De La Rue PLC Preliminary Statement to 28 March 2009

News Release: 20 May 2009

HIGHLIGHTS

(Continuing Group including Cash Processing Solutions but excluding the disposed businesses of Cash Systems)

• Operating profit margin up 2.2 percentage points to 19.2 per cent driven by productivity, volume and foreign exchange benefits*
• PBT up 18.5 per cent to £105m*
• Currency operating profit up 25 per cent to £82.8m
• Central cost reduction programme largely complete
• Strong underlying operating cash flow from continuing operations of £88.9m**
• Extension of Bank of England contract for five years
• Return to shareholders of £460m in November 2008
• Final dividend increase to 27.4p, making a total of 41.1p for the year, up 92 per cent
• Good order book coverage in all businesses for 2009/2010

KEY FINANCIALS

*Excluding exceptional items
**Before special pension contribution of £15m and exceptional cash items of £4.5m

Nicholas Brookes, Chairman of De La Rue plc, commented:

"I am pleased to report another excellent year of trading across all our activities. These results - and the continuing strength of the order book in each of our businesses - highlight the quality and resilience of De La Rue in terms of long-term growth, profitability and underlying cash generation.

"De La Rue is now focused on meeting the needs of our customers in the high value areas of currency, security, identity and authentication following the sale of Cash Systems.

"On behalf of my fellow Directors, I welcome James Hussey and Simon Webb to the Board. Their energy and passion for the business will be key in ensuring the continuing success of our strategy for the newly-focused Group.

"As announced in March, De La Rue entered the year with good order book coverage across its businesses which is expected to continue despite the uncertain global economic environment. As a result, the Board has confidence in the outlook for the current year."

SUMMARY OF GROUP RESULTS

De La Rue reports another excellent performance for the year ended 28 March 2009. Revenues for the continuing Group grew by 8 per cent to £502.4m (2007/2008: £467.0m) and operating profit rose by 22 per cent to £96.5m (2007/2008: £79.2m). Operating profit margins (before exceptional items) for the continuing Group were 2.2 percentage points higher at 19.2 per cent (2007/2008: 17.0 per cent), reflecting the benefits of productivity improvements, volume, customer mix and foreign exchange. Overall for the continuing Group, movement in the value of sterling against the euro and US Dollar contributed £25m to revenue and £6m to operating profit.

Profit before tax and exceptional items increased by 18.5 per cent to £105.0m (2007/2008: £88.6m). Headline earnings per share increased by 37 per cent to 57.0p (2007/2008: 41.7p) reflecting the improved trading performance and the benefits of the share consolidation carried out in conjunction with the special dividend payment. Basic earnings per share from continuing operations were 50.9p compared with 43.4p in 2007/2008, representing an increase of 17 per cent.

Cash generated from continuing operations was £69.4m (2007/2008: £86.7m). The cash movement in the year reflected positive working capital management partially offset by the increased trading activity and, as expected, a reduction in advance payments of £23m, from £63m at 29 March 2008 to £40m at 28 March 2009 as well as an additional one-off contribution of £15m to the Group pension fund as a result of the disposal of Cash Systems. Following the return to shareholders of £460m in November 2008, the Group ended the year with net debt of £33.1m (2007/2008 net cash: £106.7m).

STRATEGY

The Group's strategy is to build on its position as the world-leading producer of banknotes and banknote paper to become the premier supplier to central banks, governments and international corporations of security features and authentication systems used in payment and identity transactions. These are the markets for Currency (including Cash Processing Solutions), Security Products and Identity Systems.

The strategy aims to deliver value by extending existing customer relationships, continuing to drive productivity improvement and developing intellectual property to capitalise on market opportunities. The Board believes that through this strategy, De La Rue will continue to enhance shareholder value. The Board also anticipates that the growth in the demand for security products and identity solutions will provide opportunities for De La Rue to develop its brand protection and identity products activities.

BANK OF ENGLAND

Following completion of an eight month process, De La Rue announces that the Bank of England has extended the minimum term of its banknote supply agreement by a period of five years.

RESULTS FROM CONTINUING BUSINESSES

*excluding impact of exchange

In Currency, banknote volumes remained consistent (up 3 per cent on 2007/2008), with a number of new banknote families being launched and a particularly strong sales mix. Overspill represented only 11 per cent (2007/2008: 29 per cent). Productivity efficiencies increased paper output (up 3 per cent on 2007/2008) with the business continuing to benefit from strong capacity utilisation.

Operating profit margins rose reflecting increasing volumes, efficiencies from increased productivity across the business, customer mix and the benefit of the current Sterling exchange rates for the US Dollar and the euro.

*excluding impact of exchange

The strategy of integrating the offerings of CPS for central banks with those of Currency is progressing well. The business has refreshed its large sorter range and is benefiting from demand for high-speed, low-cost cash handling solutions.

*excluding impact of exchange and De La Rue Smurfit disposal

The Security Products business delivered a good performance, with a strong profit improvement underpinned by continuing productivity improvements. Underlying revenue was marginally down year on year with a decline in brand licensing revenues due to the current economic climate, partially offset by growth in high-margin internal components sales, particularly from Security Paper and Holographics.

