preliminary results 2000/2001 23 may 2001 building for growth paymentbrand protection identity
TRANSCRIPT
Preliminary Results 2000/200123 May 2001
“Building for Growth”
Payment Brand ProtectionIdentity
Ian MuchChief Executive
Payment Brand ProtectionIdentity
Main Achievements
• Excellent all round performance reflecting Group’s profitability and leading market positions
• Further improvement in Currency margins
• Recovery in Cash Systems’ margins with business exiting year at 10% margins as predicted
• Bolt on acquisitions in Cash Systems to expand product range and geographical reach [e.g., ATS, ASCOM]
• Progress in Global Services with emphasis on brand and identity markets
Main Achievements continued …
• Good cash generation for the second consecutive financial year
• Re-orientation of the Group in core areas of payment, identity and brand protection
BUILDING FOR GROWTH
Paul HollingworthGroup Finance Director
Payment Brand ProtectionIdentity
Financial Highlights
* Before exceptional items/re-organisation costs
2000/01 £m
1999/00 £m
Change £m
Sales Continuing operations Discontinued operations Operating profit* Continuing operations Discontinued operations Profit before tax and exceptional items Earnings per share* Dividend per share Net cash/(debt)
524.8
-
524.8
66.4 -
66.4
77.8
32.4p
12.6p
36.1
518.9 98.2
617.1
55.2 5.1
60.3
75.0
26.5p
12.0p
2.1
5.9
11.2
2.8
+5.9p
+0.6p
34.0 £337.6
Cash Systems
• Strong return to profitability with margins up 4.9% on comparable period last year• Operating margins target of 10% exit rate hit for final quarter• 1750 orders received for Twinsafe™ II TCR product• Sales down (before acquisitions) due to slowdown in sales of large sorters and resignation
of customer account in OEM business due to pricing• Emphasis now moved to growth with several bolt on acquisitions announced during the
year and good order book
2000/01 £m
1999/00 £m
Change £m
Sales Continuing Acquisitions Operating profit Continuing Acquisitions Margins Continuing
239.0
23.4 262.4
15.8 1.0
16.8
6.6%
257.3
- 257.3
4.4
- 4.4
1.7%
5.1
12.4
4.9 pts
Security Paper & Print
• Operating profits and margins up despite tight market conditions• Banknotes had quieter second half but mix good• Paper volumes down by 7.4% which has impacted profits• India contract pause will affect paper volumes in 2001/02 as predicted, but strong banknote order book
should partly offset• Non-banknote Security Products business benefiting from focusing on “product and solutions” and
upgrading facilities• Cash generation excellent with operating cash flow in excess of operating profit
2000/01 £m
1999/00 £m
Change £m
Sales Operating profit Margins (%)
212.8
50.4
23.7
214.0
45.7
21.4
(1.2)
4.7
+2.3 pts
pts
Global Services
• Excluding Microsoft, sales up 14.1% (change in Microsoft contract depressed sales not profits)• Decrease in profits primarily a result of planned revenue investment which was announced in
the previous year• New contract won with Microsoft for X-box will partly offset loss of Windows™ contract• Identity Systems had good year with strong sales• Focus in future on opportunities in brand protection and identity where there is greatest scope
for significant growth
2000/01 £m
1999/00 £m
Change £m
Sales Operating (loss)\profit
55.3
(0.8)
50.5
5.1
4.8
(5.9)
Associates
• Camelot profits hold up (pre exceptionals) as we approach end of first licence• Camelot awarded second seven year licence which starts end January 2002 but profitability will be
half of first licence period• Second half contribution from De La Rue Giori reflects small improvement on first half• Expect small upturn in profits next year from De La Rue Giori• [Conditional sale of Giori announced on x May along with settlement of arbitration]
2000/01 £m
1999/00 £m
Change £m
Camelot Other (inc De La Rue Giori)
10.4
(2.2)
8.2
10.8
3.9
14.7
(0.4)
(6.1)
(6.5)
Earnings per Share
2000/01 (p)
1999/00 (p)
Change (p)
As calculated under FRS 14 Loss on disposal of continuing operations Profit on the disposal of discontinued operations (Loss)/profit on disposal of fixed assets and assets held for resale Profit on sale of investments Scheme of arrangement costs Amortisation of goodwill Headline earnings per share as defined by the IIMR Reorganisation and arbitration costs Share of associated company’s exceptional items Exceptional release of tax provision Headline earnings per share before items shown above
34.6 1.6 -
0.1 (0.1)
- 1.1
37.3 0.4 1.3
(6.6)
32.4
39.9 -
(24.3)
(0.1) (0.9) 0.5 0.7
15.8 10.7
- -
26.5
(5.3)
21.5
5.9
Cashflow / Borrowings / Interest
2000/01 £m
1999/00 £m
Change £m
