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Psion Preliminary Results Presentation
- 2. 2
Agenda
Overview John Hawkins, Chairman
Financial results Fraser Park, CFO
Strategy update John Conoley, CEO
© Psion CONFIDENTIAL psion.com
- 3. 3
Shifting gears in 2010
Continued Shifting focus to Sustainable
margin
improvement
© Psion
X revenue
growthCONFIDENTIAL
= long-term
profits psion.com
- 4. 4
Agenda
Overview John Hawkins, Chairman
Financial results Fraser Park, CFO
Strategy update John Conoley, CEO
© Psion CONFIDENTIAL psion.com
- 5. 5
Adjusted operating profit
GBP million
Analyst consensus 3.2
Normalized operating profit 4.0
Additional inventory provision -5.6
Capitalization of R&D +3.5
Adjusted operating profit 2.0
Restructuring,
-5.0
share-based payments
Reported operating profit -3.1
© Psion CONFIDENTIAL psion.com
- 6. 6
Highlights
FY, GBP m, except dividend, rounded
2009 2008 Change
Revenues 170.0 199.4 -15%
Normalised op profit 4.0 6.0 -33%
Operating cash inflow 31.7 7.0 +353%
2nd interim / final dividend 2.6p 2.5p +4%
Closing cash balance 45.3 41.3 +10%
© Psion CONFIDENTIAL psion.com
- 7. 7
Operating performance
GBP million, rounded
Constant currency comparisons are made between 2009 reported
income statement items and those of 2008 by applying the average
exchange rates for 2009 to the 2008 local currency amounts Constant
Reported
currency
2009 2008 +/- 2008 +/-
Revenues 170.0 199.4 -15% 226.0 -25%
GP before inventory adjustment 66.1 86.4 -23% 97.2 -32%
R&D expenses -11.9 -13.7 -13% -15.1 -21%
Other operating expenses -50.2 -66.7 -25% -75.2 -33%
Normalized operating profit 4.0 6.0 -33% 6.9 -42%
Exceptional inventory adjustment -5.6 - - - -
Capitalization of R&D 3.5 - - - -
Adjusted operating profit 2.0 6.0 -67% 6.9 -71%
Restructuring, share-based pmts. -5.0 -14.9 -66% -18.9 -74%
Reported operating profit -3.1 -8.8 -65% -12.0 -74%
© Psion CONFIDENTIAL psion.com
- 8. 8
Margin development
FY FY H2 H1 FY
% of revenues, rounded
2009 2008 2009 2009 2008
constant
currency
Revenues 100.0 100.0 100.0 100.0 100.0
COGS -61.1 -56.7 -60.9 -61.3 -57.0
GP before inventory adjustment 38.9 43.3 39.1 38.7 43.0
R&D expenses -7.0 -6.9 -6.3 -7.7 -6.7
Other operating expenses -29.5 -33.5 -26.2 -32.9 -33.3
Normalized operating profit 2.4 3.0 6.6 -1.9 3.1
Exceptional inventory adjustment -3.3 - - -6.6 -
Capitalization of R&D 2.1 - 4.1 - -
Adjusted operating profit 1.2 3.0 10.7 -8.5 3.1
Restructuring, share-based payments -2.9 -7.5 2.0 -7.9 -8.4
Reported operating profit -1.8 -4.5 12.7 -16.4 -5.3
Net finance income 0.1 0.6 - 0.1 0.4
Taxation -2.8 -1.3 -4.0 -1.7 -1.3
Net income -4.5 -5.2 8.7 -18.0 -6.2
© Psion CONFIDENTIAL psion.com
- 9. 9
Revenues declined as recession hit
Revenues, GBP million, rounded
% change
226.0 -25%
Total 19.3 -38%
199.4 -15%
Asia 16.3 -26%
170.0
71.9 -26%
12.0
Americas 62.7 -15%
53.0
EMEA 134.8 -22%
120.4 -13%
105.0
2008 constant 2008 reported 2009
currency
© Psion CONFIDENTIAL psion.com
- 10. 10
Gross margin
Gross margin, % of net revenues, rounded
43.3%
Adjusted
38.7% 39.1% 38.9%
Additional inventory
3.3%
6.6% adjustment
35.6% Reported
32.1%
2008 2009 2009 2009
H1 H2 average
© Psion CONFIDENTIAL psion.com
- 11. 11
Significant cost reductions
GBP million Opex
COGS
2008 cost as reported 81 31 112
Savings 35 10 -46
Currency 7 3 +10
52 24 76
Investments in growth 11
2009 exit rate 63 24 87
© Psion CONFIDENTIAL psion.com
- 12. 12
Operating cash flow
GBP million, rounded
