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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 5.80 | 6.67% | 92.80 | 89.20 | 93.40 | 93.40 | 87.40 | 87.40 | 204,626 | 15:09:09 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Printing, Nec | 349.7M | -55.9M | -0.2854 | -3.27 | 182.96M |
From Apr 2019 to Apr 2024
TIDMDLAR
RNS Number : 3510I
De La Rue PLC
16 June 2017
De La Rue plc - Publication of Documents
De La Rue plc (the Company) has today posted or otherwise made available the following documents to shareholders:
Annual Report 2017
Notice of Annual General Meeting to be held on 20 July 2017.
In accordance with Listing Rule 9.6.1, the Company has today submitted a copy of the above documents to the UK Listing Authority via the National Storage Mechanism and the documents will shortly be available for inspection at www.Hemscott.com/nsm.do
Copies of the documents are also available on the Company's website www.delarue.com
In addition, the information below which is extracted from the De La Rue plc Annual Report 2017 is in accordance with the requirements of the DTR 4.1.3 and DTR 6.3.5 to make public an annual financial report.
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DE LA RUE PLC
ANNUAL FINANCIAL REPORT ANNOUNCEMENT - PERIOD TO 25 MARCH 2017
De La Rue plc (LSE: DLAR) (De La Rue, the "Group" or the "Company") announces its full year results for the twelve months ended 25 March 2017 (the period or full year).
KEY FINANCIALS
The figures below are for continuing operations only and exclude the Cash Processing Solutions business which was sold on 22 May 2016.
FY 2016/17 FY 2015/16 Change
GBPm GBPm %
Revenue 461.7 454.5 2%
Adjusted operating profit*(1) 70.7 70.4 0%
Adjusted operating margin*(1) 15.3% 15.5% (20bpts)
Reported operating profit 70.2 66.8 5%
Adjusted profit before
tax*(1) 58.7 58.5 0%
Reported profit before
tax 58.2 54.9 6%
Adjusted basic earnings
per share*(2) 47.1p 48.1p (2%)
Reported basic earnings
per share 47.2p 46.8p 1%
Dividend per share 25.0p 25.0p 0%
* This is a non-IFRS measure. The Directors are of the opinion that
these measures give a better understanding of the underlying performance
of the business. For further explanations and reconciliation to
the comparable IFRS measure see reconciliation in note 19. "Reported"
measures are on an IFRS basis.
(1) Excludes exceptional item charges of GBP0.4m (2015/16: GBP3.6m)
and amortisation of acquired intangible assets of GBP0.1m (2015:16:
GBPnil).
(2) Excludes exceptional item charges of GBP0.4m (2015/16: GBP3.6m),
amortisation of acquired intangible assets of GBP0.1m (2015:16:
GBPnil) and related tax credits of GBP0.6m (2015/16: GBP2.3m).
Revenue and adjusted operating profit growth rates for the Identity
Solutions and Product Authentication reflect a change in allocation
of results for these segments made in the year. See "Operating
reviews" section for further details.
FINANCIAL HIGHLIGHTS
-- Group revenue +2% and adjusted operating profit up marginally year on year
-- Resilient performance in our Currency business, improved mix in Banknote Print and increased Paper volumes partially offsetting the impact of a concluded security features contract
-- Identity Solutions revenue +5% and adjusted operating profit +37% -- Product Authentication & Traceability revenue +20% and adjusted operating profit +29% -- Net debt up GBP14.8m to GBP120.9m following the $25m acquisition of DuPont Authentication -- Proposed final dividend of 16.7p; Full year dividend maintained at 25.0p
-- Group 12 month order book of GBP387m providing good visibility and confidence for the year ahead
STRATEGIC AND OPERATIONAL HIGHLIGHTS
Good progress in delivering our strategic plan:
Optimise & Flex
-- Banknote Print volumes similar to last year at 7.1bn notes -- Banknote Paper volumes increased by 18% to 11,800 tonnes, a seven year high
-- Restructuring of print manufacturing footprint on track to deliver cGBP13m annual cost savings from FY18/19 - two banknote print lines removed in Malta; retaining third line for operational flexibility
Invest & Build
-- Accelerating product development through increased investment in R&D and product management -- Good momentum in Polymer continues - volumes nearly quadrupled to 380 tonnes
-- Completed acquisition of DuPont Authentication, further broadening our portfolio of security features to include highly specialised Lippmann 3D Holograms
-- Centre of excellence for security print opened in Malta, including new capability to produce polycarbonate - first volume customer secured
Martin Sutherland, Chief Executive Officer of De La Rue, commented:
"De La Rue has delivered a good performance this year. We are two years into our five year strategic plan and have made solid progress against our objectives to diversify the business and improve the quality of earnings. Identity Solutions and Product Authentication are both delivering good growth and are underpinned by the resilience of our Currency business.
"Our investment in product management and R&D has seen us introduce six new products into our pipeline, including DLR Analytics, a software solution to help central banks manage their cash cycle requirements. We are already piloting with 26 countries at launch.
"In January, we completed our first acquisition in 14 years. DuPont Authentication is a business with a strong intellectual property portfolio, global blue-chip customers and a committed and experienced workforce. This transaction further strengthens our position in the strategically important and growing product authentication market.
"With continuing good momentum in delivering our 2020 strategic plan and a strong 12 month order book of GBP387m, I am confident that we will deliver on our expectations for the year."
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 presentation to analysts will take place at 9:00 am BST on 23 May 2017 at The Lincoln Centre, 18 Lincoln's Inn Fields, WC2A 3ED. The presentation will also be accessible via a conference call and a video 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 23 May 2017, which is accessible via +44 (0) 121 260 4861, passcode: 5990361#. 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.
FULL YEAR RESULTS
The Group delivered a good set of results in 2016/17. The strategic plan set out in May 2015 to diversify our business and improve the quality of earnings is progressing well. Identity Solutions and Product Authentication delivered strong revenue and adjusted operating profit growth, while the Currency business performed with resilience. The Group's 12 month order book was up 6% to GBP387m (2015/16: GBP365m) at the end of the period.
The Currency business delivered an 18% increase in Banknote Paper volumes and a 280% increase in Polymer volumes. The improved mix in Banknote Print and higher Paper volumes partially offset the impact of a security features contract that concluded in the prior year. Revenue and adjusted operating profit in the Currency business were 1% and 9% lower than the prior year.
The Identity Solutions business grew for the first time since 2014 with a 5% increase in revenue to GBP80.6m. This, combined with improved margins from a better mix of orders, resulted in a 37% rise in adjusted operating profit.
Product Authentication & Traceability (PA&T) also delivered strong performance, with revenue up 20% and adjusted operating profit up 29%. This was primarily driven by good growth in tax revenue protection.
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 GBP8.0m, comprising a trading loss of GBP2.2m for the two months prior to disposal and exceptional charges net of tax of GBP5.8m. See Note 3 in the accounts for details of the discontinued operations.
Group revenue grew 2% to GBP461.7m (2015/16: GBP454.5m) and adjusted operating profit was up marginally at GBP70.7m (2015/16: GBP70.4m). Adjusted profit before tax was similar to last year at GBP58.7m (2015/16: GBP58.5m). Adjusted basic earnings per share were 2% lower at 47.1p (2015/16: 48.1p) reflecting the impact of lower tax charges in the prior year.
On a reported basis operating profit was GBP70.2m, an increase on the prior year (2015/16: GBP66.8m) due to lower exceptional net charges of GBP0.4m in the current year (2015/16:GBP3.6m). Profit before tax on a reported basis was GBP58.2m (2015/16: GBP54.9m). Reported basic earnings per share were 47.2p (2015/16: 46.8p).
Cash generated from operating activities, which includes the discontinued operations, was 9% higher at GBP64.3m (2015/16: GBP58.9m). The benefit of higher profits was offset by adverse working capital movements due to the timing of shipments and a reduction in advanced payments. Net debt as at 25 March 2017 increased by GBP14.8m to GBP120.9m (26 May 2016: GBP106.1m), reflecting the $25m acquisition of DuPont Authentication which was funded from the existing credit facility.
DIVID
The Board proposes to leave the dividend unchanged and is recommending a final dividend of 16.7p per share (2015/16: 16.7p per share). This, together with the 8.3p paid in January 2017, would make a full year dividend of 25.0p per share. Subject to shareholders' approval, the final dividend will be paid on 3 August 2017 to shareholders on the register on 30 June 2017.
STRATEGIC PROGRESS
The five year strategic plan set out in May 2015 to improve our business mix and quality of earnings is progressing well. We continue to improve efficiency and create flexibility across the business, while driving growth through investments in innovation and product management.
Optimise and Flex
Currency is the bedrock of our business and our brand, as well as an important part of our diversified portfolio.
We seek to build outsourcing partnerships in banknote print to provide added flexibility, reduce risk and manage surge demand. At the same time, we aim to increase earnings visibility through long term agreements (LTA) with customers. We are also looking to smooth demand by helping our customers improve their cash requirement forecasting. In May 2017, we launched DLR Analytics(TM), a software solution that helps central banks manage their cash cycle by drawing on insights and intelligence from the collected data. It is currently piloted with 26 customers.
The banknote paper market has been oversupplied for a number of years. Although demand for banknote paper has increased in recent months, we expect oversupply to continue in the long term.
We are targeting direct sales to state print works (SPW) and commercial printers in order to increase utilisation of our paper mills. We continue to engage in complex and constructive dialogue with a number of paper makers to identify a long term solution for the business.
Driving efficiency
Driving down costs enables us to remain price competitive while protecting margins. We are working hard to improve manufacturing efficiency. During the year, we successfully completed Level 2 of our Operational Excellence programme.
Our manufacturing footprint restructuring programme, designed to optimise our capacity, has now completed its first phase. Two banknote print lines have been decommissioned in Malta and machine upgrades in other sites are going to plan. In November 2016, we refined the plan to improve our flexibility in outsourcing and in-house production, and decided to retain the remaining banknote print line in Malta. The plan to deliver cGBP13m annual cost savings from FY18/19 remains unchanged, although some of these savings are expected to be reinvested in the business.
In August, we agreed to enter into a joint venture that would see the Government of Kenya acquire a 40% interest in our wholly-owned Kenyan subsidiary for GBP5.0m. This will further strengthen our ties with the country and secure our position as a supply hub of currency and security solutions in East Africa. We expect this to complete in the current financial year.
We are also creating a leaner and more agile organisation. We began changing our systems and processes in 2015/16 and are now upgrading our finance and management information systems to increase efficiency and improve decision making. We have also significantly improved a number of commercial processes which have shortened our response time to submit bids and win new business.
Invest and Build
Diversifying revenues
We continue to invest in areas with potential for attractive profitable growth.
Polymer sales have gained significant traction since the launch of our Safeguard(R) substrate. We aim to grow our market share by targeting existing polymer customers as well as paper and coin customers looking to switch to polymer. In 2016/17, volumes increased from 100 tonnes to 380 tonnes.
We aim to increase recurring revenues from software solutions and services. In 2016/17, we won a new multi-year Identity Solutions contract and secured the renewal of three service contracts. In Product Authentication and Traceability (PA&T), Cameroon became the first customer for our track and trace system DLR Certify(TM). The launch of DLR Analytics(TM) has further strengthened our digital and service offering.