Cash inflow/(outflow) before items shown below Equity dividends paid Associated dividends received Acquisitions and disposals
40.8
(24.1) 21.2
(4.5)
44.7
(27.0) 20.6 185.9
(3.9)
Cash inflow
33.4
224.2
(190.8)
Net Cash/(Debt)
36.1
2.1
34.0 Net Interest: Group Associates
(1.2) 4.4
(3.0) 3.0
1.8 1.4
3.2
0.0
3.2
Outlook
• Banknote order book good (should partly offset India)
• More upside on Cash Systems next year
• Benefits of synergies within Global Services from combining with Security Products under common management
• Focus on core businesses
Ian MuchChief Executive
Payment Brand ProtectionIdentity
Strategic Direction (summary)• Maintain and nurture our high margin Security Paper and Print operations
whilst recognising top line growth will be limited
• Emphasis in Cash Systems to offer customer a total service giving them flexibility, choice and value in order to reduce cash handling costs
• Invest in brand protection and identity opportunities within our Global Services division which have the potential to achieve substantial sales and earnings growth
• Leveraging core competencies for benefit of Group
• Use the strong balance sheet, where appropriate, to make acquisitions to complement organic growth
GROUP FOCUSSED AROUND SECURE TRANSACTIONS
Acquisitions Strategy
• Focus on Payment, Identity and Brand Protection
• Geographic expansion
• Infill service provision in a number of countries
• Extend product / service provision
ONLY IF WE CAN ADD SHAREHOLDER VALUE
Strategic Focus
SECURITYSECURITYThe The securesecure exchange of exchange of moneymoney between between
two partiestwo parties for for goods & servicesgoods & services
INTEGRITYINTEGRITYConfidence that Confidence that goods or servicesgoods or services are are
original, genuineoriginal, genuine and from a valid and from a valid source source
TRUSTTRUSTAssuring Assuring the physical andthe physical and
digital digital identityidentity of individuals of individualsIDENTITYIDENTITY
PAYMENTPAYMENT
BRAND BRAND PROTECTIONPROTECTION
Securing the exchange of money for authentic goods and Securing the exchange of money for authentic goods and services between trusted partiesservices between trusted parties
FUTURE DEVELOPMENT AND DIRECTION OF GROUP
David YoungGroup Director of Strategic Marketing
Payment Brand ProtectionIdentity
De La Rue Securing Transactions
• A Typical Transaction:• The exchange of money
for goods and services between trading parties.
• The Security Dimension:• The Security of the tokens of money value.• The integrity of the goods or services. • The Identity of the Individual Parties.
Reminder from yr2000:
We provide Secure Transaction
products and services for:
• National and State Governments• Banks and Financial Institutions• Major Commercial Companies
De La Rue Main Market Sectors
Commercial activity in Payment, Identity and Authenticity is Growing.As Markets develop, Growth Comes from Additional PlayersIt starts with Government, adds Financial, then Commercial
DevelopingWorld
‘Second’World
‘First’ World Future
Commercial
Financial
Government
International
Evolution of our markets in time and geography
Technology BasedHigh MarginEstablishedNo New EntrantsManageableUniquesHistoryRepeatableSimple to ValuePatent-able
Most Competition ThreatHistorically Most Profitable
DevelopingWorld
‘Second’World
‘First’ World Future
Very SLOW Evolution Addition, not SubstitutionGeographic EffectsInfrastructure, Legal,Culture, Cost/Effect
Delivery BasedStanding CostsCompetitionChanging RulesRisk/LiabilityStandardisationPartnersIT SkillsComplex ValueShorter IPR
Pace of Market Evolution
“Shape” of the Business Today
SecurityMaterials
SecurityProducts
Solutions Services FacilitiesManagement
GoingDigital
PortalsTapesBathford
OEMMechanisms
Holograms
PassportComponentsTapes
Tapes &Paper
Currency
Branch CashCount & CoinCashProcessing
PassportsStampsChecks
HologramsOVDs
Kryptal?SecureNotes
CP Software
ID CardProjects
MedicalProductProtection
Note Design
CSDCustomerService
ID Issue
BrandProtectionServices
SPWOutsource?
CB Brazil
ID Lifecycle
Supply ChainManagement?
Pre-Pay?e-cash?
DigiCertificates
Consulting?Track &Trace?
DevelopingWorld
‘Second’World
‘First’ World Future
Aligning our “Face to Market”
SecurityMaterials
SecurityProducts
Solutions Services FacilitiesManagement
GoingDigital
PortalsTapesBathford
OEMMechanisms
PassportComponentsHologramsTapes
Tapes &Paper
Currency
Branch CashCounters &CoinsCashProcessing
PassportsStampsChecks
HologramsOVDs
Kryptal?SecureNotes
CP Software
ID CardProjects
MedicalProductProtection
Note Design
CSDCustomerService
ID Issue
BrandProtectionServices
SPWOutsource?
