book remained strong at GBP409m, providing good visibility for the rest of the year and beyond
-- Concluded pension deficit funding plan with reduced cash contributions in 2017/18 and 2018/19
-- Interim dividend maintained at 8.3p
STRATEGIC AND OPERATIONAL HIGHLIGHTS
Optimise & Flex - on track to deliver operational flexibility and planned cost savings
-- Banknote Print volumes up 22% to 3.3bn notes, reflecting success in winning both overspill and relationship orders
-- Banknote Paper volumes up 8% to 5,300 tonnes
-- Successful launch of new Bank of England GBP5 polymer notes, designed and printed by De La Rue. Printing of GBP10 polymer notes underway
-- Agreement to enter 60/40 joint venture with the Government of Kenya, which will strengthen our position in East Africa
-- Restructuring of manufacturing footprint on track
Invest & Build - good momentum building in growth segments
-- Good momentum in Polymer - Second significant volume customer win - 15 note issuing authorities secured since launch in 2012
-- Holographic foil security feature for polymer launched and issued into circulation on the Gibraltar GBP100 during H1, further enhancing our polymer offering
-- Active(TM) - our latest security thread with lenticular technology - in circulation on first note on Bahamas $10
-- Secured two multi-year Identity Solutions contracts with Qatar and Barbados
-- DLR Certify(TM) track and trace system successfully deployed with Cameroon as the first customer
Martin Sutherland, Chief Executive Officer of De La Rue, commented:
"De La Rue's half year results are in line with our expectations. The Currency business has shown strength and resilience despite the impact from the conclusion of a material contract last year. Both Banknote Print and Banknote Paper have performed well with increased volumes.
"De La Rue continues to make good progress against our 2020 strategic plan. We have further strengthened our position in the fast growing East Africa region through the agreement to form a joint venture with the Government of Kenya. I am also pleased with the progress in Polymer where we have secured a second volume customer. We now supply polymer substrate to 15 issuing authorities, representing c40% of total polymer customers. Although the contribution to the Group from Polymer is still small, we are optimistic about its potential growth in the coming years.
"In non Currency businesses, we have secured two multi-year Identity Solutions contracts and gained early traction in the enterprise market for Product Authentication and Traceability.
"While we expect little impact in the current financial year, as a major UK-based exporter with more than 80% of our revenue from outside the UK, we believe that we would benefit from a sustained weakness of Sterling. We are also encouraged by our 12 month closing order book of GBP409m and the early strategic momentum in the key future growth areas. We remain confident of the business' outlook for the rest of the year and beyond."
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 Jon Coles Oliver Hughes A presentation to analysts will take place at 9:00 am GMT on 22 November 2016 at the Lincoln Centre, 18 Lincoln's Inn Fields, WC2A 3ED. The presentation will also be accessible via a conference call and an audio webcast. Dial-ins for the conference call are +44 (0) 20 3059 8125, passcode: De La Rue. An archive of the conference call is available for a week from midday 22 November 2016, which is accessible via +44 (0) 121 260 4861, passcode: 4596 218#. 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.
INTERIM STATEMENT
De La Rue's half year results were in line with expectations, with revenue flat and underlying operating profit up 2%. Implementation of the strategic plan is progressing well with the restructuring of the manufacturing footprint on track and an agreement to form a joint venture with the Government of Kenya. The Group's 12 month closing order book remained strong at GBP409m (H1 2015/16: GBP405m) at the end of the period.
In the first half of the year, we successfully mitigated the impact of the conclusion of a security features contract which contributed annual revenue of cGBP30m with good performance in Banknotes and Banknote Paper. Revenue in Currency was 2% lower than the prior year but underlying operating profit was up 3%.
Identity Solutions performed as expected with revenue up 6% and operating profit down 26%. Margins were in line with those in the FY2015/16. Product Authentication and Traceability performed well with revenue up 10% and operating profit up 24%, driven by higher volumes from existing customers.
FINANCIAL RESULTS
All numbers below are shown for continuing operations only and exclude the Cash Processing Solutions business which was sold on 22 May 2016. The loss from the discontinued operations in the period was GBP6.2m. See Note 3 in the accounts for details of the discontinued operations.
Group revenue was flat at GBP189.5m (H1 2015/16: GBP188.7m) in the first half. Underlying operating profit was up 2% at GBP24.0m (H1 2015/16: GBP23.6m). Underlying profit before tax increased by 3% to GBP18.2m (H1 2015/16: GBP17.6m) and underlying earnings per share was 4% lower at 14.0p (H1 2015/16: 14.6p). Exceptional net charges in the period were GBP1.0m (H1 2015/16: exceptional net gains of GBP7.5m), consisting of GBP1.6m site relocation and restructuring costs which were offset by GBP0.5m income relating to release of warranty provisions and a GBP0.1m gain from a land sale. This resulted in profit before tax of GBP17.2m (H1 2015/16: GBP25.1m), down 31% year-on-year.
Underlying operating cash flow, comprising underlying operating profit adjusted for depreciation and the movement in working capital, was GBP25.0m (H1 2015/16: GBP61.1m). Net debt at 24 September 2016 was GBP115.5m up GBP9.4m since the year end mainly due to an adverse working capital movement. Inventory increased in preparation for sales in the second half of the year.
DIVID
An interim dividend of 8.3p has been declared for the half year ended 24 September 2016 (H1 2015/16: 8.3p), payable on 11 January 2017 to shareholders on the register on 9 December 2016.
STRATEGIC PROGRESS
During the first half, we have made good strategic progress in our three areas of focus: Optimise and Flex, Invest and Build, and the culture change programme.
Optimise and Flex
Optimise and Flex aims to mitigate the risks in the product lines that are challenged by pricing and/or limited growth potential, i.e. Banknote Paper, or that face unpredictable demands, i.e. Banknote Print.
To better align De La Rue's capacity with historic volumes and the unpredictability in the banknote market, in December 2015 we announced our manufacturing footprint restructuring programme to improve efficiency and reduce costs. The programme will see a significant reduction in our banknote production capacity but with an ability to flex with changeable shift patterns and the use of outsourcing partners.
We have agreed changes to working practices in a number of sites, significantly improving labour flexibility. During the period, we have decommissioned two lines in Malta and upgraded a banknote print line in Gateshead, UK. We have also refined the implementation plan to give us a better blend of outsourcing with a more flexible in house production capacity, which involves keeping the remaining banknote print line open in Malta. The plan to deliver cGBP13m savings per annum from FY2018/19 with GBP15m incremental capital expenditure remains on track.
