2011 Half Year Results Presentation 1 August 2011 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 1 www.intertek.com
Cautionary statement regarding forward-looking statements This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and business of Intertek Group plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this presentation should be construed as a profit forecast. 1 August 2011 2 www.intertek.com
Lloyd Pitchford Financial Performance 2011 Half Year Results Presentation 3 www.intertek.com
Results Overview • Strong growth in revenue, profit and earnings • Moody acquisition completed; strong momentum • Operating margin 15.6% • Diluted adjusted EPS up 12%; interim dividend up 15% • Progress on Intertek as One programme • Three bolt on acquisitions 4 www.intertek.com
Financial Highlights For the six months to 30 June 2011 Revenue £763m + 16.9% at actual + 8.3% at constant organic Operating profit (1) £119m + 14.5% at actual + 7.8% at constant organic Operating profit margin (1) 15.6% – 30bps at actual – 10bps at constant organic Profit before tax (1) £111m + 13.7% Diluted adjusted EPS (1) 45.4p + 11.8% Operating cash flow £47.6m – 2.9% (1) Before separately disclosed items 5 www.intertek.com
1H Revenue Growth + 16.9% Actual rates £m £m 800 800 (8) 65 763 763 7 12 2 63 750 750 53 700 700 26 653 653 650 650 + 8.3% 600 600 Constant rates 550 550 500 500 450 450 400 400 Acquisitions 1H 2010 Organic FX 1H 2011 1H 2010 Commodities I&A CG C&E C&P 1H 2011 6 www.intertek.com
Moody International Acquisition • Completed April 27th; £450 million • Good performance momentum • Two month performance • Revenue growth 13% on prior year • Operating margin 13% • Good progress on integration - savings delivery ahead of schedule 7 www.intertek.com
Interest, Tax and Other • Interest charge of £8.1m, up £1.7m • Net debt of £638m, net debt/EBITDA of 1.9x • Effective tax rate of 28% • Separately disclosed items: • £9.5m amortisation of acquisition intangibles • £9.5m acquisition, transaction costs and integration costs • £6.3m restructuring charges – Finance and IT outsourcing 8 www.intertek.com
Intertek as One Finance & IT Restructuring • US Shared Service created in 2010 • Outsourcing of Finance and IT back office services • Accenture delivery centre in Delhi • Phased implementation over two years • Create platform for efficient, scalable growth • £11m restructuring costs across 2011 and 2012 • Benefits ramping to c £10m p.a. cost savings by FY 2014 9 www.intertek.com
Cashflow and Investment • DSO of 65 days (1H10: 68 days) EBITDA Cash Conversion % • Cash conversion broadly in line 140 1H with 1H trend 2H 120 • Cashflow from operations £47.6m 100 • Capex £32m; 4.2% of revenue 80 60 • Moody acquisition £450m 40 20 0 2007 2008 2009 2010 2011 Days Sales Outstanding (DSO) 1H 75 71 62 68 65 2H 70 69 62 64 - 10 www.intertek.com
Interim Dividend • Interim dividend of 10.7p, up 15% Interim Dividend Per Share Pence • Interim payout of £17m 12 • Strong and consistent record of 10 dividend growth 8 6 4 2 0 2007 2008 2009 2010 2011 11 www.intertek.com
Five Year 1H History 2007 to 2011 1H Revenue 1H Adjusted Operating Profit £m £m 21% CAGR 22% CAGR 800 725 100 650 575 500 50 425 350 275 200 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 12 www.intertek.com
Financial Summary • Strong growth in revenue, profit and earnings • Moody acquisition completed; strong momentum • Cost savings: Finance and IT outsourcing • 2011 Outlook • High single digit organic growth • Operating margin close to 2010 13 www.intertek.com
Wolfhart Hauser Chief Executive Officer Operating Performance 2011 Half Year Results Presentation 14 www.intertek.com
What we do for our customers Speed to Protect Support Market Their products and Reduce financial, processes in their Cut lead times operational, global trade in all and costs without reputational and quality related compromising quality environmental risks aspects safety or environment 15 www.intertek.com