To grow our sales pipeline, we are targeting direct sales of product components, such as passport paper, polycarbonate and security labels to SPWs, system integrators and other commercial printers. Our renewed focus on direct sales will not only increase our addressable market, but also even out the peaks and troughs we experience in orders for finished products.
We also aim to build stronger customer relationships via a network of new regional sales offices and a direct sales force, reducing reliance on third parties. During the year, we set up sales hubs in Dubai and Miami and relocated sales staff to be closer to our customers in Africa and Asia. These changes will help us better understand customer needs, ensuring we offer the right products and services.
Investing in innovation
A rolling programme of investments in R&D maintains our competitiveness and creates high barriers to market entry.
We have calibrated all features into key technology platforms, such as lenticular and holographics. This approach allows us to maximise our technology know-how and create various platform-based applications for different products. We launched six new products in May 2017, including four security features that were developed using our existing technologies.
Our strategy includes accelerating technology development through partnerships and acquisitions. In January 2017 we acquired US-based brand protection company DuPont Authentication for $25m, which develops and owns the highly specialised and differentiated Lippmann (or 3D) holographic technology. While its main applications are authentication labels and anti-tampering packaging, this 3D hologram technology can also be applied to identity documents and, with modification, to banknotes.
The fact that around 40% of banknote denominations in circulation globally were designed by De La Rue endorses our design capability as a core strength and differentiator. During the year we have changed our approach to increase the interaction between our design team and customers.
As part of the manufacturing footprint restructuring programme, we have created a centre of excellence for identity and security print in Malta, which includes the installation of a new polycabonate line. This new capability, combined with other technology such as Lippmann holography, has further strengthened our product offering for both passport and national ID.
Driving culture change
To encourage a high performance culture, we have focused further on performance management and, for the first time, all employees now have a set of individual objectives aligned to group strategy.
To ensure that we have the right skills and capabilities to take our business forward, we have changed 50% of the senior leadership team over the last two years and continue to upgrade the skillset of our sales force. We have invested in extensive training, development and recognition programmes. In June 2016 we launched the second phase of the Leadership Development Programme. This focuses on developing the agility and capability to lead and inspire colleagues in a matrix organisation, and is also helping to build a strong pipeline for succession planning.
The average number of employees reduced by 12% to 3,151 in the year (2015/16: 3,566).
OPERATING REVIEWS
Reclassification of results between Product Authentication & Traceability (PA&T) and Identity Solutions (IDS)
Historically the results of one of the Group's manufacturing 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, we have started reviewing its numbers split between IDS and PA&T. In order to align the Group's external reporting segments to the information reviewed internally, the results of this site have been split in the current year between the IDS and PA&T segment. The 2015/16 figures have also been adjusted for comparability.
Currency
FY 2016/17 FY 2015/16 Change
Revenue (GBPm) 350.6 353.3 (1%)
Adjusted operating profit* (GBPm) 50.3 55.1 (9%)
Adjusted operating margin* (%) 14.3% 15.6% (130bpts)
Banknote print volume (bn notes) 7.1 7.1 0%
Banknote paper volume ('000 tonnes) 11.8 10.0 18%
*Excludes exceptional item credits of GBP1.9m
(2015/16: Charges of GBP13.1m).
The Currency business comprises Banknote Print, Banknote Paper, Polymer and Security Features.
The Currency business benefited from an improved mix in Banknote Print and higher volumes in Banknote Paper, which partially offset the impact of the security features contract that concluded in the prior year. Revenue fell by 1% year on year to GBP350.6m (2015/16: GBP353.3m). The lower revenue and change in sales mix resulted in a 9% decline in adjusted operating profit.
We achieved good volumes in Banknote Print of 7.1bn notes (2015/16: 7.1bn) in the year despite the decommissioning of two print lines as part of the footprint restructuring programme. This not only demonstrated our sales capability, but also the flexibility of our manufacturing capacity following the restructuring.
Banknote Paper volumes increased by 18% to 11,800 tonnes (2015/16: 10,000 tonnes), primarily driven by stronger external sales. Prices of raw materials such as cotton have increased substantially in recent months and are expected to remain high throughout the coming year.
Polymer almost quadrupled in volume to 380 tonnes in the year, demonstrating continuing good momentum for growth. Margins are expected to improve over time as we continue to reduce production costs and build scale.
Security Features was adversely impacted by the material contract which concluded in the prior year. Both revenue and operating profit were lower than the prior year. However, underlying performance, i.e. excluding the impact of the concluded contract, was encouraging. We launched four new features in May 2017 - TrueImage(TM) , TextMark(TM) , enhanced Gemini(TM) , Kinetic StarChrome(R) Portrait - further strengthening our product portfolio.
At the year end the 12 month order book for Currency including estimated call-off orders for contracts was GBP311m (2015/16: GBP278m).
Identity Solutions
FY 2016/17 FY 2015/16 Change
Revenue (GBPm) 80.6 76.5 5%
Adjusted operating profit* (GBPm) 11.4 8.3 37%
Adjusted operating margin* (%) 14.1% 10.8% 330bpts
*Excludes exceptional items charges of
GBPnil (2015/16: GBPnil).
Identity Solutions performed well in the year. Revenue grew by 5% to GBP80.6m (2015/16: GBP76.5m), with an improved margin of 14.1%. This reflected an increased proportion of revenues from software and services, as well as increased focus on component sales. Adjusted operating profit in the period increased by 37% to GBP11.4m (2015/16: GBP8.3m).
We continue to invest in skills and capabilities. During the year, we more than doubled our R&D investment and added a new polycarbonate line in Malta, which will soon be operating at full capacity.
Product Authentication & Traceability
FY 2016/17 FY 2015/16 Change
Revenue (GBPm) 34.6 28.8 20%
Adjusted operating profit* (GBPm) 9.0 7.0 29%
Adjusted operating margin* (%) 26.0% 24.3% 170bpts
*Excludes exceptional items charges of GBP0.9m (2015/16: GBP0.5m)
and amortisation of acquired intangible assets of GBP0.1m (2015/16:
GBPnil).
Product Authentication & Traceability (PA&T) delivered an excellent performance. Revenue increased by 20% to GBP34.6m (2015/16: GBP28.8m), driven by growth in tax revenue protection. The segment benefited from lower production cost, which was partly offset by increased investment in R&D and sales. Adjusted operating profit in the period was up 29% to GBP9.0m (2015/16: GBP7.0m).
We completed the acquisition of DuPont Authentication on 6 January 2017. Integration of the business has now completed. Excluding the acquisition, revenue in the segment grew by 13% and adjusted operating profit was up 24%.
FINANCE CHARGE
The Group's net interest charge was GBP4.6m, a slight decrease on the prior year (2015/16: GBP4.8m) due to lower charges in respect of the amortisation of financing fees in the current year. The IAS 19 related finance cost, which represents the difference between the interest on pension liabilities and assets was GBP7.4m (2015/16: GBP7.1m).
EXCEPTIONAL ITEMS
During the period, exceptional net charges on continuing operations amounted to GBP0.4m (2015/16: charges of GBP3.6m).
Exceptional net charges comprise: site relocation and restructuring costs of GBP0.2m (2015/16: GBP9.2m); gains on sale of land of GBP0.2m (2015/16: GBP9.5m); a credit relating to the release of warranty provisions of GBP0.5m (2015/16: credit of GBP1.3m); asset impairment charges of GBPnil (2015/16: GBP5.2m) and acquisition related costs of GBP0.9m (2015/16: GBPnil). See note 4 for further details.
TAXATION
The net tax charge for the year was GBP8.7m (2015/16: GBP6.3m). The effective tax rate before exceptional items was 15.8% (2015/16: 14.7%). The tax rate was lower in 2015/16 due to a non-recurring tax benefit.
Net tax credits relating to exceptional items, on continuing operations, arising in the period were GBP0.6m (2015/16 GBP2.3m).
CASH FLOW AND BORROWING
Cash generated from operating activities, which includes the discontinued operations, was 9% higher at GBP64.3m (2015/16: GBP58.9m). Working capital increased by GBP17.2m in the year due to the timing of shipments and a lower advanced payments compared to the prior year. Net trade receivables increased by GBP11.9m. Cash generated from operating activities also includes GBP3.3m of payments in relation to exceptional items (the net cash cost of exceptional items in 2015/16 was GBP12.5m). The adverse working capital movement resulted in a lower cash conversion ratio of 114% (2015/16: 160%).
Capital expenditure for the year was lower than expected at GBP26.1m, due to the timing of investments.
Net debt increased by GBP14.8m to GBP120.9m (2016/17: GBP106.1m) primarily due to the $25m acquisition of DuPont Authentication.
The Group utilises a GBP250.0m revolving credit facility and has operated well within the key financial covenants. On 27 April 2017, the Group extended the maturity date of this facility by two years to December 2021. It is subject to the same financial covenants which require that the ratio of EBIT to net interest payable be greater than four times and the net debt to EBITDA ratio be less than three times. At the period end the specific covenant tests were as follows: EBIT/net interest payable of 16.1 times, net debt/EBITDA of 1.27 times.
PENSION DEFICIT AND FUNDING
The Group's formal triennial funding valuation of the UK defined benefit pension scheme (the Scheme) was finalised in June 2016. The Group agreed a revised funding plan with the trustees 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. In addition, we have created a joint working group with the pension trustees to explore ways to proactively improve the management of our pension obligations. The next triennial funding valuation is due in April 2018.
In the year ended 25 March 2017, the Group made funding payments and management fees together totalling GBP14.6m.
The valuation of the UK Scheme under IAS 19 indicates a post-tax deficit at 25 March 2017 of GBP196.7m (26 March 2016: GBP178.4m). On a pre-tax basis the net pension deficit was GBP237.0m (26 March 2016: GBP217.6m) The increase is due to the impact of a lower discount rate used to value the scheme liabilities (2.75% in 2016/17 compared with 3.50% in 2015/16) because of a significant fall in corporate bond yields and an increase in the longer term inflation rate. The increase in liabilities has been partially offset by an increase in assets which have performed strongly in the year.
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 GBP55m 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 Scheme in 2016/17 was GBP1.5m (2015/16: GBP1.2m). In addition, under IAS 19 there was a finance charge of GBP7.4m arising from the difference between the interest cost on liabilities and the interest income on scheme assets (2015/16: GBP7.1m).
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 is a Chartered Accountant and brings extensive and highly relevant experience in the technology and information security industries to the Board.
Rupert Middleton, Chief Operating Officer and Executive Director, has informed the Board of his intension to step down from the Board after the AGM on 20 July 2017. We are grateful for his contribution and wish him well for this future. The position will be replaced by the newly created role of Chief Operating Director which will not be a Board position. A search has commenced to identify suitable internal and external candidates.
OUTLOOK
We start the year with a strong order book of GBP387m. While the sustained weakness of Sterling gives us a competitive advantage in the export market, most of our sales are invoiced in Sterling and do not automatically result in higher margins. We will continue to increase investments in R&D, product management and sales capabilities. Taking this into account, as well as the increased costs of raw materials, the Board is confident of continued progression and its expectations for the financial year of 2017/18 remain unchanged.
