De La Rue plc

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De La Rue plc
Interim Results 26 November 2002
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De La Rue plc
Ian Much Chief Executive
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De La Rue plc
David Finnett Group Financial Controller
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Trading Summary

• Results down, as expected
• Operating profits from continuing operations
  14.5m down from 31.0m
• Profit before tax 19.6m down from 35.6m
• Cash Systems sales down
• Currency profits down as predicted (new designs)
• Action being taken to rationalise Security
  Products manufacturing operations
• But fundamentals have not changed
• Better second half outlook supported by
  improving prospects
• in Cash Systems and strong order book in
  Currency
• Strong, balance sheet with low gearing (just
  8) despite 17.0m net
• expenditure on acquisitions/disposals and
  32.4m on share buy-back
• in first half
• Dividend increased by 4.8 to 4.4p per share

Before reorganisation costs and goodwill
amortisation charged to operating profits
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Financial Summary
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Cash Systems

• Sales from continuing operations down 16.9 and
  operating profits down
• 10.1m to 4.3m. Lower margins in first half
  as a result
• Delays in ordering in eurozone has been primary
  factor
• Currency Systems (CSI) also experiencing delays
  in ordering decisions for
• several major projects by US casinos and
  commercial banks
• OEM, Service, Retail businesses, however, all
  in line with expectations
• Acquisitions - Serbatech
• - Papelaco

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Security Paper and Print

• New designs in banknote order book affected
  first half
• performance in Currency
• Banknote paper profits and margins down, as
  expected
• Security Products weak. Action being taken to
  rationalise
• manufacturing base and reduce overheads
• Reorganisation charge taken in first half, of
  17.7m,
• 11.6m of which is cash

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Global Services

• Sales disappointing, down 7.3 to 17.9m and
  division incurred a loss of 2.5m
• Action taken to reduce overheads
• Identity Systems - timing delays on major
  projects affected first half
• Holographics revenues affected by reduced
  demand in banknote sector
• Acquired Sequoia Voting Systems in May,
  performance in line with expectations

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Associates

• Profits down in first half as expected
• Last years result affected by one-off costs
  (bid and new licence)
• Main associate now Camelot plc, UK national
  lottery operator
• New licence period
• Shareholding decreased to 20
• Contribution per 100p down from 1.0p to 0.5p

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Earnings per Share
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Cashflow / Net Debt
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Share buy back

• To date De La Rue has acquired for cancellation
  
• 11 million shares (5.65). Cost 32.4m
• Currently have authority from shareholders
  (July AGM)
• to acquire up to 10 of issued capital
• Further authority being sought from
  shareholders to approve an extension to De La
  Rues existing authority
• Upper limit raised from 10 to 14.99
• Extraordinary General Meeting
• Circular to shareholders shortly

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De La Rue plc
Ian Much Chief Executive
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Cash Systems

• Service business continues to perform strongly
• Since half year Financial Institutions order
  book in eurozone
• largely recovering, except Germany and Spain
• Situation partly offset by strong trading in USA
  and Switzerland
• USA now largest market for equipment
• Papelaco acquisition
• Integration completed in first half
• Launching self service range in several key
  European markets
• (most developed first)
• Recently secured first banking self service
  outsourcing contract
• (hardware and software) for large European
  commercial bank
• Currency Systems (CSI) commercial environment,
  as outlined

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Cash Systems

• Retail Payment Solutions
• Focusing on large retailers initially in USA and
  UK markets
• Trials underway with several key retail
  customers in these regions
• Chinese Joint Venture agreement with Nantian
  Electronics
• signed in September 2002
• Long standing trading relationship
• 51 shareholding De La Rue
• Operations to commence early 2003 (subject to
  regulatory approval
• from Chinese authorities)
• Customised product range in development
• Continue to see underlying expansion
  opportunities through
• Service (e.g., Serbatech) - approximately 30 of
  total sales
• Expanding and improving product range
  (organically and by
• acquisition)
• New geographic and marketing opportunities

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Currency

• Banknote business remains strong
• New designs issue resolved in first half
• Good order book and visibility of earnings
  underpins
• second half result
• Focus now on fulfilment
• Closure of Singapore banknote factory on track
• Savings in 2003/2004
• Reorganisation of four worldwide printing
  factories nearing completion
• Volumes unaffected
• Improving situation for banknote paper next year
• Expect return to historical ordering patterns
  next year
• Knock on effect for Currency components
  businesses
• (particularly Tapes)

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Security Products

• Management of Security Products and Global
  Services
• Interim arrangements
• Future focus on sales and marketing
• Reorganisation of manufacturing operations on
  track
• Capacity reduced through closure of High
  Wycombe. - Agreement over closure now
  reached with union and
• employee groups
• Acquisition of House of Questa gives separate
  focus for gravure
• printing going forward
• Further progress in reducing divisional
  overheads
• Total factory and overhead savings of 7m
  (indicated 5m in September)
• Some benefits in second half of this year

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Global Services

• Action taken in first half to restructure
  central overheads
• (in conjunction with Security Products)
• Identity Systems
• Substantial base of long term government
  contracts
• Significant interest in large scale national
  identity, passport and
• drivers licence projects
• Size and complexity of projects increasing
• Longer decision cycles as a result
• Holographics affected by decrease in demand for
  currency
• components arising from Currency and general
  eurozone
• situation. Second half outlook better

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Sequoia Acquisition May 2002

• Increasing levels of activity in US markets
• Secured 4 counties in Florida for November 2002
  
• congressional elections
• Also involved in California and Washington
• Help America Vote Act 2002
• US3.9bn over 4 years in Federal funding (plus
  matching State funds)
• UK opportunities

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Outlook

• In line with trading update in September

• Strong order book in Currency, particularly
  banknotes
• Expect market for banknote paper to return to
  historical
• ordering patterns and volumes
• Improving situation continues in Cash Systems
  Financial
• Institutions in most of the eurozone
• Strong market in USA for Cash Systems
• Continuing strong performance in Cash Systems
  service
• business
• Action to reduce cost base in Security Products
  and
• Global Services some second half benefit

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De La Rue plc