Interim Statement - Six months to 28 September 2002

News Release : 26 November 2002

• Profit before tax, exceptionals and goodwill amortisation of £19.6m down, as expected, from £35.6m last year.

• Interim dividend increased by 4.8% to 4.4p per share (2001/2002 : 4.2p).

• Cash Systems' sales* were down 16.9% and operating profits* down £10.1m to £4.3m. Last year the division benefited from one-off sales of euro related equipment. In addition, delays in ordering by financial institutions in the eurozone in the first half further impacted revenues.

• As previously announced, Currency's results were affected in first half by an unusually large number of new designs, which took longer to prepare than repeat orders.

• Rationalisation of Security Products'manufacturing operations and overhead reductions going to plan. Target annualised cost savings now increased from £5m to £7m.

• Closing net debt at £21.0m (gearing 8%) after outflows of £17.0m net for acquisitions/sale of investments and £32.4m for the share buy back.

• To date, the Company has acquired for cancellation 11 million shares (5.65%) under the share buy back programme at a cost of £32.4m. Further authority is being sought from shareholders to approve an extension to De La Rue's existing authority to repurchase shares from an upper limit of 10% to 14.99%.

• Outlook for second half supported by improving prospects in Cash Systems and strong banknote order book and the initial benefits of the Security Products' manufacturing review.

* From continuing operations and before reorganisation costs and goodwill amortisation

Sir Brandon Gough, Chairman of De La Rue plc, commented on the results:

"While, as we've previously indicated, this has been a disappointing first half, a strong banknote order book in Currency, planned action to reduce costs in Security Products' manufacturing base and overheads and some improvement in Cash Systems lead the Board to expect a significantly better result in the second half. Current outlook for the full year is in line with our statement in September provided there is no further deterioration in the trading environment in our key markets."

For further information please contact:

David Finnett Group Financial Controller +44 (0)1256 605310

Mark Fearon Head of Corporate Affairs +44 (0)1256 605303

Stephen Breslin Brunswick +44 (0)20 7404 5959

26 November 2002

Group Results

Group turnover from continuing operations fell by 8.4 per cent from £294.4m to £269.6m while profit before tax* was also lower at £19.6m, down from £35.6m last year. As a result, headline earnings per share fell from 13.4p to 7.3p. Reorganisation costs in the first half were £18.7m. After outflows of £17.0m net for acquisitions/sale of investments and £32.4m on purchasing our own shares for cancellation in the first half, closing net debt was £21.0m. The underlying effective tax rate increased from 27.3 per cent to 28.4 per cent.

In our September 2002 trading statement, we indicated that Cash Systems' progress in the first half was even slower than we had previously expected, predominantly due to customers in the eurozone holding back on re-ordering following the euro changeover. In addition, Currency Systems also experienced delays in ordering decisions for several major projects by US casinos and commercial banks. As a result operating profits** in Cash Systems were down in the first half from £14.4m to £4.3m.

As previously announced, in Currency the first half was affected by an unusually large number of new designs in the order book, which took longer to prepare than normal repeat orders. This situation has now been resolved and the second half in Currency is now underpinned by a solid banknote order book.

The performance of our non-banknote Security Products business has been disappointing and in September 2002 we announced our plans to improve the effectiveness and focus of the manufacturing base, including the proposed closure of our High Wycombe facility. The costs of this action will result in an exceptional charge taken in the current half-year of £17.7m, £11.6m of which is cash. We announced in September 2002, that a combination of the proposed restructuring, the acquisition of House of Questa and associated reductions in overheads in the division should result in ongoing annual savings of approximately £5m. Since September we have identified further overhead savings in Security Products and Global Services of £2m. Most of the £7m total savings will come through in the 2003/2004 financial year.

Continued difficult trading conditions and, in particular, timing delays in Identity Systems'projects have delayed the expected recovery of Global Services. As a result the division made an operating loss** of £2.5m, which was marginally better than last year (operating loss of £2.7m). Better order books should lead to some improvement in the second half.

Dividend

An increased interim dividend of 4.4p per share, up 4.8per cent on last years' interim dividend will be paid on 17 January 2003 to shareholders on the register on 13 December 2002. As outlined at the full year 2001/2002 results in May the timing of the interim dividend payment has been be brought forward from April to January to spread payments more equally over the year. As a result, the Company will have made three dividend payments in the year ending 29 March 2003.