- ends -
Risk and risk management
Risk management is the responsibility of the Board, supported by the Risk Committee which comprises members of our Executive Leadership Team. The Risk Committee is accountable for identifying, mitigating and managing risk. Further details about the Committee can be found on page 69 of De La Rue's Annual Report 2017. We have a formal risk identification process which evaluates and manages our significant risks in accordance with the requirements of the UK Corporate Governance Code. Our Group risk register identifies the risks, their potential impact and likelihood of occurrence, and the key controls and management processes we have established to mitigate these risks.
The Risk Committee meets twice a year to review risk management and monitor the status of key risks as well as the actions we have taken to address these at both Group and functional level. Any material changes to risk are highlighted at the monthly Executive Leadership Team meetings, while the Audit Committee also reviews the Group's risk report.
Management is responsible for implementing and maintaining controls, which have been designed to manage rather than eliminate risk. These controls can only provide reasonable but not absolute assurance against material misstatement or loss. See page 62 of the De La Rue Plc Annual Report 2017 for further information regarding internal controls.
Financial risk management
Overview
The Group's activities expose it to a variety of financial risks, the most significant of which are liquidity risk, market risk and credit risk.
The Group's financial risk management policies are established and reviewed regularly to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The use of financial derivatives is governed by the Group's risk management policies approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with the Group's risk management strategy. The Group's treasury department is responsible for the management of these financial risks faced by the Group.
Group treasury identifies, evaluates and in certain cases hedges financial risks in close cooperation with the Group's operating units. Group treasury provides written principles for overall financial risk management as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial instruments and the investment of excess liquidity.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities where due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The Group manages this risk by ensuring that it maintains sufficient levels of committed borrowing facilities and cash and cash equivalents. The level of headroom needed is reviewed annually as part of the Group's planning process.
A maturity analysis of the carrying amount of the Group's borrowings is shown below in the reporting of financial risk section together with associated fair values.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's income or the value of its holdings of financial instruments. The Group uses a range of derivative instruments, including forward contracts and swaps to hedge its risk to changes in foreign exchange rates and interest rates with the objective of controlling market risk exposures within acceptable parameters, while optimising the return. Derivative financial instruments are only used for hedging purposes.
(a) Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities, unrecognised firm commitments and investments in foreign operations.
To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency. Group treasury is responsible for managing the net position in each currency via foreign exchange contracts transacted with financial institutions.
The Group's risk management policy aims to hedge firm commitments in full, and between 60 per cent and 100 per cent of forecast exposures in each major currency for the subsequent 12 months to the extent that forecast transactions are highly probable.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The Group's policy is to manage the currency exposure arising from the net assets of the Group's foreign operations primarily through borrowings denominated in the relevant foreign currencies and through foreign currency swaps.
The Group's policy is not to hedge net investments in subsidiaries or the translation of profits or losses generated in overseas subsidiaries.
(b) Interest rate risk
All material financial assets and liabilities are maintained at floating rates of interest. Where the Group has forecast average levels of net debt above GBP50m on a continuing basis, the policy is to use floating to fixed interest rate swaps to fix the interest rate on a minimum of 50 per cent of the Group's forecast average levels of net debt for a period of at least 12 months.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and investment securities.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Geographically, there is no concentration of credit risk. Where appropriate, letters of credit are used to mitigate the credit risk from customers.
The Group has established a credit policy that ensures that sales of products are made to customers with an appropriate credit history. The Group has a policy to procure advance payments during order negotiation which further reduces credit risk. Derivative counterparties and cash transactions are limited to high credit quality financial institutions and the Group has policies that limit the amount of credit exposure to any one financial institution.
Principal risks and uncertainties
The following pages set out the principal risks and uncertainties that could crystallise over the next three years. The Board has undertaken a robust risk assessment to identify these risks, which are listed in order of potential impact. There may be other risks that we currently believe to be immaterial. These could become material, either individually or simultaneously, and significantly affect our business and financial results. We have modelled potential scenarios of these risks crystallising to support the disclosures in the Viability Statement. See page 37 of the De La Rue Plc Annual Report 2017 for further details. Due to the nature of risk, the mitigating factors stated cannot be viewed as assurance that the actions taken or planned will be wholly effective.
Risk
Breach of legal and regulatory requirements.
Exposure
It is possible that our employees or overseas representatives, either individually or in collusion with others, could act in contravention of our stringent requirements in relation to bribery and corruption, anti-competitive behaviours and management of third party partners (TPPs).
Impact
Major reputational and financial damage.
Mitigation
We are accredited to the Banknote Ethics Initiative, which provides governments and central banks with assurance regarding our ethical standards and business practices. Our commitment to ethical standards is articulated in the Code of Business Principles. This is supported by underlying policies which are reviewed regularly and enforced robustly. Where necessary, non-compliances is dealt with through disciplinary procedures. We have a particular focus on raising awareness as well as training on anti-bribery and corruption, and competition law. Our policies and processes are independently audited. Our process for the appointment, management and remuneration of TPPs operates independently of the sales function. The behaviours of TPPs are strictly monitored and the TPP process is overseen by the General Counsel and Company Secretary, who reports directly to the Board on these matters. Our whistle blowing policy and associated procedures are integral aspects of the compliance framework.
Risk
Failure to win or renew a material contract.
Exposure
While we operate globally and have a diversified geographic, product and customer profile, we rely heavily on a small number of medium and longer term material contracts.
Impact
Failure to win or renew a key contract could restrict growth opportunities and have a material impact on our financial performance and reputation.
Mitigation
Our track record of delivering product innovation and our commitment to quality, combined with a commercial approach to tendering, means we are well positioned to win or renew strategic or significant contracts.
We are focused on retaining key contracts, as and when they fall due for renewal, and on winning new opportunities as they arise.
Risk
Pension fund deficit.
Exposure
The Group's UK defined benefit pension scheme (the Scheme) is in deficit. As at 25 March 2017 the post-tax deficit as accounted for under IAS 19 was GBP196.7m (26 March 2016: GBP178.4m).
Impact
We have created a joint working group with the pension trustees to proactively manage our pension obligations. If at the next triennual valuation in 2018 the deficit increases further under actuarial valuation, the future cash flow commitments may put future capital investment and dividends at risk.
Mitigation
We are working with the pension trustees to explore methods of improving the return of the Scheme's assets and reducing the Scheme's liabilities.
Risk
Failure to maintain and exploit competitive and technologically advanced products and services
Exposure
We operate in competitive markets. Our products and services are characterised by continually evolving industry standards and changing technology, driven by the demands of our customers. Longer term threats could include the growth of eCommerce, the emergence of cashless societies and lower barriers to manufacturing.
Impact
Failure to maintain and exploit technical innovation and intellectual property may result in lower demand, loss of market share and lower margins.
Mitigation
We maintain sustained levels of investment in research and development to ensure a steady flow of ideas into our innovation pipeline. Our product roadmaps are designed to meet our customers' needs. Our materials science expertise and software science team are centralised in the UK. These teams follow defined technology anagement processes, which include regular pipeline and portfolio reviews. We continue to invest in new technologies to enable us to advance our R&D capabilities, and have increased our focus on digital technologies since the strategy review in 2015.
We aim to double our R&D investment in the five years to 2020.
Risk
Failure to adopt performance driven culture.
Exposure
In order to ensure our continued success and growth, we carried out an internal organisational redesign in 2015/16. The focus for this programme is to achieve sustained cultural change in order to enable us to adapt to a rapidly changing market environment.
Impact
Without a change in our culture, we may not be able to execute the strategy laid out in May 2015.
Mitigation
In 2016/17 we delivered leadership training to build on the achievements of the 2015/16 strategic leadership skills programme. The new training focused on cross-functional working, especially in the areas of influencing and managing competing interests. We have set specific targets for performance appraisal and employee engagement. The results of the employee engagement survey in late 2016 have been cascaded throughout the business, and we have developed appropriate response plans. The strategic plan envisaged a three year programme of training, communication and recruitment to fill capability gaps. This plan is on track - and the outcome is expected to be a change in behaviours and skills that will enable us to be a more dynamic, agile and high performing organisation.
Risk
Failure to secure strategic partnerships to address key issues.
Exposure
Our ability to address the key issues of volatile demand in banknotes and over capacity in the paper business depend on third party agreements.
Impact
The predictability of future revenue streams and our ability to increase the return on capital employed may be compromised.
Mitigation
If third party agreements cannot be concluded, we will continue to use existing strategic initiatives to mitigate this risk. These are: continue to drive efficiency; diversify revenues; innovate; and strengthen the overall financial position of the Group.
Risk
Information security risk.
Exposure
The confidentiality and integrity of our customer, employee and business data could be affected by factors that include human error, ineffective design or operation of key data security controls, or by the breakdown of IT control processes.
Impact
Any compromise in the confidentiality of information could impact our reputation with current and potential customers.
Mitigation
Our corporate information systems are accredited to the ISO27001 Information Security standard. We maintain a strict control environment to enforce disciplined information security practices and behaviours. A number of key technical controls are in place to manage this risk, including network segregation, access restrictions, system monitoring, security reviews and vulnerability assessments of infrastructure and applications. We regularly review all aspects of information security arrangements, and our employees undertake mandatory information security
e-learning.
Risk
Loss of a key site.
Exposure
A number of our manufacturing sites are exposed to business interruption risks.
Impact
The total loss of any one of these key sites could have a major financial impact, particularly where the site represents a single source of supply.
Mitigation
Our head office and the banknote production operations in Debden, UK are both accredited to the ISO22301:2012 Business Continuity standard.
We maintain a high degree of interoperability across our banknote production and security printing sites. We aim to minimise risk by adopting the highest standards of risk engineering in our production processes.
In recognition of our customers' increasingly high requirements regarding business continuity, we continue to enhance the resilience of our major facilities in line with the ISO standard.
Risk
Health, safety or environmental failure.
Exposure
All of our activities are subject to extensive internal health, safety and environmental (HSE) procedures, processes and controls. Nevertheless, there is a risk that any failure of an HSE management process could result in a serious incident.
Impact
Failure of an HSE management process could lead to a serious injury or an environmental breach.
Mitigation
At all major facilities, we have a robust HSE management system which is internally audited and certified to the OHSAS18001 and ISO14001 standards.All of our activities are subject to extensive internal HSE procedures, processes and controls.
The Group HSE Committee regularly reviews HSE performance. This is also monitored by the Chief Operating Officer's leadership team and reported to the Board monthly. Each manufacturing facility has clear HSE action plans which are prioritised, monitored and subject to review by local senior management to ensure that health and safety standards are maintained.
Risk
Quality management failure
Exposure
Each of our contracts has a unique specification on product quality and delivery. Some of these contracts demand a high degree of technical specification.
Impact
A shortfall in quality management may expose us to additional cost to remake as well as to any associated warranty costs.
Mitigation
We operate an established quality management system across all production sites. All major sites are certified to ISO9001 quality management standards.
In 2012, we introduced an Operational Excellence programme to further drive continuous improvement across our manufacturing sites. This programme is well established and continues to deliver operational enhancements.
Risk
Supply chain failure
Exposure
We have close trading relationships with a number of key suppliers, including unique producers of specialised components that we incorporate into our finished products.
Impact
Failure of a key supplier, the inability to source critical materials or poor supplier performance in terms of quality or delivery could disrupt our supply and ability to deliver on time and in full.
