Long history in security printing and growth potential

In FY24, Security Printing generated c 34% of group revenue, Book Retailing 49%, Industrial Systems 10% and Publishing and Digital combined generated 7%. The company’s most compelling growth opportunity is through Procivis, capitalising on the EU eIDAS 2.0 regulation, which was the subject of a recent positive vote in Switzerland, which requires digital wallets by 2026.

Consistent growth towards strategic targets

Orell Füssli delivered outstanding FY24 results and momentum continued into H125, with revenue of CHF120.1m (+12.1% y-o-y) and EBIT of CHF10.2m. Revenue expansion far exceeded the company’s organic growth target of 4–6% and demonstrated strong operational leverage (H125 vs H124). The Security Printing division won two new central bank key customers in 2024, providing multi-year contract visibility, and is operating at full capacity in 2025.

Strategic targets may be reviewed in November

One of the company’s targets is to generate CHF300m in revenue by FY28, supported by digital and acquired revenue of CHF30–50m. It targets an EBIT margin of at least 8%. Given both the organic and acquired growth in recent periods and the fact that it exceeded the margin target in FY24 and H125, it seems likely that Orell Füssli will review these targets. It will host a CMD on 11 November in Zurich, at which the revised targets are likely to be discussed.

Valuation: SOTP implies a target of CHF168.5/share

Orell Füssli operates under four divisions, with two stable cash-generating divisions accounting for the lion’s share of value. We have chosen to value the company on a sum-of-the-parts (SOTP) basis and on our estimates, we value Orell Füssli at CHF168.5/share, which implies that the share currently trades at a c 32% discount to our valuation.

What do we like?

• Exceptional financial performance with strong momentum: Orell Füssli delivered outstanding FY24 results, with revenue of CHF252.5m (+8.7% y-o-y) and EBIT of CHF22.6m (+24.5% y-o-y), representing an EBIT margin of 8.9%. The momentum continued into H125 with revenue of CHF120.1m (+12.1% y-o-y) and EBIT of CHF10.2m. Revenue expansion significantly exceeded the company's organic growth target of 4–6% and demonstrated greater operational leverage in H125 versus H124.
• Strong order visibility with expanding geographical presence: the Security Printing division secured two new central bank key customers in 2024, providing multi-year contract visibility while operating at full capacity through 2025. Orell Füssli maintains strong positions in Switzerland, Central and South America, and Africa, benefiting from a diversified customer portfolio with continued global banknote volume growth of 4–6% per year driven by population growth and limited digital banking penetration in emerging markets.
• Market-leading book retail position despite structural headwinds: Orell Füssli Thalia maintains Switzerland’s leading book retail position, with more than 50 stores, and has successfully implemented an omnichannel strategy similar to Waterstones’ approach. According to management, despite weak Swiss consumer sentiment, the division increased H125 revenue through operational excellence and selective store expansion.
• Strategic M&A execution strengthening the education portfolio: the March 2025 acquisition of Verlag SKV accelerated growth in the Swiss education market, particularly commercial and business education, where commercial apprenticeships account for more than 12,000 students annually. With recurring annual fees, Verlag SKV's high-margin digital platform model enhances portfolio quality.
• Digital identity opportunity with Procivis gaining traction: Procivis capitalises on the momentum of the EU’s electronic identification, authentication and trust services (eIDAS 2.0) regulation, with EU member states required to offer digital identity wallets by the end of 2026. Prestigious contract wins to date include the US Department of Homeland Security and operational deployment in the town of Zug, which demonstrate technology credibility and Procivis’s strong position for European expansion.
• Robust balance sheet supporting progressive dividend policy: an equity to total assets ratio of 73.8% and strong cash generation (CHF28.2m in operating cash flow in FY24) supported FY24’s dividend increase (+12.8% y-o-y) to CHF4.40, representing an attractive 3.8% yield while maintaining investment flexibility. Orell Füssli enjoys a debt-free balance sheet and has done so for many years.