In August 2016 we agreed to enter into a joint venture with the Government of Kenya which will acquire a 40% interest in De La Rue's wholly owned subsidiary in Kenya for GBP5.0m. Leveraging our existing long term strategic relationship with the Government of Kenya, the joint venture will further strengthen our ties with the country and secure our position as a supply hub of currency and security solutions for the East Africa region. The transaction is expected to complete by the end of the financial year.
Our view of the banknote paper market remains unchanged. We continue to pursue strategic partnerships to rationalise capacity and reduce ongoing capital requirements. Discussions with a number of potential partners are ongoing.
Invest and Build
Invest and Build aims to invest in and grow the product lines that are exposed to higher growth and more predictable markets, namely Polymer and Security Features in the Currency segment, Identity Solutions and Product Authentication and Traceability.
Momentum in polymer continues. We gained market share by becoming the joint supplier of polymer substrate in a large market. While we expect limited contribution to the Group's profitability from Polymer in the short term, we believe it has significant growth potential in the coming years.
Security Features has progressed well strategically. We launched holographic foil on polymer with the issue of the Gibraltar GBP100 note in September 2016. As the most versatile product category in our portfolio, Security Features can be applied across all other product lines. Our renewed focus on holographic features will help to increase return on assets by utilising the features in banknotes as well as other security products.
Identity Solutions have seen some early success in the first half with the winning of two multi-year ePassport and service contracts - Qatar and Barbados. We have also increased our focus on selling individual components and standalone service contracts to State Print Works (SPWs) and commercial operators.
Product Authentication and Traceability has also made good progress. Just a year after launch, DLR Certify(TM) was successfully deployed in Cameroon. We also gained traction in the enterprise market, with initial discussions with a number of large commercial organisations about bespoke digital solutions.
We aim to accelerate growth in Invest and Build product lines through partnerships and bolt-on acquisitions, with the main focus on security features. Discussions with a number of potential technology partners are ongoing.
Drive a high performing culture
As part of the culture change programme, we launched the second phase of the Leadership Development Programme, focusing on developing the agility and capability to lead and inspire others to perform at the highest levels while working effectively in a matrix organisation. In June 2016 we hosted our first Above & Beyond Recognition Awards to recognise and celebrate both individual and team achievements in the past year.
We aim to create a leaner, more dynamic and agile organisation. The total headcount as at the end of September 2016 was 3,067, 14% fewer than a year ago.
OPERATING REVIEWS
Currency
Half Year Half Year
2016/17 2015/16 Change
Banknote print volume (bn notes) 3.3 2.7 22%
Banknote paper volume ('000 tonnes) 5.3 4.9 8%
GBPm GBPm
Revenue 136.4 139.8 (2%)
Operating profit* 14.3 13.9 3%
Operating margin* 10.5% 10.0% 50bpts
*Segmental operating profit is stated before exceptional items
The Currency segment comprises Banknote Print, Banknote Paper, Polymer and Security Features.
Performance in the segment has benefited from strong volumes in Banknote Print and Banknote Paper, but offset by the conclusion of an important contract in December 2015. Currency revenue was 2% lower year on year at GBP136.4m (H1 2015/16: GBP139.8m), while operating profit was 3% higher, reflecting a better business mix.
The commercial banknote market continues to be buoyant, however orders remain unpredictable due to overspill work from SPWs. Banknote Print volumes increased by 22% during the period to 3.3bn notes (H1 2015/16: 2.7bn), partly by winning overspill orders. Banknote Print revenue was up 8% year on year, with gross profit up 4%.
The new Bank of England GBP5 polymer notes, designed and printed by De La Rue, were successfully entered into circulation in September. Production of the new GBP10 polymer notes is now underway.
Banknote Paper volumes increased by 8% to 5,300 tonnes (H1 2015/16: 4,900 tonnes), also benefiting from overspill orders. Banknote Paper revenue was up 6% in the period, offset by lower margins from a different mix of contracts.
There was a 70% increase in Polymer revenue and a doubling of gross profit in the period, although it remains a small part of the Group. We now supply our Safeguard(R) polymer substrate to 15 issuing authorities across 21 denominations. All three new Scottish GBP5 notes that were designed and printed on Safeguard(R) successfully went into circulation in the last two months.
Security Features performance was adversely impacted by the concluded contract. We have made considerable progress on mitigating the impact with several new wins, including the UAE and Dominican Republic. Active(TM) , our latest security thread based on lenticular technology, went into full circulation for the first time with the new Bahamas $10 note in September 2016.
The 12 month order book for Currency remained strong at GBP322m (H1 2015/16: GBP318m) at the period end.
Identity Solutions
Half Year Half Year
2016/17 2015/16 Change
GBPm GBPm
Revenue 33.5 31.5 6%
Operating profit* 3.4 4.6 (26%)
Operating margin* 10.0% 14.6% (460bpts)
*Segmental operating profit is stated before exceptional items
Revenue grew 6% to GBP33.5m (H1 2015/16: GBP31.5m) primarily due to timing of deliveries. Operating profit fell to GBP3.4m (H1 2015/16: GBP4.6m), mainly due to the contractual reduction in contribution from a large contract as previously announced. Operating margin in the second half is expected to be in line with the first half.
Our focus on ePassport, digital and service offerings has borne fruit, securing multi-year contracts with Barbados and Qatar to provide ePassport and service solutions.
We have also made considerable progress on our strategy to sell to SPWs and commercial operators with a number of repeat and new orders for individual passport components. The sales pipeline for Identity Solutions remains strong.
Product Authentication & Traceability
Half Year Half Year
2016/17 2015/16 Change
GBPm GBPm
Revenue 21.5 19.6 10%
Operating profit* 6.3 5.1 24%
Operating margin* 29.3% 26.0% 330bpts
*Segmental operating profit is stated before exceptional items
Revenue grew by 10% to GBP21.5m (H1 2015/16: GBP19.6m), while operating profit increased by 24% to GBP6.3m (H1 2015/16: GBP5.1m).
DLR Certify(TM), our first track and trace software solution, was successfully launched in Cameroon during the period. The end-to-end solution authenticates each pack of cigarettes with uniquely coded tax stamps that also enable the product to be traced through the supply chain with the DLR Certify(TM) system, thus protecting its citizens and tax revenue from illicit trade.