Mitigation
Our exposure is reduced because we source many components from within our own organisation. Where we rely on external supply, we have established procedures for identifying possible risks for each supplier. Key suppliers are managed through a supplier relationship management programme. This incorporates checks on their financial strength and their ability to deliver to our quality standards and security, as well as their business continuity arrangements. Key suppliers are audited on a rotational basis.
As a contingency, alternative suppliers are pre-qualified wherever possible and where necessary we retain higher levels of stocks.
Risk
Unpredictability in the timing and size of substantial contract awards
Exposure
Political and other factors can delay government procurement decisions for sensitive products such as banknotes and passports.
Impact
The timing and size of contract awards is often uncertain. Delays lead to volatility in our order book and financial performance.
Mitigation
We maintain close and regular contact with customers so that any changes in timing and requirements are recognised promptly. We monitor our sales activity, order pipeline and forward order book to optimise production planning and ensure that delivery to customers is on time and in full. We also monitor any delays in order confirmation on a weekly basis. This enables us to maintain flexibility in the supply chain and to accommodate any changes to production planning.To minimise future unpredictability, we proactively pursue longer term commitments from customers. We also aim to grow recurring revenues by expanding our digital and service offerings.
Risk
Product security
Exposure
Loss of product or high security components from a manufacturing site could occur as a result of negligence or theft. Loss of product while in transit, particularly during transhipment, through the failure of freight companies or through the loss of an aircraft or vessel as a result of an accident or natural disaster, is also possible.
Impact
Any loss of product or high security components has the potential to cause reputational and financial damage. In certain circumstances, customer contracts may mean that we are liable for those losses.
Mitigation
We have robust physical security and materials control procedures at our production sites, which reduce the risk of inadvertent loss or theft during manufacturing. We apply stringent operational procedures - and use carefully selected carriers and personnel - to handle movements of security materials between our sites and onward delivery to customers. All movements are risk managed and monitored globally on a 24/7 basis. We also maintain a comprehensive global insurance programme.
Responsibility Statement of the Directors in respect of the Annual Report Announcement
The 2016 Annual Report and Accounts, which will be issued to shareholders on 15 June 2017, contain a responsibility statement in compliance with Rule 4.1.12 of the Financial Services Authority's Disclosure & Transparency Rules. This states that each of the Directors as at 23 May 2017, the date of approval of the 2017 Annual Report and Accounts, confirms that to the best of their knowledge: (a) The Group Financial Statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole (b) The management report represented by the strategic and directors' reports includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face
The Board
The Board of Directors that held office at 25 March 2017 and their respective responsibilities can be found on pages 52 to 53 of the De La Rue plc Annual Report 2017.
For and on behalf of the Board
Philip Rogerson
Chairman
23 May 2017
GROUP INCOME STATEMENT For the period ended 25
March 2017
======================================================== ====== ======= ========
2017 2016
Notes GBPm GBPm
======================================================== ====== ======= ========
Revenue 461.7 454.5
======= ========
Operating expenses - ordinary (391.1) (384.1)
Operating expenses - exceptional 4 (0.4) (3.6)
======= ========
Total operating expenses (391.5) (387.7)
======================================================== ====== ======= ========
Operating profit 70.2 66.8
Comprising:
------- --------
Adjusted operating profit* 70.7 70.4
Amortisation of acquired intangible assets (0.1) -
Exceptional items 4 (0.4) (3.6)
------- --------
Profit before interest and taxation 70.2 66.8
Interest income - 0.1
Interest expense (4.6) (4.9)
Retirement benefit obligation net finance expense (7.4) (7.1)
======================================================== ====== ======= ========
Net finance expense (12.0) (11.9)
======================================================== ====== ======= ========
Profit before taxation 58.2 54.9
Comprising:
------- --------
Adjusted profit before tax* 58.7 58.5
Amortisation of acquired intangible assets (0.1) -
Exceptional items (0.4) (3.6)
------- --------
Taxation 5 (8.7) (6.3)
======================================================== ====== ======= ========
Profit for the year from continuing operations 49.5 48.6
-------------------------------------------------------- ------ ------- --------
Comprising:
------- --------
Adjusted profit for the year* 49.4 49.9
Amortisation of acquired intangible assets (0.1) -
Profit/(loss) for the year on exceptional items 0.2 (1.3)
------- --------
Loss from discontinued operations (8.0) (31.0)
Profit for the year 41.5 17.6
======================================================== ====== ======= ========
Profit attributable to equity shareholders of the 47.9
Company
Profit for the year from continuing operations (8.0) 47.4
Loss for the year from discontinuing operations 39.9 (31.0)
Total profit attributable to equity shareholders 16.4
of the Company
Profit attributable to non-controlling interests 1.6
Profit for the year from continuing operations - 1.2
Profit for the year from discontinuing operations 1.6 -
Total profit attributable to non-controlling interests 1.2
41.5 17.6
======================================================== ====== ======= ========
*This is a non IFRS measure. See note 19 for further explanations
and reconciliation to the comparable IFRS measure.
Profit for the year attributable to the Company's Notes 2017 2016
equity holders GBPm GBPm
================================================== ===== ====== =======
Earnings per share
Basic 6
Basic EPS continuing operations 47.2p 46.8p
Basic EPS discontinued operations (7.9p) (30.6p)
Total basic earnings per share 39.3p 16.2p
Diluted 6
Diluted EPS continuing operations 46.6p 46.2p
Diluted EPS discontinued operations (7.8p) (30.2p)
Total diluted earnings per share 38.8p 16.0p
================================================== ===== ====== =======
Adjusted earnings per share 6 47.1p
Basic (2.3p)
Basic EPS continuing operations 44.8p 48.1p
Basic EPS discontinued operations (7.1p)
Total Basic Earnings per share 41.0p
Diluted 6 46.5p
Diluted EPS continuing operations (2.2p) 47.5p
Diluted EPS discontinued operations 44.3p (7.0p)
Total Diluted Earnings per share 40.5p
==================================== ======== ========
GROUP STATEMENT OF COMPREHENSIVE INCOME For the
period ended 25 March 2017
========================================================= === ======= =======
2017 2016
GBPm GBPm
========================================================= === ======= =======
Profit for the year 41.5 17.6
============================================================== ======= =======
Other comprehensive income
Items that are not reclassified subsequently to
profit or loss:
Remeasurement losses on retirement benefit obligations (25.2) 5.4
Tax related to remeasurement of net defined benefit
liability 2.3 (5.4)
Items that may be reclassified subsequently to
profit or loss:
Foreign currency translation differences for foreign
operations 2.6 1.5
Change in fair value of cash flow hedges 7.8 4.1
Change in fair value of cash flow hedges transferred
to profit or loss (8.0) 1.6
Change in fair value of cash flow hedges transferred
to non-current assets (0.2) 1.5
Income tax relating to components of other comprehensive
income 0.2 (1.8)
Other comprehensive income for the year, net of
tax (20.5) 6.9
============================================================== ======= =======
Total comprehensive income for the year 21.0 24.5
============================================================== ======= =======
Comprehensive income for the year attributable
to:
Equity shareholders of the Company 19.4 23.3
Non-controlling interests 1.6 1.2
============================================================== ======= =======
21.0 24.5
============================================================= ======= =======
GROUP BALANCE SHEET At 25 March 2017
========================================================= === ======= =======
2017 2016
GBPm GBPm
========================================================= === ======= =======
Assets
Non-current assets
Property, plant and equipment 167.2 167.0
Intangible assets 30.9 13.4
Investments in associates and joint ventures 0.1 0.1
Deferred tax assets 43.7 41.6
Derivative financial assets 0.6 1.9
242.5 224.0
============================================================= ======= =======
Current assets
Inventories 67.8 67.1
Trade and other receivables 109.7 93.5
Current tax assets - 1.3
Derivative financial assets 15.3 15.0
Cash and cash equivalents 15.4 40.5
Assets classified as held for sale - 11.2
208.2 228.6
============================================================= ======= =======
Total assets 450.7 452.6
============================================================== ======= =======
Liabilities
Current liabilities
Borrowings (136.3) (146.6)
Trade and other payables (175.1) (171.5)
Current tax liabilities (19.6) (17.6)
Derivative financial liabilities (7.7) (12.0)
Provisions for liabilities and charges (10.4) (9.0)
Liabilities classified as held for sale - (10.5)
========================================================= === ======= =======
(349.1) (367.2)
============================================================= ======= =======
Non-current liabilities
Retirement benefit obligations (239.4) (219.9)
Deferred tax liabilities (4.9) (1.6)
Derivative financial liabilities (0.6) (1.2)
Provisions for liabilities and charges (2.0) (6.9)
Other non-current liabilities (1.3) (1.4)
============================================================== ======= =======
(248.2) (231.0)
============================================================= ======= =======
Total liabilities (597.3) (598.2)
============================================================== ======= =======
Net liabilities (146.6) (145.6)
============================================================== ======= =======
Equity
Share capital 46.8 46.6
Share premium account 36.7 35.7
Capital redemption reserve 5.9 5.9
Hedge reserve 2.0 2.3
Cumulative translation adjustment (9.7) (12.3)
Other reserves (83.8) (83.8)
Retained earnings (152.4) (146.6)
============================================================== ======= =======
Total equity attributable to shareholders of the
Company (154.5) (152.2)
Non-controlling interests 7.9 6.6
============================================================== ======= =======
Total equity (146.6) (145.6)
============================================================== ======= =======
GROUP STATEMENT OF CHANGES IN EQUITY For the period ended
25 March 2017
=============== =======
Attributable to equity Non-controlling Total
shareholders interests 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 year - - - - - - 16.4 1.2 17.6
Other comprehensive
income for the year,
net of tax - - - 5.8 1.5 - (0.4) - 6.9
------- ------- ---------- ------- ----------- ----------- ----------- --------------- -------
Total comprehensive
income for the year - - - 5.8 1.5 - 16.0 1.2 24.5
Transactions with
owners of the Company
recognised directly
in equity:
Share capital issued 0.1 0.2 - - - - - - 0.3
Employee share scheme:
* value of services provided - - - - - - 2.4 - 2.4
Income tax on income
and expenses recognised
directly in equity - - - - - - (0.3) - (0.3)
Dividends paid - - - - - - (25.3) (0.3) (25.6)
================================= ======= ======= ========== ======= =========== =========== =========== =============== =======
Balance at 26 March
2016 46.6 35.7 5.9 2.3 (12.3) (83.8) (146.6) 6.6 (145.6)
------- ------- ---------- ------- ----------- ----------- ----------- --------------- -------
Profit for the year - - - - - - 39.9 1.6 41.5
Other comprehensive
income for the year,
net of tax - - - (0.3) 2.6 - (22.8) - (20.5)
------- ------- ---------- ------- ----------- ----------- ----------- --------------- -------
Total comprehensive
income for the year - - - (0.3) 2.6 - 17.1 1.6 21.0
Transactions with
owners of the Company
recognised directly
in equity:
Share capital issued 0.2 1.0 - - - - - - 1.2
Employee share scheme:
* value of services provided - - - - - - 1.5 - 1.5
Income tax on income
and expenses recognised
directly in equity - - - - - - 1.0 - 1.0
Dividends paid - - - - - - (25.4) (0.3) (25.7)
================================= ======= ======= ========== ======= =========== =========== =========== =============== =======
Balance at 25 March
2017 46.8 36.7 5.9 2.0 (9.7) (83.8) (152.4) 7.9 (146.6)
================================= ======= ======= ========== ======= =========== =========== =========== =============== =======
GROUP CASH FLOW STATEMENT For the period ended
25 March 2017
============================================================================================ ======== ======= ===============
2017 2016
Notes GBPm GBPm
============================================================================================ ======== ======= ===============
Cash flows from operating activities
Profit before tax* 51.8 20.8
Adjustments for:
Finance income and expense 12.0 12.1
Depreciation 24.3 23.0
Amortisation 2.5 3.2
Decrease in inventory 3.4 5.0
Increase trade and other receivables (4.6) (2.0)
(Decrease)/increase in trade and other payables (11.9) 11.4
(Decrease)/increase in reorganisation provisions (3.6) 0.4
Special pension fund contributions (14.6) (19.1)
Loss/(profit) on disposal of property, plant,
equipment and software intangibles 1.4 (7.6)
Asset impairment - 10.8
Loss in disposal of discontinued operations 4.1 -
Other non-cash movements (0.5) 0.9
Cash generated from operating activities 64.3 58.9
Tax paid (5.7) (4.7)
============================================================================================ ======== ======= ===============
Net cash flows from operating activities 58.6 54.2
============================================================================================ ======== ======= ===============
Cash flows from investing activities 2.1
Proceeds from sale of discontinued operations (2.5) -
Transaction costs relating to sale of discontinued -
operations
Purchases of property, plant, equipment and software
intangibles (24.0) (25.0)
Development assets capitalised (2.1) (3.0)
Acquisition of subsidiary (net of cash acquired) (17.9) -
Proceeds from sale of property, plant and equipment 0.2 9.9
============================================================================================ ======== ======= ===============
Net cash flows from investing activities (44.2) (18.1)
============================================================================================ ======== ======= ===============
Net cash flows before financing activities 14.4 36.1
============================================================================================ ======== ======= ===============
Cash flows from financing activities
Proceeds from issue of share capital 1.2 0.3
(Repayments of)/proceeds from borrowings (12.4) 3.6
Interest received - 0.1
Interest paid (4.2) (4.2)
Dividends paid to shareholders (25.4) (25.3)
Dividends paid to non-controlling interests (0.3) (0.3)
============================================================================================ ======== ======= ===============
Net cash flows from financing activities (41.1) (25.8)
============================================================================================ ======== ======= ===============
Net (decrease)/increase in cash and cash equivalents
in the year (26.7) 10.3
Cash and cash equivalents at the beginning of
the year 37.9 28.9
Exchange rate effects - (1.3)
============================================================================================ ======== ======= ===============
Cash and cash equivalents at the end of the year 11.2 37.9
============================================================================================ ======== ======= ===============
Cash and cash equivalents consist of:
Cash at bank and in hand 8 13.2 40.5
Short term bank deposits 8 2.2 -
Bank overdrafts 8 (4.2) (2.6)
============================================================================================ ======== ======= ===============
8 11.2 37.9
============================================================================================ ======== ======= ===============
*Profit before tax includes continuing and discontinued operations.
