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PRELIMINARY RESULTS1999/2000
“Cash to Secure Transactions”
IAN MUCHChief Executive
Main Achievements
Creation of a more focused organisation following the Card activities disposal
Recovery in Currency margins
Return to profitability with more to come next year from Cash Systems
Excellent cash generation with an inflow on working capital for the first time since 1994
Main Achievements Continued ...
Business is now more customer facing with the emphasis on service and solutions not just products
Overhaul of the top management team which has seen 75% of the top 60 management positions changed
Strong balance sheet with zero debt provides platform to exploit future growth opportunities
Re-orientation of the Group towards sustainable sales growth, particularly in Cash Systems and the new Global Services
PAUL HOLLINGWORTHFinance Director
Financial Highlights1999/00
£m 1998/99
£m Change
£m SalesContinuing operationsDiscontinued operations
Operating profit*Continuing operationsDiscontinued operations
Profit before tax andexceptional items
Earnings per share*
Dividend per share
Net cash/(debt)
518.998.2
617.1
55.25.1
60.3
75.0
26.5p
12.0p
2.1
526.2211.7
737.9
37.3(0.9)
36.4
57.1
18.8p
12.0p
(126.3)
(7.3)
+17.9
+17.9
+7.7p
-
+128.4£337.6
* Before exceptional items/re-organisation costs
Security Paper & Print
1999/00 £m
1998/99 £m
Change £m
Sales
Operating profit
Margins (%)
263.3
50.8
19.3
263.5
43.1
16.4
(0.2)
+7.7
+2.9
Strong second half performance boosted by overspill business in CurrencyMargins have risen as a result of reorganisation actions and improved mixPaper volumes down by 19% but improved mix partly offsets impact on profitsIncreased holographic usage and higher sales of Microsoft covers have benefited sales of non banknote security productsCosts associated with set up of Global Services and investments made in Transaction Services and Brand ProtectionExcellent cash generation
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%
1999/00
+7.3%
+11.4%
-11.7%
82/18
-2.6%
1998/99
Cash Systems
1999/00 £m
1998/99 £m
Change £m
Sales
Operating profit
257.3
4.4
268.2
(5.8)
(10.9)
+10.2
Sales down as result of consolidation of distribution but next year should see a return to sales growthSecond half saw a modest return to profitability (£4.0m)Reorganisation is on track to deliver 10% operating margins for final quarter of 2000/2001
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)
1998/99
14
19.410.0
193.4 74.8
268.2
1999/00
20
15.18.4
179.4 77.9
257.3
Reorganisation Summary
1999/00 £m
1998/99 £m
Total £m
Restructuring Charge 19.2 25.9 45.1
Original restructuring complete, but up to £2.5m to be spent integrating Ascom acquisitionHigher non-cash costs then anticipated as a result of asset write-offs mainly with respect to old stockOn track to achieve targeted savingsNew IT system (MFG.Pro) successfully installed at Portsmouth
Global Services
Sales for 1999/2000 of £50.5m up £4.0m or 8.6%
Operating profits for year ended 1 April 2000 were £5.1m
Results included within SPPD division, but will be separately accounted for from 2 April 2000
Holographics and Microsoft were main drivers behind sales growth
Next year’s results will be impacted by £5m net revenue investment to drive top line growth
Associates
Increased marketing spend at Camelot reduced profitsResults of lottery rebid due in June 2000, current licence expires September 2001Second half contribution from DLRG well down as a result of poor order bookGiori arbitration ongoing; arbitration panel still hearing preliminary arguments - case could take 2-3 years to conclude; £2.0m legal fee provision raised to rebut claim
1999/00 £m
1998/99 £m
Change £m
Camelot
Other (inc De La Rue Giori)
10.8
3.9
14.7
14.0
12.7
26.7
(3.2)
(8.8)
(12.0)
Earnings per Share
1999/00 (p)
1998/99 (p)
Change (p)
As calculated under FRS 14Loss on the disposal of continuing operations(Profit)/loss on the disposal of discontinued operationsProfit on disposal of fixed assets and assets held for resaleProfit on sale of investmentsProfit on the part disposal of the shareholding in CamelotScheme of arrangement costsAmortisation of goodwill
Headline earnings per share as defined by the IIMRReorganisation and arbitration costs
Headline earnings per share before reorganisation andarbitration costs
39.9-
(24.3)(0.1)(0.9)
-0.50.7
15.810.7
26.5
(6.2)0.96.5
(0.8)-
(1.0)-
0.7
0.118.7
18.8
46.1
15.7
7.7
Cashflow / Borrowings / Interest
1999/00 £m
1998/99 £m
Change £m
Cash inflow/(outflow) before itemsshown below
Equity dividends paidAssociated dividends receivedAcquisitions and disposals
44.7
(27.0)20.6
185.9
(30.6)
(10.1)21.319.5
+75.3
Cash inflow 224.2 0.1 +224.1
Net Cash/(Debt) 2.1 (126.3) +128.4
Finance charges 0.0 6.0 +6.0
Outlook
Cash Systems re-organisation will continue to deliver benefits into next year