31.7 Adjusted
9.9
Exceptional items
21.8 Reported
7.0
5.9
1.1
2008 2009
© Psion CONFIDENTIAL psion.com
- 15. 15
Tax expense
GBP million, rounded
FY FY H2 H1 FY
2009 2008 2009 2009 2008
constant
currency
Current -0.1 -3.3 1.4 -1.5 -3.6
Deferred -4.7 0.6 -4.8 0.1 0.6
Total -4.8 -2.7 -3.4 -1.4 -3.0
© Psion CONFIDENTIAL psion.com
- 17. 17
Agenda
Overview John Hawkins, Chairman
Financial results Fraser Park, CFO
Strategy update John Conoley, CEO
© Psion CONFIDENTIAL psion.com
- 18. 18
Earning the right to grow
© Psion CONFIDENTIAL psion.com
- 19. 19
Progress, but still in transition
Cost and cash
Channel progress
Improving culture
Investing in growth
Op margin improving
© Psion CONFIDENTIAL psion.com
- 20. 20
Expanding our partner program
“Psion tops 2nd annual “Best Channel Vendors”
“Psion tops 2nd annual “Best Channel Vendors”
Product sales breakdown issue in the data collection and mobility
issue in the data collection and mobility
category”
category”
Indirect - Business Solutions Magazine
- Business Solutions Magazine
Direct
36% 40% 40% “Logistics Professionals Hail Psion partner
“Logistics Professionals Hail Psion partner
50% CLEOR as the "King of the Supply Chain”
CLEOR as the "King of the Supply Chain”
64% 60% 60%
50%
“Psion teams with Ingram Micro to bring more
“Psion teams with Ingram Micro to bring more
value and business support to channel
value and business support to channel
partners”
partners”
H1 08 H2 08 H1 09 H2 09
© Psion CONFIDENTIAL psion.com
- 21. 21
Expanding our partner program
Further progress in US
• One third of US resellers transferred to distribution so far
• 60 net new resellers signed by Ingram in 2009
• $550k through US resellers in Q1 09 forecast to treble in Q1 10
Supply agreement signed with BT Global Services
€1.2m order from European distributor this week
Launch of our first Global Partner Programme
© Psion CONFIDENTIAL psion.com
- 22. 22
Other operational improvements
70 supply chain projects
Beyond
Revision of incentive plans cost cutting
Enhanced new product introduction process
Improved sales and operations planning
New sales management tools (pilot implementation)
Modularity
© Psion CONFIDENTIAL psion.com
- 24. 24
Our growth challenge
© Psion CONFIDENTIAL psion.com
- 25. 25
Customer needs are diverse
Customer Customer Customer Customer
picture picture picture picture
Customer Customer Customer Customer
picture picture picture picture
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- 27. 27
A complicated starting position
Not meeting
market needs
Outgunned by larger
competitors
Poor
financial results
© Psion CONFIDENTIAL psion.com
- 28. 28
Our path to growth
© Psion CONFIDENTIAL psion.com
- 32. 32
The impact of modularity
# variations # parts Time to market
15-24
13,000 600 months
6-12
7,000 400 months
Today Tomorrow Today Tomorrow Today Tomorrow
© Psion CONFIDENTIAL psion.com
- 34. 34
Leveraging resources
Psion
+ Large
partners players
tomorrow
Innovation
MM
OS
OS
Psion,
the rest
yesterday
R&D resources
© Psion CONFIDENTIAL psion.com
- 36. 36
Everyone wins
Lower Upgrading and changing functions
customer TCO Rapid / easy serviceability
Best possible Buy exactly what you need, today
customer fit Adjust if you need to, tomorrow
Create new Innovative business model
partner business opportunities Differentiated market offer
© Psion CONFIDENTIAL psion.com
- 37. 37
OSM: sustainable advantage
Larger Smaller
competitors competitors
Limited
Why change?