1 Basis of preparation and accounting policies
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 25 March 2017
or 26 March 2016. The financial information for the period ended
25 March 2017 is derived from the statutory accounts for the period
ended 25 March 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 25 March 2017
has been prepared consistently with International Accounting Standards
and International Financial Reporting Standards (collectively "IFRS")
as adopted by the European Union (EU) at 25 March 2017. Details
of the accounting policies applied are those set out in De La Rue
plc's annual report 2016.
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
25 March 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 (effective for the
year ending 30 March 2019) provides a single, principles based,
five step model to be applied to all sales contracts. The Group
continues to assess the impact of the new standard.
IFRS 16 Leases was issued by the IASB in January 2016 (effective
for the year ending 28 March 2020, not yet endorsed by the EU)
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.
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.
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 Cash Processing Solutions (CPS) operation, was primarily focused
on the production of large banknote sorters and authentication machines for central banks.
This business was disposed on 22 May 2016 (see Note 3).
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 in
the current year between the IDS and PA&T segment. The 2015/16 figures have also been adjusted
for comparability.
2017 Currency Identity Product Unallocated Total of Discontinued Total
Solutions Authentication Continuing operations
and operations
Traceability
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
GBPm GBPm GBPm GBPm GBPm GBPm
Total revenue 350.6 80.6 34.6 - 465.8 4.9 470.7
Less:
inter-segment
revenue (1.1) - (3.0) - (4.1) - (4.1)
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
Revenue 349.5 80.6 31.6 - 461.7 4.9 466.6
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
Adjusted
operating
profit/(loss) 50.3 11.4 9.0 - 70.7 (2.3) 68.4
Amortisation
of acquired
intangible
assets - - (0.1) - (0.1) - (0.1)
Exceptional
items -
operating
(note 4, 3) 1.9 - (0.9) (1.4) (0.4) (4.1) (4.5)
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
Operating
profit/(loss) 52.2 11.4 8.0 (1.4) 70.2 (6.4) 63.8
Net interest
expense (4.6) (4.6) - (4.6)
Retirement
benefit
obligations
net finance
expense (7.4) (7.4) - (7.4)
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
Profit/(loss)
before
taxation 58.2 (6.4) 51.8
--------------- --------- --------------- --------------- ------------ --------------- --------------- --------
Segment assets 243.4 46.3 23.1 137.9 450.7 - 450.7
Segment
liabilities (113.0) (30.3) (10.4) (443.6) (597.3) - (597.3)
Capital
expenditure
on property,
plant and
equipment 13.1 4.5 2.6 3.3 23.5 - 23.5
Capital
expenditure
on intangible
assets 2.1 0.6 0.1 - 2.8 - 2.8
Depreciation
of property,
plant and
equipment 17.6 3.3 1.5 1.9 24.3 - 24.3
Impairment of - - - - - - -
property,
plant and
equipment
Amortisation
of intangible
assets 1.7 0.6 0.2 - 2.5 - 2.5
Impairment of - - - - - - -
intangible
assets
2016 Currency Identity Product Unallocated Total Discontinued Total
Solutions Authentication of Continuing operations
and operations
Traceability
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total revenue 353.3 76.5 28.8 - 458.6 33.9 492.5
Less: inter-segment
revenue (0.8) - (3.3) - (4.1) (0.2) (4.3)
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
Revenue 352.5 76.5 25.5 - 454.5 33.7 488.2
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
Adjusted operating
profit/(loss) 55.1 8.3 7.0 - 70.4 (7.9) 62.5
Exceptional items -
operating
(note 4, 3) (13.1) - (0.5) 10.0 (3.6) (26.0) (29.6)
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
Operating
profit/(loss) 42.0 8.3 6.5 10.0 66.8 (33.9) 32.9
Net interest
expense (4.8) (4.8) (0.2) (5.0)
Retirement benefit
obligations
net finance
expense (7.1) (7.1) - (7.1)
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
Profit/(loss)
before taxation 54.9 (34.1) 20.8
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
Segment assets 238.4 43.8 15.9 143.3 441.4 11.2 452.6
Segment liabilities (119.4) (28.6) (5.3) (434.4) (587.7) (10.5) (598.2)
Capital expenditure
on property,
plant and
equipment 11.1 0.2 1.7 3.5 16.5 - 16.5
Capital expenditure
on intangible
assets 3.3 1.4 0.3 - 5.0 0.3 5.3
Depreciation of
property,
plant and
equipment 17.0 2.6 1.4 2.0 23.0 - 23.0
Impairment of
property,
plant and
equipment 5.2 - - - 5.2 - 5.2
Amortisation of
intangible
assets 2.2 0.7 0.1 - 3.0 0.2 3.2
Impairment of
intangible
assets - - - - - 5.6 5.6
-------------------- --------- ----------- ---------------- ------------ --------------- ------------- --------
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 plus an additional GBP0.8m is receivable relating to a closing working capital adjustment. In addition, deferred consideration totalling GBP1.5m is payable in two equal instalments on the first and second anniversaries of the transaction. The Group is also entitled to further contingent consideration following the sale of up to GBP6m if certain performance related and event driven milestones are achieved by CPS.
No pension liability transferred as part of the disposal.
Results of the discontinued operation including the disposal group held for sale
2017 2016
GBPm GBPm
========================================= ====== ======
Revenue 4.9 33.7
====== ======
Operating expenses - ordinary (7.2) (41.6)
Operating expenses - exceptional (4.1) (26.0)
====== ======
Total operating expenses (11.3) (67.6)
========================================== ====== ======
Operating loss (6.4) (33.9)
Comprising:
====== ======
Adjusted operating (loss) (2.3) (7.9)
Exceptional items (4.1) (26.0)
====== ======
Loss before interest and taxation (6.4) (33.9)
Interest income - -
Interest expense - (0.2)
Net finance expense - (0.2)
========================================== ====== ======
Loss before taxation (6.4) (34.1)
Comprising:
====== ======
Adjusted loss before tax (2.3) (8.1)
Exceptional items (4.1) (26.0)
====== ======
Taxation (1.6) 3.1
========================================== ====== ======
Loss from discontinued operations (8.0) (31.0)
========================================== ====== ======
Comprising:
====== ======
Adjusted (loss) for the year (2.2) (7.2)
(Loss) for the year on exceptional items (5.8) (23.8)
====== ======
Assets/liabilities held for sale/disposal group
2017 2016
Notes GBPm GBPm
=================================== ======= ===== =====
Assets classified as held for sale
Derivative financial assets - 0.2
Trade and other receivables - 11.0
- 11.2
=========================================== ===== =====
2017 2016
GBPm GBPm
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)
======================================== ===== ======
2017 2016
GBPm GBPm
Exceptional items on discontinued operations
Site closures and restructuring - (2.6)
Remeasurement of carrying value following classification
as an asset for sale - (23.4)
Loss on disposal of discontinued operations (4.1)
Exceptional items (4.1) (26.0)
========================================================== ===== ======
Tax (charge)/credit on exceptional items (1.7) 2.2
========================================================== ===== ======
Site closure and restructuring costs in 2015/16 were GBP2.6m comprising GBP0.7m in staff compensation, and GBP1.9m for site exit costs.
In 2015/2016 asset impairments of GBP23.4m arising on the remeasurement of the disposal group to fair value less costs to sell have been recognised. The impairment related to intangibles of GBP1.6m, goodwill of GBP4.0m and inventories of GBP17.8m.
The cash costs for exceptional items in the period was GBP2.5m (2015/16: GBP1.0m).
Tax credits relating to the exceptional items arising in the period were GBP1.7m (2015/16 GBP0.3m).
