2014 Half Year Results Presentation 4 August 2014 Wolfhart Hauser - - PowerPoint PPT Presentation

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4 August 2014

Wolfhart Hauser Chief Executive Officer Lloyd Pitchford Chief Financial Officer

2014 Half Year Results Presentation

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Lloyd Pitchford Chief Financial Officer

Financial Performance 2014 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. 4 August 2014

Cautionary statement regarding forward-looking statements

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Results Overview

• Revenue headwinds in some businesses
• Good growth in remaining portfolio
• Focus on profit and cash
• Currency impact
• Improving second half and into 2015
• Strong acquisition contribution and pipeline

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For the six months to 30 June 2014 Revenue £1,024m + 2.9% at constant

• 5.6% at actual
• 0.5% at constant organic(2)

Operating profit(1) £152m + 5.1% at constant

• 3.8% at actual

+ 0.8% at constant organic(2)

Operating profit margin(1) 14.9% + 30bps at constant

+ 30bps at actual + 20bps at constant organic(2)

Adjusted Diluted EPS(1) 61.2p + 8.6% at constant

• 1.1% at actual

Adjusted cash generated from operations(1) £148m + 20%

Financial Highlights

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

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1,084.7 1,024.3 (4.9) 33.9 (89.4) 400 500 600 700 800 900 1,000 1,100 1,200 H1 2013 Organic Acquisitions / Disposals FX H1 2014 £m

1,084.7 1,024.3

(3.3) (4.5) 8.5 22.4 5.9 (89.4) 400 500 600 700 800 900 1,000 1,100 1,200 H1 2013 I&A Commodities CG C&E C&P FX H1 2014 £m + 2.9% Constant rates

H1 Revenue Growth

+ 2.9% Constant rates

• 0.5%

Constant

• rganic

rates

H1 2014 revenue of £1,024.3m is made up of £987.3 organic revenue and £37m from acquisitions and disposals. H1 2013 revenue of £1,084.7m is made up of £1,081.3 organic revenue and £3.4m from acquisitions and disposals.

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Organic Revenue Growth -0.5%

992.2 987.3 (0.8%) (1.5%) (0.7%) (1.2%) (0.6%) 4.3% 600 700 800 900 1,000 1,100

H1 2013 Industry Contract Exits Minerals Industry Energy Projects Contract Changes Europe Cargo & Chems Other H1 2014

£m

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USD, CNY & HKD ~ 55% GBP ~ 10% EUR ~ 10% Other ~ 25%

Revenue By Currency

Currency Analysis

Local currency to GBP H1 2014 H1 2013 H2 2013 FY 2013 USD -7.8% 1.67 1.54 1.59 1.56 CNY -6.1% 10.25 9.62 9.79 9.68 EUR -3.3% 1.22 1.18 1.18 1.18 HKD -7.7% 12.94 11.94 12.36 12.12 AUD -16.9% 1.83 1.52 1.74 1.62 CAD -14.2% 1.83 1.57 1.67 1.61 BRE -18.5% 3.84 3.13 3.63 3.36 INR -16.6% 101.70 84.83 99.90 91.99 Group -8%

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Divisional Operating Margin

11.1% 10.2% 31.6% 15.1% 8.6% 14.9% 10.8% 10.4% 31.3% 15.1% 7.8% 14.6% 0.0% 10.0% 20.0% 30.0% 40.0%

I&A Commodities Consumer Goods C&E C&P Group

H1 14 H1 13*

*H1 13 at constant exchange rates

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(6.9)% (3.8)%

Operating Profit & Separately Disclosed Items

£m @ actual exchange rates

H1 2014 H1 2013

Adjusted operating profit (1) 152.3 158.3 Separately disclosed items: Amortisation of acquisition intangibles (10.3) (12.7) Acquisition and Project Costs (1.1) (0.8) Restructuring costs (9.7) (4.1) Profit on disposal

• 0.2

Statutory operating profit 131.2 140.9

(1) Before separately disclosed items

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• Strong focus on cash management
• Adjusted cash from ops up 20%
• Adjusted effective tax rate 24.5%
• Capex £52.1m; 5.1% of revenue
• £40m acquisition spend
• Strong pipeline

