Interim Results 2001/2002 27 November 2001 PaymentBrand Identity Cash to Secure Transactions.
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Transcript of Interim Results 2001/2002 27 November 2001 PaymentBrand Identity Cash to Secure Transactions.
Interim Results 2001/2002Interim Results 2001/200227 November 200127 November 2001
Payment BrandIdentity
““Cash to Secure Transactions”Cash to Secure Transactions”
Ian MuchIan MuchChief ExecutiveChief Executive
Payment BrandIdentity
Highlights
* before exceptional items, reorganisation costs and goodwill amortisation charged to operating profits
Earnings up• Operating profits* up 7% at £29.8m• Profit before tax* up 13% at £35.6m• Headline EPS up 7% at 13.4p• Dividend increased by 5%
Excellent trading performance in Cash Systems Currency profits down as predicted (India effect) Action taken to reorganise Global Services Positive second half outlook underpinned by good order book visibility
in Cash Systems and Currency Strong balance sheet with scope for acquisitions
Paul HollingworthPaul HollingworthGroup Finance DirectorGroup Finance Director
Payment BrandIdentity
Financial Highlights
* Before exceptional items, re-organisation costs and goodwill amortisation charged to operating profits
1st half 2001/02
£m
1st half 2000/01
£m
Change
£m Sales Continuing operations Acquisitions Discontinued Operating profit* Continuing operations Acquisitions Discontinued Profit before tax* Headline earnings per share Dividend per share Net debt
273.5 20.9 9.5 303.9
30.6
0.4 (1.2) 29.8
35.6
13.4p
4.2p
(29.8)
244.7
2.9 247.6
28.5
(0.7) 27.8
31.5
12.5p
4.0p
(9.7)
28.8 20.9 6.6 56.3
2.1 0.4 (0.5) 2.0
4.1
+0.9p
+0.2p
(20.1)
£337.6294.4
Cash Systems 1st half
2001/02 £m
1st half 2000/01
£m
Change
£m Sales Continuing Acquisitions Operating profit Continuing Acquisitions Margins Continuing
147.8 20.9
168.7
14.0 0.4
14.4
9.5%
120.2
120.2
3.8
3.8
3.2%
27.6 20.9
48.5
10.2 0.4
10.6
+6.3pts
Sales up 23% and operating profits rise £10.2m to £14.0m (excluding acquisitions) First half sales uplift – euro and Twinsafe II benefit On schedule to reach 10% margin target for year – first half 9.5% (excluding acquisitions) Service organisation continues to grow and accounts for 30% of sales in the first half Good order books maintained into second half (particularly Branch Cash Solutions) but revenue growth will
not be at first half levels Currency Systems sales disappointing but should be some second half improvement
Security Paper & Print
1st half 2001/02
£m
1st half 2000/01
£m
Change
£m Sales Operating profit Margins (%)
108.0
19.3
17.9
103.9
23.8
22.9
4.1
(4.5)
-5.0pts
pts
Banknote paper profits and margins down, as predicted, because of India paper order wind down and adverse mix
Banknote business continues to flourish with good order coverage and good sales visibility in second half
Euro order fulfilment on track; second large overspill order secured in first half Non-banknote business profits and margins down mainly due to Tapes business
relocation to larger facility and lower tape sales to Currency which adversely impacted profits
Global Services*
1st half 2001/02
£m
1st half 2000/01
£m
Change
£m Sales Operating (loss)/profit
19.3
(2.7)
23.5
0.9
(4.2)
(3.6)
Sales disappointing - down 18% to £19.3m and division incurred a loss Transaction Services disposal for £6m (£3m in Alphyra shares) De La Rue now retaining a higher proportion of the Microsoft labels Holographics sales and margins under pressure but euro orders now
secured Identity Systems timing delays on several contracts adversely affected
profits but contracts now secured for second half Outlook more positive for second half and action has been taken
* Excludes Transaction Services
Associates
1st half 2001/02
£m
1st half 2000/01
£m
Change
£m Camelot Other (inc De La Rue Giori)
4.5
-
4.5
4.8
(2.4)
2.4
(0.3)
2.4
2.1
Rise in profits before interest and tax due to absence of De La Rue Giori losses
Camelot profits down in first half as a result of lower sales Second licence commences 27 January 2002 when De La Rue’s shareholding
decreases from 26.67% to 20% Dividend of £15.4m received from Camelot post half year
Earnings per Share
1st half 2001/02
(p)
1st half 2000/1
(p)
Change
(p)
As calculated under FRS 14
Loss on disposal of continuing operations
Profit on sale of investments
Loss on disposal of fixed assets
Amortisation of goodwill
Headline earnings per share as defined by the IIMR
Reorganisation costs
Headline earnings per share before items shown above
16.8
-
(5.0)
-
1.0
12.8
0.6
13.4
10.1
1.6
-
0.1
0.5
12.3
0.2
12.5
6.7
0.5
0.9
FRS 19 : Restatement of Taxation
Recognised on balance sheet as deferred tax asset of £35m
The asset of £35m mainly reflects the recognition of taxable losses and other timing differences in Germany and USA
As a result of no longer recognising the benefit of taxable losses through the tax charge, last year’s effective tax rate of 23% has been increased to 27%
The increase in this year’s effective tax rate to 28% from 27% is mainly because of the increase in profits in higher tax rate jurisdictions
Cashflow / Borrowings / Interest 1st half
2001/02 £m
1st half 2000/01
£m
Change
£m
Cash inflow before items shown below Tax (paid)/received Equity dividends paid Associated dividends received Own shares purchased Acquisitions and disposals Giori disposal less arbitration costs
