Knowing De La Rue

1
Interim Results 2001/2002 27 November 2001
Cash to Secure Transactions
Payment
Brand
Identity
2
Ian Much Chief Executive
Payment
Brand
Identity
3
Highlights

• 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

before exceptional items, reorganisation costs
and goodwill amortisation charged to operating
profits
4
Paul Hollingworth Group Finance Director
Payment
Brand
Identity
5
Financial Highlights
Before exceptional items, re-organisation costs
and goodwill amortisation charged to operating
profits
6
Cash Systems

• 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

7
Security Paper Print

• 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

8
Global Services

• 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
9
Associates

• 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 Rues shareholding decreases from 26.67 to
  20
• Dividend of 15.4m received from Camelot post
  half year

10
Earnings per Share
11
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
  years effective tax rate of 23 has been
  increased to 27
• The increase in this years effective tax rate to
  28 from 27 is mainly because of the increase in
  profits in higher tax rate jurisdictions

12
Cashflow / Borrowings / Interest
Excludes 12.7m net debt acquired
13
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

14
Ian Much Chief Executive
Payment
Brand
Identity
15
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

16
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

17
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

18
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

19
Use of Cash in G-10 Countries
Source Bank for International Settlements
UK is the most cashless economy in the G-10
20
Finland A Model of Cashlessness?
Source Bank of Finland
Even in the most cashless of societies, the use
of cash is stable.
21
Non-cash threat summary

• UK is relatively cashless but UK public want
  cash (NOP/ De La Rue poll)
• 66 prefer cash
• 77 dont want physical cash replaced with
  e-cash
• First signs of decline should be in the
  advanced economies but demand for cash
  remains strong
• Currencys markets are generally not in
  advanced economies

22
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

23
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

24
Global Services - Organisational Structure
Managing Director Jon Marx
Financial Government Business Director Keith
Brown
Marketing Services Director Pippa Wells
RD Director Bryan Christophersen
Brand Business Director Colin Frey
MD, Tapes, Holographics Interclear Julie Furber
HR Director Kate Price
Customer Services Director Tracey Graham
Finance Director Patrick Spencer
Identity Business Director Patrick Dexyl
Manufacturing Director Gary Carter
MD, Portals Bathford Simon Jarvis
External Appointments
25
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

26
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

27
Interim Results 2001/2002 27 November 2001
Cash to Secure Transactions
Payment
Brand
Identity