2 0 1 0 Full-year results March-April 2011 1
DISCLAIMER Safe Harbour Statement This presentation contains forward-looking statements (made pursuant to the safe harbour provisions of the Private Securities Litigation Reform Act of 1995). By their nature, forward-looking statements involve risk and uncertainty. Forward-looking statements represent the company s judgement regarding future events, and are based on currently available information events. Consequently the company cannot guarantee their accuracy and their completeness and actual results may differ materially from those the company anticipated due to a number of uncertainties, many of which the company is not aware of. For additional factors that may cause the company s actual results to differ materially from expectations and underlying assumptions, please refer to the reports filed by the company with the Autorité des Marchés Financiers. 2
2010 2010 Highlights 2010 Financial Statements Focus on Neopost North America 2011 Outlook 3
2010 HIGHLIGHTS
2010 KEY FIGURES Sales: 965.6m Annual sales growth (At constant exchange rates) 2010 quarterly sales growth (At constant exchange rates) 7% 6% +6.1% 7% 6% 5% 4% 3% 2% +2.4% +2.0% 5% 4% 3% 2% +1.4% +3.3% +3.6% 1% 0% -1% 2007-0.3% 2008 2009 2010 1% 0% -1% -0.4% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Current operating margin*: 25.7% of sales Net margin: 16.2% of sales Rebound of the activity after having well resisted during the crisis 5 * Current operating income / total sales
2010 KEY POINTS (1/2) Numerous product launches: IS 5000 and IS 6000 in the USA IS 280 in the United Kingdom Roll-out of IS 350 to IS 480 on all markets DS 75 150 140 130 Success of high end folders/ inserters Number of DS-100/140/1000/1200 sold per semester (Rebased H1-09 = 100) 120 110 100 H1-09 H2-09 H1-10 H2-10 Rebound of the activity after having well resisted A great year for products launches during the crisis 6
2010 KEY POINTS (2/2) Success of the integration of dealers acquired in 2009 In the USA In Scandinavia Performance of Satori 2009: $15m (including $3m of inter company sales) 2010: +10% growth Deployment in the United Kingdom Improved EBIT margin Rebound of the activity after having well resisted Successful integrations during the crisis 7
UPDATE ON MAIL VOLUMES Mail volumes in the USA 2009 2010 USPS in the USA Continuing increase of the marketing mail in 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Transactional mail structurally decreasing 10% 5% 0% La Poste in France Mail volume declining by 3.5% in 2010 versus -5% in 2009-5% -10% -15% 1st Class mail Standard mail Deutsche Post Mail volume declining by 3.5% in 2010 Slight increase of the volumes in Q4-20% Evolutions in line with Neopost s view 8
2010 FINANCIAL STATEMENTS 9
2010 SALES Sales (in million) 990 970 +34.3 965.6 950 930 910 890 870 913.1 +18.2 850 FY 2009 Change* Currency FY 2010 impacts Sales growth of +5.8% in 2010, +2.0% at constant exchange rates 10 * Excluding currency impacts
SALES BY AREA 2010 / 2009 change* 2010 sales: 965.6m North America France UK +4.8% -2.4% -2.9% Rest of world 14% Germany 7% North America 41% Germany +1.2% UK 12% Rest of world Total Group +8.3% +2.0% France 26% Further growth in North America, contrasted performance elsewhere 11 * At constant exchange rates
SALES GROWTH PER REVENUE TYPE 2010 / 2009 change* 2010 sales: 965.6m Recurring revenue ** +1.1% Rental & leasing 29% Services and supplies 40% Equipment sales +4.0% Equipment sales 31% Four consecutive quarters of growth in equipment sales 12 * At constant exchange rates ** After adjustment for changes in revenues from postal rate changes, recurring revenue increased by about 3%.
SALES GROWTH PER BUSINESS LINE 2010 / 2009 change* 2010 sales: 965.6m Mailing systems ** -1.1% Document and logistics systems 31% Documents and logistics systems +9.5% Mailing systems 69% Good performance of the Document systems 13 * At constant exchange rates ** After adjustment for changes in revenues from postal rate changes, mailing systems revenue would have increased by about 1%.
