INTERTEK GROUP PLC Investor Presentation
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. 2 Presentation date: December 2018
AGENDA 1 Intertek: A Pioneer in Quality Assurance 2 Attractive Structural Growth Opportunities 3 Intertek 5x5 Growth Strategy 4 Executing our 5x5 Growth Strategy 5 ATIC Innovations to Accelerate Growth 6 Sustainable Shareholder Value Creation 3
1 INTERTEK: A PIONEER IN QUALITY ASSURANCE
INTERTEK PIONEERED THE QUALITY ASSURANCE INDUSTRY 1888: Milton Hersey Establishes his chemical testing lab in Canada 1954: Warnock Hersey Merger to create 'Warnock Hersey', one of the largest testing and 1927: Chas Warnock inspection groups in Canada Forms the Chas Warnock Company in Montreal, Canada to inspect steel products 1885: Caleb Brett Founds his cargo certification business in the UK 1996: Management 2002 – 18: Continuing 1973-85: Inchcape 1987: Inchcape 1987-94: ITS Acquires BUILDING ON Buyout of ITS, to Strengthen Our Starts Labtest Launches ITS Caleb Brett (‘87) Renamed to Intertek Offering OUR STRONG ETL (‘88) Initially focussed on textiles testing Inchcape Testing Services (ITS) Alchemy (‘18) – People Assurance SAAS services. The business later expands includes Labtest and other Testing, HERITAGE Warnock Hersey (‘92) 2002: Intertek Cyber acquisitions (‘16 -18) – NAM, UK across Asia and to serve a range of Inspection and Certification SEMKO (‘94) PSI (‘15) – US Construction Industry industries acquisitions Launches on the LSE Moody (‘11) – Global Energy Industry 1896: Thomas Edison Sets up the Lamp Testing Bureau in the US. This later becomes the Electrical Testing Laboratories of ETL – a mark that Intertek still applies today 1925: SEMKO The Swedish Electronic Equipment Control Office is founded to provide electrical product safety testing in Sweden 1911: Virginius Daniel Moody Established Moody Engineering for construction and electrical engineering projects, later expanding to Oil and Gas 5
LEADING TOTAL QUALITY ASSURANCE PROVIDER TO INDUSTRIES GLOBALLY A Purpose-Led Vision Our Purpose Our Vision Bringing Quality and Safety to Life To Be the Most Trusted Partner in Quality Assurance Total Quality Assurance = Assurance + Testing + Inspection + Certification Assurance Testing Inspection Certification Assurance ensures our customers Testing is evaluating how products Inspection is validating the Certification is certifying that identify and mitigate the intrinsic and services meet and exceed specifications, value and safety of products and services meet trusted risk in their operations, supply chain quality, safety, sustainability and raw materials, products and assets standards and quality management systems performance standards Global Market Leader 100+ Countries 1,000+ Labs A Leading Position, Serving 80+ languages 43,000+ Employees Clients Across a Wide Range of Industries 6
INTERTEK PROVIDES A DEPTH AND BREADTH OF ATIC SOLUTIONS Assurance Testing Inspection Certification Management Systems Softlines Agriculture Appliance & Electronic Benchmarking in Quality Hardlines Asset Integrity Aerospace & Automotive & Performance Automotive Building & Construction Building & Construction Sustainability & Environment Biofuels Chemical & Petrochemical Conformity by Country Facility / Plant & Equipment Building & Construction Electrical Eco-Textile Legal & Regulatory Chemicals & Pharma Exporter & Importer Food & Food Services Product Development Electrical Field Labelling Hazardous Locations Vendor Compliance HVACR 1 Food Industrial Corporate Social Responsibility Health & Beauty Minerals Industrial Equipment Failure Investigation Minerals Oil & Gas IT & Telecoms Laboratory Outsourcing Packaging Site Construction Life Safety & Security Risk Management Pharmaceutical Textile & Apparel Lighting Supply Chain Assessment Oil & Gas Medical Devices Network Assurance 14% FY17 Revenue 54% FY17 Revenue 24% FY17 Revenue 8% FY17 Revenue 7 1 Heating Ventilation Air Conditioning and Refrigeration
