Psion Preliminary Results Presentation

1

2009 preliminary results
4 March 2010

© Psion CONFIDENTIAL psion.com

2

Agenda

Overview John Hawkins, Chairman

Financial results Fraser Park, CFO

Strategy update John Conoley, CEO


3

Shifting gears in 2010

Continued Shifting focus to Sustainable
margin
improvement
© Psion
X revenue
growthCONFIDENTIAL
= long-term
profits psion.com

4

Agenda





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


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%

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%

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


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

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

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


12

Operating cash flow

31.7 Adjusted

9.9
Exceptional items

21.8 Reported
7.0

5.9
1.1
2008 2009


13

Working capital
DSO’s DSI’s


14

Platforms: capitalization of R&D

2010 Longer product life time


15

Tax expense

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


16

Contingent liabilities

2.6

16.2
13.6

2008 Currency and claims 2009


17

Agenda





18

Earning the right to grow


19

Progress, but still in transition

Cost and cash 
Channel progress 
Improving culture 
Investing in growth 
Op margin improving 

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


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


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

23

First preview of new products


24

Our growth challenge


25

Customer needs are diverse

Customer Customer Customer Customer
picture picture picture picture

Customer Customer Customer Customer
picture picture picture picture


26

Today’s devices: the opposite of diverse...


27

A complicated starting position

Not meeting
market needs

Outgunned by larger
competitors

Poor
financial results


28

Our path to growth


29

Two drivers of growth


30

A new business model

OSM
open source mobility


31

Defining modularity

Defined interfaces and
modules

Platforms

Modular, flexible
development process


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

33

Leveraging open innovation


34

Leveraging resources

Psion
+ Large
partners players
tomorrow
Innovation

MM
OS
OS
Psion,
the rest
yesterday

R&D resources


35

Innovation through collaboration


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


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


38

Excited about the future

OSM
open source mobility


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


40

Appendix: detailed financials


41

Income statement
FY FY H2 H1 FY
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


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


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


44

Inventory analysis
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


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


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