2012 Half Year Results Presentation 26 July 2012 Wolfhart Hauser - - PowerPoint PPT Presentation

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26 July 2012

Wolfhart Hauser Chief Executive Officer Lloyd Pitchford Chief Financial Officer

2012 Half Year Results Presentation

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Lloyd Pitchford Chief Financial Officer

Financial Performance 2012 Half Year Results Presentation

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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. 26 July 2012

Cautionary statement regarding forward-looking statements

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Results Overview

• Strong growth in revenue, profit and earnings
• Total revenue up 29.9%; Organic growth of 9.9%
• Operating margin 15.4%; Organic margin up 40bps
• EPS up 28.2%
• Interim dividend increased by 21.5%

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For the six months to 30 June 2012 Revenue £991m + 29.9% at actual + 9.9% at constant organic(2) Operating profit(1) £152m + 28.2% at actual + 12.7% at constant organic(2) Operating profit margin(1) 15.4% – 20bps at actual + 40bps at constant organic(2) Profit before tax(1) £140m + 26.6% Diluted EPS(1) 58.2p + 28.2% Cash generated from

• perations(1)

£118m + 29.6%

Financial Highlights

(1) Before separately disclosed items (2) Growth excluding acquisitions at constant exchange rates

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+43.8% +28.2%

Profit Before Tax & Separately Disclosed Items

£m @ actual exchange rates

H1 2012 H1 2011 Adjusted operating profit (1) 152.2 118.7 Separately disclosed items: Amortisation of acquisition intangibles (15.0) (9.5) Acquisition transaction and integration costs (1.1) (9.5) Restructuring costs – Business Process Outsourcing (1.8) (6.3) Statutory operating profit 134.3 93.4

(1) Before separately disclosed items

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763 991 71 154 3 400 500 600 700 800 900 1,000 1,100 H1 2011 Organic Acquisitions FX H1 2012 £m 763 991 164 27 18 16 3 400 500 600 700 800 900 1,000 1,100 H1 2011 I&A Commodities CG C&E C&P H1 2012 £m

H1 Revenue Growth

+ 29.9% Actual rates + 9.9% Constant rates

H1 2011 revenue of £763.1m is made up of £712.8m organic revenue, £53.9m from acquisitions made in H1 2011, less £3.6m for foreign exchange. Organic revenue growth of £70.6m is 9.9% at constant exchange rates.

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15.6% 15.4% 14.0 14.5 15.0 15.5 16.0 16.5 YTD June 11 FX Organic growth Moody YTD June 12 %

Constant Organic Margin Progression of 40bps

+ 20 bps + 40 bps

• 80 bps

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• Adjusted cash generated from operations

£118.1m; up 29.6%

• Net interest charge £12.2m
• Adjusted effective tax rate at 27.7%
• Capex £46m; 4.6% of revenue
• 3 acquisitions for £17m

Financing, Tax, Investment & Cash Flow

2013-15 13% 2016+ 87%

Funding Maturity Profile

• £0.9bn facilities
• 50% Bond: 50% Bank
• Maturity profile strong
• Net debt:EBITDA of 1.6

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Five Year H1 History 2008 to 2012

H1 Revenue H1 Adjusted Operating Profit

200 275 350 425 500 575 650 725 800 875 950 1,025 1,100 2008 2009 2010 2011 2012 £m 40 60 80 100 120 140 160 2008 2009 2010 2011 2012 £m 21% CAGR 22% CAGR

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2 4 6 8 10 12 14 2008 2009 2010 2011 2012 Pence

Interim Dividend

• Interim dividend of 13.0p, up 21.5%
• Interim payout of £21m
• Strong and consistent record of

dividend growth

Interim Dividend Per Share

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Summary

• Strong growth delivery
• Underlying margin progression
• Strong cash generation and financial position

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Wolfhart Hauser Chief Executive Officer