CURRENT OPERATING MARGIN 2009 2010 Change In million % Sales 913 966 +5.8% Gross margin As % of sales 726 79.5% 758 78.5% +4.4% EBITDA 297 314 +5.6% As % of sales 32.5% 32.5% Current Operating Income As % of sales 235 25.7% 248 25.7% +5.7% A high level of profitability 14 /$ 2010 = 1.32 and 2009 = 1.40 ; / 2010 = 0.86 and 2009 = 0.89
PERFORMANCE ANALYSIS Positive factors Negative factors Optimization plan Mix effect Adjustment of production facilities Rebound of equipment sales Success of high-end folders / inserters R&D IFRS impacts Rate change: - 11m in revenues End of R&D projects related to the IS range Subcontracting Short-term dilutive impacts of acquisitions Control of operating costs Natural currency hedge Distributors Targeted acquisitions Good control of the operating margin 15
1500 FINANCING STRUCTURE In million 1000 500 0 855 881 842 825 July 09 January 10 July 10 January 11 558m Natixis / BPCE private placement availability Revolving line availability Revolving line drawn (1) Maturity: June 2013 Rate: Euribor + 20bp OCEANE Maturity: February 2015 Rate: 3.75% Crédit Agricole Private Placement Maturity: December 2012 Rate: 4.09% USPP (1) Maturity: September 2010 Rate: 4.83% and 4.52% Maturity: September 2014 Rate: Euribor + 190bp After reimbursement of the USPP, Neopost has Net margin maintained at a high level sufficient financing capacity 16 (1) EUR/USD : 1.3966 at 31/01/2010, 1.3028 at 31/07/10 and 1,3692 at 31/01/2011
COST OF DEBT EVOLUTION Net cost of debt In million 1 st Semester 2009 (13.4) 2010 (18.4) Variation % 2 nd Semester (16.6) (13.5) Total (30.0) (31.9) Important decrease of the cost of debt between H1 and H2 2010: Savings coming from the USPP reimbursement: - 2,4m Exceptional items: - 2,5m 2011 net cost of debt is expected between 30m and 31m A financial result under control 17
NET INCOME In million 2009 2010 Change % Operating Income 235 248 +5.7% Net cost of debt (30) (32) Other financial gains or losses - (1) Taxes (57) (59) Share of associated companies - 1 Net Income 148 157 +6.1% As % of sales 16.2% 16.2% Net Attributable Income 148 156 +5.3% EPS 4.85 4.96 +2.3% Fully diluted EPS 4.68 4.68 +0.0% A high level of Net Margin 18 /$ 2010 = 1,32 and 2009 = 1,40 ; / 2010 = 0,86 and 2009 = 0,89
CASH FLOW GENERATION In million 2009 2010 Change % EBITDA 297 314 +5.6% Other items 5 (8) Cash flow* 302 306 Change in Working Capital Requirement (16) (8) Change in lease receivables (38) (51) Interests and Income taxes paid (75) (62) Cash flow from Operations 173 185 +6.7% Investments (134) (80) Cash flow after Investments 39 105 High cash flow from operations that are highly recurring and growing 19 * Before net cost of debt and income tax /$ 2010 = 1,32 and 2009 = 1,40 ; / 2010 = 0,86 and 2009 = 0,89
CHANGE IN WORKING CAPITAL REQUIREMENT Details of the variation In million 2009 2010 Inventories Accounts receivable Prepaid income Other payables and receivables Total excluding leasing (7) (13) 2 2 (16) - 14 3 (25) (8) A structurally negative WCR at - 196m 20 /$ 2010 = 1.32 and 2009 = 1.40 ; / 2010 = 0.86 and 2009 = 0.89
HEALTHY FINANCIAL STRUCTURE In million Financial debt Cash and marketable securities Net financial debt 31/01 2010 855 (139) 716 31/01 2011 825 (136) 689 Shareholders equity Net debt / shareholders equity Net debt / EBITDA ratio EBITDA / financial charges* ratio 490 146% 2.4 9.9 606 114% 2.2 9.8 A strengthened equity level and covenants** that are easily met 21 * Financial charges= cost of debt ** Minimum equity of 400m and maximum leverage ratio of 3.25
SOLIDITY OF NEOPOST BALANCE SHEET Equity: 606m at end-january 2011 versus 490m at end-january 2010 Leasing portfolio as at end-january 2011: 572 M +10% versus end-january 2010* Rental Net present value of future rental cash flows above 300m Net debt: 689m at end-january 2011 Leasing + rental future cash flows about 900m i.e. >> 100% of net debt Acquisitions de nouvelles technologies Debt is totally backed by future cash flows payantes 22 * At constant exchange rates
INCREASE OF THE DIVIDEND IN 2010 5 5 4 4 In 5.01 3.80 4.85 3.80 4.96 3.90 EPS Dividend 3 3 2 2 1 1 0 Pay-out ratio: 100% Cash Of which 59% Cash Of which 2008 2009 2010 75% 78% 79% 52% Cash 2.25 Interim dividend 1.65 A proposed dividend of 3,90 per share for FY 2010, i.e. a yield above 6%* 23 * Based on 27 March 2011 closing price ( 64.31)
FOCUS ON NEOPOST NORTH AMERICA 24
NORTH AMERICA: THE WORLD S LARGEST AND MOST DYNAMIC MARKET North America is the world s largest market 50% + of world s total volume of mail 50% + of mailing systems global installed base North American postal organizations are extremely dynamic Long track record in encouraging the mandatory renewal of the installed base (decertifications) Early adopters of new technologies: digitalization, connectivity, IBI, Shape-Based Pricing Technological innovation as a driver for operational efficiency / productivity Mail accounts for an increasing share of marketing expenditure From 19.5% of total US advertising spending in 2002 to 23% in 2009 25