Ongoing joint R&D projects with existing enterprise customers have progressed well, which further strengthen our longstanding relationships.
EXCEPTIONAL ITEMS
The net exceptional charge in the period was GBP1.0m, comprising GBP1.6m costs relating to site relocation and structure, offset by GBP0.5m gain from the release of warranty provisions and GBP0.1m income from land sale. Tax credits relating to exceptional items arising in the period were GBP0.2m.
INTEREST
The Group's net interest charge was GBP2.2m (H1 2015/16: GBP2.3m). The IAS19 related finance cost, which represents the difference between the imputed interest on pension liabilities and assets, was GBP3.6m (H1 2015/16: GBP3.7m).
FOREIGN EXCHANGE IMPACT
The currency market has become more volatile following the UK Referendum vote. The majority of our sales are invoiced in Sterling and as the Group hedges all confirmed foreign currency orders and purchases, we expect little impact from the foreign exchange movement in the 2016/17 financial year. However, as a major UK-based exporter with more than 80% of revenue from outside the UK, De La Rue is expected to benefit from competitive advantages presented by the weakness of Sterling.
PENSION DEFICIT AND FUNDING
The Group's formal triennial funding valuation of the UK defined benefit pension scheme was finalised in June 2016. The underlying funding deficit as at 5 April 2015 was valued at GBP252m. The Group 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 GBP13.0m and GBP13.5m in 2017 and 2018 respectively, increasing to GBP20.5m in 2019 and then rising by 4% per annum to 2022. It will be frozen at GBP23.0m per year between 2023 and 2028. In the year ended 26 March 2016, the Group made funding payments and management fees totalling GBP19.1m. The Group will continue to pay annual fees of GBP1.6m for managing the scheme in addition to the cash contributions. The next triennial funding valuation is due in April 2018.
The valuation of the pension scheme under IAS 19 indicates a scheme post tax deficit at 24 September 2016 of GBP297.7m (26 March 2016: GBP178.4m), reflecting a decrease in the discount rate used to value the scheme liabilities (2.10% in H1 2016/17 compared with 3.50% in FY 2015/16) and the Group funding contributions. The increase was partly offset by the higher than expected returns on scheme assets.
In common with other final salary schemes, the scheme valuation is very sensitive to any movement in the discount rate, with a 0.25% increase in discount rate resulting in a GBP49m decrease in liabilities or vice versa and hence the deficit would reduce should interest and discount rates increase in the future.
The charge to operating profit in respect of the UK defined benefit pension scheme for the half year was GBP0.6m (H1 2015/16: GBP0.5m). In addition, under IAS 19 there was a finance charge of GBP3.6m arising from the difference between the interest cost on liabilities and the interest income on scheme assets (H1 2015/16: GBP3.7m).
BOARD CHANGES
Nick Bray, Chief Financial Officer of Sophos Group plc, joined the Board as a Non-executive Director and Chair of the Audit Committee at the AGM on 21 July 2016. Nick brings extensive and highly relevant experience in the technology and information security industries to the Board. He succeeds Victoria Jarman, who stepped down at the AGM.
OUTLOOK
The Group's 12 month order book at GBP409m provides good visibility for the rest of the year and the Board is encouraged by the early strategic momentum in the Invest and Build product lines. The outlook for the year remains unchanged.
- ends -
Martin Sutherland Jitesh Sodha Chief Executive Officer Chief Financial Officer
22 November 2016
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 2016 Annual Report, the principal risks include failure to innovate, timing of contract awards and political factors, loss of a key customer or contract, product security, product integrity, reputational damage, supplier failure, health and safety failure, environmental breach, loss of a key site, contract issues, breach of competition regulations, loss of core IT systems, information security and actions of its employees and third parties. 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 2016 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 6 to 24 of the strategic report in the 2016 Annual Report. In addition, pages 86 to 89 of the 2016 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 26 of the 2016 Annual Report. As described on page 26 of the 2016 Annual Report, the Group meets its funding requirements through cash generated from operations and a revolving credit facility which expires in December 2019.
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 2016 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.
Responsibility Statement of the Directors in respect of the Interim Statement
We confirm that to the best of our knowledge:
* the condensed set of financial statements has been
prepared in accordance with IAS34 'Interim Financial
Reporting' as adopted by the EU;
* the Interim Management Statement includes a fair
review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed interim
financial statement; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes
in the related party transactions to those described in the last Annual
Report that could do so.
The Board
The Board of Directors of De La Rue plc at 26 March 2016 and their respective responsibilities can be found on pages 38 and 43 of the De La Rue plc Annual Report 2016. Since that date the following changes have taken place:
-- Victoria Jarman stepped down as Non-executive Director and Chair of the Audit Committee at the conclusion of the AGM on 21 July 2016
-- Nick Bray was appointed as Non-executive Director and Chair of the Audit Committee on 21 July 2016
For and on behalf of the Board
Philip Rogerson
Chairman
22 November 2016
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 six months ended 24 September 2016 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 the terms of our engagement to assist the company in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
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 DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
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 UK. 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 Ireland) 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 six months ended 24 September 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Ian Bone
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf,
London, E14 5GL
22 November 2016
GROUP CONDENSED CONSOLIDATED INTERIM
INCOME STATEMENT - UNAUDITED
FOR THE HALF YEARED 24 SEPTEMBER 2016
--------------------------------------------------------------------------------------------------------------
