2019 HALF YEAR RESULTS PRESENTATION CONTINUOUS PROGRESS ON - PowerPoint PPT Presentation

2019 HALF YEAR RESULTS PRESENTATION CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH 1 August 2019 1

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. IFRS 16 was adopted on 1 January 2019 for our statutory reporting, without restating prior year figures. As a result, the discussion of our operating results is on an IAS 17 basis for all periods presented, unless otherwise stated. 1 August 2019 2

AGENDA Performance Highlights 01 H1 2019 Financial Results 02 Total Quality Assurance 03 2019 Outlook by Division 04 Summary 05 3

01 PERFORMANCE HIGHLIGHTS 4

CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH Revenue (£m) Adjusted Operating Profit (£m) Adjusted Operating Margin (%) 244 16.8% 16.9% 226 1,443 1,348 224 1,372 16.3% 186 1,024 1,060 1,204 164 152 15.5% 15.4% 14.9% HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 +4.9% CCR +6.8% CCR 14-19 CAGR: +7.1% 14-19 CAGR: +9.8% 14-19: +200bps +30bps CCR +7.0% +7.9% +10bps Adjusted Operating Cash Flow (£m) Adjusted EPS (p) Interim Dividend (p) 34.2 31.9 229 226 204 97.8 91.2 90.4 23.5 170 148 156 74.5 65.3 19.4 17.0 61.2 16.0 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 +12.4% +6.0% CCR 14-19 CAGR: 16.4% +7.2% 14-19 CAGR: 9.1% 14-19 CAGR: +9.8% +7.2% 5

BROAD-BASED REVENUE, PROFIT AND MARGIN PERFORMANCE Margin Accretion 1,2 Revenue Growth 1 Operating Profit Growth 1,2 10% Total revenue growth 1 (%) Group 6.8% Group +30bps Products: +4.9% 18% Trade: +5.8% Products 6.0% of Products +20bps 76% earnings 5% of earnings 6% Trade 6.8% Trade +10bps Resources: +3.5% Resources 16.9% Resources +70bps 0% 0% 5% 10% Organic revenue growth 1 (%) 6 Note: (1) At 2019 constant currency rates; (2) Adjusted

M&A IN ATTRACTIVE MARKETS ADDING 1.9% TO REVENUES IN H1 Aldo Abela Surveys Proasem NTA Monitor Alchemy Business line Cargo / AA Cargo / AA Network Assurance People Assurance Location Malta Colombia UK, Malaysia USA, Canada Completion Date March 2018 April 2018 June 2018 August 2018 Leading provider of laboratory testing, A leading provider of quality and A leading network security and A leading provider of SaaS solutions Market position inspection, metrology and training quantity cargo inspection services assurance services provider for People Assurance services Structural growth in regional and Structural growth in regional and Increased corporate and consumer Increased focus on food safety, and Growth drivers global trade flows global trade flows focus on data security increased regulation; scalability RNS Aldo Abela Surveys (AAS) Proasem NTA Monitor Alchemy 7

5 TH CONSECUTIVE YEAR OF MARGIN PROGRESSION IN H1 Margin Accretion, CCR 1 Organic Margin Accretion, (bps) 1,3 Operating Margin, Actuals 16.8% 16.9% 110 100 16.3% 15.5% 15.4% 60 14.9% 40 40 30 30 30 30 20 20 10 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 Productivity management Portfolio strategy Portfolio review Headcount Savings 2 • • Monthly performance reviews for Top 30 Growth and margin accretive portfolio strategy reduction countries/16 Business Lines 2017 400 £7m • Organic and inorganic investments • Business Line and country benchmarking 2018 100 £2m • Consolidation of facilities • Site span of performance management 2019 250 £4m 8 Note: (1) In bps and at constant currency of that year; (2) Annualised; (3) Organic definition of that year

SUSTAINED STRONG CASH PERFORMANCE Free Cash Flow (£m) 1 Working Capital as % of Revenue 2 Operating Cash Flow (£m) 1 132 13.4% 226 229 105 204 99 10.6% 11.0% 85 170 148 156 8.2% 59 7.7% 53 6.4% HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 14-19 CAGR: 9.1% 14-19 CAGR: 18.6% 14-19: (420bps) Free Cash Flow as % of Net Income 1,2 Cash Conversion (%) 2 Net Debt / Adjusted EBITDA 2 130% 143% 107% 100% 2.0 90% 97% 77% 1.6 1.5 1.4 127% 1.3 126% 125% 125% 1.0 123% HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 9 Note: (1) Adjusted; (2) On a last twelve months basis

