Preliminary Results 2000/2001 23 May 2001 Building for Growth PaymentBrand Protection Identity

Preliminary Results 2000/200123 May 2001

“Building for Growth”

Payment Brand ProtectionIdentity

Ian MuchChief Executive


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


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



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


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


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


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


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



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%


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


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%


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


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”


Documents

Preliminary Results 2000/2001 23 May 2001 Building for Growth PaymentBrand Protection Identity