Re-presented*
2016/17 2015/16 2015/16
Half Year Half Year Full Year
Notes GBPm GBPm GBPm
Revenue 2 189.5 188.7 454.5
------------ -------------- -----------
Operating expenses - ordinary (165.5) (165.1) (384.1)
Operating (expenses)/income - exceptional 4 (1.0) 7.5 (3.6)
------------ -------------- -----------
Total operating expenses (166.5) (157.6) (387.7)
Operating profit 23.0 31.1 66.8
Comprising:
------------ -------------- -----------
Underlying operating profit 2 24.0 23.6 70.4
Exceptional items 4 (1.0) 7.5 (3.6)
------------ -------------- -----------
Profit before interest and taxation 23.0 31.1 66.8
Interest income - - 0.1
------------------------------------------------------ ------ ------------ -------------- -----------
Interest expense (2.2) (2.3) (4.9)
Net retirement benefit obligation finance
cost (3.6) (3.7) (7.1)
------------------------------------------------------ ------ ------------ -------------- -----------
Net finance expense (5.8) (6.0) (11.9)
------------------------------------------------------ ------ ------------ -------------- -----------
Profit before taxation 17.2 25.1 54.9
Comprising:
------------ -------------- -----------
Underlying profit before tax 18.2 17.6 58.5
Exceptional items 4 (1.0) 7.5 (3.6)
------------ -------------- -----------
Taxation - UK (1.0) (1.3) (4.9)
- Overseas (1.7) 2.3 (1.4)
------------ -------------- -----------
Total taxation (2.7) 1.0 (6.3)
Profit for the period from continuing operations 14.5 26.1 48.6
------------------------------------------------------ ------ ------------ -------------- -----------
Comprising:
------------ -------------- -----------
Underlying profit for the period 15.3 15.6 49.9
(Loss)/profit for the period on exceptional
items 4 (0.8) 10.5 (1.3)
------------ -------------- -----------
Loss from discontinued operations 3 (6.2) (5.9) (31.0)
------------------------------------------------------ ------ ------------ -------------- -----------
Profit for the period 8.3 20.2 17.6
------------------------------------------------------ ------ ------------ -------------- -----------
Profit attributed to equity shareholders
of the company
Profit for the period from continuing operations 13.4 25.3 47.4
Loss for the period from discontinued operations (6.2) (5.9) (31.0)
Total profit attributable to equity shareholders 7.2 19.4 16.4
of the company
------------------------------------------------------ ------ ------------ -------------- -----------
Profit attributed to non-controlling interests
Profit for the period from continuing operations 1.1 0.8 1.2
Total profit attributable to non-controlling 1.1 0.8 1.2
interests
------------------------------------------------------ ------ ------------ -------------- -----------
Profit for the period 8.3 20.2 17.6
------------------------------------------------------ ------ ------------ -------------- -----------
Profit for the period attributable to the
Company's equity holders
Earnings per ordinary share
Basic
Basic EPS continuing operations 13.2p 25.0p 46.8p
Basic EPS discontinued operations (6.1p) (5.8p) (30.6p)
Total Basic Earnings per share 7.1p 19.2p 16.2p
Diluted
Diluted EPS continuing operations 12.9p 24.6p 46.2p
Diluted EPS discontinued operations (6.0p) (5.7p) (30.2p)
Total Diluted Earnings per share 6.9p 18.9p 16.0p
*2015/16 H1 figures have been re-presented
for the impact of discontinued operations -
see Note 3
GROUP CONDENSED CONSOLIDATED INTERIM
STATEMENT OF COMPREHENSIVE (LOSS)/INCOME - UNAUDITED
FOR THE HALF YEARED 24 SEPTEMBER 2016
2016/17 2015/16 2015/16
Half Year Half Year Full Year
GBPm GBPm GBPm
Profit for the financial period 8.3 20.2 17.6
---------------------------------------------------------- ---------- ---------- -----------
Other comprehensive income
Items that are not reclassified subsequently
to income statement:
Re-measurement (losses)/gains on retirement
benefit obligations (141.0) 20.1 5.4
Tax related to remeasurement of net defined
benefit liability 21.8 (4.0) (5.4)
Items that may be reclassified subsequently
to income statement:
Foreign currency translation difference for
foreign operations (4.6) (2.1) 1.5
Foreign currency translation recycled on disposal 4.5 - -
of discontinued operations
Change in fair value of cash flow hedges 7.1 (0.5) 4.1
Change in fair value of cash flow hedges transferred
to income statement (3.2) 2.8 1.6
Change in fair value of cash flow hedges transferred (0.3) - 1.5
to non-current assets
Income tax relating to components of other 1.6 (0.5) (1.8)
comprehensive income
Other comprehensive (loss)/income for the
period, net of tax (114.1) 15.8 6.9
---------------------------------------------------------- ---------- ---------- -----------
Total comprehensive (loss)/income for the
period (105.8) 36.0 24.5
---------------------------------------------------------- ---------- ---------- -----------
Total comprehensive income for the period
attributable to:
Equity shareholders of the Company (106.9) 35.2 23.3
Non-controlling interests 1.1 0.8 1.2
---------------------------------------------------------- ---------- ---------- -----------
(105.8) 36.0 24.5
---------------------------------------------------------- ---------- ---------- -----------
GROUP CONDENSED CONSOLIDATED INTERIM
BALANCE SHEET - UNAUDITED
AT 24 SEPTEMBER 2016
--------------------------------------------------------------------------------------------
2016/17 2015/16 2015/16
Half Year Half Year Full Year
Notes GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 162.7 175.3 167.0
Intangible assets 14.4 16.8 13.4
Investments in associates 0.1 0.1 0.1
Deferred tax assets 67.9 43.2 41.6
Derivative financial instruments 8 0.6 0.5 1.9
245.7 235.9 224.0
----------------------------------------------- ------ ---------- ---------- ----------
Current assets
Inventories 75.2 83.0 67.1
Trade and other receivables 91.1 82.7 93.5
Current tax assets 0.2 1.1 1.3
Derivative financial instruments 8 31.0 6.1 15.0
Cash and cash equivalents 11.6 52.4 40.5
Assets classified as held for sale 3 - - 11.2
209.1 225.3 228.6
----------------------------------------------- ------ ---------- ---------- ----------
Total assets 454.8 461.2 452.6
----------------------------------------------- ------ ---------- ---------- ----------
LIABILITIES
Current Liabilities
Borrowings (127.1) (155.7) (146.6)
Trade and other payables (163.0) (179.1) (171.5)
Current tax liabilities (20.9) (17.2) (17.6)
Derivative financial instruments 8 (22.6) (7.9) (12.0)
Provisions for liabilities and charges (14.7) (9.9) (9.0)
Liabilities classified as held for sale 3 - - (10.5)
----------------------------------------------- ------ ---------- ---------- ----------
(348.3) (369.8) (367.2)
----------------------------------------------- ------ ---------- ---------- ----------
Non-current liabilities
Retirement benefit obligations 10 (361.1) (212.4) (219.9)