Operating Performance 2012 Half Year Results Presentation

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What

Market Drivers

Regulation

Quality, Safety and Environmental standards

Supply Chain Changes

Shifting cycles, sourcing and complexity

New Technologies

Innovation and product variety

Energy Growth & Diversity

Capex and Opex

End-User Quality Expectations & Diversity

Developed and emerging economies

Market Drivers in our Industries

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Market Drivers in Action: H1 2012

Electric vehicle technologies

Europe, North America & China lab network

EU Cosmetics

New regulation driving wider testing & quality assurance demand

Medical Devices ‘3rd Edition’

Global standard rolling out greater performance, risk & safety requirements

Unconventional fuel development

Supporting customers’ infrastructure &

• perational

developments

Shifting supply chains

Double-digit growth rates in new customer sourcing markets

‘Total’ Quality Solutions

Delivering new tools & solutions, for better overall supply chain quality performance

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Hewlett-Packard

Greener printers HP Indigo uses Intertek’s green leaf mark in verifying the sustainability of commercial printers

Market Drivers in Action: H1 2012

Sabic

Expanding Partnership Supporting product development with testing and measurement, extending into new markets.

UK ‘Big 4’ Supermarkets

Quality Assurance Testing and auditing programmes across food and hard-line supply chains. BASF Infrastructure integrity Expanding support with integrity assessment of chemical plants

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Industry & Assurance 32% 22% Commodities 28% 23% Consumer Goods 17% 34% Commercial & Electrical 16% 17% Chemicals & Pharma 7% 4%

Divisional Mix

% of Group Revenue % of Group Profit

Industry & Assurance Commodities Consumer Goods Commercial & Electrical Chemicals & Pharma

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£m @ constant exchange H1 12 Change Organic change Revenue 318.5 106.8% 14.3% Operating profit 33.6 124.0% 27.6% Margin 10.5% 80bps 90bps

Industry & Assurance

• Strong demand for Technical

Inspection for new build energy assets

• Exceptional growth from Moody
• Systems Certification and Food & Agri

good growth H1 12 Performance Developments

Add chart

• Continuing high energy sector

investment across all asset classes and geographies

• Further consolidation of global contracts
• Good acquisition opportunities
• Acquisition in US of Automation

Technology Inc diversifying service

• ffering to our clients
• Increased Food labs and linked into Agri

and Systems Certification Outlook

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• Strong performance in Minerals
• Government Services grew strongly on

the back of increased Product Conformity Programmes

• Good demand for Oil Cargo Inspection

and Analytical Assessment in Asia and Middle East balancing steady US market

Commodities

H1 12 Performance Developments

• Emerging economies continuing to drive

demand for commodities and product quality

• Potential for growth in Minerals to

moderate

• Opportunities in alternative energies eg

Shale Oil

£m @ constant exchange H1 12 Change Organic change Revenue 278.2 10.7% 10.5% Operating profit 34.3 19.9% 19.9% Margin 12.3% 90bps 100bps

Outlook

• Expanded capabilities in Asia and

Middle East supporting client demand eg Additives, Bunker fuels

• Acquisition of Vigalab in Chile for

Minerals exploration support

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£m @ constant exchange H1 12 Change Organic change Revenue 163.9 10.1% 8.9% Operating profit 51.6 6.8% 6.6% Margin 31.5% (100)bps (70)bps

Consumer Goods

• Good growth in textiles, driven by

chemical testing

• Strong growth in Social Compliance

auditing

• Global leadership position maintained

through continued investment in service delivery H1 12 Performance

• More regulation to come
• Western retailers seeking more

complete supply chain quality support

• Quality and safety demand in growth

economies expanding Outlook Developments

• Continued network expansion
• Investment in new client tools
• Acquisition of 4th Strand in US providing

new service offering to our clients

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£m @ constant exchange H1 12 Change Organic change Revenue 157.9 9.8% 9.8% Operating profit 26.1 10.6% 10.6% Margin 16.5% 10bps 10bps

Commercial & Electrical

• Strong performance across all

business lines and geographies

• New product launches, models,

convergence of technologies and standards driving demand for expert advice and testing