resources
• Organizational and
cultural resistance
• R&D
• Potential 2-year journey Psion
from deciding to
• Partner network
compete on same basis opportunity
• Might want to join rather
• Existing strategy working
than combat OSM
or half working
• Lots to lose, less to win
© Psion CONFIDENTIAL psion.com
- 39. 39
Current trading and outlook
Modest improvement in market conditions continuing
Greater sales activity
2010 - a year of evolution:
- Launch of first new products on modular platform
- Continued attention to costs and cash generation
Previously stated goal of 10% operating margin still stands
© Psion CONFIDENTIAL psion.com
- 40. 40
Appendix: detailed financials
© Psion CONFIDENTIAL psion.com
- 41. 41
Income statement
FY FY H2 H1 FY
GBP million, rounded
2009 2008 2009 2009 2008
constant
currency
Revenues 170.0 199.4 85.5 84.5 226.0
COGS -103.9 -113.0 -52.1 -51.8 -128.8
GP before inventory adjustment 66.1 86.4 33.4 32.7 97.2
R&D expenses -11.9 -13.7 -5.4 -6.5 -15.1
Other operating expenses -50.2 -66.7 -22.4 -27.8 -75.2
Normalized operating profit 4.0 6.0 5.6 -1.6 6.9
Exceptional inventory adjustment -5.6 - - -5.6 -
Capitalization of R&D 3.5 - 3.5 - -
Adjusted operating profit 2.0 6.0 9.1 -7.2 6.9
Restructuring, share-based payments -5.0 -14.9 1.7 -6.7 -18.9
Reported operating profit -3.1 -8.8 10.8 -13.9 -12.0
Net finance income 0.1 1.2 - 0.1 1.0
Taxation -4.8 -2.7 -3.4 -1.4 -3.0
Net income -7.8 -10.3 7.4 -15.2 -14.0
Adjusted EPS -3.18 2.58
Reported EPS -5.52 -7.34
© Psion CONFIDENTIAL psion.com
- 42. 42
Segment analysis
GBP million
226.0 -25%
199.4 -15%
46.0 -12%
40.6 0%
170.0
Customer
service 40.6
and support
Hardware, 180.0 -28%
software, and 158.8 -19%
professional 129.4
services
2008 constant 2008 reported 2009
© Psion CONFIDENTIAL psion.com
- 43. 43
Balance sheet
GBP million, rounded December June December December
2009 2009 2008 2008
constant currency
Goodwill and intangibles 105.4 99.4 113.9 105.4
Fixed assets 9.9 9.5 11.2 11.4
Deferred tax and prepayments 7.5 10.0 10.9 11.5
Total long term assets 122.9 118.9 136.0 128.3
Inventory 18.4 17.5 37.1 35.8
Trade and other receivables 45.6 39.6 57.6 54.1
Current tax 3.7 1.6 1.9 1.1
Cash 45.3 39.9 41.3 40.0
Total current assets 113.0 98.6 137.9 131.0
Trade and other payables -51.2 -41.2 -53.8 -53.5
Current tax liabilities -2.2 -2.3 -2.4 -0.3
Total current liabilities -53.4 -43.5 -56.2 -53.8
Total long term liabilities -4.9 -5.9 -7.3 -7.3
Net assets 177.6 168.1 210.4 198.2
© Psion CONFIDENTIAL psion.com
- 44. 44
Inventory analysis
GBP million, rounded
42.3
37.1
Finished goods 8.8
1.3 8.5
Work in progress
1.3
17.5 18.4
2.5 2.7
Components 32.2 0.8 1.3
27.3
14.2 14.4
December December June December
2008 2008 2009 2009
constant currency
© Psion CONFIDENTIAL psion.com
- 45. 45
Cash flow
GBP million, rounded FY FY H2 H1
2009 2008 2009 2009
Normalised operating profit 4.0 6.0 5.1 -1.1
Depreciation and amortization 4.8 5.0 2.3 2.5
Loss on sale of fixed assets 0.2 0.1 0.1 0.1
Provision movement -1.4 1.1 1.0 -2.4
Discontinued -0.8 -0.1 -0.2 -0.6
Working capital excluding exceptionals 24.9 -5.1 8.2 16.7
Continuing operating cash flow 31.7 7.0 16.5 15.2
Cash spend on exceptionals -9.9 -5.9 -2.9 -7.0
Tax and financing -3.2 -3.2 -1.8 -1.4
Capital expenditure -4.1 -4.0 -2.0 -2.1
Capitalized costs -3.5 - -3.5 -
Proceeds of disposals 0.1 6.6 0.1 -
Dividends paid -5.2 -5.2 -1.7 -3.5
Share issued - 1.0 - -
Cash flow before FX adjustment 5.9 -3.7 4.7 1.2
FX adjustment -1.9 6.6 0.6 -2.5
Net cash flow 4.0 2.9 5.3 -1.3
© Psion CONFIDENTIAL psion.com