preliminary results 2014

De La Rue plcF ll Y R ltFull Year Results28 May 2014

© De La Rue 2014© De La Rue 2014 1

Group Headlines

100

Underlying Operating Cash Flow **

600

Revenue20100

Underlying Operating Profit and Margin*

Group Headlines

+6% +43%

9975£m

484 513

400

£m 90 1810

15

20

50

75

100

£m

%

73

502013 2014

484 513

0

200

2013 2014

63

9013

18

0

5

0

25

Profit 2013

Profit 2014

Margin 2013

Margin 2014

300

Group 12 Month Order Book75

Underlying Earnings** and Dividend per Share

2013 2014 2013 2014

+58% +5%

Summary

232150

200

250

£m

60 7

50

p/sh

are

• Good order book

• Pricing pressure in Currency

• Further operational efficiency opportunities available207 232 218

0

50

100

Mar 2013 Sep 2013

38.5

60.742.3 42.3

0

25

EPS 2013

EPS 2014

DPS 2013

DPS 2014

p

Mar 2014

opportunities available

• Unchanged expectations for 2014/15

© De La Rue 2014 2** Before exceptional items* Before exceptional items and the impact of IAS 19

Financial ResultsC li ChildColin ChildChief Operating Officer


Financial ResultsFinancial Results2013/14

£m

2012/13*

£m Change

Revenue 513.3 483.7 6%

Underlying operating profit pre IAS 19** 90.5 63.2 43%

U d l i ti i IAS 19 17 6% 13 1%Underlying operating margin pre IAS 19 17.6% 13.1%

Underlying profit before tax** 77.3 51.3 51%

Taxation (16.1) (12.0)

Underlying profit after tax** 61.2 39.3 56%

Underlying earnings per share** 60.7p 38.5p 58%

Dividend per share 42.3p 42.3p -

Print volume (notes) 6.2bn 6.3bn (2%)

Paper volume (tonnes) 9,600 8,700 10%

© De La Rue 2014 4* Restated to reflect the amendments to IAS 19 Employee Benefits ** Before exceptional items

2012/13 2013/14: Revenue & Operating Profit2012/13 2013/14: Revenue & Operating Profit

Revenue* Operating Profit** MarginRevenue* Operating Profit** Margin

Business Units2013/14

£m

2012/13

£m

2013/14

£m

2012/13

£m

2013/14

%

2012/13

%

Currency 341 296 62 38 18 13

Solutions

Cash Processing 53 61 (4) (8)Cash Processing Solutions 53 61 (4) - (8) -

Security Products 42 42 10 9 24 21

Identity Systems 77 85 22 16 29 19

172 188 28 25 16 13

Total 513 484 90 63 18 13Total 513 484 90 63 18 13

© De La Rue 2014 ** Before exceptional items and the impact of IAS 19 5* After intra-group eliminations

2012/13 2013/14: Operating Profit Trail2012/13 2013/14: Operating Profit TrailVolume / Mix

20

6 90

(3)

2

(1)

20

C CPS Id tit T t l

(3)

(4)

632

22011

Improvement Plan

Currency CPS Identity Systems

Total

(3)

55

4

© De La Rue 2014 6* Before exceptional items and the impact of IAS 19

Profit*2012/13

Foreign Exchange

Volume/Mix

Cotton Price Improvement Plan

All Other Overheads

Profit*2013/14

SiteRelocation Plan

Procurement Process Improvement

Total

Underlying Operating Cash Flow and Net DebtUnderlying Operating Cash Flow and Net Debt

2013/14 2012/13

£m £m

Underlying operating profit 89.3 61.5

Depreciation 28.3 26.3Depreciation 28.3 26.3

Working capital (18.5) (14.8)

Underlying operating cash flow 99.1 73.0

2013/14

£m

Opening net debt (76.7)

Capital expenditure (34.9) (37.1)

Special pension fund contributions (11.5) (16.2)

N t h t f ti l it (4 0) (17 3)

Net cash flow (13.2)

Closing net debt (89.9)

Net cash cost of exceptional items (4.0) (17.3)

Tax, interest and dividend (58.0) (53.1)

Other (3.9) (1.2)

Net cash flow (13.2) (51.9)

© De La Rue 2014 7

Exceptional ItemsExceptional Items2013/14

£m

2012/13

£m

Improvement Plan (3.5) (7.6)

Legacy indirect tax issue (2.2) -

Gain on sale of fixed assets 4.5 -Gain on sale of fixed assets 4.5

CPS asset impairment (14.2) -

Other (2.1) -

Total exceptional items (17.5) (7.6)

Net cash cost of exceptional items (4.0) (17.3)

