Preliminary Results28 May 2003

Ian MuchGroup Chief Executive

Stephen KingGroup Finance Director

Trading Summary

Disappointing Results

Operating profits from continuing operations of £37.5m down from £77.6m in 2001/02

Profit before tax £48.1m*, in line with our February trading statement, but down from £90.6m** last year

Poor performance reflects: sharply worsening economic markets in Europe disruption to reordering cycles following significant euro

changeover benefit in 2001/02 Increasing worldwide political uncertainty

* Before exceptional charge of £49.2m and goodwill amortisation of £3.6m 2002/03 ** Before exceptional gain of £13.1m and goodwill amortisation of £2.8m 2001/02

Trading Summary

However, balance sheet remains strong

£72.7m of free cashflow* generated (2001/02 £81.6m*)

Returned a total of £71.3m to shareholders through a combination of three dividends and the share buy back programme

Closing net cash position £8.2m, ahead of recent expectations

Final dividend maintained at 9.2p (full year dividend 13.6p up 1.5% on last year)

* Before dividends from associates, exceptional cashflows, capital expenditure, acquisitions, dividend and share buy back costs

Taking Action

– closure of Singapore site - completed– annualised cost savings £3.0m, of which

£1m benefit achieved in 2002/03

– reduction in European cost base – annualised cost savings circa £7.0m

– manufacturing review; closure of High Wycombe site – on track for completion June 2003 (loss of 350 staff)

– divisional costs reduced– annualised cost savings circa £7.0m of

which £2m benefit achieved in 2002/03– strategic review of activities

Currency

Cash Systems

Global Services(inc Security Products)

Financial Summary

2002/03 2001/02 £m £m

SalesContinuing operations 536.6 641.7 Acquisitions 46.1 - Discontinued operations - 9.5

582.7 651.2

Operating profit*Continuing operations 37.5 77.6 Acquisitions 0.5 - Discontinued operations - (1.4)

38.0 76.2

Profit before tax, exceptional items and goodwill amortisation 48.1 90.6

Earnings per share* 18.9 34.4Dividend per share 13.6p 13.4p

Net cash 8.2 50.0

* Before exceptional charge of £49.2m (2001/02 - £13.1m gain), and goodwill amortisation of £3.6m (2001/02 £2.8m)

Security Paper and Print

Sales from continuing operations down £15.8m (or 6.9%) to £211.0m and operating profits* down £10.6m to £30.5m

Currency business in line with expectations at beginning of year – good banknote performance offsetting weaker paper markets Closing order book slightly ahead of previous year

Majority of underlying operating profit reduction from Security Products’ activities - volumes reduction; reorganisation of manufacturing base including closure of High Wycombe

2002/03 2001/02

£m £m

Sales Continuing operations 211.0 226.8

Acquisitions 2.8 - 213.8 226.8

Operating profit Continuing operations 30.5* 41.1

Acquisitions (0.1) -

30.4 41.1

Margins (%) 14.2% 18.1%

*Before exceptional charge of £19.9m and goodwill amortisation credit of £0.2m

Cash Systems

2002/03 2001/02

£m £m

Sales Continuing operations 292.8 370.5

Acquisitions 18.1 - 310.9 370.5

Operating profit Continuing operations 8.4* 36.0

Acquisitions 3.2 -

11.6 36.0

Margins (%) 3.7% 9.7%

*Before exceptional items of £10.5m and goodwill amortisation of £3.3m

Sales from continuing operations down 21% and operating profits down £27.6m to £8.4m

Good contribution from Papelaco acquisition, increased total operating profit to £11.6m

Profit reduction due to sharply worsening economic markets in Europe disruption to reordering cycles following on from significant euro changeover benefit in 2001/02 increasing worldwide political uncertainty

Service, OEM, Retail businesses in line with expectations at beginning of year

Global Services

Poor year – Identity and Holographics suffering reduced volumes and delayed orders Sales from continuing operations down £13.4m to £34.7m and an operating loss of £1.4m reported

Acquisition of Sequoia completed partial year, with losses in post acquisition period following good profitability in previous 6 months Exeter, USA ballot printing facility to close in 2003/2004, as anticipated in acquisition plan - 60 redundancies – annualised cost saving circa £1m

2002/03 2001/02

£m £m

Sales Continuing operations 34.7 48.1

Acquisitions 25.2 - 59.9 48.1

Operating (loss)/ profit Continuing operations (1.4)* 0.5

Acquisitions (2.6) -

(4.0) 0.5

*Before exceptional charge of £2.8m and goodwill amortisation of £0.5m

Associates

2002/03 2001/02 £m £m

Profit before interest and tax 9.2 11.8

Main associate is Camelot, UK national lottery operator, following disposal of 50% shareholding in De La Rue Giori

Profits down in first half, as expected New licence conditions Shareholding decreased to 20% from 26.67% Contribution per 100p down from 1.0p to 0.5p

Earnings per share

2002/03 2001/02 p p

As calculated under FRS14 (4.3) 40.7Profit on disposal of discontinued operations - (0.7) Profit on sale of investments - (12.0) Loss in impairment of investment 0.7 -(Loss)/Profit on disposal of fixed assets 0.2 (0.1)Amortisation of goodwill - continuing 1.7 1.5

