2018 HALF YEAR RESULTS PRESENTATION Good Revenue Growth Momentum 7 August 2018
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. 7 August 2018 2
AGENDA Performance Highlights 01 H1 2018 Financial Results 02 Strategic Update 03 2018 Outlook by Division 04 Summary 05 3
01 PERFORMANCE HIGHLIGHTS 4
CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH Operating Profit (£m) Operating margin (%) Revenue (£m) 16.8% 1,372 1,348 226 16.3% 224 H1 17 H1 18 H1 17 H1 18 H1 17 H1 18 +3.9% CCR +6.4% CCR +40bps CCR (1.8%) +0.8% +50bps Working Capital (£m) Interim Dividend (p) Adjusted EPS (p) 225 211 31.9 90.4 91.2 23.5 H1 17 H1 18 H1 17 H1 18 H1 17 H1 18 8.2% of Revenue 1 7.7% of Revenue 1 +6.8% CCR +35.7% +0.9% (6.5%)YoY 5 1 Rolling 12 months revenue
ORGANIC REVENUE GROWTH ACCELERATION Organic growth at constant currency H1 organic growth by division Organic revenue growth 1 (%) 3.4% 10.0% Products: +5.7% 76% 2.5% of earnings 1.7% Trade: +0.7% 18% of Revenue (10.0%) earnings 10.0% growth (%) 6% Resources: (0.7%) H1 17 H2 17 H1 18 []% (10.0%) 6 Note: (1) At 2018 constant currency rates
CONTINUOUS PROGRESS ON MARGIN Operating margin (%) 16.8% 16.3% 15.4% H1 16 H1 17 H1 18 +40bps CCR 3 +60bps CCR 3 +110bps CCR 3 Productivity management Portfolio strategy Portfolio review • • Monthly performance reviews for Top Growth and margin accretive portfolio Savings 2 Headcount 30 countries/16 Business Lines strategy reduction • Organic and inorganic investments 2016 550 £10m • Business Line and country benchmarking • Strategic review of underperforming 2017 400 £7m business units 2018 100 £2m • Site span of performance management • Consolidation of facilities 7 Note: (1) operating margin; (2) Annualised; (3) at constant currency of that year
02 H1 2018 FINANCIAL RESULTS 8
KEY P&L FINANCIALS YoY % Actual Constant H1 18 Rates Rates Revenue £1,347.7m (1.8%) 3.9% Organic revenue 1 £1,339.4m (2.3%) 3.4% Operating profit 2 £225.8m 0.8% 6.4% Operating profit margin 2 16.8% 50bps 40bps Adjusted diluted EPS 2 91.2p 0.9% 6.8% Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2017 and 2018; (2) Before separately disclosed items 9
OPERATING MARGIN BRIDGE 17.0% 16.8% 10bps 10bps 16.7% 30bps (20bps) 10bps 20bps (10bps) 16.3% 16.0% 15.0% +40bps at constant rates 14.0% 13.0% (1) H1 17 Products Trade Resources Divisional mix Acquisitions Other items FX H1 18 & Disposals Excluding FX 10 Note: (1) Comprises a net gain in relation to the implementation of a pensionable salary freeze in the UK scheme, partially offset by other specific items in the period
CASH FLOW & NET DEBT £m @ actual exchange rates H1 17 H1 18 Adjusted operating profit 1 223.9 225.8 Depreciation/amortisation 47.3 43.8 Change in working capital (52.3) (75.4) Other 2 7.1 9.9 Adjusted cash flow from operations 226.0 204.1 Net capex (33.9) (46.3) Other 3 (68.1) (67.2) Free cash flow 124.0 90.6 Acquisitions 4 (10.5) (10.6) Net debt 696 568 Notes: 11 (1) Before Separately Disclosed Items; (2) Comprises Special Pension payments, add back Equity Settled transactions and other Non-Cash Items; (3) Comprises: Exceptionals, Interest Paid/Received and Tax; (4) Total cash consideration in HY18 for 2018 acquisition £13.0m, net of cash acquired £10.6m
FINANCIAL GUIDANCE FY 2018 Guidance Net finance cost £28 – 30m Effective tax rate 25.3 – 25.8% Minority interest c.£20m Diluted shares (as at 30 June 2018) 163.0m Capex £130 – 140m Net Debt (incl. acquisition of Alchemy) £800 – 850m Note: Before any material change in FX rates and any additional M&A 12
03 STRATEGIC UPDATE 13
INTERTEK HIGH QUALITY EARNINGS MODEL Our Services Assurance Testing Inspection Certification Products Trade Resources Our Sectors GDP+ GDP growth Long-term growth Our Mid- to Long-Term Intertek Virtuous Economics GDP+ Organic revenue growth Value Creation Margin accretive Investments in attractive revenue growth growth and margin sectors Strong free with Capex / M&A cash flow Disciplined capital allocation 14
