INTERIM RESULTS

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INTERIM RESULTS 1999/00
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INTERIM HEADLINES

• Headline earnings per share of 11.7p up 5.4p or
  86 on comparable period
• Operating profits from continuing activities up
  9.7m at 25.3m
• Appointed external Managing Director to head up
  new Services and Solutions business
• Approximately 100m from 200m disposal proceeds
  of cards activities to be returned to
  shareholders
• Interim dividend unchanged at 4.0p per share.

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PAUL HOLLINGWORTH Finance Director
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HIGHLIGHTS
Before exceptional items/reorganisation costs
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SECURITY PAPER PRINT
Summary

• Margins continue to rise benefiting from
  reorganisation actions
• Reorganisation largely completed
• Holding onto gains in banknote prices
• Paper volumes down but improved mix largely
  offsets impact of lower sales
• Non banknote security products results benefiting
  from increased holographic usage and higher
  sales of Microsoft covers

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SECURITY PAPER PRINT
Average banknote prices (indexed from 1990)
3.7 rise
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SECURITY PAPER PRINT
Banknote order book Value per banknote -12 month
moving average
Index
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SECURITY PAPER PRINT
Banknote volumes (billions of notes)
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SECURITY PAPER PRINT
Banknote sales - segmental analysis
Percentage of total value
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SECURITY PAPER PRINT
Lerchundi (Security print business)
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CASH SYSTEMS
Summary

• Sales down as we focused on products and
  geographical areas which were most profitable
• New products as a percentage of total product
  sales now account for 20 compared to 14 for
  last year
• Breakeven result represents a positive shift in
  recent trend of results
• Reorganisation on track

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CASH SYSTEMS
RESTRUCTURING PROGRESS UPDATE
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RESTRUCTURING ANNOUNCED MARCH 1999

• Additional 40m PL charge over 98/99 and 99/00
• Cash element 30m
• 2 year pay back on cash
• Progressive benefits over 2 years
• 500 job losses

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MANUFACTURING UNIT COST REDUCTIONS

• More focused organisation and tighter management
  in place
• New strategic purchasing manager in place
• New strategic freight partnership in place
• New flexible labour partnership deal at
  Portsmouth
• Invested to improve manufacturing processes

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FACTORY FIXED COSTS REDUCTION

• Consolidation of sites in UK and Sweden underway
  and on track
• Headcount reduction ahead of schedule (120 heads
  gone to date)
• Annualised savings of 3m

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PRODUCT DEVELOPMENT

• Radically reviewed organisation
• Undertaken clean-up of pipeline
• Reduced heads by 50
• Spend is in line with budget
• Annualised saving of circa 4m

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CASH SYSTEMS
Product development expenditure (first half)
m
9.6m
9.3m
7.9m
8.0m
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DISTRIBUTION COMPANIES

• Office closure and down-sizing
• By year end we will have rationalised 8 sales
  offices
• Not affecting business

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IT SYSTEM

• MfgPro implementation at Portsmouth on track to
  go-live April 2000
• More cost effective stand alone system
  implementations in several regions
• On track for running cost reduction of 3m

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CURRENT STATUS OF RESTRUCTURING

• At the half year achieved 436 of 500 targeted job
  reductions
• Per Annual Report
• Total overall charge of 45.9m, of which
  25.9m booked in 98/99
• 20m to be incurred in current financial year
• Looking to exit financial year 2000/2001 at 10
  margins

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PROFIT BEFORE TAX EXCEPTIONAL ITEMS
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EARNINGS PER SHARE
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CASHFLOW

• Normal seasonal outflow on working capital
• Final and interim dividend paid in first half
• No dividend paid by Giori
• Net cash of 39.3m at half year

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REPAYMENT OF CAPITAL

• Cards disposal raised 200 million before costs
• Return of surplus capital
• tax efficient structure
• re-introduce gearing to the Group
• retains financial strength
• Future dividend policy

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REPAYMENT OF CAPITAL

• Proposed return of 46 pence per share
  (approximately 103.7 million)
• Scheme of arrangement
• New De La Rue acquires De La Rue
• Consolidation ratio of 17 new shares for 20
  existing shares
• Reduction in number of shares in issue by 15
• Share repurchase authority
• Expected timetable
• Documentation in early December
• Court meeting and EGM in second week of January
• Dealings in new shares 1 February
• Board of New De La Rue will be identical to the
  existing board

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CURRENT TRADING OUTLOOK

• Trading in our operations since the half year has
  continued in line with our expectations and above
  last year.
• Performance of associated companies is down and
  second half likely to be at similar levels to
  first half.
• Major changes that have occurred in first half
  are delivering shareholder value.

