Neopost FY 2002 results April 2003
2002: an eventful year External growth - Finalisation of the acquisition and integration of Ascom Hasler - Acquisition of Stielow Our own achievements - New products - New contracts - New organisation A new dimension Three strategic priorities - Technological innovation - Market coverage - Productivity 2
2002 vs. 2001 EBIT +60% A record performance Net income +83% Sales +32% 761m 133m 70m Strong growth and record increase in profitability 3
A new dimension Pro-forma 2002 sales of more than 800m 5,000 employees Global market share gains From 15% to 26% of the global franking machines market More than 56% of the global folder / inserter market Consolidated leadership positions Canada : #2 (22%) UK : #2 (40%) #1 in Europe #2 worldwide USA : #2 (17%) France : #1 (65%) Germany: #2 (21%) Switzerland: #1 (56%) Italy: #1 (27%) (as a % of the installed base of franking machines) 4
A broader product range Many new developments 2002: IJ35, IJ45, IJ85 and IJ105 franking machines SI92 folder / inserter 2003: Dynamic scale, SI30 folder / inserter, Cyberstation Exciting R&D projects (online and traceability): kiosks, RF Tags, etc. Major commercial success (Hallmark + USPS, General Motors Spare Parts, Cisco, etc.) Expanding subcontracting in China A broader offering and enhanced competitiveness 5
Agenda Integration of Ascom Hasler Acquisition of Stielow FY 2002 results Dollar exposure Outlook Neopost prepares for the future 6
Integration of Ascom Hasler A success
Chronology of events 2 October 2001: announcement of the acquisition of Ascom Hasler 28 February 2002: finalisation of the acquisition of Ascom Hasler North America after the Federal Trade Commission approval in US 31 May 2002: finalisation of the acquisition of Ascom Hasler Rest of the World after the UK government s clearance 8
Ascom Hasler integration process Achieved Ongoing Manufacturing Closure of the Berne site (Switzerland) R&D Reorganisation of the Group s R&D Sales and Marketing Merger of Ascom Hasler and Neopost distribution Development of commercial synergies networks in Europe and in Extension of the Leasing Canada offering to Hasler Inc. Back office & maintenance Hasler Inc. repair centre transferred to Mexico Merger of back offices in Europe Merger of Neopost Inc. and Hasler Inc. logistics platforms in Memphis Synergies in the US back offices 9
A more rational organisation Manufacturing Three plants: France - the Netherlands - China R&D Marketing Franking machines : Shelton (Connecticut) and Bagneux (France) Document systems: Drachten (the Netherlands) Unified networks in Europe and in Canada Two separate networks in the United States Management Integrated teams Unified reporting system Shared culture and common set of values A successful integration 10
Extracting synergies Cost synergies Around 22m of savings expected in FY 2004 More than half of these savings will be delivered in 2003 Commercial synergies from 2003 Merger benefits completely in line with the company's targets 11
Acquisition of Stielow Integration process well on track
Stielow: Stielow: a strategic acquisition in a major market A private German Group specialised in mailroom equipment Distributor of Neopost equipment in Germany for the last 30 years Acquisition signed on 18 July 2002 and finalised on 31 August 2002 Acquisition price: 39.5m, brought down to 34m after adjustments In Germany, Neopost becomes the leading supplier of folders/inserters (50%) and the #2 supplier of franking machines (21%) 13
Stielow Two business lines: Mailing solutions: mailing systems, folders / inserters, letter openers / extractors Non-core businesses: print finishing, label printing equipment, parcel preparation Pro-forma 2002 sales: 65 million euros 38.8 million euros in the mail processing business 26.2 million euros in the non-core businesses Level of sales in line with Neopost's expectations when it acquired Stielow 14
Decision to sell Stielow s non-core businesses during the year 2003 integration plan Transfer of letter opener/extractor manufacturing and R&D to the Drachten, Netherlands, site Merger of the Stielow and Neopost GmbH back-offices Confirmation of operating margin of 10-15% in Germany by end 2003 15
FY 2002 results Record growth in sales and profitability