Deferred tax liabilities (2.9) (1.5) (1.6)
Derivative financial instruments 8 (1.0) (1.0) (1.2)
Provisions for liabilities and charges (1.8) (1.6) (6.9)
Other non-current liabilities (7.0) (1.0) (1.4)
----------------------------------------------- ------ ---------- ---------- ----------
(373.8) (217.5) (231.0)
----------------------------------------------- ------ ---------- ---------- ----------
Total liabilities (722.1) (587.3) (598.2)
----------------------------------------------- ------ ---------- ---------- ----------
Net liabilities (267.3) (126.1) (145.6)
----------------------------------------------- ------ ---------- ---------- ----------
EQUITY
Ordinary share capital 46.7 46.6 46.6
Share premium account 36.6 35.6 35.7
Capital redemption reserve 5.9 5.9 5.9
Hedge reserve 8 5.3 (1.7) 2.3
Cumulative translation adjustment (12.4) (15.9) (12.3)
Other reserves (83.8) (83.8) (83.8)
Retained earnings (273.0) (119.3) (146.6)
----------------------------------------------- ------ ---------- ---------- ----------
Total equity attributable to shareholders
of the Company (274.7) (132.6) (152.2)
Non-controlling interests 7.4 6.5 6.6
----------------------------------------------- ------ ---------- ---------- ----------
Total equity (267.3) (126.1) (145.6)
----------------------------------------------- ------ ---------- ---------- ----------
GROUP CONDENSED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE HALF YEARED 24 SEPTEMBER 2016
2016/17 2015/16 2015/16
Half Half Year Full Year
Year
Notes GBPm GBPm GBPm
Cash flows from operating activities
Profit before tax* 11.8 19.6 20.8
Adjustments for:
Finance income and expense 5.8 6.1 12.1
Depreciation 12.0 10.9 23.0
Amortisation 1.5 2.0 3.2
(Increase)/decrease in inventories (6.6) (12.5) 5.0
(Increase)/decrease in trade and other
receivables (2.5) 19.4 (2.0)
(Decrease)/increase in trade and other
payables (1.8) 9.2 11.4
(Decrease)/increase in reorganisation provisions (0.9) (3.2) 0.4
Special pension fund contribution (4.2) (8.4) (19.1)
(Profit)/loss on disposal of property,
plant and equipment and software intangibles 0.8 (9.4) (7.6)
Asset impairments - - 10.8
Other non-cash movements 0.8 (3.6) 0.9
--------------------------------------------------- ----- -------------- -------- -----------
Cash generated from operations 16.7 30.1 58.9
Tax paid (0.8) (1.0) (4.7)
Net cash flows from operating activities 15.9 29.1 54.2
--------------------------------------------------- ----- -------------- -------- -----------
Cash flows from investing activities
Proceeds from sale of discontinued operation 2.1 - -
Purchases of property, plant and equipment
and software intangibles (6.3) (10.8) (25.0)
Development expenditure capitalised (2.5) (0.9) (3.0)
Proceeds from sale of property, plant and
equipment - 9.7 9.9
Net cash flows from investing activities (6.7) (2.0) (18.1)
Net cash flows before financing activities 9.2 27.1 36.1
--------------------------------------------------- ----- -------------- -------- -----------
Cash flows from financing activities
Proceeds from issue of share capital 1.0 0.1 0.3
(Repayment of)/proceeds from borrowings,
net (17.3) 14.1 3.6
Interest received - 0.1 0.1
Interest paid 5 (2.0) (1.8) (4.2)
Dividends paid to shareholders (16.9) (16.9) (25.3)
Dividends paid to non-controlling interests (0.3) - (0.3)
--------------------------------------------------- ----- -------------- -------- -----------
Net cash flows from financing activities (35.5) (4.4) (25.8)
--------------------------------------------------- ----- -------------- -------- -----------
Net (decrease)/increase in cash and cash
equivalents in the period (26.3) 22.7 10.3
Cash and cash equivalents at the beginning
of the period 37.9 28.9 28.9
Exchange rate effects (0.1) (0.7) (1.3)
--------------------------------------------------- ----- -------------- -------- -----------
Cash and cash equivalents at the end of
the period 8 11.5 50.9 37.9
--------------------------------------------------- ----- -------------- -------- -----------
Cash and cash equivalents consist of:
Cash at bank and in hand 9.4 50.2 40.5
Short term deposits 4 2.2 2.2 -
Bank overdrafts (0.1) (1.5) (2.6)
--------------------------------------------------- ----- -------------- -------- -----------
8 11.5 50.9 37.9
--------------------------------------------------- ----- -------------- -------- -----------
*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 24 SEPTEMBER 2016
-------------------------------------------------------------------------------------------------------------------------------
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
2015 46.5 35.5 5.9 (3.5) (13.8) (83.8) (139.4) 5.7 (146.9)
Profit for the
period - - - - - - 19.4 0.8 20.2
Other
comprehensive
income, net of
tax - - - 1.8 (2.1) - 16.1 - 15.8
------------------ -------- -------- ----------- -------- ------------ -------- ----------- ---------------- ---------
Total
comprehensive
income - - - 1.8 (2.1) - 35.5 0.8 36.0
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 - - - - - - 1.7 - 1.7
Income tax on
income
and expenses
recognised
directly in
equity - - - - - - (0.2) - (0.2)
Dividends paid - - - - - - (16.9) - (16.9)
------------------ -------- -------- ----------- -------- ------------ -------- ----------- ---------------- ---------
Balance at 26
September
2015 46.6 35.6 5.9 (1.7) (15.9) (83.8) (119.3) 6.5 (126.1)
Profit for the
period - - - - - - (3.0) 0.4 (2.6)
Other
comprehensive
income, net of
tax - - - 4.0 3.6 - (16.5) - (8.9)
------------------ -------- -------- ----------- -------- ------------ -------- ----------- ---------------- ---------
Total
comprehensive
income - - - 4.0 3.6 - (19.5) 0.4 (11.5)
Transactions with
owners
of the company
recognised
directly in
equity:
Share capital
issued - 0.1 - - - - - - 0.1
Employee share
scheme:
- value of
services
provided - - - - - - 0.7 - 0.7
Income tax on
income
and expenses
recognised
directly in
equity - - - - - - (0.1) - (0.1)
Dividends paid - - - - - (8.4) (0.3) (8.7)
------------------ -------- -------- ----------- -------- ------------ -------- ----------- ---------------- ---------
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)
------------------ -------- -------- ----------- -------- ------------ -------- ----------- ---------------- ---------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS - UNAUDITED
1 Basis of preparation and accounting policies
This statement is the condensed consolidated financial information
of the Company and its subsidiaries (together referred to as the
'Group') and the Group's interests in associates and jointly controlled
entities as at and for the half year ended 24 September 2016. It
has been prepared in accordance with the requirements of IAS34 Interim
Financial Reporting as adopted by the European Union.
