Interim Results 2001/2002 27 November 2001 PaymentBrand Identity Cash to Secure Transactions.

Interim Results 2001/2002Interim Results 2001/200227 November 200127 November 2001

Payment BrandIdentity

““Cash to Secure Transactions”Cash to Secure Transactions”

Ian MuchIan MuchChief ExecutiveChief Executive

Payment BrandIdentity

Highlights

* before exceptional items, reorganisation costs and goodwill amortisation charged to operating profits

Earnings up• Operating profits* up 7% at £29.8m• Profit before tax* up 13% at £35.6m• Headline EPS up 7% at 13.4p• Dividend increased by 5%

Excellent trading performance in Cash Systems Currency profits down as predicted (India effect) Action taken to reorganise Global Services Positive second half outlook underpinned by good order book visibility

in Cash Systems and Currency Strong balance sheet with scope for acquisitions

Paul HollingworthPaul HollingworthGroup Finance DirectorGroup Finance Director

Payment BrandIdentity

Financial Highlights

* Before exceptional items, re-organisation costs and goodwill amortisation charged to operating profits

1st half 2001/02

£m

1st half 2000/01

£m

Change

£m Sales Continuing operations Acquisitions Discontinued Operating profit* Continuing operations Acquisitions Discontinued Profit before tax* Headline earnings per share Dividend per share Net debt

273.5 20.9 9.5 303.9

30.6

0.4 (1.2) 29.8

35.6

13.4p

4.2p

(29.8)

244.7

2.9 247.6

28.5

(0.7) 27.8

31.5

12.5p

4.0p

(9.7)

28.8 20.9 6.6 56.3

2.1 0.4 (0.5) 2.0

4.1

+0.9p

+0.2p

(20.1)

£337.6294.4

Cash Systems 1st half

2001/02 £m

1st half 2000/01

£m

Change

£m Sales Continuing Acquisitions Operating profit Continuing Acquisitions Margins Continuing

147.8 20.9

168.7

14.0 0.4

14.4

9.5%

120.2

120.2

3.8

3.8

3.2%

27.6 20.9

48.5

10.2 0.4

10.6

+6.3pts

Sales up 23% and operating profits rise £10.2m to £14.0m (excluding acquisitions) First half sales uplift – euro and Twinsafe II benefit On schedule to reach 10% margin target for year – first half 9.5% (excluding acquisitions) Service organisation continues to grow and accounts for 30% of sales in the first half Good order books maintained into second half (particularly Branch Cash Solutions) but revenue growth will

not be at first half levels Currency Systems sales disappointing but should be some second half improvement

Security Paper & Print

1st half 2001/02

£m

1st half 2000/01

£m

Change

£m Sales Operating profit Margins (%)

108.0

19.3

17.9

103.9

23.8

22.9

4.1

(4.5)

-5.0pts

pts

Banknote paper profits and margins down, as predicted, because of India paper order wind down and adverse mix

Banknote business continues to flourish with good order coverage and good sales visibility in second half

Euro order fulfilment on track; second large overspill order secured in first half Non-banknote business profits and margins down mainly due to Tapes business

relocation to larger facility and lower tape sales to Currency which adversely impacted profits

Global Services*

1st half 2001/02

£m

1st half 2000/01

£m

Change

£m Sales Operating (loss)/profit

19.3

(2.7)

23.5

0.9

(4.2)

(3.6)

Sales disappointing - down 18% to £19.3m and division incurred a loss Transaction Services disposal for £6m (£3m in Alphyra shares) De La Rue now retaining a higher proportion of the Microsoft labels Holographics sales and margins under pressure but euro orders now

secured Identity Systems timing delays on several contracts adversely affected

profits but contracts now secured for second half Outlook more positive for second half and action has been taken

* Excludes Transaction Services

Associates

1st half 2001/02

£m

1st half 2000/01

£m

Change

£m Camelot Other (inc De La Rue Giori)

4.5

-

4.5

4.8

(2.4)

2.4

(0.3)

2.4

2.1

Rise in profits before interest and tax due to absence of De La Rue Giori losses

Camelot profits down in first half as a result of lower sales Second licence commences 27 January 2002 when De La Rue’s shareholding

decreases from 26.67% to 20% Dividend of £15.4m received from Camelot post half year

Earnings per Share

1st half 2001/02

(p)

1st half 2000/1

(p)

Change

(p)

As calculated under FRS 14

Loss on disposal of continuing operations

Profit on sale of investments

Loss on disposal of fixed assets

Amortisation of goodwill

Headline earnings per share as defined by the IIMR

Reorganisation costs

Headline earnings per share before items shown above

16.8

-

(5.0)

-

1.0

12.8

0.6

13.4

10.1

1.6

-

0.1

0.5

12.3

0.2

12.5

6.7

0.5

0.9

FRS 19 : Restatement of Taxation

Recognised on balance sheet as deferred tax asset of £35m

The asset of £35m mainly reflects the recognition of taxable losses and other timing differences in Germany and USA

As a result of no longer recognising the benefit of taxable losses through the tax charge, last year’s effective tax rate of 23% has been increased to 27%

The increase in this year’s effective tax rate to 28% from 27% is mainly because of the increase in profits in higher tax rate jurisdictions