4. Exceptional items
==================================================================== ====== ========
2017 2016
GBPm GBPm
==================================================================== ====== ========
Site relocation and restructuring (0.2) (9.2)
Sale of land 0.2 9.5
Warranty provisions 0.5 1.3
Asset impairment - (5.2)
Acquisition related (0.9) -
Exceptional items in operating profit (0.4) (3.6)
==================================================================== ====== ========
Tax credit on exceptional items 0.6 2.3
==================================================================== ====== ========
Site relocation and restructuring costs
Site relocation and restructuring costs in 2016/17 were GBP0.2m
net (2015/16: GBP9.2m net) and included charges of GBP1.7m including
staff compensation costs related to the redesign of the organisation
structure which was offset by a credit of GBP1.4m in relation to
the manufacturing footprint review announced in December 2015 which
planned to reduce our core banknote print production capacity from
eight billion to six billion notes a year. As noted in Note 18
"Provisions for liabilities and charges" of De La Rue Annual Report
2017, in November 2016 we announced a refinement to that plan which
resulted in a change in the total estimate for the associated site
relocation and reorganisation costs resulting in a credit to the
Income Statement which has been recorded as an exceptional item
consistent to the original presentation in the Annual Report.
Sale of land
The gain in 2016/15 related to the sale of surplus land in Overton
which generated a profit of GBP9.5m. Gains of GBP0.2m in the current
year relate to several individually small land sales.
Warranty provisions
Surplus warranty provisions of GBP0.5m in 2016/17 (2015/16: GBP1.3m)
have been credited to exceptional items consistent to where the
cost of the original provisions was presented in the Annual Report.
Asset impairments
In 2015/16 following a review of capitalised assets, GBP5.2m of
tangible assets within the Currency segment were written down representing
assets linked with specific products whose future income streams
are forecast to be insufficient to support the current carrying
value.
Acquisition related
De La Rue has incurred costs of GBP0.9m related to the acquisition
of DuPont Authentication Inc during 2016/17. These acquisition
related costs include GBP0.5m of professional advisor fees. In
addition an amount of GBP0.4m has been recorded in exceptional
items relating to the "unwind" of the fair value adjustment to
acquired inventory recognised on the opening day balance sheet
as the related inventory was fully sold by year end. The Directors'
believe that this non-cash item is distortive to underlying profit
levels compared to the expected cost of inventories recognised
as an expense for this subsidiary going forward.
Net cash cost of exceptional items
The net cash cost of exceptional items for continuing operations
in the period was GBP3.3m (2015/16: GBP12.5m). GBP0.8m of the cash
cost of exceptional items related to prior periods and primarily
to payment of items associated with site relocations and restructuring.
Tax credits relating to continuing exceptional items arising in
the period were GBP0.6m (2015/16 GBP2.3m).
5 Taxation
================================================================ ========= =======
2017 2016
GBPm GBPm
================================================================ ========= =======
Consolidated income statement
================================================================ ========= =======
Current tax:
UK corporation tax:
- Current tax 8.4 8.3
- Adjustment in respect of prior years (0.6) (0.1)
================================================================ ========= =======
7.8 8.2
================================================================ ========= =======
Overseas tax charges:
- Current year 3.7 2.2
- Adjustment in respect of prior years (0.2) (0.7)
================================================================ ========= =======
3.5 1.5
================================================================ ========= =======
Total current income tax charge 11.3 9.7
================================================================ ========= =======
Deferred tax:
================================================================ ========= =======
- Origination and reversal of temporary differences,
UK (0.7) (3.3)
- Origination and reversal of temporary differences,
overseas (0.3) (0.1)
================================================================ ========= =======
Total deferred tax (credit) (1.0) (3.4)
Income tax expense reported in the consolidated income
statement in respect of continuing operations 8.7 6.3
Income tax expense/(credit) in respect of discontinued
operations (note 3) 1.6 (3.1)
================================================================ ========= =======
Total income tax charge in the consolidated income
statement 10.3 3.2
================================================================ ========= =======
Tax on continuing operations attributable to:
================================================================ ========= =======
- Ordinary activities 9.3 8.6
- Exceptional items (0.6) (2.3)
================================================================ ========= =======
Tax on discontinuing operations attributable to:
- Ordinary activities (0.1) (0.9)
- Exceptional items 1.7 (2.2)
================================================================ ========= =======
Consolidated statement of comprehensive income:
================================================================ ========== ======
- On remeasurement of net defined benefit liability (2.3) 5.4
- On cash flow hedges (0.1) 1.4
- On foreign exchange on quasi-equity balances (0.1) 0.4
Income tax (credit)/charge reported within comprehensive income (2.5) 7.2
================================================================ ========== ======
Consolidated statement of changes in equity:
================================================================ ========== ======
- On share options (1.0) 0.3
================================================================ ========== ======
Income tax charge reported within equity (1.0) 0.3
================================================================ ========== ======
The tax on the Group's consolidated profit before tax for continuing
operations differs from the UK tax rate of 20 per cent as follows:
2017 2016
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ---------------- ----------------- -------------------- ------------------ ------------- --------------------
Profit before tax 58.7 (0.4) 58.3 58.5 (3.6) 54.9
----------------------- ---------------- ----------------- -------------------- ------------------ ------------- --------------------
Tax calculated at UK
tax
rate of 20 per cent
(2015/16:
20 per cent) 11.7 (0.1) 11.6 11.7 (0.7) 11.0
Effects of overseas
taxation (0.1) - (0.1) (1.1) - (1.1)
(Credits)/charges not
allowable
for tax purposes (1.8) (0.5) (2.3) (1.5) 0.8 (0.7)
Increase in unutilised
tax
losses (0.1) - (0.1) - (1.9) (1.9)
Adjustments in respect
of
prior years (0.1) - (0.1) (0.1) (0.5) (0.6)
Change in UK tax rate (0.3) - (0.3) (0.4) - (0.4)
----------------------- ---------------- ----------------- -------------------- ------------------ ------------- --------------------
Tax charge/(credit) 9.3 (0.6) 8.7 8.6 (2.3) 6.3
----------------------- ---------------- ----------------- -------------------- ------------------ ------------- --------------------
The underlying effective tax rate excluding exceptional items
was 15.8 per cent (2015/16: 14.7 per cent).
6 Earnings per
share
================== =============== ======================= ============ =================
2017 2017 2017 2016 2016 2016
Continuing Discontinued Total Continuing Discontinued Total
operations operations pence operations operations
pence pence per pence pence pence
per per share per per per
share share share share share
================== =============== ======================= ============ ===================== ================== ====================
Earnings per share
Basic earnings per
share 47.2 (7.9) 39.3 46.8 (30.6) 16.2
Diluted earnings
per share 46.6 (7.8) 38.8 46.2 (30.2) 16.0
================== =============== ======================= ============ ===================== ================== ====================
Adjusted earnings
per
share
Basic earnings per
share 47.1 (2.3) 44.8 48.1 (7.1) 41.0
Diluted earnings
per share 46.5 (2.2) 44.3 47.5 (7.0) 40.5
------------------ --------------- ----------------------- ------------ --------------------- ------------------ --------------------
Basic earnings per share is calculated by dividing the profit attributable
to equity shareholders by the weighted average number of ordinary
shares outstanding during the year, excluding those held in the
employee share trust which are treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted for the impact of the dilutive
effect of share options.
The Directors are of the opinion that the publication of the underlying
earnings per share, before exceptional items, is useful to readers
of the accounts as it gives an indication of underlying business
performance.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below.
Earnings 2017 2017 2017 2016 2016 2016
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
GBPm GBPm GBPm GBPm GBPm GBPm
============================= ====================== =============== ================= ========================== ============= =========
Earnings for basic and
diluted
earnings per share 47.9 (8.0) 39.9 47.4 (31.0) 16.4
Amortisation of acquired
intangible
assets 0.1 - 0.1 - - -
Exceptional items 0.4 4.0 4.4 3.6 26.0 29.6
Less: Tax on exceptional
items (0.6) 1.7 1.1 (2.3) (2.2) (4.5)
Earnings for adjusted
earnings
per share 47.8 (2.3) 45.5 48.7 (7.2) 41.5
============================= ====================== =============== ================= ========================== ============= =========
Weighted average number of ordinary shares 2017 2016
Number Number
m m
===================================================================================================================== ============= =========
For basic earnings per share 101.6 101.3
Dilutive effect of share options 1.2 1.3
===================================================================================================================== ============= =========
For diluted earnings per share 102.8 102.6
===================================================================================================================== ============= =========
7 Equity dividends
================================================================ ======== ========
2017 2016
GBPm GBPm
================================================================ ======== ========
Final dividend for the period ended 28 March 2015 of
16.7p paid on 1 August 2015 - 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 2016 of
16.7p paid on 3 August 2016 16.9 -
Interim dividend for the period ended 24 September
2016 of 8.3p paid on 11 January 2017 8.5 -
25.4 25.3
================================================================ ======== ========
A final dividend per equity share of 16.7p has been proposed for the period
ended 25 March 2017. If approved by shareholders the dividend will be paid on
3 August 2017 to ordinary shareholders on the register at 30 June 2017.
8 Analysis of net debt
================================================================ ======== ========
2017 2016
GBPm GBPm
================================================================ ======== ========
Cash at bank and in hand 13.2 40.5
Short term bank deposits 2.2 -
Bank overdrafts (4.2) (2.6)
================================================================ ======== ========
Total cash and cash equivalents 11.2 37.9
Borrowings due within one year (132.1) (144.0)
Net debt (120.9) (106.1)
================================================================ ======== ========
9 Financial Instruments
Fair values
The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Fair Fair
value value
Total - - Total
fair Carrying discontinued Continued fair Carrying
Fair value value amount operations operations value amount
measurement 2017 2017 2016 2016 2016 2016
basis GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ -------------- -------- --------- -------------- ------------ -------- ---------
Financial assets
Trade and other receivables(1) 102.6 102.6 10.8 88.7 99.5 99.5
Cash and cash equivalents 15.4 15.4 - 40.5 40.5 40.5
Derivative financial
instruments:
- Forward exchange
contracts designated Level
as cash flow hedges 2 4.5 4.5 - 5.0 5.0 5.0
- Short duration
swap contracts designated Level
as fair value hedges 2 0.2 0.2 - 0.1 0.1 0.1
- Foreign exchange
fair value hedges
- other economic Level
hedges 2 0.9 0.9 0.1 3.6 3.7 3.7
Level
- Embedded derivatives 2 10.3 10.3 0.1 8.2 8.3 8.3
Level
- Interest rate swaps 2 - - - - - -
------------------------------ -------------- -------- --------- -------------- ------------ -------- ---------
Total financial assets 133.9 133.9 11.0 146.1 157.1 157.1
---------------------------------------------- -------- --------- -------------- ------------ -------- ---------
Financial liabilities
Unsecured bank loans
and overdrafts (136.3) (136.3) - (146.6) (146.6) (146.6)
Trade and other payables(2) (61.6) (61.6) (1.8) (61.3) (63.1) (63.1)
Derivative financial
instruments:
- Forward exchange
contracts designated Level
as cash flow hedges 2 (1.6) (1.6) - (1.8) (1.8) (1.8)
- Short duration
swap contracts designated Level
as fair value hedges 2 (0.1) (0.1) - (0.3) (0.3) (0.3)
- Foreign exchange
fair value hedges
- other economic Level
hedges 2 (5.5) (5.5) (0.3) (10.1) (10.4) (10.4)
Level
- Embedded derivatives 2 (0.7) (0.7) - (0.7) (0.7) (0.7)
Level
- Interest rate swaps 2 (0.4) (0.4) - (0.3) (0.3) (0.3)
------------------------------ -------------- -------- --------- -------------- ------------ -------- ---------
Total financial liabilities (206.2) (206.2) (2.1) (221.1) (223.2) (223.2)
---------------------------------------------- -------- --------- -------------- ------------ -------- ---------
(1) Excluding prepayments.