NORTH AMERICA: NEOPOST S LARGEST MARKET North America accounts for 41% of Neopost total revenues in 2010 Neopost employs 1,800 people in North America North America has been Neopost engine for growth in 2010 and momentum will remain positive in 2011 and beyond Neopost key marketing initiatives and product launches target North America first, prior to global roll-out Longstanding partnership with US and Canadian postal organizations: Shared vision, common goals 26
NEOPOST NORTH AMERICA Canada : Headquarters in Toronto 20%* market share 2010 revenues: CAD 36m Sales force: 60 people including dealers USA : Headquarters in Milford, CT 18%* market share 2010 revenues: USD 490m Sales force: 800 people including dealers Satori HQ HQ Logistic center Call center R&D 27 * in percentage of the installed base of franking machines end of 2010
NORTH AMERICA: A STRUCTURAL OPPORTUNITY FOR NEOPOST Neopost, the North American challenger # 2 in Canada with 20% market share* # 2 in the US with 18% market share* Neopost has already been capturing a growing share of North American total revenues Despite recession, Neopost has been growing faster than market average at +3% per year from 2007 to 2010 550 500 450 North American sales in USD millions CAGR @+3% 400 2007 2008 2009 2010 28 *of mailing system installed base - Source USPS and Canada Post
NORTH AMERICAN DECERTIFICATION ECHO: A MARKET OPPORTUNITY FOR NEOPOST 2011 2012 2013 2008 2006 Decertification of all electromechanical machines in Canada and partially in the USA 2007 Shape-Based Pricing in the USA Decertification of the remaining electro-mechanical machines in the USA With an average 5 year leasing period, past decertifications will continue to bring boosts of activity 29
CONSISTENT ROLL OUT OF NEOPOST STRATEGY IN NORTH AMERICA Launch of new innovative products Optimization of distribution Promotion of leasing and financial services Marketing of services Operational efficiency in particular through 2008/09 restructuring Creating a new culture among employees Neopost has prepared itself for seizing the decertification echo opportunity 30
TIMELY LAUNCH OF MAILING SYSTEMS Price in $k 15 2008 IS-6000 2010 2011 IS-480 IS-5000 2011 IS-440 IS-460 2010 1 IS-280 IS-350 IS-420 2011 Volume 10-30 envelopes / day 30-200 envelopes / day >200 envelopes / day 31
FOLDERS/INSERTERS: A RANGE AMPLY RENEWED Price in $k 150 DS-1200 2009 DS-200 2011 DS-1000 2008 DS-100/140 2008 DS-86 2007 3 DS-35 2011 DS-62 2006 DS-75 2010 DS-80 2007 Office Mailroom Mail center Production 32
A CONTINUOUS MOVE TOWARDS A MORE DIRECT DISTRIBUTION The goal is to be direct in highly dense metropolitan areas From 31%* direct in 2004 to 57%* direct in 2010 in the US 100 80 60 40 57%* direct 43% indirect 20 0 2004 2005 2006 2007 2008 2009 2010 Key recent acquisitions: Baltimore, Florida, San Diego, Connecticut, Los Angeles, New York/Long Island, Atlanta, Philadelphia, Washington DC Further acquisitions still possible 33 *Percentage of the installed base covered by a direct distribution
BENEFITS OF A MORE DIRECT DISTRIBUTION Capture 100% of revenues Deployment of Neopost s business model Grow recurring revenues Leasing and financial services Maintenance and other services Increase cross selling between mailing and document systems More consistency in the deployment of the marketing strategy Better access to large and national accounts Ability to define the pace of investments [Moving direct boasts effective leverage over operations] 34
DISTINCTIVE DISTRIBUTION MODEL Combine the best of direct control and dealer s entrepreneurial spirit Drive decision making to the market level Centralize all non-customer facing activities Roll-out market by market Local decision-making entails faster customer response 35
PROMOTION OF LEASING A high value added service High probability of replacement of equipment at end of contract Ability to bundle additional services High profitability Leasing expansion Increased penetration* +50% in 5 years Dealer acquisitions Around 60% of the installed base covered with leasing 450 350 250 North American leasing portfolio in USD millions CAGR @+18% 150 2005 2006 2007 2008 2009 2010 A critical tool to plan for equipment renewal in the context of the decertification echo 36 *Penetration rate: hardware sales leased / total hardware sales
DEVELOPMENT OF SERVICES Postage financing Service launched in 2006 Attachment rate* reached 60% in 2010 Online services Available thanks to mailing systems digital technology /connectivity Attachment rate* around 30% in 2010 Rate change protection (RCP) In 2010, RCP represented 60%+ of rate change revenues in North America Maintenance Increased attachment rate Dealer acquisitions Potential to further increase recurring revenues will be boosted by opportunity of decertification echo 37 *Attachment rate: number of service contract / new machine
