De La Rue plc. Strong Fundamentals 2011 Results 24 May De La Rue De La Rue plc 2010

Transcription

1 De La Rue plc Strong Fundamentals 2011 Results 24 May 2011 De La Rue 2011 De La Rue plc

2 2011 Results AGENDA Group Headlines Financial Results De La Rue and its Markets Improvement Plan Outlook 2

3 Group Headlines Revenue Operating Profit (17%) 120 (63%) UK Passport Launch and Camelot sale Improvement Plan Operating Profit > 100m within 3 years Build on fundamental strengths Address opportunities p/share Headline Earnings and Dividend per share EPS: (5%) DPS: HELD Earnings per Share Dividend per share 3

4 Financial Results Colin Child Group Finance Director 4

5 2010/11 Financial Results Change Revenue (17%) Operating profit* (63%) Exceptional items 39.5 (7.5) Finance expense (7.1) (11.4) Income from associates Profit before tax (25%) Headline earnings per share 24.0p 76.2p (69%) Basic earnings per share 67.6p 71.0p (5%) Dividend 42.3p 42.3p - Volume Change Print (notes) 5.9bn 7.8bn (24%) Paper (tonnes) 9,900 15,500 (36%) * Before exceptional items 5

6 : Revenue Business Units* Currency Cash Processing Solutions Security Products (122) Identity Systems (7) *After eliminations (17%) Revenue 2010 Currency Cash Processing Solutions Security Products Identity Systems Revenue

7 : Operating Profit* Business Units Currency Cash Processing Solutions (3) 1 Security Products (27) Identity Systems 2 2 (40) 120 (63%) (30) 4 (6) Profit* 2010 Production issues Currency Cash Processing Solutions Security Products Identity Systems Profit* * Before exceptional items 7

8 Exceptional Items Curtailment gain on closure of pension scheme Paper production quality issues Corporate costs Gain on sale of Camelot investment CPS reorganisation Legacy overseas indirect tax Total exceptional items (29.0) (2.6) (4.8) (2.7) (7.5) 8

9 Operating Cash Flow Operating profit before exceptional items Depreciation Working Capital Pension fund Contribution Other Operating cash flow before special pension contribution One off special pension fund contribution Cash flow from operating activities (29.4) (7.5) (13.2) 14.7 (35.0) (20.3) (17.0) (10.1)

10 Net Debt Opening net debt Cash flow from operating activities Tax and interest Capital expenditure Sale of investment in Camelot / Associate income Dividends Other Closing net debt 2011 (11.0) (20.3) 1.2 (30.7) 75.4 (42.1) (3.7) (31.2) 2010 (33.1) (24.3) (33.1) 6.3 (40.6) (2.3) (11.0) 10

11 De La Rue and its Markets Tim Cobbold Chief Executive 11

12 De La Rue and its Markets Currency Banknote paper, security features Design, origination and printing of banknotes Cash Processing Solutions High speed sorting machines Service: maintenance and spares Cash management solutions Security Products Design, origination and printing of secure products Tax stamp and authentication solutions Identity Systems Design, origination and printing of identity documents Personalisation solutions 12

13 Importance of Currency Revenue Operating Profit Operating Margin (17%) 25% (63%) (10pts) % 79 17% 19% 19% 80 15% 61 15% % 9% % Currency Cash Processing Solutions Security Products Identity Systems % Business Units Number of employees Business Units Number of manufacturing sites Currency 2,469 Currency 7 Cash Processing Solutions 698 Cash Processing Solutions 2 Security Products 563 Security Products 6 Identity Systems 267 Identity Systems 3 13

14 Currency Market - Overview Hologram Intaglio print Banknotes: c150bn banknotes Watermark Serial number SPECIMEN SPECIMEN See-Through Thread Indicative cost profiles Engraved portrait Micro text 84% 3-6% 13% State paper mills or State print works Overspill Commercial print market Commercial paper market Others Labour Cotton Others Security Features Labour Ink Paper: c150k tonnes 50% 3-6% Security Features Paper 13% 34% Paper Banknote Source: Estimates De La Rue 14

15 Currency Market - Dynamics Global Banknote Issuance CAGR: 4-5% Market Segment Growth CAGR Notes issued (bn) Notes issued (bn) State Paper Mills or SPW Commercial Paper 4% 4% Commercial Print 3% 100 Paper Demand and Capacity 5 Overspill Print Market Notes equivalent (bn) Notes (bn) Demand Capacity Source: Estimates De La Rue 15

16 Market Leading Presence Print: Market Share Paper: Market Share Other Other De La Rue De La Rue Securency Orell Fussli Fabriano G&D Oberthur Crane G&D Arjo Crane De La Rue involved in c150 national currencies over last 5 years Long standing customer relationships Differentiate through design and technology Significant benefit from vertical integration High barriers to entry Source: Estimates De La Rue 16

17 Leading Technology Cornerstone Optiks Tilt Multitext Edgestone Gemini StarChrome Flexycoin Multitext Mask Source: De La Rue 17

18 Order Intake and Order Book Print Order Intake (indexed to Sept 08 ) 6 month rolling average Currency Year End Order Book Value H2 H2 120 Profitability 120 Index H1 H Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 0 March 2010 March 2011 Source: Estimates De La Rue 18