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IAN MUCH Chief Executive
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SECURITY PAPER PRINT CURRENCY
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KEY TRENDS

• Concern from customers about new counterfeiting
  threats leading to the introduction of new
  features
• More opportunities to link print and paper
  features with sorting equipment
• Competitor consolidation now taking place

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OPPORTUNITIES FOR GROWTH
Indications of a slow shift towards more private
sector involvement in State Printing
Works However pace is dictated by political
considerations in individual territories This
presents opportunities for

• Technology sales
• Facilities management contracts
• Overspill printing

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QUALITY TECHNOLOGY

• Automatic inspection of banknotes during printing
  is now proven and reliable
• Ongoing major investment programme in such
  equipment (eg NotaSave)
• Continuing investment in security features, such
  as holographic foils and novel iridescent effects

Starwide holographic thread
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COST REDUCTION EFFICIENCY

• Re-allocation of equipment to maximise the use of
  capital assets
• Ink usage reduction systems
• Improved systems for worldwide production
  scheduling to optimise capacity utilisation
• Development of an advanced batch control system
  to enhance physical security and reduce cost

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THE EURO

• De La Rue fully involved in the origination
  process and production trials
• Predominance of State Printing Works and paper
  mills
• Qualifying process for tapes and holograms
• Strategic investment with the Banco de Portugal
  in a state-of-the-art Euro production facility in
  Lisbon

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SECURITY PRODUCTS

• Increased use of holograms, sales up 30
• Microsoft cover volumes up 24
• Planned relocation of Tapes to modern facility in
  second half
• Tapes, Thermotext product has been well received
• High Wycombe operational performance still needs
  improving
• Just won contract to supply Argos with retail
  gift vouchers
• Brand Protection winning consultancy contracts,
  need to convert into orders

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SUMMARY

• Profitable ongoing business with modest growth
  opportunities
• Leverage strong customer relationships
• Continue to target top and middle end of market
• Value not volume
• Continuous improvement in operational efficiency

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CASH SYSTEMS
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ORGANISATION

• Cash Systems division is now focused on
• Branch Cash Solutions
• Cash Processing
• Desktop Products
• Service
• OEM

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NEW PRODUCT DEVELOPMENTS/OPPORTUNITIIESTCR8000c
PROJECT

• Teller cash recycler
• Product definition complete
• Launched at recent trade shows
• Good response from customers
• Competitive positioning
• Concurrent operation
• Speed and authenticity
• Reliability and service

TCR8000c
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6000 SERIES NOTE SORTER

• Bulk cash processor
• Major customer launch July 1999
• joint with key customers
• over 40 customers
• from 19 countries
• Now installed on 3 continents
• Complete solution and integration to customers
  back office systems proven

New 6000 Sorter
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BRAZIL FACILITIES MANAGEMENT CONTRACT

• Building on the De La Rue reputation
• A model for the future
• Already working with other banks both the
  commercial and state sectors to examine
  opportunities to replicate the experience

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AFTER SALES CUSTOMER SERVICE SUPPORT

• 20 of the divisions turnover
• Employs one third of the workforce
• Direct service operations in 15 of our direct
  markets
• Supporting a franchised distributor network of
  over 200 service partners
• 20 of our service activity is on non De La Rue
  manufactured products

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SUMMARY

• The restructuring is on schedule
• The streams organisation has proven to function
  and is ready for growth
• The product range has been enriched
• Cash Systems is now providing solutions not only
  boxes
• Cash Systems team is enthusiastic and very
  committed

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NEW SERVICES SOLUTIONS DIVISION
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WORK BEING UNDERTAKEN

• Recruited new MD, Chris Chadwick who joined on 15
  November
• Keith Brown heading up internal development team
• We are identifying potential areas of opportunity
  and defining business logic
• Decided on initial internal components for new
  division

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NEW SERVICES SOLUTIONS DIVISION

• Identity Systems
• Transaction Services
• Holographics
• Brand Protection
• Royal Mint Services

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CORE AREAS FOR NEW DIVISION
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NEXT STEPS
Action
Timing
Status

• Develop business plan
• Complete market study
• Identify existing businesses for new division
• Identify skills gap and recruit
• Appoint new MD
• Create new division
• Consider small acquisitions

• Ongoing
• Autumn 1999
• Autumn 1999
• Autumn/end 1999
• End 1999
• End 1999
• Early 2000

• Done
• Done
• Done
• Ongoing
• Done
• Ongoing
• Ongoing

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SUMMARY
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STRATEGIC FOCUS
OPERATE IN AREAS WHERE OUR CORE VALUES
ANDCAPABILITIES OF SECURITY, INTEGRITY TRUST
CAN BE LEVERAGED PROFITABLY TO THE BENEFIT OF
OUR CUSTOMERS AND WHERE WE HAVE, OR ARE ABLE TO
DEVELOP, WORLD LEADING POSITIONS
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KEY OPERATIONAL ISSUES

• Complete reorganisation of Cash Systems and
  deliver targeted returns
• Achieve substantial improvement in working
  capital performance
• Build on strong product base with service
  approach
• Get closer to customer base to leverage our core
  strengths/values
• Progress on new Services Solutions division

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INTERIM RESULTS 1999/00
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