De La Rue plc. Interim Results 25 November 2014

Transcription

1 De La Rue plc Interim Results 25 November 214 1

2 Introduction Martin Sutherland Chief Executive

3 Introduction De La Rue core strengths Market leader in an industry with high barriers to entry Global brand and reputation Long standing and strong customer relationships Innovative, with a proven ability to bring new products to market Proven, long term cash generative business model Initial impressions Confirmation of fundamental strengths of the business Culture of continuous improvement - further opportunities Operating against a backdrop of challenging markets and overcapacity 3

4 Financial Results Colin Child Group Finance Director 4

5 p/share Print volume (bn notes) Paper volume ( tonnes) Financial Results 214/15 Half year 213/14 Half year Change Revenue (8%) Underlying operating profit* (31%) Underlying operating margin* 12% 16% Print Sept 213 Volumes Print Sept 214 Paper Sept 213 Paper Sept Earnings* and Dividend per Share Underlying profit before tax* (37%) 2 Taxation (4.) (6.9) Underlying profit after tax* (36%) EPS Sept DPS EPS Sept 213 Sept DPS Sept 214 Exceptional items Site relocation and restructuring (2.5) (2.3) Legacy indirect tax issue - (2.1) Total exceptional items (2.5) (4.4) Tax credit on exceptional items Group 12 Month Order Book Sept 213 Mar 214 Sept 214 * Before exceptional items 5

6 Revenue and Operating Profit Revenue* Operating Profit** 213/14 214/15: Operating Profit Trail** 214/15 213/14 214/15 213/14 Half year Half year Half year Half year 38 Currency Solutions (1) IDS SP (9) (1) 1 2 CPS (1) (3) Total Price/volume * After intra-group eliminations ** Before exceptional items 6

7 Underlying Operating Cash Flow and Net Debt 214/15 Half year 213/14 Half year Working Capital Movement Underlying operating profit Depreciation (15) 1 (14) Working capital (13.6) (4.7) Underlying operating cash flow Increase in Inventories Decrease in Receivables/Payables Total Capital expenditure (13.1) (2.4) Special pension fund contributions (7.7) - Net cash cost of exceptional items (2.7) (6.1) 214/15 Half year Tax, interest and dividend (36.) (33.6) Other (2.8) (1.3) Net cash flow (36.9) (12.) Opening net debt (89.9) Net cash flow (36.9) Closing net debt (126.8) 7

8 Operational Performance Colin Child Group Finance Director 8

9 Currency Market summary Performance Industry volume growth in line with historic trend Overcapacity in paper Continuing pricing pressure in paper and print 4 3 Revenue Operating Profit* Overview Bank of England contract renewed Satisfactory print volumes H1 H2 12/13 13/14 14/ /13 13/14 14/15 Improved component sales Reduced margins in both paper and print Actions Continuous improvement reducing costs Maintained market share Tactical approach to pricing and utilising capacity Mothballed surplus machine capacity Good progress on polymer * Before exceptional items 9

10 Billion notes Currency Market Overview Global Substrate Market* (c163k Tonnes) 51% 41% Landqart Substrate Market Share* (Commercial Market) Other DLR Arjo Global Print Market* (c163 billion notes) ~1-3% 12% Print Market Share* (Commercial Market) Other DLR KOMSCO Crane Fabriano 3% ~1-6% Commercial paper market Polymer Securency Goznak Crane G&D State Print Works (SPW) 86% Overspill from SPWs Goznak FCO G&D Overspill from SPMs State paper mills (SPM) Commercial Print Market 2 Global Banknote Issuance Estimate* CAGR 4% E 215E 216E 217E *Source: De La Rue estimate 1

11 Billion notes Billion Notes Index Currency Order Book 175 Banknote Order Intake (6 month rolling average) 25 Currency 12 Month Order Book 15 Revenue 2 4% Profitability Mar-11 Mar-12 Mar-13 Mar-14 Mar 211 Sept 211 Mar 212 Sept 212 Mar 213 Sept 213 Mar 214 Sept Global Print Market Overspill* (Order basis) 8 De La Rue Banknote Volume (Sales basis) /9 29/1 21/11 211/12 212/13 213/14 214/15E 1/2 2/3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/11 11/12 12/13 13/14 Commercial Overspill *Source: De La Rue Estimate 11

12 Solutions Identity Systems Market summary Performance Delays in tenders 9 Revenue 25 Operating Profit* Some pricing pressure mainly from SPWs Slower uptake of epassports Overview Lower operating profit reflecting: High number of contracts completed in 213/14 H1 H2 12/13 13/14 14/15 12/13 13/14 14/15 Lower than expected number of tenders UK Passport contract continues to perform well Over 2m passports issued Actions Streamlined management structure Procurement initiatives yielding benefits Focus on higher value, longer term epassport and ID schemes Developing enhanced service offering * Before exceptional items 12

13 Solutions Security Products Market summary Performance Governments continue efforts to combat illicit trade 5 Revenue 12 Operating Profit* Implementation of Government Revenue Solutions has been slower than expected 8 Continued decline of mature products 25 4 Overview Lower call off on longer term contracts Slow adoption of new Government Revenue Solutions H1 H2 12/13 13/14 14/15 12/13 13/14 14/15 contracts Lengthy implementation lead times on existing contracts Actions Streamlined management structure Site rationalisation Cost reduction yielding further benefits * Before exceptional items 13

14 Solutions Cash Processing Solutions Market summary Mature market but central banks continue to seek more sophisticated authentication and sorting systems Drive towards increasing efficiency through automation and software Growing requirement for end of line inspection and processing of printed banknotes Revenue Performance 2-2 Operating Profit* 12/13 13/14 14/15 Overview Reduced operating loss Lower volumes Target breakeven for 214/15 H1 H2 12/13 13/14 14/15-4 Actions New leadership team appointed May focused exclusively on CPS Cost reduction programme underway * Before exceptional items 14

15 Continuous Improvement Operational excellence Innovation Cost reduction and efficiency initiatives have delivered 3m: Procurement costs reduced and supplier management programme yields benefits Cost of quality reduced through process improvement and lower waste Improved machine performance through enhanced asset care Number of patents filed 211/12 212/13 213/14 214/15E Increasing Micro Optics capability Improving pipeline across whole business Continued investment in R&D Site rationalisation and investment Transfer of Dulles Security Products operations to other manufacturing facilities. Expected completion by financial year end Ongoing investment in manufacturing and design capabilities Continuous improvement embedded in De La Rue s culture 15

16 Outlook As previously announced, the Board expects 214/15 underlying operating profit to be approximately 2m lower than 213/14 Ongoing focus on continuous improvement and operational efficiencies Challenging market conditions to remain in the short term Medium and long term opportunities within core markets remain attractive 16

17 Conclusion Martin Sutherland Chief Executive 17

18 Conclusion Assessment Fundamental strengths of the business confirmed Strong foundations from which to leverage future opportunities Continuous improvement embedded in culture Actions Immediate focus is getting to know the business Continue with short term priorities and improvements Evaluating the strategy will give more colour at full year results in May

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