Cash Flow, Tax & Investment

Adjusted Cash Generated from Operations

H1 2011 2012 2013 2014 Cash from Operations £m 91.1 118.1 123.7 148.2 % Change

• 29.6%

4.7% 19.8%

Cash Conversion*

H1 2011 2012 2013 2014 Cash Conversion 56% 61% 61% 77% H1 2011 2012 2013 2014 Cash Holding £m 171.8 160.2 123.8 100.5

Cash Holding

* Cash from operations / EBITDA post SDIs

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Financing

11% 19% 70%

• $110m new bond debt
• Bank facility refinanced and

expanded

• Strong maturity profile
• Interest charge H1 2014 £11.4m

(2013: £13.0m)

• Net debt EBITDA of 1.6

(1) Post refinancing of bank facility in July 2014

Less than one year Between one and four years Five years +

Drawn debt Debt duration(1)

£310m £452m Bank Debt Bond Debt

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Interim dividend increased by 6.7%

• Interim dividend of 16.0p, up 6.7%
• Interim pay-out of £26.0m
• Reflects good underlying earnings

progression

Interim Dividend Per Share

5 10 15 20 2010 2011 2012 2013 2014 Pence

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Wolfhart Hauser Chief Executive Officer

Operating Performance 2014 Half Year Results Presentation

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Industry & Assurance (6.7)% 24% Commodities (1.6)% 18% Consumer Goods 5.0% 36% Commercial & Electrical 6.3% 17% Chemicals & Pharma 4.5% 5%

Divisional Overview – H1 2014

H1 Organic revenue growth % of Group H1 Profit

Industry & Assurance

32%

Commodities

26%

Consumer Goods

17%

Commercial & Electrical

17%

Chemicals & Pharma

8%

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H1 14 Performance H1 14 Revenue Mix

Industry & Assurance

£m @ constant exchange H1 14 Change Organic change

Revenue

325.3 (1.0)% (6.7)%

Operating profit

36.1 2.0% (5.4)%

Margin

11.1% 30bps 10bps

Industry Services Food & Agri BA

• Industry Services: Revenue down on low-margin

contract exits, capital project phasing delays

• £15m low-margin contracts exited YTD
• Food & Agri: Strong Agri trade flows and customer

demand in Asia & Latin America

• Business Assurance (BA): Strong growth with Western

brands on global quality systems; Market expansion Mexico, India H1 14 Trading

• Industry Services: H2 improvement in Tech Inspection
• Food & Agri: High demand for complex analytical food

services

• Business Assurance: Customer base growing in

developing markets Outlook

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H1 14 Performance H1 14 Revenue Mix

Cargo Minerals GTS

Commodities

£m @ constant exchange H1 14 Change Organic change

Revenue

262.8 (1.7)% (1.6)%

Operating profit

26.8 (3.2)% (3.9)%

Margin

10.2% (20)bps (20)bps

• Minerals: Strong decline continued (-16%). Indonesian

trade bans affecting entire region

• Cargo: Improving growth. Good demand from US shale
• il transit testing, Asia and Middle East. Europe weak
• Government Services (GTS): Product Conformity

Programme reduction since Q413 H1 14 Trading

• Minerals decline will continue
• US shale oil & gas services further growth
• Process optimisation

Outlook

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H1 14 Performance H1 14 Revenue Mix

Softlines Toys & Hardlines Audit & Other

Consumer Goods

£m @ constant exchange H1 14 Change Organic change

Revenue

176.1 5.1% 5.0%

Operating profit

55.6 5.9% 6.0%

Margin

31.6% 30bps 30bps

• Textiles: Good growth; market expansion in Turkey,

India, Vietnam >20% growth in new sourcing markets

• Toys: Growth moderated by prior year regulatory

increase

• Margin stable

H1 14 Trading

• Continued investment in new countries and capabilities -

leading industry position

• Strong growth in India, Turkey, South Korea, Mexico

and Colombia Outlook

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H1 14 Performance H1 14 Revenue Mix

Electrical & Wireless Building Products

Trans Tech

Commercial & Electrical

£m @ constant exchange H1 14 Change Organic change

Revenue

176.0 14.6% 6.3%

Operating profit

26.6 14.7% 3.4%

Margin

15.1% 0bps (40)bps

• Transport Technologies: Very high growth
• Electrical: Strong growth, particularly in UAE, Taiwan,

