Giesecke & Devrient Sets the Course for the Future

Giesecke & Devrient Sets the Course for the Future

2005 financial year brought to a successful close–Sales grow 7 percent–Group targets growth markets with its Government Solutions business unit and New Business division

Munich, May 23, 2006–Fiscal 2005 was another successful year for Giesecke & Devrient (G&D). Consolidated net sales rose 7 percent from EUR 1.16 billion to EUR 1.24 billion in 2005. G&D also raised earnings (EBIT) 8 percent, generating a total of EUR 80.7 million. That equals a 6.5 percent return on sales. Net income stood at EUR 48.5 million. During the past financial year, capital expenditure amounted to EUR 50.5 million, up 5.6 percent on the previous year’s level. The Company had more than 7,500 people on its payrolls in 2005.

“Our healthy financials show that our Company’s position in our current core markets is sound and strong. Throughout 2005, G&D continued to grow profitably. And the Company’s future growth can build on a solid foundation of financial stability and earnings power,” said Dr. Karsten Ottenberg, Chairman of the Management Board and CEO of Giesecke & Devrient at the annual report press conference. The Banknotes business unit reported above-average growth and consistently good profit margins. In the Paper Production and Banknote Printing segments, sales went up from EUR 586 million in 2004 to EUR 640 million–a 9.2 percent sales increase. “Cash and the efficient organization of the cash life cycle still play a big role the world over. Because of this, our banknote operations will remain a core business and one of our main drivers,” said Ottenberg.

Prices continue to plummet in card business

The Card business unit stayed the course in what remains a difficult market environment. The card industry is facing fiercer and fiercer competition as rivals merge and fuel further market consolidation. “Despite plummeting prices, we closed out the year with EUR 595 million in revenues in this segment, which translates into 4.7 percent sales growth,” explained Ottenberg.

The Card business unit effectively improved its earnings power and defended its share of the global market, which it had aggressively expanded the previous year. G&D consistently broadened the positioning of its Industry and Government division. One of the biggest growth drivers of 2005 was the launch of the Austrian social insurance e-card. In only 6 months, the Company had delivered 8 million cards. The system has been readily accepted and proven its value in the field. “After Taiwan, G&D views the e-card project as another milestone in implementing successful health care card solutions–a milestone that underscores our global leadership in this future market,” said Ottenberg.

Future markets

Germany also took a crucial step closer to launching the electronic health care card in 2006. AOK, BKK and IKK are the first insurance companies to roll out the G&D-engineered Card Application Management System (CAMS). Their involvement means over 40 million cards–or more than 50 percent of the total German market–will be managed by G&D CAMS in around 15 data centers. CAMS is the nerve center of the new health care card system since it controls all the functions in the card’s life cycle.

Government contracts represent a growth market with enormous upside. Besides the health care card, G&D’s new Government Solutions unit has taken over several other major national and international projects since January 1, 2006. They include the e-passport, the electronic personal ID card, and the electronic driver’s license. This business unit is also in charge of the visa, transit and security printing segments. Being a capable partner for electronic ID systems, G&D was awarded a contract by the Macedonian government in late 2005 to provide a combined system for personalizing e-passports, personal ID cards and driver’s licenses as well as all the associated documents. The contract includes the delivery of 1.5 million electronic passport documents with integrated microchips, 1.8 million personal identity cards and 500,000 driver’s licenses. More contracts are expected to come in soon from EU member states.

Company’s strategic alignment

To leverage the company’s potential more effectively and accelerate the development of new technologies and markets for G&D, the Company was reorganized on January 1, 2006, into three market-driven business units. The Banknotes business unit consists of the Paper, Printing and Processing divisions. The Cards and Services business unit, on the other hand, comprises the Payment and Telecommunications divisions. Government business was consolidated into a separate business unit called Government Solutions. Finally, the New Business division was created to hone the company’s innovative edge significantly. “New Business allows G&D to focus on innovative issues and contribute its extensive security expertise to them. For example, we add new methods for securing access to digital content to established technologies and applications, or develop security-related applications for mobile devices,” said Ottenberg. One such application is a solution developed and operated by G&D that allows secure cashless payments to be made with mobile phones. A secure chip in the phone has a built-in payment application that can be personalized using an “over-the-air interface”, permitting banks to easily manage, activate and update the chip-based application. “This solution is a prime example of how technological know-how can be used in an interdisciplinary fashion. This results in synergies which we enhance in order to leverage growth potential,” explained Ottenberg.

About Giesecke & Devrient:

Giesecke & Devrient (G&D), based in Munich, Germany, is an international technology group operating subsidiaries and joint ventures throughout the world. Founded in Leipzig in 1852, G&D began as a printer of securities, and later specialized in banknote production. The company has been developing solutions and complete systems for automatic currency processing since 1970. Today, G&D is also a technology leader in smart cards, and a solutions provider in a wide range of fields, including telecommunications, electronic payments, identification, health, transportation, and IT security (PKI). In fiscal 2005, the Group employed more than 7,500 people and generated a revenue of €1.24 billion.