- exceptional (CSI) 8.7 - _____________________

Headline earnings per shareas defined by the IIMR 7.0 29.4

Reorganisation costs 11.9 5.0

Headline earnings per share before reorganisation costs 18.9 34.4

2002/03 2001/02 £m £m

Net free cashflow 72.7 81.6

Exceptional cashflows (16.7) (3.9) Capital expenditure (21.3) (22.0)

Equity dividends paid (33.3) (24.1)Share buy back / own shares (38.0) (14.9) Acquisitions and disposals (33.4) (50.8)Sale of investments 15.9 13.3Associate dividends received 9.0 28.3

Share capital issued 1.1 6.4Exchange 2.2 -

Cash (outflow)/inflow (41.8) 13.9

Net cash 8.2 50.0

Net interest: Group 0.5 (0.4) Associates 0.4 3.0

Cashflow / Net Debt

Exceptional Items

Cash Non Total Cash

£m £m £m

Reorganisation Security Products (inc. Global Services) (12.7) (5.9) (18.6)

Cash Systems (8.5) (2.0) (10.5)Sequoia (2.8) - (2.8)

(24.0) (7.9) (31.9)

CSI goodwill write-off - (16.0) (16.0)

Loss on impairment of investment in JV - (1.3) (1.3) _________________________

Exceptional pre-tax costs (24.0) (25.2) (49.2)

2002/03 11.32003/04 12.7

Pensions

Full implementation of FRS17 deferred (announced Sept 2002) Net charge to P&L under SSAP 24 for UK share was £1.9m (FRS17: £2.4m)

Amortising surplus following last triennial valuation in April 2002 2002/2003 impact was credit to P&L of £6.1m

Triennial review due later this year - deficit expected - amortisation credit eliminated

Underlying regular pension cost under SSAP 24 of £8.0m may also increase in light of depressed levels of equity markets

Adverse impact on 2003/04 likely to be £7m-£8m. Need to await outcome of triennial review due September 2003

Source: DATASTREAM

Foreign Exchange

A M J J A S O N D J F M A M J J A S O N D J F M8.00

8.50

9.00

9.50

10.00

10.50

11.00

11.50

2001 2002 2003

LOW 8.35 07/0/3/03

HIGH11.03 11/06/01

Swedish Krona to US Dollar

Exc

ha

nge

Rat

e (W

MR

)

Ian MuchGroup Chief Executive

Situation analysis

Several key markets affected by worsening macro economic conditions

Increased concerns about global security added to market weakness

But….

Actions in place to improve cost effectiveness and efficiency

Lower cost base will ensure De La Rue well placed whenever markets improve

Strong balance sheet backed by underlying cash generation

Cash Systems

Current issues

Division holding market share

Cost base (particularly in Eurozone) too high for current market conditions

Financial Institutions not been able to grow new markets fast enough to offset downturn in Spain and Germany

Currency Systems significantly under-performing - both market and structural issues

Cash Systems

Actions Cost reduction

Germany Spain Currency Systems Manufacturing

Push development of newer FI markets USA Central/ Southern Europe China Russia Latin America

Cash Systems

Financial Institutions – revenue trend

GBPm

1999/2000 2000/2001 2001/2002 2002/2003

France, UK & USA Germany & Spain

Cash Systems

2003/2004 focus Delivery of cost reduction programme on schedule

Exploit potential of Papelaco acquisition Opportunities to extend self service offering in most developed markets

Retail opportunities Successful trials in USA and UK with major retailers – business still in start up mode

Service Acquired three small service operations in 2002/2003

Currency

Banknote business continues to perform strongly Market increasingly looking to sophisticated anti-counterfeit solutions to counter increasing threats from technology

Rigorous approach to cost base, e.g. Singapore

Acquired Bank of England banknote printing operations in April 2003

Paper business outlook improving Expect return to historical ordering patterns in 2003/2004 Knock on effect for Currency components businesses

Global Services (including Security Products)

Management Peter Cosgrove appointed in March 2003 to lead Security Products and Global Services

Reorganisation of manufacturing operations on track

Capacity reduced through closure of High Wycombe On track for site closure in June 2003 - 225 redundancies to date, balance on closure

Cost savings in Security Products and Global Services c. £7m in 2003/2004

Completion by September 2003

Global Services (including Security Products)

Action taken to reduce cost base

Strategic Review underway Examining long term attractiveness of constituent businesses Update in November 2003

Development of Sequoia business in line with expectations, on acquisition

Summary

Focus on core technologies and skills

Actions underway to reduce cost base

Strengthened management team

Strong balance sheet

Outlook

Underlying tough market conditions continue in 2003/2004

Priority to complete cost cutting exercises in Cash Systems and Global Services to underpin profitability

Currency business solid Papermaking business returning to production levels closer to capacity Banknote printing overspill order levels returning to long term average levels

Adverse impact from foreign exchange and pensions

Underlying performance therefore expected to show some improvement as cost reduction exercises are delivered