* Before reorganisation costs and goodwill amortisation

** From continuing operations and before reorganisation costs and goodwill amortisation

Share Buy back

In May 2002, the Board announced its intention to use, where appropriate, the existing authorities granted to it at the 2001 Annual General Meeting (AGM) to acquire for cancellation up to 10 per cent of the issued share capital in the market place. The Board renewed this authority at the AGM on 17 July 2002. To date, the Company has acquired and cancelled 11 million shares (5.65 per cent) under the share buy back programme at a cost of £32.4m. The Board is to seek shareholder approval at an Extraordinary General Meeting for an extension to De La Rue's existing authority to repurchase shares from an upper limit of 10% to 14.99% of issued capital. Further details will be given in a circular, which will be sent to shareholders shortly.

Acquisitions

During the first half, Group expenditure on acquisitions was £31.4m.

In May 2002, we acquired 85 per cent of Sequoia Voting Systems Inc. from Jefferson Smurfit Group plc. Sequoia is one of the largest providers of voting equipment and software, ballot printing and election services in the USA. The cash consideration was US$23m (£15.1m) with a future payment of up to US$12m (£8.0m) dependent on certain performance criteria, linked to sales growth, being met.

In June 2002, Cash Systems completed the acquisition of the banking automation business of Papelaco for €20.5m (£12.8m) having received the necessary regulatory approval from the Portuguese competition authorities. A future payment of up to €10.5m (£6.5m) is payable dependant on certain performance criteria being met, linked to sales and margin growth. In addition, in June 2002 the division acquired Serbatech Inc., a small Canadian based service business for CAN$ 640,000 (£260,000).

In September 2002, Security Products acquired the entire share capital of House of Questa Ltd, a UK based high security gravure printer, for a total consideration of £3.2m.

Board and Management Changes

In September 2002, we were pleased to announce the appointment of Stephen King as Group Finance Director and an executive director of the Board with effect from 31 January 2003. He joins De La Rue from Aquila Networks plc, formerly Midlands Electricity plc, where he has been Group Finance Director since 1997. Mr King, 42, has a broad range of financial and commercial expertise and we look forward to his contribution to the Board.

Jon Marx has resigned as Managing Director of Global Services and Security Products. Since joining De La Rue in February 2000 Jon has overseen the integration of Security Products and Global Services and more recently he has led the strategic review of Security Products' manufacturing base, the results of which are currently being implemented. We would like to thank Jon for his valuable contribution. Until a successor is appointed Ian Much, De La Rue's Chief Executive, has assumed responsibility for the division. The emphasis now will be on developing a greater focus on sales and marketing for Global Services as well as the completion of the reorganisation of Security Products’ manufacturing operations.

Cash Systems

* From continuing operations and before reorganisation costs and goodwill amortisation

Cash Systems’ operating profits* in the first half were £4.3m, down £10.1m on the comparable period last year. As outlined in May, last year the division benefited from one-off sales of euro related equipment, but first half revenues this year in Cash Systems were below expectations in a tough trading environment. The major factor was postponements in ordering by financial institutions in the eurozone. In addition, delays in ordering decisions for several major projects by US casinos and commercial banks also affected the Currency Systems business. Elsewhere the Service, OEM and Retail businesses were all in line with our expectations.

Cash Systems' trading has been historically second half weighted and we anticipate that this will be the case this year, provided that the trading environment does not deteriorate further in our key markets. First half operating margins have inevitably suffered as a result of the decreased revenues but these are expected to recover in the second half. As announced in May 2002, we have refocused Cash Systems predominantly on three market facing business units with effect from the start of the current financial year.

In September 2002, we concluded an agreement with Nantian Electronics to form a joint venture to target the growing Chinese market for cash handling products. Nantian is a leading systems integrator and provider of products and solutions for electronic banking in China. The initial scale of the operation will be modest and we intend to develop and manufacture products specifically designed to meet local needs.

Business stream performance

Sales in our Financial Institutions (FI) business were lower in the first half than expected due to weak ordering levels in the eurozone, following last year's changeover to the single currency. As a result, volumes of Teller Cash Recyclers and Teller Cash Dispensers were significantly lower and this impacted revenues. The German and Spanish markets, in particular, remain slow but we are now seeing a return to more normal ordering patterns in most of the regions in the eurozone. Consequently, we expect a better second half in FI. The slow start to the year has also been partly offset elsewhere in FI and in particular our US and Swiss businesses have had an excellent first half. Another key success has been a recent outsourcing contract with a large European commercial bank. Under the contract, De La Rue will provide all the hardware and software requirements to meet its needs for managing and supporting self service cash transactions. We are already working with other banks to examine further opportunities in this area.