02 H1 2019 FINANCIAL RESULTS 10

KEY P&L FINANCIALS YoY % H1 19 Actual Rates Constant Rates H1 19 Δ versus IAS 17 IAS 17 IAS 17 IFRS 16 IAS 17 Revenue £1,442.6m 7.0% 4.9% £1,442.6m - Organic revenue 1 £1,415.0m 5.1% 3.0% £1,415.0m - Operating profit 2 £243.6m 7.9% 6.8% £248.9m +£5.3m Operating profit margin 2 16.9% 10bps 30bps 17.3% +40bps Adjusted diluted EPS 2 97.8p 7.2% 6.0% 98.2p +0.4p Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2018 and 2019; (2) Before separately disclosed items 11

OPERATING MARGIN BRIDGE 17.5% 17.1% 10bps 10bps 0bps 16.9% 16.8% 10bps 17.0% (20bps) 16.5% 16.0% +30bps at constant rates 15.5% 15.0% 14.5% 14.0% H1 18 Products Trade Resources FX H1 19 Divisional mix Excluding FX 12

CASH FLOW & NET DEBT £m @ actual exchange H1 19 H1 19 Δ versus H1 18 rates IAS 17 IFRS 16 IAS 17 Adjusted operating profit 1 225.8 243.6 248.9 5.3 Depreciation/amortisation 43.8 51.0 86.6 35.6 Change in working capital (75.4) (76.2) (76.2) - Other 2 9.9 11.0 14.7 3.7 Adjusted cash flow from 204.1 229.4 274.0 44.6 operations Net capex (46.3) (45.7) (45.7) - Other 3 (58.7) (79.1) (123.7) (44.6) Adjusted Free cash flow 99.1 104.6 104.6 - Acquisitions (10.6) - - - Net debt 568 826 1,082 256 Net debt/Adjusted EBITDA 1.0 1.4 1.7 0.3 13 (rolling 12 months) Notes: (1) Before separately disclosed items; (2) Comprises special pension payments, add back equity settled transactions and other non-cash items; (3) Comprises: interest paid/received and tax, lease liability repayment.

FINANCIAL GUIDANCE (IAS 17) FY 2019 Guidance (IAS 17) Net finance cost £31 – 33m Effective tax rate 24.5 – 25.5% Minority interest £21m – 23m Diluted shares (as at 30 June 2019) 162.7m Capex £130 – 140m Net debt £670 – 700m Note: Before any material change in FX rates and any additional M&A 14

03 TOTAL QUALITY ASSURANCE 15

DEEP AND LONG-LASTING CUSTOMER RELATIONSHIPS Net Promoter Customer Score Centric Listening to c.7,000 Entrepreneurial, putting customers per month the Customer 1st Our TQA Customer Promise Intertek Total Quality Assurance expertise delivered consistently, with precision, pace and passion, enabling our customers TQA Value to power ahead safely Data Delivery Intelligence Disciplined operating Benchmarking by site, processes and continuous service, and customer ATIC innovations 16

ATTRACTIVE QUALITY ASSURANCE GROWTH PROSPECTS GLOBAL ATIC MARKET GROWTH OPPORTUNITY 17

INTERTEK TQA VALUE PROPOSITION A SYSTEMIC APPROACH TO QUALITY ASSURANCE Helping corporations manage the complexity of their supply chains by taking a systemic risk-based approach to quality assurance 18

INNOVATION AND KAIZEN INNOVATIONS: CUSTOMER FACING DIFFERENTIATED SOLUTIONS Acquisition of leading and Technology Based Innovations Digital Based Innovations innovative solutions KAIZEN: OPERATIONAL MARGIN ACCRETIVE SOLUTIONS Operating Systems Shared Services Systems 19

INNOVATIONS: PRODUCTS Virtual Audits Intertek STEM Toy Mark Global Sanitation Authorised Materials Database • Business Assurance innovation: Intertek has • Hardlines innovation: Intertek has developed • Electrical innovation: Intertek has developed developed a pioneering Virtual Audit a unique STEM (Science, Technology, a proprietary global database of Sanitation solution, through which our TQA Experts are Engineering, and Math) Toy Mark, verifying Authorised Materials, materials which have able to audit remotely. This allows us to that our customers’ Toys have met stringent been evaluated by Intertek and determined deliver our audits faster and with a wider quality and safety standards, as well as to be safe to come into contact with food audience of observers bringing educational benefits in STEM skills development • Customer benefit: As the world of our clients • Customer benefit: Through this unique • Customer benefit: With the STEM Toys Mark, becomes increasingly complex, our solution our customers can save substantial our customers are able to give consumers the customers can now benefit from real time time in providing the required information peace of mind that their STEM Toy is safe, as quality audits, delivering robust assurance while making sure their products comply with well as educational against key risk areas across their supply safety standards. chains 20