2002 financial accounts First-time consolidation of Ascom Hasler and Stielow: Ascom Hasler North America consolidated for 11 months Ascom Hasler Rest of the World consolidated for 8 months Stielow consolidated for 5 months Pro-forma accounts Ascom Hasler and Stielow consolidated over all of 2001 and 2002 Accounts impacted by: The dollar s depreciation The last Neopost Online losses 17
(Euro millions) A change in dimension 831* 761* + 32% + 12% per year 575 365 1997 1998 1999 2000 2001 2002 Consistent organic growth, boosted by acquisitions in 2002 2002 pro-forma * Including Stielow's non-core businesses in 2002 : 11m reported and 26.2m on a pro-forma basis 18
Sales: organic growth & acquisitions + 32.3% 2001 2002 575.0 million euros + 37.6% 761.0 million euros on a constant exchange rate basis N. America + 42.1% France + 1.0% U.K. + 42.1% Germany + 225.4% ROTW + 54.3% 19
Sales by geographical area 2001 2002 pro-forma 575.0 million euros 830.8 million euros France 36% ROW 9% Germany 10% France 25% ROW 9% U.K. 12% North America 43% U.K. 13% North America 43% A balanced split versus the market 20
Sales by business 2001 2002 pro-forma 575.0 million euros 830.8 million euros Document & Logistics Systems 31% Document & Logistics Systems 32% Mailing Systems 69% Mailing Systems 68% An unchanged breakdown 21
2001 Recurring revenues Sales by revenue type 2002 pro-forma 575.0 million euros 830.8 million euros Rental & leasing 39% Services & other 20% Rental & leasing 36% Services & other 22% Equipment sales Equipment sales 41% 42% A high proportion of recurring revenues 22
Strong growth in profitability Reported Pro-forma Euro millions 2001 2002 Chg. % 2001 2002 Chg. % Sales 575 761 +32.3% 853 831 (2.6%) Gross margin 413 525 +27.1% 577 568 (1.5%) As a % of sales 71.8% 69.0% 67.6% 68.4% EBITDA 129 199 +54.7% 185 207 +11.9% As a % of sales 22.4% 26.2% 21.7% 24.9% EBIT 83 133 +59.5% 107 137 +28.2% As a % of sales 14.5% 17.5% 12.5% 16.5% Exchange rates 2001 2002 Euro / GBP 0.62 0.63 Euro / USD 0.89 0.96 23
Strong earnings growth Euro millions 2001 2002 Chg. % 2002 pro-forma Sales 575 761 +32.3% 831 EBIT 83 133 137 Net financial charges (19) (25) (27) Goodwill amortisation (4) (6) (6) Extraordinary income (1) 1 1 Tax (21) (33) (34) Net income 38 70 +82.9% 71 Net margin 6.6% 9.2% 8.5% Controlled financial charges and tax charges optimised thanks to acquisitions 24
Working capital requirement inflated by acquisitions Euro millions 2001 2002 Inventories 34 71 Trade receivables 141 186 Prepaid income (122) (142) Other pay. and receivables (148) (160) Total* (95) (45) Bringing Ascom Hasler & Stielow in conformity with Neopost's standards: an opportunity to generate cash * Excluding leasing 25
Strong cash generation Euro millions 2002 Change in net debt incl. leasing 173 Change related to forex 30 Acquisition of Ascom Hasler (217) Acquisition of Stielow (34) Acquisition costs (10) Cash cost of restructuring in 2002 (22) Cash from operations 80 Easier funding of acquisitions 26
A healthy financial structure (1) Euro millions 2001 2002 Financial debt excluding leasing 303 441 Cash & marketable securities (112) (98) Short-term loans for leasing (28) (6) Net financial debt excluding leasing 163 337 Leasing debt 103 124 Short-term leasing debt from operations 28 6 Total leasing debt 131 130 Net financial debt 294 467 Shareholders' equity 253 316 Net debt / equity 1.2 1.5 A gearing ratio linked with rental and leasing businesses 27
A healthy financial structure (2) Euro millions 2001 2002 2002 pro-forma Debt / EBITDA ratio 2.3 2.4 2.3 Interest cover: EBITDA / interest expense 6.9 8.0 7.8 Comfortable ratios 28
A healthy financial structure (3) Implementation of a dividend pay-out policy Proposal to pay out a dividend of 30.3m in 2003, which equates to 1 per share and 43.5% of 2002 net income Proposal submitted for shareholder approval at the next AGM A 5.8%* yield including the tax credit * Yield based on the closing share price on 31 March 2003 29
Dollar exposure
Dollar exposure under control (1) % in dollars 2003 Budget Sales 43% Cost of sales 44% Expenses 40% Debt 40% Maintained margins In 2003, 100% of $ / cash requirements covered at a rate below 1.05 31
Dollar exposure under control (2) Impact of a euro at $1.10 vs. $1.05 assumed in the budget Euro millions Before forex hedging After forex hedging Sales (16) (16) EBIT (5) (3) Net income (3) (1) Marginal impact on net income 32