The acquisition of Papelaco, which we completed in June, has given us an excellent foundation to enter the banking self-service market, and we completed the integration of the business within FI in the first half. We are now concentrating on launching the Papelaco range in several of the most developed European territories. Papelaco's sales in the first half have been in line with our expectations and the second half order book is encouraging.

First half sales in Currency Systems were lower despite a significant increase in worldwide sales of the 6000 banknote sorter. Unfortunately, this has been more than offset by delays in ordering decisions for several major projects by US casinos and commercial banks. An improving order book for large sorters should lead to a better second half result.

The newly formed Retail Payment Solutions business performed in line with our expectations and we are continuing to develop our approach to the market. Our initial focus has been on developing solutions for the UK and USA markets and we are currently operating trials with several key retail customers. These are progressing well and, once fully developed, these solutions will be rolled out to a wider geographic market in 2003/2004.

The Original Equipment Manufacture business, which makes dispensing mechanisms for ATMs, had a good first half with excellent sales in all regions. Our technology licensing agreement with Itautec Philco in Brazil, announced last year, has progressed well with good volumes in the first half. Under the agreement, De La Rue licenses technology to allow Itautec to manufacture De La Rue's NMD 100 cash dispenser platform.

The Customer Services business has also had a strong first half with good underlying sales growth. We continue to see excellent growth opportunities for the business and in June 2002 we acquired Serbatech Inc., a small Canadian based service business which enables us to penetrate the Canadian market further following the acquisition last year of Haliburton and White.

Security Paper and Print

* Before reorganisation costs

Currency

Operating profits in the Currency business were lower than last year. This was mainly due to a large number of new designs in the banknote order book, which have taken longer to prepare than repeat orders. This situation has now been resolved, and consequently we expect a much better second half from Currency underpinned by a strong banknote order book. The emphasis for the remainder of the year will centre on order fulfilment. Next year, we expect the banknote paper market to return to historical ordering patterns and volumes.

The closure of the Singapore banknote printing factory, announced in March 2002, is on schedule for completion by the financial year-end. The consequent reorganisation of our four remaining worldwide printing operations is nearing completion. We are already manufacturing the same volume of banknotes as were previously produced by five plants.

Security Products

Trading in the Security Products business continues to be weak. In September 2002, we announced the reorganisation of the manufacturing operations of the business to create focused factories around our main product classes and their respective specialist production processes. The review also addressed the current overcapacity in the manufacturing base and we announced our intention to cease production at our High Wycombe factory in the UK. The reorganisation, which will result in the loss of 350 jobs, is expected to be completed by the end of June 2003 and we have recently reached agreement with the union and employee groups over the closure of the site.

In September 2002, Security Products also announced the acquisition of the entire share capital of House of Questa Ltd, a UK based high security gravure printer, for a total consideration of £3.2m. We propose to consolidate the existing gravure printing operations based at High Wycombe at the House of Questa facility in Byfleet, UK. The site will become a focused facility for postage stamp production and other high security gravure web printing.

Portals Bathford, our pulp based papermaking business, performed in line with expectations, but De La Rue Tapes, which produces security threads for banknotes, had a slow first half as a result of weak demand in the banknote papermaking business. However, we expect a much better second half backed by the improving banknote paper order book in Currency.

A combination of the proposed reorganisation, the acquisition of House of Questa and associated reductions in overheads in Global Services should result in some savings in the current financial year and ongoing annual savings of £7m in Global Services and Security Products, most of which will come through in the 2003/2004 financial year.

Global Services

* From continuing operations and before reorganisation costs and goodwill amortisation

Continued difficult trading conditions and, in particular, longer decision cycles on Identity Systems' projects have delayed the expected recovery of Global Services. Revenues declined to £17.9m (2001/2002: £19.3m) and the division made an operating loss* of £2.5m, marginally better than last year's operating loss* of £2.7m. Better order books should lead to some improvement in the second half.

Business stream performance

The Identity Systems business now has a substantial base of several long-term government contracts which provide it with an ongoing revenue stream. Although margins in the first half were reduced due to a lower number of new installations and implementations, we are seeing significant interest from government customers in large-scale national identity and drivers licence projects. These projects are, however, larger and more complex and consequently decision cycles are much longer.