Tax credit on exceptional items

Credit in period 0.9 2.1p

Prior year tax credits 3.3 4.4

Total tax on exceptional items 4.2 6.5

© De La Rue 2014 8

Operational PerformanceC li ChildColin ChildChief Operating Officer


De La Rue Business OverviewDe La Rue Business Overview

Proportion of Group 2013/14

O tiRevenue Operating Profit*

• Banknotes – design, origination and printing• Substrates – paper and polymer• Security Components threads and holograms

Currency 66% 69%

Cash • High speed cash sorting and inspection equipment

• Security Components – threads and holograms

s

Processing Systems

• Specialist vault management software• Service, maintenance and spares

11% (5%)

Solu

tion

• Design, origination and print of secure products• Secure track and trace software• Solution integration and support

SecurityProducts 8% 12%

15% 24%• Design, origination and print of identity documents • Identity management and personalisation software• Solution integration and support

IdentitySystems


g pp

Currency – Market OverviewCurrency Market OverviewGlobal Substrate Market*

(c157k Tonnes)DLROther

Substrate Market Share*(Commercial Market)

Global Print Market*(c157 billion notes)

Print Market Share*(Commercial Market)

48%

43% 85%13%

Arjo

Fabriano

KOMSCO

LandqartDLR

Crane

Other

~1-3%

3%State paper mills (SPM) Commercial paper market State print works (SPW) Overspill from SPWs

G&D

CraneGoznak

Securency

Fabriano

G&D

FCO

Goznak

~1-6%

Polymer Overspill from SPMs Commercial print market

200

Global Banknote Issuance CAGR 4%

Estimate*

100

150

on N

otes

Estimate

0

50

100B

illi

© De La Rue 2014 11

02009 2010 2011 2012 2013 2014E 2015E 2016E 2017E

*Source: De La Rue Estimate

Currency – Order Book

250Currency 12 Month Order Book

Currency Order Book

+8%250

Banknote Order Intake (6 month rolling average)

100

150

200

£m

158195183176155 180 170100

150

200

Inde

x

Revenue

0

50

March September March September March September March

158195183176155 180 170

0

50

100

MarchMarchMarch March

Profitability

6Global Print Market Overspill*

March 2011

September2011

March 2012

September2012

March2013

September2013

March2014

(Order basis) 8

De La Rue Banknote Volume(Sales basis)

March 2013

March 2012

March 2011

March 2014

4

on N

otes

4

6

ion

Not

es

0

2Bill

io

0

2

Bill

© De La Rue 2014

02008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15E

12

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14Volume Overspill

*Source: De La Rue Estimate

Solutions – Cash Processing SolutionsSolutions Cash Processing SolutionsOverview

• Target breakeven for 2014/15• Disappointing performanceAction Plan

• Re-structured CPS leadership team• Cost reduction actions underway• Initial focus on capabilities and operational

excellence

• Competitive pressures and margin erosion• Reduced large sorter volumes• Reduction in service revenue

Operating Profit*Revenue

-3

-1

1

3

11/12 12/13 13/14£m

0

20

40

60

80

11/12 12/13 13/14

£m

Operating ProfitRevenue

-511/12 12/13 13/14

• Increasing cash in circulation and central bank

Market Summary• Increasing cash in circulation and central bank

de-centralisation driving automation

• Market opportunity as central banks continue to replace fsorter fleets over the next 3-5 years

• Commercial cash processors seeking to reduce cost and increase efficiency through automation and software


Solutions – Security ProductsSolutions Security ProductsOverview

• Increased operating profit

Operating Profit*Revenue

• Benefits from cost reduction programme• Full year effects of reduced costs following relocation of

manufacturing from Dunstable to Gateshead

0

3

6

9

12

11/12 12/13 13/14

£m

0

20

40

60

80

£m

Operating ProfitRevenue

11/12 12/13 13/1411/12 12/13 13/14

Products and Services• Diverse portfolio• Diverse portfolio

• Traditional security print products in mature markets– Stamps, security paper, cheques and labels

• Digital and security print solutions in developing marketsmarkets

– Government Revenue Solutions - technically complex, long term contracts


Solutions – Identity SystemsOverview

Solutions Identity Systems

• Strong operational performanceProducts and Services

• Broad portfolio

Revenue Operating Profit*

• Delivered further operating efficiencies• Unusually high number of longer term contracts completed

• Highly secure ID documents– Machine readable passports, ID cards and visa stickers

• Fully integrated identity solutions– ePassports, eID, personalisation solutions

05

10152025

11/12 12/13 13/14

£m

Revenue

0

30

60

90

11/12 12/13 13/14

£m

Operating Profit• Focus on higher value, longer term ePassport and ID

schemes

11/12 12/13 13/1411/12 12/13 13/14

s)

Commercial Market Annual Passport Issuance**(c.40 million annual issues)