Core investment drivers

The following factors appear to drive Orell Füssli's stock performance:

• Security printing order flow: the announcement of new central bank contracts and anchor customer relationships directly affects investor sentiment, as evidenced by the positive market reaction to the two new key customers secured in 2024.
• Steadily growing book retail revenue: The company’s book retailing division is number one in Switzerland and is benefiting from its omnichannel sales strategy.
• Strong execution driving margin expansion: management's focus on operational excellence and strategic acquisitions has delivered exceptional results, with the EBIT margin expanding from 7.8% in FY23 to 8.9% in FY24 and 8.5% in H125. The company benefits from a favourable product mix and efficiency gains across its main divisions.
• Orell Füssli’s 2028 strategy targets are well within reach: with FY24 revenue of CHF252.5m and organic growth consistently above the 4–6% target range, the company's FY28 objectives of CHF300m in revenue and an EBIT margin of more than 8% appear achievable. The strategy combines organic growth with CHF30–50m in new digital business by FY28.
• An attractive dividend policy with progressive increases: the FY24 dividend of CHF4.40 represents a 12.8% increase on the previous year and a 3.8% yield, which is consistent with the company's policy of distributing 60–80% of net profit. Orell Füssli’s strong cash generation and balance sheet support continued dividend growth.
• Management guidance upgrade for 2025: based on its strong H1 performance and robust order backlogs, management has raised FY25 guidance to revenue growth above the 4–6% target range and an EBIT margin slightly higher than FY24's 8.9%, demonstrating continued momentum.

What could derail the story?

• Cyclical nature of banknote printing and pricing pressure: despite global growth in circulation, the timing and volume of banknote orders are unpredictable. Global overcapacity of banknote printing creates pricing pressure, although technology leadership provides some protection. A strong Swiss franc affects export competitiveness for international security printing contracts.
• Structural decline in physical book retail: the Swiss retail sector faces weak consumer sentiment, while physical book sales remain under long-term pressure from digitalisation. New store openings may affect near-term profitability margins.
• Execution risk in digital transformation: success in digital identity through Procivis depends on the successful execution of eIDAS 2.0 opportunities and Orell Füssli’s ability to compete with larger technology players in this emerging market segment.
• Customer concentration and contract dependency: exposure to individual large central bank customers (notably the Swiss National Bank) creates revenue volatility, although recent key customer acquisitions help mitigate this concentration risk.

Recent newsflow

Orell Füssli has maintained steady progress across all divisions in recent months:

• Outstanding H125 results (August 2025): revenue reached CHF120.1m (+12.1% y-o-y), with EBIT of CHF10.2m, significantly outperforming guidance and demonstrating continued operational excellence across all divisions.
• Security Printing capacity expansion (Q225): the division operated at full capacity, with multiple shifts to meet demand from new key customers. In addition, the order backlog extended well into 2026, providing excellent revenue visibility.
• Zeiser technology breakthrough (spring 2025): the first major reference installation of a track and trace system for banknote printing was successfully commissioned, with a second European security printer installation completed, validating the technology proposition.
• Completion of strategic acquisition (March 2025): Verlag SKV acquisition finalised, with retroactive effect from January 2025, immediately contributing to the education portfolio with a high-margin digital recurring revenue model.
• Procivis European expansion (2024–25): strengthened sales teams across Northern, Central and Southern Europe positioned for upcoming government tenders as the eIDAS 2.0 implementation deadline approaches.

Upcoming catalysts

• 2028 strategic guidance upgrade expected: based on its exceptional H1 performance, we note the company’s potential to revise or raise its strategic revenue and margin targets around the time of the CMD on 11 November.
• Central bank tender outcomes: multiple international banknote tenders pending across key geographical markets, particularly in Central and South America and Africa, where Orell Füssli maintains strong competitive positions.
• eIDAS 2.0 tender activity acceleration: the 2026 deadline for EU member states to implement digital identity wallets is approaching, with Procivis positioned for multiple government procurement opportunities across European markets.
• Additional strategic acquisitions: management is targeting CHF30–50m in additional annual revenue by FY28 through investment or acquisition, with the education and digital identity sectors likely to be areas of focus.
• Zeiser track and trace commercialisation: following successful reference installations, broader commercial deployment of track and trace systems is expected across the security printing industry.

Market opportunity and business strategy

500-year heritage in security and education

Founded in 1519 by Christoph Froschauer in Zurich, Orell Füssli is one of the world’s oldest continuously operating companies and Switzerland’s oldest listed company (since 1897). What began as a printing house during the Swiss Reformation has evolved into a diversified technology leader serving governments and educational institutions globally.