Korea, Thailand, Vietnam

• Wireless: Completion of 2-year app programme in

China and USA

• Laboratory network investments

H1 14 Trading

• Strong growth in new technology and innovation areas
• New Asian growth markets
• Continued investment in best-in-class network

Outlook

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H1 14 Performance H1 14 Revenue Mix

Chemicals & Materials Pharma Health & Envi

Chemicals & Pharma

£m @ constant exchange H1 14 Change Organic change

Revenue

84.1 7.5% 4.5%

Operating profit

7.2 18.0% 3.3%

Margin

8.6% 80bps (10)bps

• Chemicals & Materials: Good growth in Middle East
• EU weak, continued restructuring and site closure
• Margin focus

H1 14 Trading

• Fuel and lubricant development and testing driven by

new engines and environmental concerns

• Pharma growth from biologics
• Development in China

Outlook

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Our strategic portfolio

RETAIL & MANUFACTURED PRODUCTS COMMODITIES & MATERIALS INDUSTRY ASSETS

Consumers

Business Assurance

Energy

Chemicals & Pharma Minerals Food & Agri

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Long term energy demand

2 4 6 8 10 12 14 16 18 1990 1995 2000 2005 2010 2012 2015 2020 2025 2030 2035

Billion tonnes of oil equivalent

Oil Gas Coal Nuclear Hydroelectric Renewables

Source: BP Energy Outlook 2030

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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

End-User Quality Expectations & Diversity

Consumers demanding safe & quality brands

Market drivers in product industries

Developing Economies

Markets developing and growing middle classes

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Outlook

• Growth strengthening in H2
• Profitability leverage from improving revenue growth
• Good development in and strong growth from emerging markets

Portfolio positioned to benefit from strong structural drivers in coming years

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Our Growth Platform

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

QUALITY

COMMODITIES & MATERIALS RETAIL & MANUFACTURED PRODUCTS INDUSTRY ASSETS

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2014 Half Year Results Presentation

Appendix

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Taxation

£m @ actual exchange rates

H1 2014 H1 2013 Profit before tax 119.8 127.9 Tax (29.5) (32.5) Profit after tax 90.3 95.4 Reported tax rate 24.6% 25.4% Effective tax rate

• n adjusted profit before tax

24.5% 25.0%

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19.8%

Operating Cash Flow

£m @ actual exchange rates

H1 2014 H1 2013 Operating Profit before changes in working capital and provisions 184.0 195.4 Changes in working capital: Inventory (1.5) (2.1) Debtors and prepayments (14.2) (61.4) Creditors and accruals (24.9) (12.7) Special contributions into pension schemes (0.9)

• Cash generated from operations

142.5 119.2 Separately disclosed items – cash flow 5.7 4.5 Adjusted cash generated from operations 148.2 123.7

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401%

Free Cash Flow

£m @ actual exchange rates

H1 2014 H1 2013 Cash generated from operations 142.5 119.2 Net interest (12.6) (12.1) Taxation (30.8) (37.7) Net capital expenditure (52.0) (60.0) Free cash flow 47.1 9.4

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Net Debt

£m @ actual exchange rates

H1 2014 H1 2013 FY 2013 Borrowings 761.3 757.3 734.6 Cash (100.5) (123.8) (116.4) Net debt 660.8 633.5 618.2 Net debt to EBITDA 1.55x 1.51x 1.44x

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Liquidity Position at 30 June 2014

£m @ actual exchange rates

H1 2014 H1 2013 Debt facilities 902.3 976.0 Borrowings (761.3) (757.3) Undrawn committed borrowing facilities 141.0 218.7 Cash 100.5 123.8 Liquid funds 241.5 342.5

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Divisional Performance Summary

£m @ constant exchange Revenue Margin H1 14 Change Organic change H1 14 Change Organic change Industry & Assurance 325.3 (1.0)% (6.7)% 11.1% 30bps 10bps Commodities 262.8 (1.7)% (1.6)% 10.2% (20)bps (20)bps Consumer Goods 176.1 5.1% 5.0% 31.6% 30bps 30bps Commercial & Electrical 176.0 14.6% 6.3% 15.1% 0bps (40)bps Chemicals & Pharma 84.1 7.5% 4.5% 8.6% 80bps (10)bps Group Total 1,024.3 2.9% (0.5)% 14.9% 30bps 20bps

H1 2014