Benefits of large banknote overspill order received in 1998/99 will run down during current year which will limit growth in SPPD. Prospects for non-banknote operations are positive
Weak orderbooks within De La Rue Giori
Current year will benefit from lower number of shares in issue following buyback and benefits of Cash Systems re-organisation
IAN MUCHChief Executive
Currency - Key Achievements
Successful reorganisation and restructuring
Ongoing investment in R&D for differentiating value added technologies:
Intaglio Gold
Starwide®
Cleartext®
Platinum® durable paper
Upgrading second paper machine for wide threads
Valora, JV with Bank of Portugal, for production of Euro banknotes up and running
Clear strategy in place
Currency - Strategic Summary
Low growth businesses (c2-3% per annum)
Strategy is long term ‘finessed’ milk
Optimise profit and cash flow on a sustainable basis
Differentiated customer strategy
Leverage Currency technologies across other parts of the Group
Security Products - Key Achievements
Appointment of new MD in February 2000
UK print operations increased profits
Portals Bathford, security paper plant, at capacity but tougher year ahead
De La Rue Tapes building new high security facility to increase capacity
Centralising sales and marketing functions
Security Products - Strategic Summary
Diverse businesses, common customers and technologies/expertise
Changing emphasis to a service/solution provider
Three markets
Commercial (growing) Invest for Growth Financial (decline) Milk Government (stable) Niche opportunities
Move to centres of process excellence
Cash Systems - Key Achievements Profitability in second half demonstrates business on track
Acquisition of Ascom - market leader in cash recyclers (Twinsafe)
Launch of several new products across all three business streams
NMD OEM Platform - ATM mechanism
6000 Sorter - multi pocket banknote sorter
8000C - compact banknote recycler
Updated 3700E - desktop fitness sorter
1250 Spindle Verifier - banded banknote counter
New MACH coin range - high speed coin sorting solutions
New product sales 20% versus 14% last year
Key Achievements continued ...
Branch Cash Solutions - rejuvenated product range and introduced new solution-orientated connectivity software
Cash Processing forecasting software achieved new high profile installations
Desktop Products ready for Euro
Emphasis on service offering which accounts for over 20% of sales
Cash Systems - Strategic Summary
- customer based transactions
- back office operations
Division To facilitate the secure and cost effective
exchange of value in: primary market secondary market
Emphasis is to offer the customer a total service giving them flexibility, choice and value in order to reduce their cash handling costs
Cash Systems - Strategic Summary
Branch Cash Solutions right products and solutions to facilitate increased
automation of cash dispensing and depositing transactions as traditional bank branches are revamped
Cash Processing Continued modernisation of current range of sorters
Increased emphasis on software where there are significant opportunities
Build on success of our outsourcing contract with the central bank of Brazil
Cash Systems - Strategic Summary
Desktop Products Broaden product range
Build strategic relationship
Exploit Euro opportunity
Ongoing reduction of cost structure in Distribution
Customer Services Expand sales and service offerings in this area
Spread best practice across division
Global Services
Brand Protection Services
Digital & Identity Securing Systems
Related Services to Core Customers Consultancy services and facilities management for Central Banks Royal Mint Services
Holographics Brand Protection
Identity Systems (IDS) Transaction Services InterClear (Digital Security)
Strategic Objectives for Global Services
To develop a world class, customer-facing services and solutions business that leverages De La Rue’s brand, market position and technical strengths
To build a business that is big enough to become an engine of growth for De La Rue and to create real shareholder value
Global Services - Strategic Status Report
Clear view on our overall strategic direction Digital and Brand Protection will be the key growth drivers of the
division Acquired InterClear as our entry into Digital Protection Secured solutions contracts with major brand owners in
Brand Protection Refined our stance on Currency Related Services
Broadened scope of offering to “Consulting Services to Central Banks”
Takeoff longer than anticipated Update to be given in Autumn
Global Services Recent Highlights
Digital Protection
Brand Protection
Services to Central Banks Transaction Services
IDS Holographics
Acquired InterClear Seeking strategic stakes in relevant
technology companies Contracts with major sportswear
manufacturer Good progress with major FMCG group Appointed specialist Sales Director Licences with three major mobile phone
operators Mexico Passport contract Euro security accreditation
We have made progress across the board…..