*excluding impact of exchange

In IDS, the business successfully pursued its strategy of building revenues, both in standard and e-solutions, and finished the year with an increased order backlog. Operating profit margins reflected the absence of higher margin one-off projects and, as expected the investment in the Malta ePassport factory which came on line at the start of the year.

ASSOCIATES

The main associated company is Camelot, the UK lottery operator, which in the current year transitioned to a new 10-year licence agreement. Profit from associates after tax was £8.9m (2007/2008: £7.1m) and dividends received from associates was £10.3m (2007/08: £7.7m). As previously announced, De La Rue is reviewing the options in relation to its shareholding in Camelot and will only pursue any outcomes of this review that fully reflect the value of its investment in Camelot.

RETURNS TO SHAREHOLDERS

Dividend

The Board is recommending a final dividend of 27.4p per share (2007/2008: 14.87p per share), subject to shareholders' approval. This will be paid on 31 July 2009 to shareholders on the register on 10 July 2009. Together with the increased interim dividend paid in January 2009, this will give a total dividend for the year of 41.1p (2007/2008: 21.4p per share).

Overall, this equates to an uplift of 92 per cent in the level of ordinary dividend and reflects the policy announced in May 2008.

Share Consolidation

Following the return of £460m to shareholders in November 2008, the issued share capital was reduced to 96,650,482 from 150,774,752 shares.

INTEREST

The Group's net interest income was £1.4m (2007/2008: £2.0m) which reflected the net benefit from the underlying cash generation of the Group. In addition, the IAS19 related finance item, arising from the difference between the interest on liabilities and the expected return on assets, was a charge of £1.8m compared with a credit of £0.3m the previous year.

TAXATION

Tax for the year on continuing operations was £28.5m, including an exceptional tax credit of £0.9m (2007/2008: £24.7m). The effective tax rate on continuing operations pre exceptional items was 28 per cent, in line with the last full year's charge.

EXCEPTIONAL ITEMS AND DISCONTINUED OPERATIONS

In accordance with the basis of preparation outlined in note 1, the following exceptional items are included within the income statement.

During the year, De La Rue announced its intention to reduce central costs by approximately 50 per cent following the disposal of Cash Systems. This programme is largely complete.

Central reorganisation costs relating to this programme principally cover redundancy, separation costs and site rationalisation charges. Tax credits relating to exceptional items were £0.9m, with a credit of £1.9m in relation to the central reorganisation being partly offset by a £1.0m charge in respect of the phasing out of Industrial Buildings Allowances, included in the Finance Act 2008.

In the prior year, profit from disposal of investments comprises a £1.7m gain from the sale of the Group's Valora investment and £0.9m gain on the sale of its 50 per cent stake in De La Rue Smurfit.

The Group completed the sale of its Cash Systems activities on 1 September 2008. Profit from discontinued operations (after tax) was £296.5m, which included £12.6m (after tax) from the trading profit of the discontinued activities for the five months to 1 September 2008. The profit on the disposal represents the proceeds of Cash Systems on a cash free, debt free basis, less net assets disposed and related transaction costs.

CASH FLOW AND BORROWINGS

Underlying operating cash flow from continuing operations was £88.9m (2007/2008: £86.7m), before the £15m one-off additional pension contribution and the cash flow impact of exceptional items of £4.5m.

Increased working capital in the year reflected both the increased trading activity and, as expected, a reduction in advance payments of £23m from £63m at 29 March 2008 to £40m at 28 March 2009. Asset working capital ratios remained consistent with the prior year.

Capital expenditure of £29.3m (2007/2008: £19.2m) was higher than depreciation, reflecting the timing of the longer term investment programme directed at enhancing the future capability of the business.

Following the return to shareholders of £460m in November 2008, the Group ended the year with net debt of £33.1m (2007/2008 net cash: £106.7m).

During the year, the Group negotiated new borrowing facilities of £175m, comprising a £50.0m three year term loan drawn on 14 November 2008, and a £125.0m revolving facility. Key covenants on these facilities require that the interest cover be greater than four times, and the net debt to EBITDA ratio be less than three times.

UK PENSION SCHEME

Funding

Special funding payments of £27m were made to the Group pension fund, comprising a regular contribution of £12m (payable per annum for five years to 2011) and a further additional one-off contribution of £15m following the disposal of Cash Systems. The results of the Group's next formal triennial funding valuation are due in early 2010.

IAS 19 Accounting

The valuation of the UK Pension Scheme under IAS 19 principles indicates a scheme deficit pre-tax at 28 March 2009 of £67.5m (March 2008: £20.7m). This significant increase in deficit during the year has mainly arisen due to the volatile markets partly offset by the benefit of the Group's special contributions of £27.0m. The charge to operating profits in respect of the UK Pension Scheme for 2008/2009 was £5.8m (2007/2008: £10.0m). In addition, under IAS 19 there was a finance charge of £1.8m arising from the difference between the expected return on assets and the interest on liabilities.

OUTLOOK

As announced in March, De La Rue entered the year with good order book coverage across its businesses which is expected to continue despite the uncertain global economic environment. As a result, the Board has confidence in the outlook for the current year.

-ends-

Notes to Editors

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