2014 Half Year Results Presentation FINAL (2) [Read-Only] · 2014 Half Year Results Presentation. 2 Lloyd Pitchford Chief Financial Officer ... Acquisition and Project Costs (1.1)

www.intertek.com1

4 August 2014

Wolfhart HauserChief Executive Officer

Lloyd PitchfordChief Financial Officer

2014 Half YearResults Presentation

www.intertek.com2

Lloyd PitchfordChief Financial Officer

Financial Performance

2014 Half Year Results Presentation

www.intertek.com3

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.

4 August 2014

Cautionary statement regarding forward-looking statements

www.intertek.com4

Results Overview

• Revenue headwinds in some businesses

• Good growth in remaining portfolio

• Focus on profit and cash

• Currency impact

• Improving second half and into 2015

• Strong acquisition contribution and pipeline

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For the six months to 30 June 2014

Revenue £1,024m + 2.9% at constant- 5.6% at actual- 0.5% at constant organic(2)

Operating profit(1) £152m + 5.1% at constant- 3.8% at actual+ 0.8% at constant organic(2)

Operating profit margin(1) 14.9% + 30bps at constant+ 30bps at actual+ 20bps at constant organic(2)

Adjusted Diluted EPS(1) 61.2p + 8.6% at constant- 1.1% at actual

Adjusted cash generatedfrom operations(1)

£148m + 20%

Financial Highlights

(1) Before separately disclosed items

(2) Growth excluding acquisitions and disposals at constant exchange rates

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1,084.71,024.3

(4.9)33.9 (89.4)

400

500

600

700

800

900

1,000

1,100

1,200H

1 20

13

Org

anic

Acq

uisi

tions

/ Dis

posa

ls FX

H1

2014

£m

1,084.71,024.3

(3.3) (4.5) 8.5 22.4 5.9 (89.4)

400

500

600

700

800

900

1,000

1,100

1,200

H1

2013

I&A

Com

mod

ities C

G

C&

E

C&

P FX

H1

2014

£m + 2.9%Constant rates

H1 Revenue Growth

+ 2.9%Constant rates

- 0.5%Constant organic

rates

H1 2014 revenue of £1,024.3m is made up of £987.3 organic revenue and £37m from acquisitionsand disposals. H1 2013 revenue of £1,084.7m is made up of £1,081.3 organic revenue and £3.4mfrom acquisitions and disposals.

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Organic Revenue Growth -0.5%

992.2 987.3

(0.8%)(1.5%)

(0.7%)(1.2%)

(0.6%)

4.3%

600

700

800

900

1,000

1,100

H1 2013 IndustryContract Exits

Minerals IndustryEnergy

Projects

ContractChanges

Europe Cargo& Chems

Other H1 2014

£m

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USD, CNY & HKD~ 55%

GBP~ 10%

EUR~ 10%

Other~ 25%

Revenue By Currency

Currency Analysis

Local currency to GBP

H1 2014

H1 2013

H2 2013

FY 2013

USD -7.8% 1.67 1.54 1.59 1.56

CNY -6.1% 10.25 9.62 9.79 9.68

EUR -3.3% 1.22 1.18 1.18 1.18

HKD -7.7% 12.94 11.94 12.36 12.12

AUD -16.9% 1.83 1.52 1.74 1.62

CAD -14.2% 1.83 1.57 1.67 1.61

BRE -18.5% 3.84 3.13 3.63 3.36

INR -16.6% 101.70 84.83 99.90 91.99

Group -8%

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Divisional Operating Margin

11.1%10.2%

31.6%

15.1%

8.6%

14.9%

10.8% 10.4%

31.3%

15.1%

7.8%

14.6%

0.0%

10.0%

20.0%

30.0%

40.0%

I&A Commodities ConsumerGoods

C&E C&P Group

H1 14

H1 13*

*H1 13 at constant exchange rates

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(6.9)%

(3.8)%

Operating Profit & Separately Disclosed Items

£m @ actual exchange rates H1 2014 H1 2013

Adjusted operating profit (1) 152.3 158.3

Separately disclosed items:

Amortisation of acquisition intangibles (10.3) (12.7)

Acquisition and Project Costs (1.1) (0.8)

Restructuring costs (9.7) (4.1)

Profit on disposal - 0.2

Statutory operating profit 131.2 140.9

(1) Before separately disclosed items

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• Strong focus on cash management

• Adjusted cash from ops up 20%

• Adjusted effective tax rate 24.5%

• Capex £52.1m; 5.1% of revenue

• £40m acquisition spend

• Strong pipeline

Cash Flow, Tax & Investment

Adjusted Cash Generated from Operations

H1 2011 2012 2013 2014

Cash from Operations £m

91.1 118.1 123.7 148.2

% Change - 29.6% 4.7% 19.8%

Cash Conversion*

H1 2011 2012 2013 2014

Cash Conversion

56% 61% 61% 77%

H1 2011 2012 2013 2014

Cash Holding £m

171.8 160.2 123.8 100.5

Cash Holding

* Cash from operations / EBITDA post SDIs

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Financing

11%

19%

70%

• $110m new bond debt

• Bank facility refinanced and expanded

• Strong maturity profile

• Interest charge H1 2014 £11.4m (2013: £13.0m)

• Net debt EBITDA of 1.6

(1) Post refinancing of bank facility in July 2014

Less than one year

Between one and four years

Five years +

Drawn debt

Debt duration (1)