(2) Excluding accrued expenses, deferred income and payments received on account.
10 Property plant and equipment
Fixtures and In course of
Land and buildings Plant and machinery fittings construction Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Cost
At 28 March 2015 64.8 349.7 30.1 18.7 463.3
Exchange differences 0.4 4.9 0.3 0.2 5.8
Additions - 7.0 0.2 9.3 16.5
Transfers from
assets in the
course of
construction 0.2 14.8 1.6 (16.6) -
Disposals (0.1) (5.4) (2.3) (1.6) (9.4)
Transferred to
assets classified
as held for sale (3.8) (1.6) (3.8) - (9.2)
--------------------- ------------------- -------------------- --------------------- -------------------- -------
At 26 March 2016 61.5 369.4 26.1 10.0 467.0
Exchange differences 0.2 6.8 0.3 0.2 7.5
Additions 0.2 6.2 0.2 16.9 23.5
Transfers from
assets in the
course of
construction 2.3 2.3 1.3 (5.9) -
Disposals - (5.5) (4.0) (1.5) (11.0)
Acquisitions (see
note 14) - 2.1 - - 2.1
--------------------- ------------------- -------------------- --------------------- -------------------- -------
At 25 March 2017 64.2 381.3 23.9 19.7 489.1
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Accumulated
depreciation
At 28 March 2015 28.8 234.5 20.7 - 284.0
Exchange differences 0.3 3.8 0.1 - 4.2
Depreciation charge
for the year 1.6 19.4 2.0 - 23.0
Impairment - 5.2 - - 5.2
Disposals - (4.9) (2.3) - (7.2)
Transferred to
assets classified
as held for sale (3.8) (1.6) (3.8) - (9.2)
--------------------- ------------------- -------------------- --------------------- -------------------- -------
At 26 March 2016 26.9 256.4 16.7 - 300.0
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Exchange differences 0.1 5.6 0.2 - 5.9
Depreciation charge
for the year 1.7 19.6 3.0 - 24.3
Impairment - - - - -
Disposals - (4.5) (3.8) - (8.3)
--------------------- ------------------- -------------------- --------------------- -------------------- -------
At 25 March 2017 28.7 277.1 16.1 - 321.9
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Net book value at 25
March 2017 35.5 104.2 7.8 19.7 167.2
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Net book value at 28
March 2016 34.6 113.0 9.4 10.0 167.0
--------------------- ------------------- -------------------- --------------------- -------------------- -------
Net book value at 29
March 2015 36.0 115.2 9.4 18.7 179.3
11 Intangible assets
Development Software Distribution
Goodwill costs assets rights Intellectual Customer Trade Total
GBPm GBPm GBPm GBPm property relationships Names GBPm
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Cost
At 28 March 2015 7.7 34.0 9.7 0.4 - - - 51.8
Exchange
differences 0.4 0.7 - - - - - 1.1
Additions - 3.0 2.3 - - - - 5.3
Disposals - - (2.5) - - - - (2.5)
Transferred to
assets
classified
as held for
resale (8.1) (16.7) - (0.3) - - - (25.1)
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
At 26 March 2016 - 21.0 9.5 0.1 - - - 30.6
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Exchange
differences (0.1) - 0.2 - (0.1) - - -
Additions - 2.1 0.7 - - - - 2.8
Disposals - - (0.4) - - - - (0.4)
Acquisitions
(see note 14) 9.8 - - - 4.6 2.3 0.3 17.0
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
At 25 March 2017 9.7 23.1 10.0 0.1 4.5 2.3 0.3 50.0
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Accumulated
amortisation
At 28 March 2015 3.7 23.4 7.7 0.4 - - - 35.2
Exchange
differences 0.4 0.5 (0.1) - - - - 0.8
Amortisation
for the year - 2.4 0.8 - - - - 3.2
Disposals - - (2.5) - - - - (2.5)
Transferred to
assets
classified
as held for
resale (4.1) (15.1) - (0.3) - - - (19.5)
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
At 26 March 2016 - 11.2 5.9 0.1 - - - 17.2
Exchange
differences - - (0.2) - - - - (0.2)
Amortisation
for the year - 1.7 0.7 - 0.1 - - 2.5
Disposals - - (0.4) - - - - (0.4)
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
At 25 March 2017 - 12.9 6.0 0.1 0.1 - - 19.1
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Carrying value
at 25 March
2017 9.7 10.2 4.0 - 4.4 2.3 0.3 30.9
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Carrying value
at 26 March
2016 - 9.8 3.6 - - - - 13.4
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
Carrying value
at 28 March
2015 4.0 10.6 2.0 - - - - 16.6
----------------- --------- ------------ --------- ------------- ------------- --------------- ------- -------
12 Retirement benefit obligations
The Group operates retirement benefit schemes, devised in accordance with local conditions and practices in the country concerned, covering the majority of employees. The assets of the Group's schemes are generally held in separately administered trusts or are insured. The major schemes are defined benefit pension schemes with assets held separately from the Group. The cost of providing benefits under each scheme is determined using the projected unit credit actuarial valuation method. The major defined benefit pension scheme is based in the UK and is now largely closed to future accrual. The current service cost and gains and losses on settlements and curtailments are included in operating costs in the Group income statement. The interest income on the plan assets of funded defined benefit pension schemes and the imputed interest on pension scheme liabilities are disclosed as retirement benefit obligation net finance expense respectively in the income statement.
Return on plan assets excluding assumed interest income on the assets, changes in the retirement benefit obligation due to experience and changes in actuarial assumptions are included in the statement of comprehensive income in full in the period in which they arise.
The liability recognised in respect of defined benefit pension schemes is the present value of the defined benefit obligation less the fair value of the scheme assets, as determined by actuarial valuations carried out at the balance sheet date.
The Group's contributions to defined contribution plans are charged to the income statement in the period to which the contributions relate.
A Trustee board has been appointed to operate the UK defined benefit scheme in accordance with its governing documents and pensions law. The scheme meets the legal requirement for member nominated trustees representation on the trustee board and a professional independent trustee has been appointed as chair of the board. The members of the trustee board undertake regular training to ensure they are able to fulfil their function as trustees and have appointed professional advisers to give them specialist expertise where required.
The Group has calculated the value of the minimum funding commitments to its schemes and determined that no additional liability under IFRIC 14 is required at 25 March 2017. No significant judgements were involved in making this determination.
(a) Defined benefit pension schemes
Amounts recognised in the consolidated balance sheet:
2017 2017 2016 2016
UK 2017 Overseas Total UK 2016 Overseas Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Equities 222.9 - 222.9 303.9 - 303.9
Bonds 270.0 - 270.0 100.1 - 100.1
Gilts - - - 156.7 - 156.7
Diversified Growth Fund 199.4 - 199.4 186.3 - 186.3
Liability Driven Investment Fund 222.2 - 222.2 90.3 - 90.3
Multi Asset Credit 38.1 - 38.1 - - -
Other 21.9 - 21.9 24.6 - 24.6
-------------------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Fair value of scheme assets 974.5 - 974.5 861.9 - 861.9
Present value of funded obligations (1,204.7) - (1,204.7) (1,072.2) - (1,072.2)
-------------------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Funded defined benefit pension
schemes (230.2) - (230.2) (210.3) - (210.3)
Present value of unfunded obligations (6.8) (2.4) (9.2) (7.3) (2.3) (9.6)
-------------------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Net liability (237.0) (2.4) (239.4) (217.6) (2.3) (219.9)
-------------------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Amounts recognised in the consolidated income statement:
2017 2017 2016 2016
UK 2017 Overseas Total UK 2016 Overseas Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Included in employee benefits expense:
- Current service cost - (0.2) (0.2) - (0.2) (0.2)
- Administrative expenses and taxes (1.5) - (1.5) (1.2) - (1.2)
Included in interest on retirement benefit
obligation net finance expense:
- Interest income on scheme assets 29.6 - 29.6 28.1 - 28.1
- Interest cost on liabilities (37.0) - (37.0) (35.2) - (35.2)
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Retirement benefit obligation net finance
expense (7.4) - (7.4) (7.1) - (7.1)
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Total recognised in the consolidated income
statement (8.9) (0.2) (9.1) (8.3) (0.2) (8.5)
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Return on scheme assets excluding assumed
interest income 114.7 - 114.7 (37.1) - (37.1)
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Remeasurement (losses)/gains on defined benefit
pension obligations (140.0) 0.1 (139.9) 42.7 (0.2) 42.5
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Amounts recognised in other comprehensive
income (25.3) 0.1 (25.2) 5.6 (0.2) 5.4
------------------------------------------------ -------- -------------- -------- ------- -------------- -------
Major categories of scheme assets as a percentage of total scheme assets:
2017 2017 2016 2016
UK 2017 Overseas Total UK 2016 Overseas Total
% % % % % %
---------------------------------- ----- -------------- ------- ----- -------------- -------
Equities 22.9 - 22.9 35.3 - 35.3
Bonds 27.7 - 27.7 11.6 - 11.6
Gilts - - - 18.2 - 18.2
Diversified Growth Fund 20.5 - 20.5 21.6 - 21.6
Liability Driven Investment Fund 22.8 - 22.8 10.5 - 10.5
Multi Asset Credit 3.9 - 3.9 - - -
Other 2.2 - 2.2 2.8 - 2.8
---------------------------------- ----- -------------- ------- ----- -------------- -------
The Diversified Growth Fund is a diversified asset portfolio which includes investments in equities, emerging market bonds, property, high yield credit and structured finance and smaller holdings in other asset classes. The Liability Driven Investment (LDI) fund consists of fixed interest bond holdings (approximately 49 per cent), index linked bond holdings (approximately 37 per cent) and cash (approximately 14 per cent). Interest rate swaps and floating rate notes are employed to complement the role of the LDI fund for liability risk management. Derivatives have been valued on a mark to market basis. The LDI is designed to proportionally counterbalance the effect/impact of a decrease/increase in interest rates/inflation on 50% of the funded obligations. The Multi-Asset Credit Fund invests in a variety of debt instruments. The scheme's assets include GBP18,000 of the Group's own financial instruments as at March 2017 which relate to ordinary shares of the Group through index tracking investments.
Multi Asset Credit, Diversified Growth Funds and LDI asset categories include certain assets which are not quoted in an active market and are stated at fair value estimates provided by the manager of the investment fund.
Other UK assets comprise cash, interest rate swaps and floating rate notes.
Principal actuarial assumptions:
2017 2016
UK 2017 Overseas UK 2016 Overseas
% % % %
----------------------------------------- ----- -------------- ----- --------------
Future pension increases - past service 3.65 - 3.60 -
Discount rate 2.75 - 3.50 -
RPI inflation rate 3.30 - 3.10 -
----------------------------------------- ----- -------------- ----- --------------
The financial assumptions adopted as at 25 March 2017 reflect the duration of the scheme liabilities which has been estimated to be 19 years.