• Leadership position in most of our

markets has been strengthened

• Continued technological developments

and new safety and environmental standards driving increased need for testing

• China producing more high-value, high-

tech products H1 12 Performance Developments Outlook

• Continued network expansion and new

marketing initiatives

• Unique market positioning driving

revenue growth

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£m @ constant exchange H1 12 Change Organic change Revenue 72.5 5.2% 3.6% Operating profit 6.6 24.5% 16.7% Margin 9.1% 140bps 100bps

Chemicals & Pharma

• Good growth in Chemicals & Materials

including new areas eg paper and packaging

• Flat overall revenue in Pharma
• Margin enhancement programme

taking effect

• Improvement in Pharma
• New outsourcing contracts
• Pick up in 2H for regulatory

requirements H1 12 Performance Developments Outlook

• Diversified the Pharma offering
• Strengthening position in Emerging

Economies

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Outlook

• Full year of Moody in 2012 (8 months 2011)
• Industry consolidation expected to continue
• High single digit organic growth
• Continuing successful delivery of quality to global customers

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Summary: Resilient Growth Platform

GLOBAL TRADE MARKET DRIVERS NETWORK & SERVICE OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION

QUALITY

COMMODITIES & MATERIALS RETAIL & MANUFACTURED PRODUCTS INDUSTRY ASSETS

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2012 Half Year Results Presentation

Appendix

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Taxation

£m @ actual exchange rates

H1 2012 H1 2011 Profit before tax 122.1 85.3 Tax (33.1) (26.5) Profit after tax 89.0 58.8 Reported tax rate 27.1% 31.1% Effective tax rate

• n adjusted operating profit

27.7% 28.0%

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30%

Operating Cash Flow

£m @ actual exchange rates

H1 2012 H1 2011 Operating Profit before changes in working capital and provisions 186.1 136.5 Changes in working capital: Inventory (1.3) (2.7) Debtors and prepayments (65.8) (33.0) Creditors and accruals (5.9) (24.5) Cash generated from operations 113.1 76.3 Separately disclosed items – cash flow 5.0 14.8 Adjusted cash generated from operations 118.1 91.1

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29%

Free Cash Flow

£m @ actual exchange rates

H1 2012 H1 2011 Cash generated from operations 113.1 76.3 Net interest (10.6) (8.0) Taxation (35.2) (19.7) Net capital expenditure (44.9) (31.3) Free cash flow 22.4 17.3

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Net Debt

£m @ actual exchange rates

H1 2012 H1 2011 Borrowings 778.7 809.9 Cash (160.2) (171.8) Net debt 618.5 638.1 Net debt to EBITDA (2011: Proforma 12mths Moody) 1.6x 1.9x

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Liquidity Position at 30 June 2012

£m @ actual exchange rates

H1 2012 H1 2011 Debt facilities 925.0 925.0 Borrowings (778.7) (809.9) Undrawn committed borrowing facilities 146.3 115.1 Cash 160.2 171.8 Liquid funds 306.5 286.9

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Revenue By Currency

USD, CNY & HKD ~ 55% GBP & EUR ~ 19% Other ~ 26%

Currency Analysis

Local currency to GBP H1 2012 H1 2011 FY 2011 USD 2.0% 1.58 1.61 1.60 CNY 6.0% 9.96 10.55 10.35 EUR 5.0% 1.21 1.15 1.15 HKD 2.4% 12.26 12.55 12.47 AUD 2.1% 1.53 1.56 1.55 CAD 0.6% 1.59 1.58 1.59

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Divisional Performance Summary

£m @ constant exchange Revenue Margin H1 12 Change Organic change H1 12 Change Organic change Industry & Assurance 318.5 106.8% 14.3% 10.5% 80bps 90bps Commodities 278.2 10.7% 10.5% 12.3% 90bps 100bps Consumer Goods 163.9 10.1% 8.9% 31.5% (100)bps (70)bps Commercial & Electrical 157.9 9.8% 9.8% 16.5% 10bps 10bps Chemicals & Pharma 72.5 5.2% 3.6% 9.1% 140bps 100bps Group Total 991.0 29.3% 9.9% 15.4% (40)bps 40bps

H1 2012