The condensed consolidated interim financial statements have been
prepared as at 24 September 2016, being the last Saturday in September.
The comparatives for 2015/16 financial year are for the half year
ended 26 September 2015 and the full year ended 26 March 2016. The
condensed consolidated financial statements were approved by the
Board of Directors on 22 November 2016.
The Group completed the sale of the Cash Processing Solutions business
on 22 May 2016. The results of the subsidiaries disposed of are included
in the condensed consolidated interim financial statements until
that date.
The condensed consolidated financial statements do not constitute
financial statements as defined in section 434 of the Companies Act
2006 and do not include all of the information and disclosures required
for the full annual financial statements. They should be read in
conjunction with the Group's Annual Report 2016 which is available
on request from the Company's registered office at De La Rue House,
Jays Close, Viables, Basingstoke, Hampshire, RG22 4BS or at www.delarue.com
The comparative figures for the financial period ended 24 March 2016
are not the Company's statutory accounts for that financial period.
Those accounts have been reported on by the Group's auditors and
delivered to the Registrar of Companies. The auditor's report was
(i) unqualified, (ii) did not include a reference to any matters
to which the auditors 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.
The half yearly results for the current and comparative periods are
unaudited. The auditors have carried out a review of the interim
statement 2016/17 and their report is set out on page [10].
These condensed financial statements have been prepared using the
same accounting policies as used in the preparation of the Group's
annual financial statements for the period ended 26 March 2016, which
were prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU.
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 year ended 26 March 2016.
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 underlying 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 (previously Security Products)
- produces security documents, including authentication labels,
brand licensing products, government documents, cheques and postage
stamps
Inter-segmental transactions are eliminated upon consolidation.
Discontinued operations - The Group completed the sale of the Cash Processing Solutions business on 22 May 2016 (see note 3).
Analysis by operating segment
2016/17 2015/16 2015/16
Half Year Half Year Full Year
GBPm GBPm GBPm
Revenue by operating segment
Currency 136.4 139.8 353.3
Identity Systems 33.5 31.5 65.8
Product Authentication and Traceability 21.5 19.6 39.5
Eliminations (1.9) (2.2) (4.1)
Total of Continuing operations 189.5 188.7 454.5
Discontinued operations 4.9 16.1 33.9
Unallocated - discontinued operations - - (0.2)
----------------------------------------- ---------- ---------- ----------
194.4 204.8 488.2
----------------------------------------- ---------- ---------- ----------
Operating profit by operating segment
Currency 14.3 13.9 55.1
Identity Systems 3.4 4.6 6.4
Product Authentication and Traceability 6.3 5.1 8.9
Total of Continuing operations 24.0 23.6 70.4
Discontinued operations (2.3) (4.7) (7.9)
Operating profit before exceptional
items 21.7 18.9 62.5
Exceptional items - Currency 0.1 (2.1) (13.1)
Exceptional items - Identity Systems - - -
Exceptional items - Product Authentication
and Traceability - (0.2) (0.5)
Exceptional items - Discontinued operations (3.1) (0.7) (26.0)
Exceptional items - unallocated (1.1) 9.8 10.0
--------------------------------------------- --------- --------- ----------------
Operating profit 17.6 25.7 32.9
Net finance expense (2.2) (2.4) (5.0)
Retirement benefit obligations net
finance expense (3.6) (3.7) (7.1)
--------------------------------------------- --------- --------- ----------------
Profit before taxation 11.8 19.6 20.8
--------------------------------------------- --------- --------- ----------------
Analysis by operating segment (continued)
2016/17 2015/16 2015/16
Half Year Half Year Full Year
GBPm GBPm GBPm
Assets by operating segment
Currency 240.0 230.4 238.4
Identity Systems 35.8 39.7 38.9
Product Authentication and Traceability 22.3 19.8 20.8
Unallocated assets 156.7 138.5 143.3
-------------------------------------------- ----------- ---------- -----------
Total Continuing operations 454.8 428.4 441.4
Discontinued operations - 32.8 11.2
-------------------------------------------- ----------- ---------- -----------
454.8 461.2 452.6
-------------------------------------------- ----------- ---------- -----------
Liabilities by operating segment
Currency (123.4) (128.5) (119.4)
Identity Systems (25.8) (22.0) (26.7)
Product Authentication and Traceability (9.6) (6.6) (7.2)
Unallocated liabilities (563.3) (419.4) (434.4)
-------------------------------------------- ----------- ---------- -----------
Total Continuing operations (722.1) (576.5) (587.7)
Discontinued operations - (10.8) (10.5)
(722.1) (587.3) (598.2)
-------------------------------------------- ----------- ---------- -----------
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. In addition, deferred consideration totalling GBP1.5m will be payable in two equal instalments on the first and second anniversaries of the transaction. The Group is also entitled to further contingent consideration and liable for certain contingent liabilities following the sale. In the event that certain performance related and event driven milestones are achieved by CPS cGBP3m would be receivable. In the event that significant reductions in working capital are achieved by CPS, amounts would be receivable in relation to this. If certain cash balances can be repatriated to the UK cGBP2m would be receivable, net of contingent tax liabilities on these transactions. As the amounts involved, timing and likelihood of these transactions cannot be determined at the period end, these have not been included in the figures below.
No pension liability transferred as part of the disposal.