3

4

5

er a

nnum

(mill

ions

0

1

2Vo

lum

e is

sued

pe

Supplied by De La Rue

© De La Rue 2014 15* Before exceptional items and the impact of IAS 19 **Source: De La Rue Estimate

0

Top 35 available contracts

Improvement PlanImprovement Plan

2010/11 – 2013/14 Profit Trail

Foundations in place for future growth

19

10 90

Foundations in place for future growth

• Renewed customer focus

• Accelerated innovation

14

• Greater professionalism

• Focus on quality, cost and delivery

• Operational excellence rolled out

40

7

£40m annual cost savingsOperational excellence rolled out

2010/11 Site RelocationPlan

Procurement ProcessImprovement

RevenueGrowth

2013/14

© De La Rue 2014 16

Continuous improvement is embedded in De La Rue’s culture

Looking AheadPhili RPhilip RogersonChairman


2014/15 - The Year Ahead2014/15 The Year Ahead

• Good order book

• Pricing pressure in Currencyg p y

• Target breakeven for CPS

• Identity Systems reverts to typical contract maturity profiley y yp y p

• Further benefits from operational excellence

Board’s expectations for 2014/15 remain unchanged

© De La Rue 2014 18

Longer Term – Continued FocusLonger Term Continued Focus

Focus on the

Currency

Solutions

Invest in

Focus on the whole market

ePassport

technology

Grow polymer

Government Revenue Solutions

Profit Growth

Cash Generation

Grow polymer

Invest in flexibility and responsiveness

Operational excellence

© De La Rue 2014 19

Revenue Growth – CurrencyRevenue Growth Currency

Focus on the whole marketmarket

Commercial Paper Mills

State Paper Mills

State Print Works

Commercial Print Works

Central Banks

Print

ppor

tuni

ty

SubstrateSubstrate Substrate

Op

Security Components

Security Components

Security Components

Security Components

Security ComponentsComponents ComponentsComponentsComponents Components

Design, consultancy and innovation

© De La Rue 2014 20

Revenue Growth – Currency

New security features

Revenue Growth Currency

Invest in technologyKinetic StarChrome®

Spectrum™● Invested in state of the art micro-optic technology rtin

g C

ore

Long Wide Windows

p gy

● Expansion of scientific research team

● Enhanced security features pipeline Supp

or

Mask™ for polymerp y

Iridescent on polymer

ccel

erat

ion

Magnetic ‘thread’ on polymer

Poly

mer

Ac

© De La Rue 2014

Spark® Orbital™ for polymer

21

Revenue Growth – CurrencyRevenue Growth Currency

Grow polymer Market Global Substrate*

43%

Global Substrate(c157k Tonnes)

48%43%

State paper mills (SPM)

C i l k t

Opportunity for De La Rue

3%

Commercial paper market

Polymer

Overspill from SPMs~1-6%


• Small but growing market

• Build on Safeguard™ momentum

I i l• Investing to accelerate progress

• Strong pipeline of new features

© De La Rue 2014 22*Source: De La Rue Estimate

Revenue Growth – SolutionsRevenue Growth Solutions

ePassports Market Total Passport Market*

De La Rue has c.30% share of commercial market

Total Passport Market(c.134 million annual issues)

Commercial market

St t f t i


State manufacturing


• Global trend towards ePassports (>50%) - largely N.America and Europe

• Lower level of adoption within the commercial marketLower level of adoption within the commercial market

• Ideally placed to provide customers with a fully integrated ePassport solution

© De La Rue 2014 23*Source: De La Rue Estimate

Revenue Growth – SolutionsRevenue Growth Solutions

Government Revenue SolutionsSolutions

Market opportunity for De La RueTh k i d l i i kl k

De La Rue“Trust Centre”

• Design and print stamps• The market is developing quickly as governments seek

to optimise indirect taxes and duties

• Predominantly tobacco and alcohol, but increasing market opportunity outside of these areas

• Systems manage stamp inventory and codes

• Ensures transparent relationship between producer and government market opportunity outside of these areas

• FCTC* standardising approach to tobacco control and illicit trade

• FCTC supported by 178 countries

producer and government

pp y

• 53 countries have signed up to implement the Illicit Trade ProtocolGovernment Producer

Flow of duty

© De La Rue 2014 24*Framework Convention on Tobacco Control

Continuous ImprovementContinuous Improvement

Invest in flexibility and responsiveness

Reduced lead times

• Improved order management processE h d hi h h

responsiveness• Enhanced machine throughputs

Operational excellence

• Simple, structured methodology• Improved quality• Reduced cost through standardised manufacturing processes

© De La Rue 2014 25

ConclusionConclusion

• Good results

• Continuous improvement is embedded into the culture of De La Rue

• Long term opportunities within De La Rue’s core markets

Board’s expectations for 2014/15 remain unchanged

© De La Rue 2014 26

preliminary results 2014

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