INTERTEK GROUP PLC 2017 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
AGENDA Intertek: A Pioneer in Quality Assurance 01 Attractive Structural Growth Opportunities 02 03 High Quality Earnings Model Strategy for Sustainable Growth 04 2016 Results 05 3
01 INTERTEK: A PIONEER IN QUALITY ASSURANCE 4
INTERTEK PIONEERED THE QUALITY ASSURANCE INDUSTRY 2009: Intertek 1888: Milton Hersey enters the FTSE 100 establishes his index chemical testing lab 1987: Inchcape Testing Services (ITS, in Canada the future Intertek) is founded and completes the purchase of Caleb Brett 2017: Intertek acquires KJ Tech 1896: Thomas Edison sets up the 1996: Inchcape sells Services – a Lamp Testing Bureau in the US (this ITS to Charterhouse leading provider 1973: Labtest 2015: Intertek later becomes the Electrical Testing Development Capital. of automotive established in acquires the PSI Laboratories of ETL – a mark that ITS is renamed Intertek testing solutions Hong Kong, building and Intertek still applies today in Germany initially to focus construction on testing textiles assurance business 2002 1880 1900 1970 1996-02 1925: SEMKO (the 1885: Caleb Brett Swedish Electronic founds his cargo 2011: Intertek Equipment Control certification acquires 1989: ITS enters Office) is founded 2016: Intertek acquires: business in the UK Moody the Chinese • FIT Italia – a food quality International 2002: Intertek market & safety assurance lists on the 1927: Charles business London Stock Warnock company • EWA Canada – a leading Exchange 1911: Moody 1988: ITS is created in cyber security business International, Oil acquires ETL Canada to inspect and Gas testing and • ABC Analitic – a JV in steel products 1994: ITS certification Mexico’s fast growing acquires SEMKO business environmental testing market Intertek develops into an international testing business Intertek’s pioneering founders Intertek Group plc listed on the LSE 5 through organic and inorganic growth
THE 21ST CENTURY HAS CREATED A TRULY GLOBAL MARKET WITH GLOBAL TRADE REPRESENTING 58% OF GDP 69% 51% 53% 65% 86% 57% 28% 43% 61% 73% 37% 35% 41% 73% 63% 27% Global trade as a % of global GDP 132% 58% 19% 56% 39% 31% 44% 49% 39% 33% 45% 24% 65% 75% 29% 63% 41% 1965 1975 1985 1995 2005 2015 6 Trade as % of GDP Source: World Bank. Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product.
THE QUALITY ASSURANCE INDUSTRY IS EVOLVING FURTHER Customers expect more than TIC* to manage the risk in their complex sourcing and distribution operations Assurance ensures our customers identify and A mitigate the intrinsic risk in their operations, supply chain and quality management systems Testing is evaluating how products and services T T meet and exceed quality, safety, sustainability and performance standards I I Inspection is validating the specifications, value and safety of raw materials, products and assets C C Certification is certifying that products and services meet trusted standards Systemic approach to Quality and Safety with ATIC Solutions Customers expect Total Quality Assurance: ATIC 7 * TIC = Testing, Inspection & Certification
WE ARE EVOLVING TO MEET THE NEEDS OF OUR CLIENTS We have evolved rapidly to support our clients Global Quality Assurance needs and we offer a systemic approach to Quality Assurance with ATIC Global Market Global Market Leader in Leader in TIC Assurance 3,000 1,000+ auditors lab and offices 90,000+ 100+ audits countries Systemic approach to Quality and Safety with ATIC Solutions 8 Uniquely positioned to take advantage of the ATIC growth opportunities
WE HAVE SCALE POSITIONS IN THE TOP 30 COUNTRIES Top 30 Countries 92% 80% 76% 91% of Intertek Revenue 1 of Global GDP of Global Trade of Global Production EMEA Americas Asia Pacific (Europe, Middle East & Africa) Belgium Australia Brazil Bangladesh France China Germany Canada Hong Kong Italy India Netherlands Indonesia Mexico Japan Norway Korea South Africa USA Malaysia Sweden Philippines Switzerland Singapore Turkey Taiwan Thailand UAE Vietnam UK 9 Note. (1) 2015 Revenue.