INTERTEK BUSINESS STRUCTURE Products Trade Resources 59% of Revenue 75% of Profit 23% of Revenue 19% of Profit 18% of Revenue 6% of Profit Softlines Hardlines Caleb Brett Capex Inspection (Cargo & Analytical Assessment) Electrical & Network Business Assurance Assurance AgriWorld Opex Inspection Building & Transportation Construction Technology Government & Trade Services Minerals Food Chemicals & Pharma 75% of Group profit based on GDP agnostic 19% 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 8
2 ATTRACTIVE STRUCTURAL GROWTH OPPORTUNITIES
ATTRACTIVE STRUCTURAL GROWTH DRIVERS Products Trade Resources 59% of Revenue 75% of Profit 23% of Revenue 19% of Profit 18% 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 75% of Group profit based on GDP agnostic 19% 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 10
INTERTEK TQA SERVICES ARE MISSION CRITICAL FOR OUR CLIENTS TO OPERATE SAFELY Growing corporate complexity Higher quality expectations Vocal consumers on social media Increased regulatory demands Greater focus on sustainability TQA = ASSURANCE + TESTING + INSPECTION + CERTIFICATION 11
INCREASED SAFETY CONCERNS IN THE FOOD INDUSTRY Frequent Food and Drink Product Recalls “Chicken salad recalls over fears it might “Canada recalls gin over too strong “Crackers recalled over potential cause food poisoning” alcohol content” salmonella risk” Independent, July 2017 Independent, July 2018 ABC News, May 2017 “Macadamia nuts recalls due to listeria “Retailers stop selling chicken wings in “Chocolate recalls over salmonella fears” contamination” safety scare” Independent, June 2017 ABC News, June 2017 Chronical Live, July 2017 “Belgian White Chocolate Cookies recalls “Needles in strawberries fear prompts “Edamame recalled over listeria fears” for containing ‘undeclared hazelnut’” New Zealand to halt Australian imports” Sydney Morning Herald, September 2018 The Sun, July 2017 CNN, March 2017 GROWING DEMAND FOR A TRUSTED FOOD SAFETY PARTNER 12 12
THE PACE OF CHANGE IS ACCELERATING IN MULTIPLE DIRECTIONS “Growth in Emerging Markets “AI forecasted to increase “The global blockchain “By 2025, the car market for “Global solar power capacity to drive an increase in the USA economic growth by market is expected to be partially autonomous vehicles to increase 590% by 2040” world’s middle class to 5bn 35% by 2035” worth US$20bn in 2024” is expected to be at US$36bn” people by 2030” “The rise of cyber crime “Ecommerce, online continues to accelerate: UK “By 2050, 70% of the world’s food and traceability “22% of American adults have business cyber crime rose 63% population will live in cities” are rewriting the sold in the Sharing Economy” in 2017” retail rulebook” “Between 2009 and 2015 the “87% of millennials would be “Sales of Electric Vehicles will number of internationally more loyal to a company that “IoT will change the way we “By 2050 there will be 2bn increase 1,000% in the next 8 recognised trademarks grew supports environmental live and work” people aged over 60” years” 50% to 24m” issues” A MORE COMPLEX CORPORATE WORLD MEANS MORE GROWTH OPPORTUNITIES FOR INTERTEK 13
EVER GROWING COMPLEXITY MEANS EVER GREATER LEVELS OF RISK Growth of New Products Drive Quality Risks Hacking is Driving Increases in Data Breaches 1,579 1,091 783 780 614 471 421 1996 1999 2002 2005 2008 2011 2014 2017 2011 2012 2013 2014 2015 2016 2017 Other Breaches Hacking Breaches Vehicle Recalls Car Makes Source: Identity Theft Resource Centre, US only 14 Source: National Highway Traffic Safety Administration
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