Interim Statement 2006/2007 We produce over 150 national currencies - PDF document

Interim Statement 2006/2007

We produce over 150 national currencies and a wide range of security documents such as passports, authentication labels and fiscal stamps. We are also a leading provider of cash handling equipment and software solutions to banks and retailers worldwide helping them reduce the cost of handling cash. We employ over 6,000 people across 31countries worldwide. We are also pioneering new technologies in government identity solutions for national identification, driver’s licence and passport issuing schemes. Contents 01 Trading Summary 02 Directors’ Review 05 Independent Review Report to De La Rue plc 06 Group Condensed Income Statement – Unaudited 07 Group Balance Sheet – Unaudited 08 Group Cash Flow Statement – Unaudited 09 Group Statement of Recognised Income and Expense – Unaudited 10 Notes to the Interim Statement – Unaudited 16 Shareholders’ Information

01 De La Rue Interim Statement 2006/2007 Trading Summary Half Year Half Year 2006/2007 2005/2006 Change Sales £328.4m £290.7m +13.0% Profit before tax and exceptional items* £43.9m £30.6m +43.5% Profit before tax £43.9m £27.6m +59.1% Group headline earnings per share* 18.5p 11.8p +56.8% Basic earnings per share 18.5p 10.6p +74.5% Operating cash flow £51.2m £46.5m +10.1% Net cash at end of period £98.9m £61.6m +60.6% Dividends per share 5.83p 5.20p +12.0% *before exceptional charges of £nil (2005/2006 : £3.0m). Highlights – Sales up 13 per cent to £328.4m (2005/2006 : £290.7m) – Profit before tax and exceptional items up 43.5 per cent to £43.9m (2005/2006 : £30.6m) – Group operating margins improved by 2.6 percentage points to 12.0 per cent (2005/2006 : 9.4 per cent) – Continued strong cash generation. Net cash £98.9m at end of the period (2005/2006 : £61.6m) – Increase in the interim dividend of 12 per cent to 5.83p per share – Ongoing share buy back programme. In the period 2.5 million shares acquired for cancellation at a cost of £13.5m, bringing the total to 4.1 million shares acquired at a cost of £21.3m since commencement of the current programme

02 De La Rue Interim Statement 2006/2007 Directors’ Review Group Results Returns to Shareholders De La Rue is pleased to report an excellent Interim Dividend performance for the half year ended 30 September In line with the Board’s continued confidence 2006 with all key performance indicators again in the Group’s prospects an interim dividend showing good improvements. The increases in of 5.83p, representing an increase of 12 per margins and operational efficiencies continue to cent on the interim 2005/2006, will be paid on demonstrate the progress the Group is making 17 January 2007 to shareholders on the register in implementing its strategy. Furthermore, we are on 15 December 2006. pleased to report revenue growth in both the Cash Systems and Security Paper and Print divisions. Share Buy Back Group underlying operating profits* of £39.4m The Board announced at the interim results in (2005/2006 : £27.3m) represented an increase November 2005 its intention to use the existing of £12.1m or 44.3 per cent and underlying authorities granted to it at the 2005 Extraordinary profit before tax* rose 43.5 per cent to £43.9m General Meeting (EGM) to use surplus cash to (2005/2006 : £30.6m). Headline earnings per share* purchase the Company’s own shares for cancellation. increased by 56.8 per cent to 18.5p. Basic earnings The upper limit of the Board’s existing authority per share were 18.5p compared with 10.6p last is 14.99 per cent of issued capital. In the first half year, which reflected the absence of exceptional the Company acquired 2.5 million shares under charges in the period. the current share buy back programme at a cost of £13.5m, bringing the total number of In Security Paper and Print, strong banknote shares acquired since the commencement of the volumes (up 26.4 per cent on 2005/2006) and programme, in December 2005, to 4.1 million at paper volumes (up 13.3 per cent on 2005/2006) a cost of £21.3m. The Board expects to continue produced an excellent first half result. In Cash this programme, funded with surplus cash and Systems the benefits of the ongoing restructuring will seek shareholder approval to renew its existing actions undertaken last year and strong current authority at the next AGM. The exact amount and growth in the USA, principally driven by the present timing of future purchases will be dependent on drive by USA retail banks toward Teller Automation, market conditions and ongoing cash generation. resulted in further margin improvements. Overall Group operating margins were 2.6 percentage points In line with our commitment to improve shareholder higher at 12.0 per cent (2005/2006 : 9.4 per cent). returns the Board will review the means and amount of capital to be returned to shareholders at the time Cash flow remains a key strength of the Group. of the preliminary results. The Board will take into Cash generated from operations of £51.2m account the level of surplus cash within the represented an improvement on the performance business, current trading conditions and the levels achieved in the first half of last year (2005/2006: achieved through the share buy back programme. £46.5m) and reflected a 129.9 per cent conversion rate from operating profit aided by record levels of advance payments. The Group ended the half year with net cash of £98.9m, compared with net cash of £91.6m at the start of the year. *before net exceptional charges of £nil (2005/2006 : £3.0m).