Results of the discontinued operation:
2016/17 2015/16 2015/16
Half Year Half Year Full Year
GBPm GBPm GBPm
Revenue 2 4.9 16.1 33.7
------------ ---------- ------------
Operating expenses - ordinary (7.2) (20.8) (41.6)
Operating expenses - exceptional (3.1) (0.7) (26.0)
------------ ---------- ------------
Total operating expenses (10.3) (21.5) (67.6)
Operating loss (5.4) (5.4) (33.9)
Comprising:
------------ ---------- ------------
Underlying operating profit 2 (2.3) (4.7) (7.9)
Exceptional items (3.1) (0.7) (26.0)
------------ ---------- ------------
Loss before interest and taxation (5.4) (5.4) (33.9)
Interest income - - -
Interest expense - (0.1) (0.2)
Net finance expense - (0.1) (0.2)
----------------------------------------------------- ------------ ---------- ------------
Loss before taxation (5.4) (5.5) (34.1)
Comprising:
------------ ---------- ------------
Underlying profit before tax (2.3) (4.8) (8.1)
Exceptional items (3.1) (0.7) (26.0)
------------ ---------- ------------
Taxation (0.8) (0.4) 3.1
Loss for the period from discontinued operations (6.2) (5.9) (31.0)
----------------------------------------------------- ------------ ---------- ------------
Comprising:
------------ ---------- ------------
Underlying profit for the period (2.3) (5.3) (7.2)
Loss for the period on exceptional items (3.9) (0.6) (23.8)
------------ ---------- ------------
Assets/Liabilities held for sale/disposal
group
----------------------------------------------------- ------------ ---------- ------------
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Assets classified as held for sale
Intangible assets - - -
Derivative financial assets - -
Inventories - - 0.2
Trade and other receivable - - 11.0
- - 11.2
------------- ------------ -----------
Liabilities classified as held for
sale
Trade and other payables - - (10.0)
Derivative financial liabilities - - (0.3)
Provisions for liabilities and charges - - (0.2)
- - (10.5)
------------ ------------ -----------
Cash flows from discontinued operations
---------------------------------------------------------- --------- ---------
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Net cash from/(used in) operating activities 5.1 (0.8) (3.3)
Net cash used in investing activities - (0.3) (0.3)
Net cash used in financing activities (0.1) (0.1) (0.1)
Net cash from/(used in) discontinued
operations 5.0 (1.2) (3.7)
-------------------------------------------------- ---------- ------------ ----------
Exceptional items on discontinued operations
---------------------------------------------------- ---------- ---------- ----------
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Site relocation and restructuring - (0.7) (2.6)
Remeasurement of carrying value following
classification as an asset for sale - - (23.4)
Loss on disposal of discontinued operations (3.1) - -
Asset impairment
--------------------------------------------- --------------- ------------ ------------
Total exceptional items (3.1) (0.7) (26.0)
--------------------------------------------- --------------- ------------ ------------
Exceptional items - tax (charge)/credit (0.8) 0.1 2.2
--------------------------------------------- --------------- ------------ ------------
Loss on disposal of discontinued operations
2016/17
Half Year
GBPm
Amount paid/payable by purchaser 4.4
Disposal costs paid/accrued (3.2)
Reserves recycled on disposal (4.5)
Net assets and liabilities disposed 0.2
Total exceptional items (3.1)
--------------------------------------------- -----------------
4 Exceptional Items
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Site relocation and restructuring (1.6) (3.1) (9.2)
Warranty provisions 0.5 1.1 1.3
Sale of land 0.1 9.5 9.5
Asset impairment - - (5.2)
------------------------------------------- ----------------- -------------- -----------------
Total exceptional items (1.0) 7.5 (3.6)
------------------------------------------- ----------------- -------------- -----------------
Exceptional items - tax credit 0.2 3.0 2.3
------------------------------------------- ----------------- -------------- -----------------
Net exceptional charge in the period was GBP1.0m (H1 2015/16: GBP7.5m
income, Full Year 2015/16: GBP3.6m charge) predominantly in relation
to site relocation and restructuring costs. Surplus warranty provisions
of GBP0.5m (previously charged as exceptional items) have been released
in the period (H1 2015/16: GBP1.1m, Full year 2015/16: GBP1.3m). Restructuring
costs of GBP1.6m were incurred in the period as part of the continuing
redesign of the organisation structure and the optimisation of manufacturing
capabilities. The cash cost of exceptional items in the period was
GBP2.4m (H1 2015/16: GBP10.8m) predominantly reflecting site relocation
and restructuring costs from the current and prior periods.
Tax credits relating to exceptional items arising in the period were
GBP0.2m (H1 2015/16: GBP3.0m, Full Year 2015/16: GBP2.3m).
5 Taxation
A tax charge of 15.8% (restated H1 2015/16: 12.9%, Full Year 2015/16:
14.7%) 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 GBP2.9m. 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 GBP2.7m.
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 15 September 2016. This will reduce the company's future
current tax charge accordingly. The UK deferred tax asset at 24 September
2016 (which has been calculated based on the rate of 17% substantively
enacted at the balance sheet date).
6 Earnings per share
2016/17 2015/16 2015/16
Half Year Half Year Full year
pence per pence per pence
share share per share
Earnings per share
Basic earnings per share from continuing
operations 13.2 25.0 46.8
Diluted earnings per share from continuing
operations 12.9 24.6 46.2
Basic earnings per share from discontinued
operations (6.1) (5.8) (30.6)
Diluted earnings per share from discontinued
operations (6.0) (5.7) (30.2)
Basic earnings per share 7.1 19.2 16.2
Diluted earnings per share 6.9 18.9 16.0
Underlying earnings per share
Basic earnings per share from continuing
operations 14.0 14.6 48.1
Diluted earnings per share from continuing
operations 13.7 14.4 47.5
Basic earnings per share from discontinued
operations (2.3) (5.2) (7.1)
Diluted earnings per share from discontinued
operations (2.2) (5.1) (7.0)
Basic earnings per share 11.7 9.4 41.0
Diluted earnings per share 11.5 9.3 40.5
----------------------------------------------- -------------- ------- --------------------
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 101,462,770 (H1 2015/16: 101,235,799) for basic
earnings per share and 103,725,369 (H1 2015/16: 102,988,888) for diluted
earnings per share after adjusting for dilutive share options.
The Directors are of the opinion that the publication of the underlying
earnings per share is useful as it gives a better indication of underlying
business performance.
Reconciliations of the earnings used in the calculations are set out
below.
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Earnings for basic earnings per share -
continuing operations 13.4 25.3 47.4
Earnings for basic earnings per share -
discontinued operations (6.2) (5.9) (31.0)
--------------------------------------------------- ---------- ---------- ----------
Earnings for basic earnings per share 7.2 19.4 16.4
Add: Exceptional items (excluding non-controlling
interests) 4.1 (6.8) 29.6
Less: Tax on exceptional items 0.6 (3.1) (4.5)
Earnings for underlying earnings per share 11.9 9.5 41.5
--------------------------------------------------- ---------- ---------- ----------
7 Equity dividends
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Final dividend for the year ended 28 March
2015 of 16.7p paid on
1 August 2015 - 16.9 16.9
Interim dividend for the period ended
26 September 2015 of 8.3p paid on 6 January
2016 - - 8.4
Final dividend for the year ended 26 March 16.9 - -
2016 of 16.7p paid on
3 August 2016
16.9 16.9 25.3
--------------------------------------------------- ---------- ---------- ----------
The Directors declared a dividend of 8.3p per share for the half year
ended 24 September 2016 which will be paid on 11 January 2017 and
will utilise GBP8.4m of shareholders' funds. In accordance with IFRS
the interim dividend has not been accrued in these condensed consolidated
interim financial statements.