2008-2009 US OPTIMISATION PLAN R&D: merger of 3 US centres into 1 (Austin) Supply chain: 1 North American logistics platform (Memphis) plus introduction of direct shipment US distribution: Combined 3 separate entities to create Neopost USA Closed all West coast operations and established headquarters in CT, including the leasing company Consolidated of all call center activities in Dallas, TX Established a cohesive management team for Neopost USA A stronger organisation creating a new momentum 38
CREATING A NEW CUSTOMER-CENTRIC CULTURE A differentiating culture versus competition A drive for excellence in customer experience and employee satisfaction NEOPOST WINS INTERNAL COMMUNICATION AWARD IN CANADA TORONTO, ON 10 March 2011 Neopost internal communications campaign received a prestigious 2010 Silver Leaf Award for excellence in business communication, presented by the International Association of Business Communicators (IABC). According to Neopost Canada president, Lou Gizzarelli, internal communications helps foster a customer-centric culture: It helps Neopost to differentiate itself from its competitors. As a result of our efforts, customer satisfaction is up, sales are up, employee engagement is up. Mr. Gizzarelli added: Our 2010 employee engagement survey results showed substantial gains in our customer-centric culture. And an amazing 96% of our Canadian team indicated they had a good understanding of their business unit s goals and objectives. We achieved that company-wide alignment by focusing on clear and consistent internal communications. It works. 39
LOW-END: A NEW GROWTH POTENTIAL Most of our US growth is today achieved in the Mid/High-end segment Total US Meter Population* The Low-end segment is very significant We have a lower market share in that segment It is a profitable segment, which requires a specific approach Low-end 70% Mid-end 20% High-end 10% 40 * Based on USPS published data and Neopost estimates
LOW-END INITIATIVE Creation of a dedicated Small Business Solutions Group Set up the right sales and service organization Increase market share in the low-end segment, and contribute to recurring revenue growth Handle remotely the lower end of the market With the neodirect sales channel Focus field sales professionals on higher $ value sales Increase field sales productivity and revenue Optimize distribution costs 41
CONCLUSION Completely realigned efficient organization Optimized and more direct distribution network More maturing leases allowing for hardware growth coupled with strong lease portfolio management Strong innovative renewed product portfolio Higher level of services attachment rate which will translate in higher recurring revenues for the future Strong customer-centric culture Low-end initiative Significant growth opportunities in North America 42
2011 OUTLOOK
2011 OUTLOOK Good momentum in North America More contrasted performance in Europe Sales growth at constant exchange rates Expected between 2% and 4% Current Operating Margin expected Expected between 25.5% and 26% of sales 44
APPENDIX 45
CONSOLIDATED BALANCE SHEET (1/2) Assets In million 31/01 2010 31/01 2011 Goodwill 748 755 Intangible fixed assets 66 73 Tangible fixed assets 140 135 Other non-current financial assets 15 26 Other non-current receivables 19 19 Leasing receivables 512 572 Deferred tax assets 15 12 Inventory Accounts receivables 56 188 57 183 Other current assets 72 88 Cash & marketable securities 139 136 TOTAL 1,970 2,056 46
CONSOLIDATED BALANCE SHEET (2/2) Liabilities In million 31/01 2010 31/01 2011 Shareholders equity 490 606 Non-current provisions 9 10 Non-current financial debt 430 431 Short-term financial debt 425 394 Deferred tax liabilities 54 74 Other non-current liabilities 27 16 Prepaid income 189 195 Current financial instruments 2 1 Other current liabilities 344 329 TOTAL 1,970 2,056 47
DEBT STRUCTURE Private placement with Crédit Agricole Regional Banks 133m at a fixed rate (4.09%) Maturity: December 2012 Revolving credit 750m at variable rates, EURIBOR or LIBOR +20bps Multi-currency drawings the currency of future cash flow Maturity: June 2012, extended to June 2013 for 675m Acquisitions Simple de nouvelles debt structure technologies payantes 48
DEBT STRUCTURE Banques Populaires / Caisses d Epargne / Natixis private placement 175m redeemable revolving loan Euribor +190bp Maturity: September 2014 OCEANE 300m, 3,622,750 convertible bonds Maturity: 1 st February 2015 Interest: 3.75% 30% premium on reference share price of 63.70, i.e. 82.81 Dividend protection clause Funds not yet drawn down: 558m as at 01/31/2011 covering future needs 49