03 De La Rue Interim Statement 2006/2007 Operating Reviews In Cash Systems, first half sales of £158.2m Security Paper and Print grew by 12.2 per cent (2005/2006 : £141.0m) and underlying operating profits of £10.7m were 2006/2007 2005/2006 2005/2006 strongly ahead of last year (2005/2006 : £6.2m). Half Year Half Year Full Year £m £m £m This reflected an incremental benefit of £3.0m Sales 170.2 149.7 318.4 restructuring actions taken in the second half of Underlying operating last year and increased sales volumes through the profit** 28.7 21.1 51.0 fixed cost base. Foreign exchange had a £0.3m Underlying operating adverse effect on sales and £0.5m adverse on profit margin (%) 16.9 14.1 16.0 operating profits. **before exceptional income of £nil (2005/2006 : £0.4m). Teller Automation volumes were up on the same period last year driven principally by continued In Security Paper and Print first half sales grew growth in North America. Over the past two years by 13.7 per cent to £170.2m (2005/2006 : £149.7m) we have invested in expanding the sales force and underlying operating profits of £28.7m were 36.0 in the region and in new product development per cent ahead of last year (2005/2006 : £21.1m). for the Teller Automation market generally which partially offset the higher sales volumes. The Sorter First half banknote volumes were exceptional, business had an improved first half and our focus increasing 26.4 per cent (2005/2006 : decrease remains on achieving operational improvements of 24.7 per cent) over the prior year. This reflected and targeting the markets in Russia, North America a strong opening order position, which was partly and China. The OEM (ATM mechanisms) and offset by a less favourable work mix compared Desktop Products businesses had a good first to the corresponding period last year. The higher half, benefiting from the pull forward of orders overall volumes reflected increased overspill associated with outsourcing of manufacturing which was 25 per cent compared to 21 per cent to China. in the corresponding period last year. In addition, banknote paper volumes rose by 13.3 per cent UK Pension Scheme (2005/2006 : decrease of 1.0 per cent) driven by The charge to operating profit in respect of the the strong print order book and resulted in the UK pension scheme for the first half of 2006/2007 paper mill operating at near capacity levels. was £4.7m (2005/2006 : £4.8m). In addition, under Overall, the order book in Currency remains IAS 19 there is a finance credit of £0.8m arising strong, providing good visibility for the second from the expected return on assets less the interest half of the year. on liabilities (2005/2006: charge of £0.7m). The pension deficit, net of deferred tax asset, recorded The Security Products and Identity Systems under IAS 19 at the half year was £76.0m (March businesses also performed strongly. Sales benefits 2006 : £80.5m). from increased volumes in authentication labels, fiscal stamps and passports all contributed to During the first half the Company started a review improved results. of the future benefits of the UK Pension Scheme and discussions have commenced with UK Cash Systems employees. The Company expects to complete the review prior to the year end. The triennial 2006/2007 2005/2006 2005/2006 Half Year Half Year Full Year valuation of the De La Rue UK Pension Scheme £m £m £m as at April 2006 is continuing. Sales 158.2 141.0 292.4 Underlying operating Associates profit † 10.7 6.2 18.4 Profit from associates after tax was lower than Underlying operating last half year at £2.2m (2005/2006 : £2.9m) reflecting profit margin (%) 6.8 4.4 6.3 preparation costs for the third lottery licence. The main associated company is Camelot, the † before exceptional charges of £nil (2005/2006 : £3.4m). UK lottery operator. It is in the process of finalising its bid with the licence running from 2009 to 2019.