8 Financial instruments
Carrying amounts versus fair
values
The fair value of financial assets and liabilities, together with
the carrying amounts shown in the balance sheet, are as follows:
Total Carrying Fair Value Fair Carrying
fair amount Discontinued Value Amount
value Sep 2016 operations Continuing Continuing
Financial assets Sep 2016 GBPm Mar 2016 operation operations
GBPm GBPm Mar 2016 Mar 2016
GBPm GBPm
Trade and other receivables(1) 81.2 81.2 10.8 88.7 88.7
Cash and cash equivalents 11.6 11.6 - 40.5 40.5
Derivative financial instruments:
- Forward exchange contracts
designated as cash flow hedges(3) 10.1 10.1 - 5.0 5.0
- 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) 3.4 3.4 0.1 3.6 3.6
- Embedded derivatives(3) 18.0 18.0 0.1 8.2 8.2
- Interest rate swaps(3) - - - - -
------------------------------------ ---------- ---------- ---------------- -------------- -----------------
Total financial assets 124.4 124.4 11.0 146.1 146.1
---------------------------------------- ---------- ---------- ---------------- -------------- -----------------
Financial liabilities
Unsecured bank loans and overdrafts (127.1) (127.1) - (146.6) (146.6)
Trade and other payables(2) (54.4) (54.4) (1.8) (61.3) (61.3)
Derivative financial instruments:
- Forward exchange contracts
designated as cash flow hedges(3) (2.8) (2.8) - (1.8) (1.8)
- Short duration swap contracts
designated as fair value hedges(3) - - - (0.3) (0.3)
- Foreign exchange fair value
hedges - other economic hedges(3) (18.8) (18.8) (0.3) (10.1) (10.1)
- Embedded derivatives(3) (1.1) (1.1) - (0.7) (0.7)
- Interest rate swaps(3) (0.9) (0.9) - (0.3) (0.3)
Total financial liabilities (205.1) (205.1) (2.1) (221.1) (221.1)
---------------------------------------- ---------- ---------- ---------------- -------------- -----------------
(1) Excluding prepayments
(2) Excluding accrued expenses, deferred income and payments received
on account
(3) Level 2 valuation
Fair value measurement basis for derivative financial instruments
Fair value is calculated based on the present value of future principal
and interest cash flows, discounted at the market rate of interest
at the reporting date.
The valuation bases are classified according to the degree of estimation
required in arriving at the fair values. Level 1 valuations 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. The financial assets and liabilities detailed
in the above table are level 2 valuations. The details of how the
fair value of each class of financial instrument is determined are
covered on pages 102 and 103 of the Group's Annual Report 2016.
Financial risk management
The Group's financial risk management objectives and policies are
consistent with those disclosed in the Group's Annual Report 2016.
9 Analysis of net debt
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
Cash at bank and in hand 9.4 50.2 40.5
Short term bank deposits 2.2 2.2 -
Bank overdrafts (0.1) (1.5) (2.6)
-------------------------------------------------- ----------- ---------- --------------
Cash and cash equivalents 11.5 50.9 37.9
Other debt due within one year (127.0) (154.2) (144.0)
Net debt at end of period (115.5) (103.3) (106.1)
-------------------------------------------------- ----------- ---------- --------------
The Group has a revolving credit facility of GBP250m. 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 2019.
As at 24 September 2016, the Group has a total of undrawn committed
borrowing facilities, all maturing in more than one year, of GBP123.0m
(26 September 2015: GBP95.8m, 28 March 2016: GBP106.0m, all maturing
in more than one year). The amount of loans drawn on the GBP250m facility
is GBP127.0m.
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.
2016/17 2015/16 2015/16
Half Year Half Year Full year
GBPm GBPm GBPm
UK retirement benefit obligations (358.7) (209.8) (217.6)
Overseas retirement benefit obligations (2.4) (2.6) (2.3)
----------------------------------------------------- ----------- ---------- -----------
Retirement benefit obligations (361.1) (212.4) (219.9)
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 1,007.8 825.7 861.9
Present value of funded obligations (1,357.9) (1,028.1) (1,072.2)
----------------------------------------------------- ----------- ---------- -----------
Funded defined benefit pension plans (350.1) (202.4) (210.3)
Present value of unfunded obligations (8.6) (7.4) (7.3)
----------------------------------------------------- ----------- ---------- -----------
Net liability (358.7) (209.8) (217.6)
----------------------------------------------------- ----------- ---------- -----------
Amounts recognised in the consolidated
Income Statement:
Included in employee benefits expense:
Administrative expenses (0.6) (0.5) (1.2)
Included in net finance cost:
Net retirement benefit obligation finance
cost (3.6) (3.7) (7.1)
Total recognised in the consolidated Income
Statement (4.2) (4.2) (8.3)
----------------------------------------------------- ----------- ---------- -----------
Principal actuarial assumptions: 2016/17 2015/16 2015/16
Half Year Half Year Full year
UK UK UK
% % %
Future pension increases - past service 3.60 3.60 3.60
Discount rate 2.10 3.80 3.50
Inflation rate 3.10 3.20 3.10
At 26 March 2016 mortality assumptions were based on tables issued
by Club Vita, with future improvements in line with the
CMI model, CMI_2013 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 GBP13.0m and GBP13.5m
in 2017 and 2018 respectively, 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 in
addition to the cash contributions shown below. In the year ended
26 March 2016, the Group made funding payments and management fees
totalling GBP19.1m.
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
GBP10.2m (H1 2015/16: GBP13.1m) for the purchase of ink and other
consumables on an arms length basis. At the balance sheet date there
was GBP2.5m (H1 2015/16: GBP6.4m) 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
2016/17 2015/16 2015/16
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 16.3 2.9 10.3
14 De La Rue financial calendar: 2016/17
Ex dividend date for interim dividend 8 December 2016
Record date for interim dividend 9 December 2016
Payment of interim dividend 11 January 2017
Financial year end 25 March 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BBBPTMBBTBAF
(END) Dow Jones Newswires
November 22, 2016 02:00 ET (07:00 GMT)
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