19 Cash Processing Solutions Revenue Large Sorters Revenue Other Software Cash Processing Installed Base Toshiba De La Rue G&D Rest of the World Americas Rest of Europe UK & IR by Geography Other Distributor Commercial Banks Central Banks by Customer Service Medium Large Shipments Toshiba G&D De La Rue Market Growth Drivers Growth in note issuance Move to automation Renewal Central bank outsourcing Centralisation of operations Niche market - Steady growth - Number 2 position Source: Estimates De La Rue 19

20 Security Products Market Growth Drivers Competitor Landscape Growing importance of indirect taxation Identity and financial fraud Revenue protection Anti-counterfeiting Other Internal Components Financial Cards Revenue Split Rest of World World Competitive Segment State print works Security printers Commercial printers New entrants, mainly around Track & Trace Players Hungarian State Print Works, PWPW De La Rue, Enschede, G&D, Walsall Security Print Kalamazoo, Madras, Paragon Authentix, Sicpa Government Revenue Americas Brand Licensing by Product Rest of Europe UK & Ireland UK & Ireland by Geography Growth opportunities - Solution development - Diverse product range Source: Estimates De La Rue 20

21 Identity Systems Market growth drivers Competitor Landscape Cross border security National Identity tracking and security Economic pressure on social services and managing entitlements Technology shift to e Driving Licence ID card Revenue Split Rest of the World Competitive Segment Documents Producers Point Solutions Providers ID System Integrators Large IT Integrators Players De La Rue, G&D, Oberthur Cogent, L1, Vernizon De La Rue, Gemalto, G&D, Sagem IBM, Siemens, Thales Passport by Product Americas Rest of Europe by Geography Growth opportunities - Solution driven - Diverse technology Source: Estimates De La Rue 21

22 Locations and Spread Sales and Manufacturing Sites Sales by Geography 19% UK and Ireland Rest of the World 52% 16% 13% Rest of Europe Americas Source: Estimates De La Rue 22

23 Improvement Plan Tim Cobbold Chief Executive 23

24 Fundamental Strengths Brand and reputation Long standing customer relationships Strong integrated competitive position Record of innovation High margin, cash generative model Good presence in niche markets Exposure to fast growing developing markets 24

25 Significant Opportunities Focus, focus, focus Deepen and broaden One De La Rue Enhance customer relationships Improve sales and marketing effectiveness Exploit technological capability Develop total supply chain Improvement Plan Build on fundamental strengths Address opportunities 25

26 Improvement Plan Target: Operating Profit > 100m within 3 years Customer Focus Innovation Professionalism Operational Excellence Initiatives Country and regional sales plans Product innovation New business models and partnerships Standardise processes Talent and reward Procurement Process improvement Facility optimisation Outcomes Top line growth Margin protection Market share Top line growth Market share Competitive positioning Best practice Lower cost Engagement Low cost Quality Margin Revenue Growth Cost Reduction 26

27 Simplify Structure; Reshape Organisation Revenue Cash Processing Solutions 58m Currency 288m Security Products 55m Currency 288m Solutions 176m Identity Systems 63m Finance Currency Business Development Business Transformation Supply Chain Human Resources Solutions Legal and Company Secretary Customer Focus Innovation Professionalism Operational Excellence 27

28 Revenue Growth Initiatives Country Plans One De La Rue basis Develop plans and align capabilities Pilot completed Phased roll-out Product Innovation Provide focus Standardise processes Evaluate and accelerate opportunities Leverage existing portfolio of well established technology 28

29 Cost Reduction Initiatives Progress to date (1/2) Procurement 11/12 12/13 13/14 Today H1 H2 H1 H2 H1 H2 Phasing: I II III IV Phase I: 4m savings negotiated addressable cost of 29m Phase II: Addressable cost of 77m Phase III: Addressable cost of 75m Phase IV: Review of strategic suppliers Process Improvement 11/12 12/13 13/14 Today H1 H2 H1 H2 H1 H2 Phasing: Focus: Spoil (Waste) reduction, quality improvement, make-ready reduction Specific project in Overton Establish continuous improvement methodology Source: Estimates De La Rue 29

30 Cost Reduction Initiatives Progress to date (2/2) Facility Optimisation 11/12 12/13 13/14 Today H1 H2 H1 H2 H1 H2 Phasing: I II Phase I: Site reviews; Facilities identified; Consolidation strategy defined Phase II: Implementation Standardise Processes 11/12 12/13 13/14 Today H1 H2 H1 H2 H1 H2 Phasing: I II III Phase I: Review of IT systems; Feasibility review Phase II: Process definition Phase III: Implementation 30

31 Generating Value for Shareholders Target Revenue Return to historic 4% growth trend Cost Reduction c 30m pa broadly even over 3 years Operating profit in excess of 100m within 3 years Investment Exceptional costs of c 25m Specific capital expenditure of c 20m Predominantly in the first two years Prudent and Pragmatic Basis - Confidence in Delivery 31

32 Conclusion and Outlook Current trading in line with expectations Stabilised order intake recovery in banknote print volume Business currently well loaded First half solid order coverage good Second half order focus pipeline good Confidence in Improvement Plan Strong fundamentals Self-help initiatives Contributing to current year 32

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