REG - De La Rue PLC - Annual Financial Report <Origin Href="QuoteRef">DLAR.L</Origin> - Part 2
16/06/2017 12:56
- Part 2: For the preceding part double click ID:nRSP3510Ia
Notes 2017£m 2016£m
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 CompanyProfit for the year from continuing operationsLoss for the year from discontinuing operationsTotal profit attributable to equity shareholders of the Company 47.9(8.0)39.9 47.4(31.0)16.4
Profit attributable to non-controlling interestsProfit for the year from continuing operationsProfit for the year from discontinuing operationsTotal profit attributable to non-controlling interests 1.6-1.6 1.2-1.2
41.5 17.6
*This is a non IFRS measure. See note 19 for further explanations and reconciliation to the comparable IFRS measure.
*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 equity holders Notes 2017 2016
£m £m
Earnings per shareBasic 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 shareBasicBasic EPS continuing operationsBasic EPS discontinued operationsTotal Basic Earnings per share 6 47.1p(2.3p)44.8p 48.1p(7.1p)41.0p
DilutedDiluted EPS continuing operationsDiluted EPS discontinued operationsTotal Diluted Earnings per share 6 46.5p(2.2p)44.3p 47.5p(7.0p)40.5p
GROUP STATEMENT OF COMPREHENSIVE INCOME For the period ended 25 March 2017
2017 2016
£m £m
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
£m £m
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 chargesLiabilities classified as held for sale (10.4)- (9.0)(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)
Total equity
(146.6)
(145.6)
GROUP STATEMENT OF CHANGES IN EQUITY For the period ended 25 March 2017
Attributable to equity shareholders Non-controlling Total
interests equity
Share Share Capital Hedge Cumulative Other Retained £m £m
capital premium redemption reserve translation reserve earnings
£m account reserve £m adjustment £m £m
£m £m £m
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
Notes 2017 2016
£m £m
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 impairmentLoss in disposal of discontinued operations -4.1 10.8-
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 activitiesProceeds from sale of discontinued operationsTransaction costs relating to sale of discontinued operations 2.1(2.5) --
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 complianceThese 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 standardsIFRS 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.
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
standardsIFRS 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 andauthentication 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.
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 andauthentication 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 Solutions Product Authentication and Traceability Unallocated Total of Continuing operations Discontinued operations Total
£m £m £m £m £m £m
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 Solutions Product Authentication and Traceability Unallocated Total of Continuing operations Discontinued operations Total
£m £m £m £m £m £m £m
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 £2.1m upon completion of
the transaction plus an additional £0.8m is receivable relating to a closing
working capital adjustment. In addition, deferred consideration totalling
£1.5m 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 £6m 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
£m £m
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
Notes 2017 2016
£m £m
Assets classified as held for sale
Derivative financial assets - 0.2
Trade and other receivables - 11.0
- 11.2
2017 2016
£m £m
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
£m £m
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 £2.6m comprising £0.7m in
staff compensation, and £1.9m for site exit costs.
In 2015/2016 asset impairments of £23.4m
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