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.
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
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