INTERTEK’S DEPTH AND BREADTH OF ATIC SOLUTIONS Assurance Testing Inspection Certification Pharmaceutical Pharmaceutical Pharmaceutical Appliance & Electronic Softlines Agriculture Aerospace & Automotive Management Systems Hardlines Asset Integrity Building Products Benchmarking in Quality & Performance Automotive Building Product Conformity by Country Sustainability & Environment Biofuels Chemical & Petrochemical Eco-Textile Facility / Plant & Equipment Building Product Electrical Food & Food Service Legal & Regulatory Chemical Exporter & Importer Hazardous Location Product Development Electrical Field Labelling HVACR (1) Vendor Compliance Food Industrial Industrial Equipment Corporate Social Responsibility Health & Beauty Mineral IT & Telecom Failure Investigation Mineral Oil & Gas Life Safety & Security Laboratory Outsourcing Packaging Site Construction Lighting Risk Management Oil & Gas Textile & Apparel Medical Device Supply Chain Assessment 10 (1) Heating Ventilation Air Conditioning and Refrigeration
INTERTEK TOTAL QUALITY ASSURANCE VALUE PROPOSITION Systemic Approach to Quality and Safety with ATIC Solutions 11
02 ATTRACTIVE STRUCTURAL GROWTH OPPORTUNITIES 12
ATTRACTIVE GROWTH IN THE $250BN GLOBAL QUALITY ASSURANCE MARKET Existing customers: $50BN • Increase account penetration • ATIC cross selling Currently outsourced New customers: • New contracts $200BN Existing & New customers: • Outsourcing Currently in-house 13
STRUCTURAL GROWTH DRIVERS Products Trade Resources 57% of Revenue 73% of Profit 23% of Revenue 20% of Profit 20% of Revenue 7% of Profit Brand & SKU Faster innovation Long term demand Investment in Population growth GDP growth proliferation cycle for energy infrastructure Focus on Increased Development of Growth in transport Supply chain risk Growth in sustainable regulation regional trade infrastructure management alternative energy products Improvements in Increased focus on Focus on Growth in port Sustainability of Focus on health & safety, performance risk management traceability infrastructure energy supply safety and quality GDP growth Long-term growth GDP+ Mid- to long-term outlook: GDP+ Organic revenue growth 14
03 HIGH QUALITY EARNINGS MODEL 15 15
INTERTEK HIGH QUALITY EARNINGS MODEL Assurance Testing Inspection Certification Our Services Products Trade Resources Our Sectors GDP+ GDP growth Long-term growth Our Mid- to Long-Term Value Creation GDP+ Organic revenue growth Margin accretive Capex / M&A revenue growth Strong free cash flow Disciplined Investments capital allocation in growth 16
ACCRETIVE DISCIPLINED ALLOCATION OF CAPITAL 01 Capex and working capital investment to support organic growth (target c.5% of revenue in capex) Sustainable shareholder returns through payment of progressive dividends 02 M&A focused on strong growth and margin prospects in businesses with leading market positions or in 03 new attractive growth areas, geographies or services Efficient balance sheet with flexibility to invest in growth with Net Debt / EBITDA target of 1.5x - 2.0x 04 17
M&A IN ATTRACTIVE MARKETS STRENGTHENING INTERTEK’S PORTFOLIO £242m additional revenue from M&A PSI MT Group FIT-Italia EWA Canada ABC Analitic Business model Building & Construction Building & Construction Food Electrical and Wireless Environmental Location US US Italy Canada Mexico Completion Date November 2015 October 2015 January 2016 October 2016 November 2016 Market position Leading US provider of testing Leading provider of materials Market leader in food assurance Leading provider of cyber Market leader in the provision of and assurance services to testing and speciality and inspection in Italy security and assurance services environmental water testing and commercial and civil construction inspection in for products, equipment and analytical services in Mexico construction markets New York networks across multiple industries Integration status Completed Completed Completed In progress In progress Synergy plans on track US infrastructure and non- US infrastructure and non- Increased focus on food supply Growth in IoT and wirelessly Increased corporate and Growth drivers residential building development residential building development chain risk management connected devices government focus on environmental safety 18
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