6.3 (9.6)
(24.0) 8.7
(10.2) (40.9)*
11.9
7.6 1.9
(24.4) 6.2 -
(3.5) -
(1.3)
Cash outflow
(57.8)
(12.2)
(45.6)
Net Debt
(29.8)
(9.7)
(20.1)
Net interest: Group Associates
- 1.3
(0.5) 1.8
0.5 (0.5)
1.3
1.3
-
* Excludes £12.7m net debt acquired
Outlook
Since half year overall trading ahead of last year and in line with our expectations
Good order book going into second half (Cash Systems and Currency)
On track to achieve 10% margin target in Cash Systems
Global Services restructuring will lead to better second half
Second half concentration on:
Driving through synergies and implementation plan for CSI
Improvement of operational performance of Global Services
Delivery of order book
Ian MuchIan MuchChief ExecutiveChief Executive
Payment BrandIdentity
Cash Systems
Strong first half performance even allowing for euro and ongoing Twinsafe™ benefit
Ascom Banking Automation acquisition very successful Cash Systems now represents over 50% of Group
revenues Underlying growth opportunities excluding euro through;
Geographical expansion and new market opportunities eg retail
Expanding and improving product range (organically and by acquisition)
Service Three acquisitions in first half (CSI, ATS, Ascom Belgium
& Switzerland) underline this strategy
CSI Acquisition - Rationale
Industry rationalisation needed CSI and Cash Processing operations complementary:
• CSI 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 gives us stronger presence in first world (De La Rue strong in developing world)
Synergies will drive up profitability through:• Lower and tighter controlled cost base• Combined product range, distribution networks and
manufacturing strategy• Technology migration between product ‘families’
CSI Acquisition - Progress
Progress to date:
• Combined business renamed Currency Systems
• Integrated sales and marketing operations
• Finalised product integration and development
• Now evaluating impact on manufacturing strategy
Currency
Overall profits down due to adverse mix in papermaking business (India)
Latest view is India will not require further deliveries before second half of 2003
Banknote business strong with good coverage for the second half
Good visibility of earnings for second half
Use of Cash in G-10 Countries
UK is the most cashless economy in the G-10
0
2
4
6
8
10
12C
ash
% o
f G
DP
1995 1996 1997 1998 1999
Year
UK USA Japan Germany
Source: Bank for International SettlementsSource: Bank for International Settlements
Finland – A Model of Cashlessness?
Even in the most cashless of societies, the use of cash is stable.
0
0.5
1
1.5
2
2.5
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Year
Cas
h %
of
GD
P
Source: Bank of FinlandSource: Bank of Finland
Non-cash threat summary
UK is relatively cashless but UK public want cash (NOP/ De La Rue poll)
66% prefer cash
77% don’t want physical cash replaced with e-cash
First signs of decline should be in the advanced economies but demand for cash remains strong
Currency’s markets are generally not in advanced economies
Security Products
Business merged with Global Services but results reported separately due to budgets etc this year
Factory move at DLR Tapes caused some first half disruption
Other Security Products operations in line with expectations
Going into second half with better order book but trading continues to be challenging
Global Services Restructuring
Restructuring announced in May now complete
Action taken:• Made management changes – Jon Marx, MD• Business Directors recruited for three business
streams of Brand, Identity Systems, Finance• Business streams offer full range of De La Rue
capabilities sharing key functional areas• Holographics and Tapes business more closely
aligned and under new management• Non-core Transaction Services business sold
Growth opportunities a priority going forward
Global Services - Organisational Structure
Managing DirectorJon Marx
BrandBusinessDirector
Colin Frey*
Financial &Government
BusinessDirector
Keith Brown
MarketingServicesDirector
Pippa Wells
HRDirector
Kate Price*
MD, Tapes,Holographics & Interclear
Julie Furber
R&DDirectorBryan
Christophersen
ManufacturingDirector
Gary Carter*
MD, PortalsBathford
Simon Jarvis
FinanceDirectorPatrick
Spencer
CustomerServicesDirector
Tracey Graham*
IdentityBusinessDirector
Patrick Dexyl
* External Appointments
Global Services
Identity Opportunities as Governments upgrade security of
national identity and passport schemes - post Sept 11 Progress now being made since half year
• Mexico,Chile, Malta Brand
Serving consumer facing industry sectors so likely to be affected by economic downturn
Clearly some significant opportunities eg China
Finance Ongoing benefit for tapes and holograms from euro Continued focus on operational efficiencies
Summary
Group is very profitable and cash generative
Growth opportunities focused around;
Short term (and medium term) opportunities in Cash Systems and;
Still committed to Global Services but growth more medium term
Acquisitions - but strict strategic and financial criteria
Confident about future prospects – through financial strength, leading market positions and strong order books
Interim Results 2001/2002Interim Results 2001/200227 November 200127 November 2001
Payment BrandIdentity
““Cash to Secure Transactions”Cash to Secure Transactions”