Outlook
Innovation - R&D: A sustained drive focused on core businesses and attractive opportunities Market coverage: Active participation in the industry s consolidation Directly: new branches, expanding sales team Acquisition of distributors Focus on Germany, the United States and new countries Productivity: Ongoing projects, including: Implementation of CRM software Enhancing efficiency in back-offices Outlook Strong sales growth potential and scope for improved profitability 34
Outlook Sales: In 2003, full impact of the acquisitions made in 2002 First half of 2003: growth comparison impacted by high level of 2002 with the euro conversion and a postal rate change in the US Second half of 2003: moderate growth expected Material impact of the dollar s depreciation Profitability: We confirm our target of growing EBIT margin from 20% to 22% in 2004, even with a weak dollar 35
Neopost is preparing for the future From postage meter impression to information flow management
Franking, Neopost s core business Neopost Folders/inserters Certification Franking machines (+ maintenance & financing) Post Offices Payment of postage Senders Secure payments or information about payments Secure invoicing Ease of use 37
Neopost s market drivers Volume of mail... Growth in direct marketing... Volume of parcels.. Mail automation.. Restructuring of the industry. Rate changes...... Postal deregulation.. Technology.. 38
Customers and partners requirements Post Offices and carriers Senders and receivers Secure payments Real-time information CRM / customised prices Confirmation and proof of delivery / traceability Identification of sender / security Stamp replacement Secure invoicing Cost accounting Ease of use Delivery (confirmation and proof) / traceability Integrated marketing Notice of reply mail Disappearance of stamps Moving toward intelligent mail 39
From postage impression to information flow management (1) Neopost Folders/inserters Certification Specialised terminals and on line services Post Offices & carriers Secure information flows Senders and receivers 40
A few examples of Neopost initiatives Development of Neopost Logistic Systems Online shipping, proof of delivery, traceability (contracts with General Motors Spare Parts, Cisco and key French transportation companies) First postal CRM with the French Post Office Successful new projects for stamp users (Hallmark, TPmac, Zeropremium, Kiosks) Development of NBG RF Tags A renewal of the infrastructure for networked franking machines An operational offering of on line services 41
From postage impression to information flow management (2) Intelligent mail.. End of non-digital / IBIP....End of non-connected End of mechanical.. 2000 2001 2002 2003 2004 2005 2006 2007 2008 42
Neopost at the heart of the mail and parcel shipping chain A growing customer base From the current customers toward users of postal contracts, stamp users, transportation companies and national Post Offices Increasingly sophisticated machines Shortening product life A wider range of premium services From printing postage to intelligent mail and on line services (on line : franking, shipping, tracing, postage ) - Strong leverage for growth - Neopost, a pre-eminent player 43
Appendices
A unified and very competitive product range Franking machines IJ 105 IJ 75 IJ 35 IJ 45 IJ 25 SOHO IJ 85 OFFICE MAILROOM MAIL CENTERS 45
A unified and very competitive product range Folders/inserters SI 68 SI 30 SI 60 SI 76 SI 92 OFFICE MAILROOM LARGE MAILROOM 46
Consolidated balance sheets Assets Euro millions 2000 2001 2002 Goodwill 139 160 229 Fixed intangible assets 185 184 276 Fixed tangible assets 124 140 165 Financial investments 7 5 4 Leasing receivables 147 187 198 Long-term deferred tax assets 4 7 41 Inventories 37 34 71 Receivables 131 141 186 Cash & marketable securities 79 112 98 Other short-term assets 25 26 57 Total 878 996 1,325 47
Consolidated balance sheets (cont d) Shareholders equity & liabilities Euro millions 2000 2001 2002 Shareholders' equity 219 253 316 Provisions 12 28 69 Financial debt 301 303 441 Leasing debt 77 103 124 Long-term deferred tax liabilities 11 13 16 Deferred revenues 114 122 142 Other short-term liabilities 144 174 217 Total 878 996 1,325 48