ATTRACTIVE GROWTH IN THE $250BN GLOBAL QUALITY ASSURANCE MARKET Existing customers: • Increase account penetration $50BN • ATIC cross selling Currently New customers: outsourced • New contracts Existing & New customers: • Outsourcing $200BN Currently in-house 15
ATTRACTIVE STRUCTURAL GROWTH DRIVERS Products Trade Resources 60% of Revenue 76% of Profit 23% of Revenue 18% of Profit 17% of Revenue 6% of Profit Increased number Faster innovation Long term demand Investment in Population growth GDP growth of Brands & SKUs cycle for energy infrastructure Increased consumer Growth in Increased focus on Development of Supply chain risk Growth in transport regulation sustainable regional trade management alternative energy infrastructure products Improvements in Increased safety, corporation focus Increased focus on Growth in port Sustainability of Focus on health & performance and on risk traceability infrastructure energy supply safety quality management 76% of Group profit based on GDP agnostic 18% of Group profit based on global trade 6% of Group profit based on global growth growth drivers growth drivers in the energy sector GDP+ GDP growth Long-term growth Growth outlook: GDP+ Organic revenue growth in real terms 16
5X5 DIFFERENTIATED STRATEGY FOR GROWTH 5x5 Strategic Goals 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in a service in Assurance, growth based on GDP+ from operations capital allocation safe environment Testing, Inspection and organic growth policy Certification 5 Strategic Priorities 5 Enablers Differentiated Brand Proposition Living Our Customer Centric Culture Superior Customer Service Disciplined Performance Management Effective Sales Strategy Superior Technology Growth and Margin Accretive Portfolio Energising Our People Operational Excellence Delivering Sustainable Results 17
INTERTEK TQA VALUE PROPOSITION A SYSTEMIC APPROACH TO QUALITY ASSURANCE Helping corporations manage the complexity of their supply chains by taking an end-to-end 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 Inlight TM Network Voice of the Consumer Intertek Sustainability • Customer insight: Our customers collect vast • Customer insight: Stakeholder expectations and • Customer insight: With increasing regulation, supply quantities of valuable feedback from consumers. growing supply chains complexity mean that chain complexity and a stronger focus on risk However, analysing this data to deliver actionable customers are more focussed on the environmental management, it is increasingly important for our product quality improvements can be challenging impact of their business than ever before customers to truly understand their supply chains • Business Assurance innovation: Inlight TM Network is • Business Line agnostic innovation: Intertek’s • Electrical & Network Assurance innovation: Our expertise allows us to offer a comprehensive suite of a trusted SaaS platform for suppliers to share their experts use advanced data analysis techniques to sustainability services, assuring sustainability across validated business profile and audits, giving quickly identify common issues and then work with our customers’ entire business organisations information on their suppliers our customers to design bespoke solutions # identities, capabilities and compliance levels aa • Customer benefit: Customers are able to anticipate, • Customer benefit: Through this Network of validated • Customer benefit: Our customers are able to better navigate, validate, and achieve their current and suppliers, customers are able to gain greater visibility leverage their customer feedback data and to deliver emerging sustainability requirements and goals of their supply chain risks, build resilience into their improved products to consumers faster global operations and safeguard their reputation 20
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