2015 Half Year Results Presentation 3 AUGUST 2015 Andr Lacroix - - PowerPoint PPT Presentation

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2015 Half Year Results Presentation 3 AUGUST 2015 Andr Lacroix - - PowerPoint PPT Presentation

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2015 Half Year Results Presentation 3 AUGUST 2015 Andr Lacroix Edward Leigh Chief Executive Officer Chief Financial Officer www.intertek.com www.intertek.com Cautionary statement regarding forward-looking statements This presentation

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www.intertek.com

André Lacroix

Chief Executive Officer

Edward Leigh

Chief Financial Officer

2015

Half Year Results Presentation

3 AUGUST 2015

www.intertek.com

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www.intertek.com 2

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. 3 AUGUST 2015

Cautionary statement regarding forward-looking statements

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Performance Highlights André Lacroix | Chief Executive Financial results Edward Leigh | Finance Director Business update André Lacroix | Chief Executive

Agenda 01 02 03

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www.intertek.com

André Lacroix

Chief Executive Performance Highlights

2015 Half Year Results Presentation

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Improved performance

 Total revenue up 3.5% at actual rates, up 1.4% at constant currency  Organic revenue up 0.9% at constant currency, up 170bps sequentially  Operating Profit1 up 7.9% at actual rates, up 3.4% at constant currency  Operating Margin1 15.5%, up 30bps at constant currency  Diluted EPS1 +6.7% at actual rates  Operating cash flow1 up 14%, Cash conversion 79%  Dividend raised 6.3% to 17 pence per share

On track to deliver full year targets

  • 1. Adjusted results
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Good growth in Products & Trade divisions

Group reported Group ex Industry contract exits Group ex Industry Services

1,046 1,055 1,055 1,060

1,020 1,030 1,040 1,050 1,060 1,070 1,080 1,090

H1 2014 Consumer Goods Commerical & Electrical Chems & Pharma Commodities Industry & Assurance Acquisitions & Disposals H1 2015

£m

(26) 11 12 5

Organic revenue growth1

  • 1. At constant exchange rates

+2.5% +4.1% +0.9% Revenue growth1

10 3

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Improved momentum in Products and Trade divisions

Organic revenue growth1

2.4% (0.5%) (0.8%) 0.9% 2.5% 2.2% 2.8% 4.1%

  • 2%
  • 1%

0% 1% 2% 3% 4% 5% H2 13 H1 14 H2 14 H1 15

Group Group Ex Industry Services

  • 1. At constant exchange rates
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38% 18% 6% 23% 15%

Well diversified portfolio

19% 18% 8% 26% 29%

H1 Revenue 20151 H1 Operating Profit 20151

Consumer Goods Commerical & Electrical Chems & Pharma Commodities Industry & Assurance

  • 1. Revenue & Adjusted Operating Profit at constant exchange rates
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Margin discipline

Group margin

 +30bps1 increase in operating margin

Cost discipline

 H1 organic cost flat  Restructuring on track for FY +20bps

contribution to Group operating margin Divisional margin

H1’15 Variance to H1’14 Consumer Goods 32.0% 0bps Commerical & Electrical 15.3% 0bps Chems & Pharma 11.5% 280bps Commodities 13.3% 290bps Industry & Assurance 8.2% (300)bps Group total 15.5% 30bps

  • 1. Adjusted results at constant exchange rates
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Cash conversion Dividend

10.7 13.0 15.0 16.0 17.0 5 10 15 20 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 (pence) 51% 48% 40% 64% 79% 0% 20% 40% 60% 80% 100% H1 2011 H1 2012 H1 2013 H1 2014 H1 2015

Sustained growth in cash and dividend

17.3 22.4 9.4 47.1 78.8 20 40 60 80 100 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015

Free cash flow

£m

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www.intertek.com

Edward Leigh

Chief Financial Officer Financial results

2015 Half Year Results Presentation

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YoY % 2015 Actual Rates Constant Rates Constant Organic2

Revenue

  • excluding low-value contract exits

£1,060m 3.5% 1.4% 0.9% 2.5% Operating profit1 £164m 7.9% 3.4% 3.0% Operating profit margin1 15.5% 60bps 30bps 40bps Adjusted Diluted EPS1 65.3p 6.7% Adjusted cash generated from