Growth Drivers 1 GLOBAL TRADE 2 MARKET DRIVERS IN OUR INDUSTRIES 3 EXPANSION AND MARKET SHARE 4 OUTSOURCING 5 ACQUISITIONS 16 www.intertek.com
Our Strategy Target the entire supply chain… Quality Advisory Assurance Testing Auditing Certification Training Outsourcing Inspection CSR Supply/Value Chain End user 17 www.intertek.com
Our Strategy ...in each industry Quality Advisory Assurance Testing Auditing Certification Training Outsourcing Inspection CSR Supply/Value Chain End user R&D Performance Certification -Compliance Production Distribution Performance Issues/Returns/ (Tech, Env, Social) Recalls 18 www.intertek.com
New Business Mix Pro-forma 1 2010 Actual Commodities Oil, Chem 33% 29% (+) Minerals & Agri Chemicals (-) Agri & Pharma Industry & Assurance Industrial 7% (+) Moody (acquisition); Services 29% Upstream; Food; Agri Commodities (-) Health & Environment Commercial Consumer & Electrical 25% Goods Consumer Goods 18% (-) Food Commercial Consumer 19% Commercial & & Electrical Goods 16% Electrical No change Industry & Analytical 11% Assurance Services Chemicals & Pharma 8% (+) Health & Environmental (-) Upstream Minerals 5% 1 Based on 2010 Divisional and Moody revenues (+) Business stream added (-) Business stream removed 19 www.intertek.com
Commodities H1 11 Performance Outlook £m @ constant Organic • Demand growth for oil and minerals exchange H1 11 Change change driven by emerging markets Revenue 251.2 12.2% 12.2% • North American refining activity to Operating profit 28.3 21.5% 21.5% gradually increase Margin 11.3% 90bps 90bps • Network expansion: Europe, Asia, Latin • Very strong results in Minerals and America Trade Services • Expansion in Asia and Western Europe • North America oil cargo inspection flat on revenue 33% of Group Revenue; 24% of Group Operating Profit 20 www.intertek.com
Industry & Assurance H1 11 Performance Outlook • Majors increasing investment in energy £m @ constant Total Total Organic Organic exchange H1 11 Change H1 11 Change assets Revenue 154.6 70.3% 92.9 3.0% • Good demand in emerging markets and Operating profit 15.1 106.8% 6.2 (13.9)% green energy construction Margin 9.8% 180bps 6.7% (130)bps • Strong backlog • Intertek-Moody trading well, contract • Pursuit of cross-selling opportunities wins • Food quality control needs and • Agri negative, impacting growth and regulation margin • Good development in Industry Services & Systems Certification • Continued expansion in Food lab and service infrastructure 20% of Group Revenue; 13% of Group Operating Profit 21 www.intertek.com
Industry & Assurance Our Strategy in Action…. Oil Major Global Mining Group Global supplier technical audit Behaviour- programme. based safety 1,500 suppliers training over 3 years programme over 4k staff over 2 years International Telecoms Beverage Industry maker Global Technical assurance inspection for auditing and construction of systems breweries in certification Asia contract with global leader 22 www.intertek.com
Consumer Goods H1 11 Performance Outlook £m @ constant • Flexible global network will capture customers’ Organic exchange H1 11 Change change new sourcing patterns Revenue 146.3 3.6% 3.6% • Adapting processes and cost base as industry Operating profit 47.0 (3.9)% (3.9)% shifts Margin 32.1% (250)bps (250)bps • Product variety • Growth in Textiles and Toys; Inspection down • Increasing quality and safety demands of end- on volume users sustaining growth; influenced by regulatory changes driving further growth • Strong growth in Emerging Markets; Coastal • Emerging market consumers China and HK flat • Cost inflation influencing cost base in Textiles; Rapid industry upsizing and downsizing in low-cost industries • Network expansion: Guatemala, Bangladesh, Vietnam, Cambodia, Turkey • Limited regulatory expansion in the period 19% of Group Revenue; 39% of Group Operating Profit 23 www.intertek.com
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