Cashflow / Borrowings / Interest 1st half

2001/02 £m

1st half 2000/01

£m

Change

£m

Cash inflow before items shown below Tax (paid)/received Equity dividends paid Associated dividends received Own shares purchased Acquisitions and disposals Giori disposal less arbitration costs

6.3 (9.6)

(24.0) 8.7

(10.2) (40.9)*

11.9

7.6 1.9

(24.4) 6.2 -

(3.5) -

(1.3)

Cash outflow

(57.8)

(12.2)

(45.6)

Net Debt

(29.8)

(9.7)

(20.1)

Net interest: Group Associates

- 1.3

(0.5) 1.8

0.5 (0.5)

1.3

1.3

-

* Excludes £12.7m net debt acquired

Outlook

Since half year overall trading ahead of last year and in line with our expectations

Good order book going into second half (Cash Systems and Currency)

On track to achieve 10% margin target in Cash Systems

Global Services restructuring will lead to better second half

Second half concentration on:

Driving through synergies and implementation plan for CSI

Improvement of operational performance of Global Services

Delivery of order book

Ian MuchIan MuchChief ExecutiveChief Executive

Payment BrandIdentity

Cash Systems

Strong first half performance even allowing for euro and ongoing Twinsafe™ benefit

Ascom Banking Automation acquisition very successful Cash Systems now represents over 50% of Group

revenues Underlying growth opportunities excluding euro through;

Geographical expansion and new market opportunities eg retail

Expanding and improving product range (organically and by acquisition)

Service Three acquisitions in first half (CSI, ATS, Ascom Belgium

& Switzerland) underline this strategy

CSI Acquisition - Rationale

Industry rationalisation needed CSI and Cash Processing operations complementary:

• CSI strong in commercial sorters, high speed, new note sorting and multi-denomination

• De La Rue strong in desktop sorting and counting technology – central bank relationships

• Some overlap geographically but gives us stronger presence in first world (De La Rue strong in developing world)

Synergies will drive up profitability through:• Lower and tighter controlled cost base• Combined product range, distribution networks and

manufacturing strategy• Technology migration between product ‘families’

CSI Acquisition - Progress

Progress to date:

• Combined business renamed Currency Systems

• Integrated sales and marketing operations

• Finalised product integration and development

• Now evaluating impact on manufacturing strategy

Currency

Overall profits down due to adverse mix in papermaking business (India)

Latest view is India will not require further deliveries before second half of 2003

Banknote business strong with good coverage for the second half

Good visibility of earnings for second half

Use of Cash in G-10 Countries

UK is the most cashless economy in the G-10

0

2

4

6

8

10

12C

ash

% o

f G

DP

1995 1996 1997 1998 1999

Year

UK USA Japan Germany

Source: Bank for International SettlementsSource: Bank for International Settlements

Finland – A Model of Cashlessness?

Even in the most cashless of societies, the use of cash is stable.

0

0.5

1

1.5

2

2.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Year

Cas

h %

of

GD

P

Source: Bank of FinlandSource: Bank of Finland

Non-cash threat summary

UK is relatively cashless but UK public want cash (NOP/ De La Rue poll)

66% prefer cash

77% don’t want physical cash replaced with e-cash

First signs of decline should be in the advanced economies but demand for cash remains strong

Currency’s markets are generally not in advanced economies

Security Products

Business merged with Global Services but results reported separately due to budgets etc this year

Factory move at DLR Tapes caused some first half disruption

Other Security Products operations in line with expectations

Going into second half with better order book but trading continues to be challenging

Global Services Restructuring

Restructuring announced in May now complete

Action taken:• Made management changes – Jon Marx, MD• Business Directors recruited for three business

streams of Brand, Identity Systems, Finance• Business streams offer full range of De La Rue

capabilities sharing key functional areas• Holographics and Tapes business more closely

aligned and under new management• Non-core Transaction Services business sold

Growth opportunities a priority going forward

Global Services - Organisational Structure

Managing DirectorJon Marx

BrandBusinessDirector

Colin Frey*

Financial &Government

BusinessDirector

Keith Brown

MarketingServicesDirector

Pippa Wells

HRDirector

Kate Price*

MD, Tapes,Holographics & Interclear

Julie Furber

R&DDirectorBryan

Christophersen

ManufacturingDirector

Gary Carter*

MD, PortalsBathford

Simon Jarvis

FinanceDirectorPatrick

Spencer

CustomerServicesDirector

Tracey Graham*

IdentityBusinessDirector

Patrick Dexyl

* External Appointments

Global Services

Identity Opportunities as Governments upgrade security of

national identity and passport schemes - post Sept 11 Progress now being made since half year

• Mexico,Chile, Malta Brand

Serving consumer facing industry sectors so likely to be affected by economic downturn

Clearly some significant opportunities eg China

Finance Ongoing benefit for tapes and holograms from euro Continued focus on operational efficiencies

Summary

Group is very profitable and cash generative

Growth opportunities focused around;

Short term (and medium term) opportunities in Cash Systems and;

Still committed to Global Services but growth more medium term

Acquisitions - but strict strategic and financial criteria

Confident about future prospects – through financial strength, leading market positions and strong order books

Interim Results 2001/2002Interim Results 2001/200227 November 200127 November 2001

Payment BrandIdentity

““Cash to Secure Transactions”Cash to Secure Transactions”