At 25 March 2017 mortality assumptions were based on tables issued by Club Vita, with future improvements in line with the CMI model, CMI_2015 (2016: CMI_2013) and a long term rate of 1.25 per cent per annum (2015/16: long term rate of 1.25% per annum). The resulting life expectancies within retirement are as follows:
2017 2016
-------------------------------------------------- -------- ----- -----
Aged 65 retiring immediately (current pensioner) Male 22.7 23.0
Female 24.2 24.4
----------------------------------------------------------- ----- -----
Aged 50 retiring in 17 years (future pensioner) Male 23.3 24.1
Female 25.5 26.9
The defined benefit pension schemes expose the Group to the following main risks:
Mortality risk - an increase in the life expectancy of members will increase the liabilities of the schemes. The mortality assumptions are reviewed regularly, and are considered appropriate.
Interest rate risk - A decrease in bond yields will increase the liabilities of the scheme. Liability driven investment strategies are used to hedge part of this risk.
Investment risk - The value of pension scheme assets vary with changes in interest rates, inflation expectations, credit spreads, exchange rates, and equity and property prices. There is a risk that asset returns are volatile and that the value of pension scheme assets may not move in line with changes in pension scheme liabilities. To mitigate against investment risk the pension scheme invests in derivatives which aim to hedge a proportion of the movements in assets and liabilities. The pension scheme invests in a wide range of assets to provide diversification in order to reduce the risk that a single investment or type of asset class could have a materially adverse impact on total scheme assets. The investment strategy and performance of investment funds are reviewed regularly to ensure the asset strategy of the pension schemes continues to be appropriate.
Inflation risk - The liabilities of the scheme are linked to inflation. An increase in inflation will result in an increase in liabilities. There are caps in place for UK scheme benefits to mitigate the risk of extreme increases in inflation. Liability driven investment strategies are used to hedge part of this risk.
Any increase in the retirement benefit obligation could lead to additional funding obligations in future years.
The table below provides the sensitivity of the liability in the scheme to changes in various assumptions:
Assumption change Approximate impact on liability --------------------------------------- --------------------------------- 0.25% decrease in discount rate Increase in liability of cGBP55m 0.25% increase in RPI inflation rate Increase in liability of cGBP28m Increasing life expectancy by one year Increase in liability of cGBP55m --------------------------------------- ---------------------------------
The liability sensitivities have been derived using projected cash flows for the Scheme valued using the membership profile as at 5 April 2015 and assumptions chosen for the 2017 year end. The sensitivity analysis does not allow for changes in scheme membership since the 2015 actuarial valuation or the impact of the Scheme or Group's risk management activities in respect of interest rate and inflation risk on the valuation of the Scheme assets.
The largest defined benefit pension scheme operated by the Group is in the UK. 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.
Changes in the fair value of UK scheme assets:
2017 2016
GBPm GBPm
---------------------------------------------- ------- -------
At 26 March 2016/28 March 2015 861.9 891.6
Assumed Interest income on scheme assets 29.6 28.1
Scheme administration expenses (1.5) (1.2)
Return on scheme assets less interest income 114.7 (37.1)
Employer contributions and other income 14.8 19.2
Benefits paid (including transfers) (45.0) (38.7)
---------------------------------------------- ------- -------
At 25 March 2017/26 March 2016 974.5 861.9
---------------------------------------------- ------- -------
Changes in the fair value of UK defined benefit pension obligations:
2017 2016
GBPm GBPm
---------------------------------------------- ---------- ----------
At 26 March 2016/28 March 2015 (1,079.5) (1,125.7)
Interest cost on liabilities (37.0) (35.2)
Effect of changes in financial assumptions (168.9) 58.7
Effect of changes in demographic assumptions 12.9 (12.3)
Effect of experience items on liabilities 16.0 (3.7)
Benefits paid (including transfers) 45.0 38.7
---------------------------------------------- ---------- ----------
At 25 March 2017/26 March 2016 (1,211.5) (1,079.5)
---------------------------------------------- ---------- ----------
During 2015/16, the Group made special funding payments of GBP19.1m (including scheme administration fees). The Group's formal triennial valuation of the UK defined benefit Scheme was finalised in June 2016. The underlying funding deficit 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 of GBP13.0m (in addition to the regular contributions outside of the revised funding plan) have been made in the current year and GBP13.5m will be made in 2018, 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. The Group will continue to pay annual fees of GBP1.6m for managing the Scheme 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.
(b) Defined contribution pension plans
The Group operates a number of defined contribution plans for which the charge in the consolidated income statement for the year was GBP8.8m (2015/16: GBP9.4m).
13 Contingent 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 and disputes 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.
14 Business combinations
On December 12, 2016 De La Rue entered into a Share Purchase Agreement ("SPA") to acquire 100% of the outstanding capital stock of DuPont Authentication Inc (subsequently renamed to De La Rue Authentication Solutions ("DAS")). The acquisition completed on January 6, 2017 for a total consideration of $26.2m (GBP21.3m). This included the initial cash payment of $24.8m (equivalent to GBP20.2m) and a closing working capital adjustment of $1.4m (GBP1.1m) as per the terms of the SPA.
DAS is a leading global producer of photopolymer holographic films and 3D holograms and associated software. Its technology is used to authenticate products ranging from consumer electronics to spirits and also to secure identity documents. Its products are based on the highly specialised and secure Lippmann holography technology. Based in Utah, USA and with operations in Delaware, DAS has a well established global customer base in brand protection and identity authentication. This acquisition is in line with De La Rue's five year strategic plan to transform the Group into a technology led Security product and service provider. It will strengthen De La Rue's Security Features, Product Authentication & Traceability, and Identity Solutions product lines. DuPont Authentication's proprietary technology will also provide a solid platform for De La Rue to create new applications for the Currency market.
Goodwill of $12.1m (GBP9.8m) was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets acquired as set out below. Through the acquisition of DAS, De La Rue has acquired the intellectual property, trade names and existing customer relationships and these intangible assets have been valued at $8.9m (GBP7.2m).
Provisional
2017
GBPm
============================== ===============
ASSETS
Non-current assets
Property, plant and equipment 2.1
Intangible assets 7.2
9.3
============================== ===============
Current assets
Inventories 2.7
Trade and other receivables 1.1
Cash and cash equivalents 2.3
6.1
============================== ===============
Total assets 15.4
=============================== ===============
LIABILITIES
Current liabilities
Trade and other payables 0.7
0.7
============================== ===============
Non-current liabilities
Deferred tax liabilities 3.2
=============================== ===============
Total liabilities 3.9
=============================== ===============
Total identifiable assets 11.5
=============================== ===============
Goodwill 9.8
=============================== ===============
Total consideration 21.3
=============================== ===============
Consideration was fully satisfied in cash. The closing working capital adjustment of $1.4m (GBP1.1m) was paid post year end. Acquisition related costs of GBP0.5m were recognised in the Income Statement (See Note 4 "exceptional items").
DAS contributed GBP2.2m of revenue and loss of GBP0.1m to the Group's profit (GBP0.3m profit based on adjusted operating profit which excludes GBP0.4m unwind of the fair value adjustment to acquired inventory. See note 4 for more details) since acquisition and the balance sheet date. If the acquisition had been completed on the first day of the financial year, revenues for the period would have been GBP10.6m and the profit would have been GBP1.0m (GBP1.7m based on adjusted operating profit).
15 Related party transactions
During the year the Group traded on an arms length basis with the associated company Fidink S.A. (33.3 per cent owned). The Group's trading activities with this company included GBP20.8m (2015/16: GBP24.2m) for the purchase of security ink and other consumables. At the balance sheet date there were creditor balances of GBP6.4m (2015/16: GBP3.2m) with Fidink S.A.
Intra-Group transactions between the parent and the fully consolidated subsidiaries or between fully consolidated subsidiaries are eliminated on consolidation.
Key management compensation
2017 2016
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Salaries and other short term employee benefits 2,959.9 3,356.6
Termination benefits - 237.7
Retirement benefits:
- Defined contribution 90.4 230.4
Share based payments 190.9 827.0
------------------------------------------------- --------- ---------
3,241.2 4,651.7
Key management comprises members of the Board (including the fees of Non-executive Directors) and the Executive Leadership Team. Termination benefits include compensation for loss of office, ex gratia payments, redundancy payments, enhanced retirement benefits and any related benefits in kind connected with a person leaving office or employment.
16 Dates
The consolidated accounts have been prepared as at 25 March 2017, being the last Saturday in March. The comparatives for the 2015/16 financial year are for the period ended 26 March 2016.
17 Statutory accounts
Statutory accounts for the period ended 25 March 2017 will be made available to shareholders for subsequent approval at the Annual General Meeting and copies will be available from the Company Secretary at De La Rue plc, De La Rue House, Jays Close, Viables, Hampshire, RG22 4BS.
18 Foreign exchange
Principal exchange rates used in translating the
Group's results:
2016/17 2015/16
Average Year End Average Year End
US dollar 1.32 1.25 1.50 1.41
Euro 1.20 1.16 1.36 1.27
19 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 2016
GBPm GBPm
===================================================== ===== =====
Operating profit from continuing operations on
an IFRS basis 70.2 66.8
====================================================== ===== =====
- Amortisation of acquired intangible assets 0.1 -
====================================================== ===== =====
- Exceptional items - operating 0.4 3.6
====================================================== ===== =====
Adjusted operating profit from continuing operations 70.7 70.4
------------------------------------------------------ ----- -----
Adjusted earnings per share
Adjusted earnings per share are the earnings attributable to equity shareholders, excluding exceptional items and amortisation of acquired intangible assets and discontinued operations divided by the weighted average number of ordinary shares dual share in issue. It has been calculated by dividing the De La Rue plc's adjusted operating profit from continuing operations for the period by the weighted average number of ordinary shares in issue.
2017 2016
GBPm GBPm
=========================================== ============ ==========
Profit attributable to equity shareholders
of the Company from continuing operations
on an IFRS basis 47.9 47.4
============================================ ============ ==========
- Amortisation of acquired intangible
assets 0.1 -
============================================ ============ ==========
- Exceptional items 0.4 3.6
============================================ ============ ==========
- Tax on exceptional items (0.6) (2.3)
============================================ ============ ==========
djusted profit attributable to equity
shareholders of the Company from
continuing operations 47.8 48.7
============================================ ============ ==========
Weighted average number of ordinary
shares for basic earnings 101.6 101.3
2016
2017 pence pence per
per share share
=========================================== ============ ==========
Earnings per ordinary share continuing
operations on an IFRS basis 47.2p 46.8p
============================================ ============ ==========
Adjusted earnings per ordinary share
for continuing operations 47.1p 48.1p
============================================ ============ ==========
Return on capital employed (ROCE)
Return of capital employed is the ratio of the operating profit before exceptional items and adjusting items over capital employed, where capital employed equals net assets, excluding pensions, tax interest and long term liabilities.
Cash conversion
Cash conversion is the ratio of adjusted operating cash flow divided by the adjusted operating profit.
19 De La Rue financial calendar 2016/17
Ex-dividend date for 2016/17 final 29 June 2017 dividend Record date for final dividend 30 June 2017 Annual General Meeting 20 July 2017 Payment of 2016/17 final dividend 3 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BBGDLSDBBGRL
(END) Dow Jones Newswires
June 16, 2017 07:48 ET (11:48 GMT)
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