- Sales in 2014 up 4.5 percent to 1.83 billion euros
- EBIT before restructuring slightly above last year at 62 million euros
- One-off restructuring costs of 74 million euros
- Consolidated net income at minus 73 million euros
- Free cash flow at 23 million euros
- Positive trend in the first quarter in terms of order backlog and earnings
For Giesecke & Devrient (G&D) 2014 was a year of restructuring, during which important strategic decisions were made. Yet sales increased by 4.5 percent to 1.83 billion euros. Group earnings (EBIT) were slightly above last year at 62 million euros (2013: 56.2 million euros). However, all three business units – Banknote, Mobile Security and Government Solutions – fell short of their earning targets. Restructuring expenses amounted to 74 million euros. EBIT after restructuring is at minus 12 million euros, while the net loss for the year amounts to 73 million euros.
"This performance can be attributed above all to increasing competitive and pricing pressure in all markets relevant to G&D. The countermeasures implemented so far had been insufficient. Last year we therefore launched an extensive cost reduction program amounting to 100 million euros, with which we will strengthen our profitability for the long term. In addition, we have undertaken structural changes at the company to enable us to better adapt to market and customer demands in future," explains Dr. Walter Schlebusch, Chairman of the Management Board of Giesecke & Devrient. Measures have been taken to strengthen all three business units for the future, including reorganization of the Mobile Security and Banknote business units, and the operational realignment of the Government Solutions business unit. "With the launch of Veridos GmbH – a joint venture by the Government division and Germany's federal mint, the Bundesdruckerei – we are pooling our international activities, giving us good opportunities for growth," commented Schlebusch on the joint venture, which became operational on January 1, 2015. "Despite the current challenges, we are on the right track. Together with the cost reduction program and structural changes, which we have undertaken with a view to the future, the current order situation, the growth markets in Asia and North America, and increasing sales prospects in future segments promise a positive outlook for G&D," continues Schlebusch.
Business Units
The Banknote business unit is market leader in the production of new banknotes, in the field of substrates, security solutions, banknote processing systems, and automated processing technology. It has succeeded in increasing its sales by 5 percent to 887 million euros in the last business year and therefore still accounts for the largest proportion of consolidated sales. Earnings were also positive, predominantly due to good sales in the areas of banknote paper, foils, and banknote security solutions. Sales in compact banknote processing systems and service sales were also significantly improved.
The Mobile Security business unit is one of the world's leading providers of products, services, and complete solutions for payment, secure communication, and identity management. In 2014, sales for this business unit were up by 6.4 percent to 778 million euros, especially in card products for banks due to continuous EMV migration in Asia and America. However, the earnings contribution was once again negative, mainly due to an even more dramatic drop in prices worldwide.
The Government Solutions business unit is a leading provider of government security documents and an integrated provider of ID solutions. Sales came in at 168 million euros, roughly 6 percent less than the previous year figure. The unit did not realize a positive contribution to earnings in 2014. However, in the same period the unit won good new contracts, such as to supply several million passports in Iraq. Signing the contract to found the joint venture Veridos GmbH also laid the foundations for the expansion of international business.
The second division of the Government Solutions business unit – the listed company Secunet, in which G&D holds a 79.43% share – performed well and succeeded in increasing both sales and earnings compared to last year. The principal share of sales growth is attributed to the public sector, due on the one hand to cryptographic products and on the other to a large cyber security product range for public-sector clients.
Outlook
The current healthy order situation will have a positive impact over the coming months. In 2015 G&D forecasts further sales growth and an increase in EBIT slightly above the 2014 figure. Consolidated net income should return to positive territory. The trend in the first quarter confirms this outlook. In addition, there will be initial positive effects of the cost reduction program. G&D will also invest heavily in research and development again this year. Dr. Walter Schlebusch comments "I am confident that we have good growth prospects, with our innovative products and our forward-looking business models. The essential restructuring will give us a boost."
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