De La Rue Holographics' revenues were also down in the first half due to reduced demand particularly for currency components, arising from both the euro and De La Rue Currency. Other sectors have been more in line with expectations and we expect a better second half on the back of stronger demand for banknote paper.

In May 2002, we announced the acquisition of 85 per cent of the share capital of Sequoia Voting Systems Inc. In October, as expected, the Help America Vote Act 2002 was signed by President Bush, releasing over US$3.9bn of Federal funding (plus matching State funding) for the upgrading of election systems over the next four years. We believe that this will now accelerate the evolution of the market to adopting highly secure automated election systems and there is already a high level of interest in such systems. We are hopeful of a favourable outcome, but in the event that it is not possible to convert these enquiries to shipments in the final quarter of the 2002/2003 financial year, we anticipate that the business will make a loss in the current year.

Associates

Profit from associates before interest and tax fell from £4.5m in the first half of 2001/2002 to £3.6m in the current half year. The main associated company is Camelot, the UK lottery operator. Our share of Camelot's profit was expected to fall, following commencement of the second lottery licence in January 2002, reflecting the decrease in De La Rue's effective shareholding from 26.67 per cent to 20 per cent. In addition, the new lottery licence has reduced shareholders' contribution from each 100p collected from around 1.0p to just under 0.5p.

Interest

The Group's net interest income of £1.1m was £0.2m down on last year due to a decline of £1.1m in interest received from associates, partly offset by an improvement of £0.9m in the Group's own interest income. This was the result of an improved average net cash position in the first half in 2002/2003 compared with 2001/2002.

Taxation

Excluding exceptional items, the underlying effective tax rate was 28.4 per cent (2001/02 27.3 per cent). We expect that, in the absence of unforeseen events, the tax rate for the full year will be at a similar level.

Exceptional Items

There was an exceptional charge of £18.7m, comprising £17.7m for the reorganisation of the Security Products business, including the proposed closure of the High Wycombe plant. Of this amount, £11.6m is cash. The remaining £1.0m were further costs incurred in the integration of CSI with our Cash Processing business.

Cashflow

The net cash inflow from operating activities was £2.5m in the first half, compared with £18.3m in the first half of 2001/02. There were outflows of £17.0m net for acquisitions/sale of investments, £32.4m for the share buy-back programme; and dividend payments of £25.4m.

The overall net debt change was an outflow of £71.0m (2001/02 £65.9m) resulting in closing net debt of £21.0m at the end of the period compared with £29.8m net debt at the end of the first half of last year, and net funds of £50.0m at the end of the full year.

FRS 17 - Pensions Accounting

The Company previously announced its intention to adopt FRS 17 for the current year. The Accounting Standards Board has announced subsequently that full implementation of the standard has been deferred in order for a consensus on pensions accounting to be reached with the International Accounting Standards Board. The Company consequently announced in September its decision to defer full implementation, but it will continue to comply with the transitional arrangements. The net charge to P&L under FRS17 would have been similar in the first half to the actual charge on a SSAP 24 basis.

Outlook

As indicated in September 2002, a strong banknote order book in Currency, planned action to reduce costs in Security Products' manufacturing base and overheads and some improvement in Cash Systems lead the Board to expect a significantly better result in the second half. Current outlook for the full year is in line with our statement in September provided there is no further deterioration in the trading environment in our key markets.

Despite the difficult trading conditions in the first half, the Board remains confident that De La Rue's underlying business is strong. In addition, a combination of anticipated market developments and actions already taken to improve manufacturing efficiencies and reduce overheads will position the Company to make significant progress in 2003/2004.

-ends-

Notes to editors

1. De La Rue is the world's largest commercial security printer and papermaker, involved in the production of over 150 national currencies and a wide range of security documents such as travellers cheques and vouchers. Employing over 6,500 people across 31 countries, the company is also a leading provider of cash handling equipment and software solutions to banks and retailers worldwide, helping them to reduce the cost of handling cash. De La Rue is also pioneering new technologies from tailored solutions to protect the world's brands through to government identity solutions for national identification, drivers' licence, passport issuing schemes and election systems.

2. An interview with Ian Much in video/audio and text will be available from 07:00 on 26 November 2002 on: http://www.delarue.com and on http://www.cantos.com