  • perations1

£170m 14.4% Free cash flow £79m 67.3% Net Debt £619.1m 6.3%

Reduction

Key Financials

(1) Before separately disclosed items (2) Growth excluding acquisitions and disposals in 2014 and 2015 at constant exchange rates

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14.9% 15.5% 15.3%

0bps 0bps 20bps 80bps 20bps (80)bps (10)bps 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%

H1 2014 Consumer Goods Commercial & Electrical Chems & Pharma Commodities Industry & Assurance Divisional mix Excluding FX and Acqns & Disposals Acquisitions & Disposals FX H1 2015

%

40bps at organic constant rates

Operating Margin bridge

30bps

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H1 2015 performance

Products

Consumer Goods

£m H1 15 Change at Actual Change at constant Organic change at constant Revenue 87.5 4.0% 3.2% 3.2% Operating Profit 10.1 40.3% 36.5% 36.5% Margin 11.5% 290bps 280bps 280bps

Commercial & Electrical Chemicals & Pharma

£m H1 15 Change at actual Change at constant Organic change at constant Revenue 194.6 10.6% 5.4% 5.4% Operating Profit 29.7 11.7% 5.3% 5.3% Margin 15.3% 20bps 0bps 0bps £m H1 15 Change at actual Change at constant Organic change at constant Revenue 196.2 11.4% 5.7% 5.7% Operating Profit 62.8 12.9% 5.5% 5.5% Margin 32.0% 40bps 0bps 0bps

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H1 2015 performance

Commodities and Industry & Assurance

Commodities Industry & Assurance

£m H1 15 Change at actual Change at constant Organic change at constant Revenue 277.2 5.5% 4.4% 4.6% Operating Profit 36.8 37.3% 33.3% 32.3% Margin 13.3% 310bps 290bps 280bps £m H1 15 Change at actual Change at constant Organic change at constant Revenue 304.7 (6.3)% (6.3)% (8.2)% Operating Profit 25.0 (30.7)% (31.1)% (33.1)% Margin 8.2% (290)bps (300)bps (300)bps

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~60% ~10% ~5% ~25%

Currency analysis: Revenue

USD, CNY & HKD GBP EUR Other Local currency to GBP H1 15 H1 14 USD 8.4% 1.53 1.67 CNY 7.0% 9.53 10.25 EUR 12.3% 1.37 1.22 HKD 8.3% 11.87 12.94 AUD 6.6% 1.95 1.83 CAD 3.3% 1.89 1.83 BRE 17.4% 4.51 3.84 INR 5.4% 96.19 101.70 Group 2.1% GBP Depreciated GBP Appreciated

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Cash flow, tax and investment

+3%

£m @ actual exchange rates H1 2015 H1 2014 Adjusted operating profit(1) 164.4 152.3 Depreciation/amortisation 41.6 37.3 Working capital (43.3) (46.6) Net capex (42.0) (52.0) Other** (41.9) (43.9) Free cash flow 78.8 47.1 Acquisitions* (6.1) (37.4) Equity dividend (53.2) (49.9) Movement in borrowings 7.7 51.0 Other*** (10.1) (23.0) Net increase/(decrease) in cash 17.1 (12.2) Opening net cash 119.5 116.4 Effect of FX on cash held (6.5) (3.7) Closing net cash 130.1 100.5

(1) Before separately disclosed items * Total purchase price in 2015 £6.5m. Net of cash acquired £6.1m. **Comprises: Exceptionals, Interest Paid/Received, Tax and Non-Cash Items ***Comprises: Purchase of own shares, tax paid on share awards, dividends paid to NCI, and purchase of minority/associate

Cash Flow

  • Free cash flow up 67.3%
  • Net capex £42.0m; 4.0% of

revenue

  • 1 acquisition for £6.1m
  • Net Debt £619.1m

Tax

  • Stable adjusted tax rate of 24.7%
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Financial guidance

Based on adjusted results, management estimates and FX rates as at 30 June 2015.