Global Services - Financial Impact
Net revenue investment of £5m in 2000/2001.
Expect to start delivering strong profits and sales growth in 2001/2002
Targeting annualised sales of circa £150m in3 years
GLOBALSERVICES SPW FM
BPHologs
CASHSYSTEMSCURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
Current Structure: Current & Potential Links Financial Institution Example
Current relationshipPotential scope for further leverage
FinancialInstitution
Track & Trace / detector solution?
Dispenser solution?
GLOBALSERVICES
SPW FMBP
Hologs
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes
Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
GLOBALSERVICES
SPW FMBP
Hologs
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes
Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
GovGov
Gov
Future
GLOBALSERVICES
SPW FMBP
Hologs
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes
Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
Finance
Future
Fin
GLOBALSERVICES
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
Commercial
Future
SPW FMBP
Hologs
IDS
PKI services
Trans Svcs
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes
Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
Post Stamp Print
BanknoteSubstrate
Comm
GLOBALSERVICES
SPW FMBP
Hologs
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
Dependencies
Future
GLOBALSERVICES
SPW FMBP
Hologs
CASHSYSTEMS
CURRENCY
SECURITYPRODUCTS
IDS
PKI services
Trans Svcs
BanknoteSubstrate
BanknotePrinting
Branch CashProducts
OEM mechanisms
ATM Servicing
Desk TopProducts
Cash ProcessProducts
Cash ProcessSoftware
Cash ProcessFM
Tapes Security Paper
Cheque Print / Perso
TC Print
Voucher Print
Passports / IDs, certificates
Post Stamp Print
Fiscal Stamp Print
Fiscal Stamp Solution
Threads
BP Print/ labels
CB Services
ID substrates
E-Business
Dependencies
Future
GovGov
Gov
Future
Finance
Future
Fin
Commercial
Future
Comm
Cross Divisional Links
Common Customers
Common Customer Needs
Common Technologies
Common Competencies
Common Requirements
Cross Divisional Initiatives
1 Internet Business Development Group
2 Technology
3 Key Account Management
4 Regional Selling
5 Purchasing
6 Manufacturing
7 Internal / External Communications
Strategic Direction
Maintain and nurture our high margin Security Paper and Print operations whilst recognising top line growth will be limited
Increased emphasis within Cash Systems on generating sales growth
Invest in new business opportunities within our Global Services division which have the potential to achieve substantial sales and earnings growth
Use the strong balance sheet, where appropriate, to make acquisitions to complement organic growth
Strategic Direction continued ...
Strengthen the cross-divisional links, to better serve our customer base and utilise our resources, through developing a more cohesive operational structure
Continue to develop our e-business strategy to improve efficiency and better meet the needs of our customers
Continue to invest in the development, training and strengthening of the De La Rue management team to deliver on the above
Key Messages
Emphasis now on sales growth
Scope for acquisitions
Ongoing drive for productivity and efficiency
Exploit Group synergies
Improved quality of earnings