CB Brazil
ID Lifecycle
Supply ChainManagement?
Top-Up?e-cash?
DigiCertificates
Track &Trace?
DevelopingWorld
‘Second’World
‘First’ World Future
SPECIALISTS in Protecting Brands
SPECIALISTS in Personal Identity
SPECIALISTS in protection of Payments
SPECIALISTS in Protecting Brands
SPECIALISTS in Personal Identity
SPECIALISTS in protection of Payments
Technology and Capability Planning
Re-UsableIPR in
Security Materials,
Production,Sensing
Transferable Skills &
Capabiltiesin Projects
& Solutions
Key CustomersNeed Evolvingand Hybrid Solutions
Playing to our reputation, capabilities and reach
De La Rue Securing Transactions
SECURITYSECURITYThe The securesecure exchange of exchange of moneymoney between between two two
partiesparties for for goods & servicesgoods & services
INTEGRITYINTEGRITYConfidence that Confidence that goods or servicesgoods or services are are
original, genuineoriginal, genuine and from a valid and from a valid source source
TRUSTTRUSTAssuring Assuring the physical andthe physical and
digital digital identityidentity of individuals of individualsIDENTITYIDENTITY
PAYMENTPAYMENT
BRAND BRAND PROTECTIONPROTECTION
Securing the exchange of money for authentic goods and Securing the exchange of money for authentic goods and services between trusted partiesservices between trusted parties
Ian MuchChief Executive
Payment Brand ProtectionIdentity
Global Services – Brand Protection and Identity
• Focus since launch on payment, identity systems and brand protection markets
• Overlap in sales and marketing functions particularly in identity and brand protection across the Group
• Larger opportunities in co-ordinated approach, e.g., end to end solutions leveraging combined Global Services and Security Products capabilities
• Common leadership and management under Jon Marx
Operational Highlights
• Further overspill order in Currency
• Improvement in travellers cheque logistics (manufacturing discipline and inventory procedures)
• Success of TCR Twinsafe™
• Greater sophistication in Cash Systems service business
• Brand Protection won business in several sectors
• Resolution of legacy issues
Summary
• Clear and effective strategy
• Looking for leadership position in key growth markets
• Strong order intake and financial position
• Existing market opportunities
• Position for growth – focus on core business
BUILDING FOR GROWTH
Rider A – Acquisition of CSI Inc
• Cash Processing lack of critical mass
• CSI and Cash Processing operations complementary
• CSU 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 give us stronger presence in first world (De La Rue strong in developing worlds)
• Scope for significant cost savings
• Integration team to conduct full assessment
SUPPLEMENTARY SLIDES
Currency KPIs
Average banknote prices
Value per banknote (per order book)
Banknote volumes
Base/overspill split
Paper volumes
+7.4%
+6.1%
+5.2%
77/23
-19.0%
2000/01 1999/00
+7.4%
+1.0%
-10.0%
81/19
-7.4%
Security Paper & Print
70
80
90
100
110
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Average banknote prices (indexed from 1990)
7.4% rise
Security Paper & PrintBanknote order book
Value per banknote - 12 month moving average
50
60
70
80
90
100
110
1995 1996 1997 1998 1999 2000 2001
Net sales value per banknote Contribution per banknote
Security Paper & Print
Banknote volumes (billions of notes)
0
1
2
3
4
5
6
7
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
1st Half 2nd Half
Full yearchange-10.0%
2nd halfchange-24.7%
1st halfchange+9.4%
Security Paper & Print
Banknote sales - segmental analysis
Percentage of total value
1995
1996
1997
1998
1999
2000
2001
Base
Overspill
Total
75
25
100
80
20
100
73
27
100
64
36
100
82
18
100
77
23
100
81
19
100
Security Paper & Print
Sales £m
Profit £m
1999/00 Exchange effect Banknote printing Banknote paper Non banknote security printing Others (inc printing works) 2000/01
214.0 -
(3.4) 2.1 1.8
(1.7)
212.8
45.7
(0.8)
7.1 (2.3) 0.4 0.3
50.4
Cash Systems KPIs
New product sales as a % of total product sales
Product development expenditure (£m) (% of product sales)
Sales: product (£m) service/software (£m)
1999/002000/01
20
15.18.4
179.4 77.9
257.3
27
16.09.3
171.4 91.0
262.4
Preliminary Results 2000/200123 May 2001
“Building for Growth”
Payment Brand ProtectionIdentity