FY2015 guidance

Interest charge £27-29m Effective tax rate 24.5-25.5% Minority interest £14-15m Diluted shares (as at 30 June 2015) 161.8m Capex £90-100m Net Debt £580-£600m

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www.intertek.com

André Lacroix

Chief Executive Business update

2015 Half Year Results Presentation

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Initial impressions

 A growth company in a growth market, organically

and by acquisition

 Essential quality assurance for customers  Strong market positions and attractive portfolio  A high-margin, strongly cash generative financial

model

 Highly skilled and entrepreneurial people,

depth and breadth of technical expertise

 Decentralised organisation structure, with deep

local-market understanding

 Strong long term customer relationships with

global and local accounts

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Structural organic growth drivers

67% 23% 10%

Mid-long term TIC

  • rganic

revenue growth ‘Global GDP Plus’

Group Operating Profit1

  • 1. Adjusted operating profit. All numbers reflect H1 2015 results.

CG, C&E and C&P Food & Business Assurance

Products Trade Resources

Cargo & Analytical Government Services & Agri Industry Services Minerals 51% of Group revenue 25% of Group revenue 24% of Group revenue

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Structural organic growth drivers

67% 23% 10%

Continuing growth from expanding investment in quality & innovation Trade-flow growth: global & regional Long-term growth

Resources

 Capex & opex investment

supporting world economic growth

 Servicing oil & gas and other sectors of

the economy

Trade

 Global and regional trade-driven, through

GDP growth

 Increased customer focus on quality and

quantity controls

Products

 Quality solutions for end-products, their

components, processes and R&D

 Product variety, brand and supply chain

expansion, innovation and regulations

 Increasing quality and sustainability

demands by developed and emerging economies

Structural Growth Drivers

Mid-Long term TIC

  • rganic revenue growth

‘Global GDP Plus’

Group Operating Profit 1

  • 1. Adjusted operating profit. All numbers reflect H1 2015 results.
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20 40 60 80 100 120 140 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Brent Oil Price – $/bbl

Resources: Insight from 2008-09

20 30 40 50 60 70 80 90 100 110 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10

TIS Organic Revenue – indexed to 100

OIL PRICE TIS (OIL & GAS INFRASTRUCTURE) ORGANIC REVENUE

TIS represents Moody pro forma organic revenue.

Oil Price Peak TIS Peak TIS Trough Oil Price Trough

Trough in TIS revenue lagged oil price trough

3 Quarters 5 Quarters

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Group Outlook

 FY organic revenue growth rate

improved on prior year − Continuing good growth in products-related and trade-related divisions − Oil and gas sector infrastructure will remain challenging

 Stable margin  Capex £90-100m  Strong cash generation  Net Debt £580-£600m

2015

 Continuing growth from expanding

quality demands, regulation and innovation in Products

 Trade flow growth from global and

regional GDP growth

 Oil & gas infrastructure gradual recovery

to support world economic growth

 Value-enhancing acquisitions  Margin accretion from growth and

productivity

 Strong cash generation

Mid-long term

2015

On track to deliver full-year guidance 'Global GDP-Plus' Organic Growth

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Consumer Goods

Good growth with stable margin

H1 Trading H2 Outlook & Strategic Highlights 5.7% Organic Revenue Growth 32.0% Margin

Softlines: strong growth in chemical testing and new sourcing countries

Toys & Hardlines: stable

Social auditing: steady good growth

Stable margin

Continued good growth expected in H2

Continuous network investment, aligning to customers global supply chain trends

New labs in South East Asia, Myanmar and Central America

‘E-Fit’ design service using CAD in India

Service expansions to capture customer innovations in ‘active’ footwear and footwear electronics

Numbers stated are at constant exchange

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Commercial & Electrical

Good growth with stable margin

H1 Trading H2 Outlook & Strategic Highlights 5.4% Organic Revenue Growth 15.3% Margin

Electrical & Wireless: Strong growth from mobile-wireless innovation

Transport Technology: Strong growth from client R&D

Building Products: strong momentum from product innovation & market position (ATI acquisition)

Stable margin

Continuation of H1 growth trend

Continued brand investment in quality, performance testing for high growth areas eg IoT

Electrical & Wireless lab network investments in South East Asia and India

High-tech transportation sector capabilities providing strong customer support: energy efficiency and battery technologies

New ‘green’ building services

Numbers stated are at constant exchange

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Chemicals & Pharma

Margin accretive growth

H1 Trading H2 Outlook & Strategic Highlights 3.2% Organic Revenue Growth 11.5% Margin, up 280bps

Health & Beauty expanding in emerging economies

Investment in lube oil testing delivered strong growth

Margin improvement from restructuring

Good growth expected in line with H1 performance

Leading positions in helping clients to develop innovative new formulations and ingredients for the products and materials of the future