Business model and competitive positioning

Orell Füssli operates through four main divisions:

1. Security Printing (34% of revenues): one of the world’s leading independent banknote printers, serving central banks globally, with particular strength in Switzerland, Central and South America, and Africa. It is a technology leader in security documents including Swiss passports and identity cards, with two new key customers secured in 2024.
2. Book Retailing (49% of revenues): Switzerland’s leading book retailer through joint venture Orell Füssli Thalia, operating more than 50 stores across German-speaking Switzerland. It is comparable with Waterstones in the UK, combining a physical retail presence with growing e-commerce capabilities through an omnichannel strategy.
3. Industrial Systems (10% of revenues): the Zeiser subsidiary provides serialisation equipment and ‘track and trace’ systems for security document production, serving security printers globally with innovative numbering and verification technologies.
4. Other business areas (7% of revenues): includes traditional publishing operations in the field of learning media, offering both analogue and digital learning content, and Procivis, the digital identity subsidiary, which develops decentralised identity software solutions for government and enterprise clients.

The company’s competitive advantages stem from its unparalleled heritage and a reputation built over 500 years, technology leadership in security features, the credibility provided by its relationship with the Swiss National Bank, which is both a major shareholder and customer, and an integrated approach combining physical security printing with digital identity solutions. It has a resilient business model that was unaffected by recent tariff announcements and is attractive to investors as c 70% of revenue is generated in CHF. As one of the largest global independant banknote printers, Orell Füssli competes with industry leaders including De La Rue (UK), Giesecke & Devrient (Germany) and Crane Currency (US).

Market dynamics and strategic positioning

Despite digitalisation concerns, global banknote demand continues to grow at 4–6% annually, driven by population growth, limited banking penetration in emerging markets and central bank policies on maintaining cash as legal tender. The Swiss education market offers low but consistent growth, with government spending growth supporting publishing and book retail operations.

Through its subsidiary Procivis, Orell Füssli is pioneering the transition from physical to digital identity documents. The EU’s eIDAS 2.0 regulation is creating a mandatory market for digital identity solutions by 2026, putting Procivis in a position to leverage the parent company’s government relationships and security expertise in this emerging high-growth segment. Procivis’s software called Procivis One already meets the regulatory requirements to allow Orell to meet this new challenge.

Financials: Solid growth, very robust balance sheet

Orell Füssli has delivered three consecutive years of strong growth and margin expansion. FY24 revenues of CHF252.5m (+8.7% y-o-y) were driven by robust performance across all divisions, with Security Printing particularly strong due to new key customers and a favourable product mix. EBIT reached CHF22.6m (+24.5% y-o-y), representing margin expansion to 8.9% from 7.8% in FY23.

The H125 results demonstrated continued momentum, with revenue of CHF120.1m (+12.1% y-o-y) and an EBIT margin of 8.5%, significantly exceeding management's 4–6% organic growth guidance. Security Printing contributed revenue of CHF47.3m (+24.7% y-o-y) while operating at full capacity and Book Retailing maintained resilience despite challenging consumer conditions.

The balance sheet remains robust, with equity to total assets ratio of 73.8% and operating cash flow generation of CHF28.2m in FY24, supporting the dividend increase to CHF4.40. The company maintains a debt-free balance sheet and therefore has financial flexibility for strategic investments while delivering progressive shareholder returns.

Management's FY28 targets of CHF300m in revenue and an EBIT margin of more than 8% appear increasingly achievable, supported by 4–6% organic growth supplemented by CHF30–50m in additional revenue from digital business development and selective acquisitions.

Valuation: Shares trade at a c 32% discount to fair value

We have adopted an SOTP valuation approach as there is little direct relationship between the group’s two major profit centres. We arrive at a valuation of CHF168.5/share, which implies a c 32% discount to fair value.

For the two major profit contributors, Security Printing and Book Retailing, we have applied the FY25 consensus EV/operating profit ratio average of peers, which is 13.0x (ANY Biztonsági Nyomda, Crane NXT and De La Rue) and 12.7x (WHSmith) for the divisions respectively. For the smaller Industrial Systems division we have applied an EV/operating profit multiple of 8.0x being the average of two peers, and for the loss-making ‘Other businesses’ we have applied an EV/revenue multiple, again versus peers. Once we have deducted a value for the ‘not assigned’ costs, we arrive at a group value of CHF394m.

We then add the FY25 expected net cash, deduct c CHF47m for the minorities (Book Retailing is a JV) and apply a notional 20% conglomerate discount. This gives us a value of CHF330.2m, or CHF168.5 per share, compared to the current share price of CHF114.5.