Leading capabilities in lubricants testing for environmental and regulatory compliance & in pharma biologics innovation support

Investing in health & beauty in Emerging Markets supporting domestic demand

Numbers stated are at constant exchange

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Commodities

Margin accretive growth

H1 Trading H2 Outlook & Strategic Highlights 4.6% Organic Revenue Growth 13.3% Margin, up 290bps

Solid growth driven by global and regional trade volumes

Cargo good trade-flow volumes across majority of countries

GTS strong growth on new and existing contracts

Significant margin progress

Continuous good growth in H2

Measuring the quality of commodities being explored, produced and traded. Help clients protect the value of products during transit

Ramp-up on outsourcing contract activity

New fuel-specific service innovations: aero, additives & lubricants

Ensuring the quality of imported products meets government-client standards

Numbers stated are at constant exchange

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Industry & Assurance

Mixed performance

H1 Trading H2 Outlook & Strategic Highlights Organic Revenue (8.2)% 8.2% Margin, (300)bps

Continuing strong growth in BA, Food & Agri

Challenging trading conditions in oil & gas infrastructure

Margin self-help with cost discipline and exit of low value contracts

Continuing good growth in BA, Food and Agri; Oil & gas capex to remain challenging

Margin self-help with cost discipline

Diversifying infrastructure services into chemical, power, renewable and civil sectors

Business assurance: Systems certification and auditing for quality management systems eg

  • ISO. Leverage Intertek client network

Food & Agri: Network and service expansions

Numbers stated are at constant exchange

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Performance management priorities

Engaged and empowered organisation driven by a common purpose Outstanding client relationships, based on operational excellence and superior customer service Financial discipline to deliver margin accretive growth with good cost and cash controls Sustainable growth and capital allocation to drive shareholder value

01 02 03 04 05

M&A to strengthen portfolio in growth areas with good returns

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Capital allocation priorities

Investing for organic growth: capex and working capital

01

Sustainable returns to shareholders: Progressive dividend policy with circa 40% pay-out ratio

02

M&A in growing sectors with good margin prospects

03

Efficient balance sheet

04

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Summary

 A growth company in a growth market,

  • rganically and by acquisition

 High margin, strongly cash generative

financial model

 Highly skilled and passionate

  • rganisation, strong customer

relationships, deep local understanding

 Well-positioned to deliver sustainable

returns to shareholders

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www.intertek.com

André Lacroix

Chief Executive Officer

Edward Leigh

Chief Financial Officer

2015

Half Year Results Presentation

3 AUGUST 2015

www.intertek.com

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www.intertek.com

2015 Half Year Results Presentation

Appendix

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Separately disclosed items

£m @ actual exchange rates H1 2015 H1 2014 Adjusted operating profit(1) 164.4 152.3 Separately disclosed items: Amortisation of acquisition intangibles (10.5) (10.3) Acquisition and disposal costs (0.2) (1.1) Restructuring costs

  • (9.7)

Separately disclosed items sub-total (10.7) (21.1) Statutory operating profit 153.7 131.2

(1) Before separately disclosed items

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7.9%

Adjusted EPS

6.7% £m @ actual exchange rates H1 2015 H1 2014 Adjusted operating profit 164.4 152.3 Net interest expense (14.6) (11.4) Profit before tax 149.8 140.9 Tax 24.7% (24.5%) (37.0) (34.5) Profit after tax 112.8 106.4 Non-controlling interest (7.2) (6.8) Net Profit 105.6 99.6 Fully diluted shares 161.8 162.7 Earnings Per Share 65.3p 61.2p

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Divisional Performance Summary

£m @ constant exchange rates Revenue Margin

H1 15 Change Organic change H1 15 Change Organic change Consumer Goods 196.2 5.7% 5.7% 32.0% 0bps 0bps Commercial & Electrical 194.6 5.4% 5.4% 15.3% 0bps 0bps Chemicals & Pharma 87.5 3.2% 3.2% 11.5% 280bps 280bps Commodities 277.2 4.4% 4.6% 13.3% 290bps 280bps Industry & Assurance 304.7 (6.3)% (8.2)% 8.2% (300)bps (300)bps Group Total 1,060.2 1.4% 0.9% 15.5% 30bps 40bps

H1 2015