£310m

£452m Bank Debt

Bond Debt

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Interim dividend increased by 6.7%

• Interim dividend of 16.0p, up 6.7%

• Interim pay-out of £26.0m

• Reflects good underlying earnings progression

Interim Dividend Per Share

0

5

10

15

20

2010 2011 2012 2013 2014

Pence

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Wolfhart HauserChief Executive Officer

Operating Performance

2014 Half Year Results Presentation

www.intertek.com15

Industry & Assurance (6.7)% 24%

Commodities (1.6)% 18%

Consumer Goods 5.0% 36%

Commercial & Electrical

6.3% 17%

Chemicals & Pharma 4.5% 5%

Divisional Overview – H1 2014

H1 Organic revenue growth

% of Group H1 Profit

Industry & Assurance

32%

Commodities

26%

Consumer Goods

17%


17%

Chemicals & Pharma

8%

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H1 14 Performance

H1 14 Revenue Mix

Industry & Assurance

£m @ constant exchange H1 14 Change

Organicchange

Revenue 325.3 (1.0)% (6.7)%

Operating profit 36.1 2.0% (5.4)%

Margin 11.1% 30bps 10bps

Industry Services

Food & Agri

BA

• Industry Services : Revenue down on low-margin contract exits, capital project phasing delays

• £15m low-margin contracts exited YTD • Food & Agri : Strong Agri trade flows and customer

demand in Asia & Latin America• Business Assurance (BA): Strong growth with Western

brands on global quality systems; Market expansion Mexico, India

H1 14 Trading

• Industry Services : H2 improvement in Tech Inspection• Food & Agri : High demand for complex analytical food

services• Business Assurance: Customer base growing in

developing markets

Outlook

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H1 14 Performance

H1 14 Revenue Mix

Cargo

Minerals

GTS

Commodities


Organicchange

Revenue 262.8 (1.7)% (1.6)%

Operating profit 26.8 (3.2)% (3.9)%

Margin 10.2% (20)bps (20)bps

• Minerals: Strong decline continued (-16%). Indonesian trade bans affecting entire region

• Cargo: Improving growth. Good demand from US shale oil transit testing, Asia and Middle East. Europe weak

• Government Services (GTS): Product Conformity Programme reduction since Q413

H1 14 Trading

• Minerals decline will continue • US shale oil & gas services further growth• Process optimisation

Outlook

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H1 14 Performance

H1 14 Revenue Mix

SoftlinesToys & Hardlines

Audit & Other

Consumer Goods


Organicchange

Revenue 176.1 5.1% 5.0%

Operating profit 55.6 5.9% 6.0%

Margin 31.6% 30bps 30bps

• Textiles: Good growth; market expansion in Turkey, India, Vietnam>20% growth in new sourcing markets

• Toys: Growth moderated by prior year regulatory increase

• Margin stable

H1 14 Trading

• Continued investment in new countries and capabilities -leading industry position

• Strong growth in India, Turkey, South Korea, Mexico and Colombia

Outlook

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H1 14 Performance

H1 14 Revenue Mix

Electrical &

Wireless

Building Products

Trans Tech



Organicchange

Revenue 176.0 14.6% 6.3%


Margin 15.1% 0bps (40)bps

• Transport Technologies: Very high growth

• Electrical: Strong growth, particularly in UAE, Taiwan, Korea, Thailand, Vietnam

• Wireless: Completion of 2-year app programme in China and USA

• Laboratory network investments

H1 14 Trading

• Strong growth in new technology and innovation areas

• New Asian growth markets

• Continued investment in best-in-class network

Outlook

www.intertek.com20

H1 14 Performance

H1 14 Revenue Mix

Chemicals &

Materials

Pharma

Health & Envi

Chemicals & Pharma


Organicchange

Revenue 84.1 7.5% 4.5%


Margin 8.6% 80bps (10)bps

• Chemicals & Materials : Good growth in Middle East

• EU weak, continued restructuring and site closure

• Margin focus

H1 14 Trading

• Fuel and lubricant development and testing driven by new engines and environmental concerns

• Pharma growth from biologics

• Development in China

Outlook

www.intertek.com21

Our strategic portfolio

RETAIL & MANUFACTURED

PRODUCTS

COMMODITIES& MATERIALS

INDUSTRY ASSETS

Consumers

Business Assurance

Energy

Chemicals & Pharma

Minerals

Food & Agri

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Long term energy demand

0

2

4

6

8

10

12

14

16

18

1990 1995 2000 2005 2010 2012 2015 2020 2025 2030 2035

Bill

ion

tonn

es o

f oil

equi

vale

nt

Oil Gas Coal Nuclear Hydroelectric Renewables

Source: BP Energy Outlook 2030

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What

MarketDrivers

Regulation

Quality, Safety and Environmental standards

Supply Chain Changes

Shifting cycles, sourcing and complexity

New Technologies

Innovation and product variety

End-User Quality Expectations & Diversity

Consumers demanding safe & quality brands

Market drivers in product industries

Developing Economies Markets developing and

growing middle classes

www.intertek.com24

Outlook

• Growth strengthening in H2

• Profitability leverage from improving revenue growth

• Good development in and strong growth from emerging markets

Portfolio positioned to benefit from strong structural drivers in coming years

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Our Growth Platform

GLOBAL TRADE

MARKET DRIVERS

NETWORK & SERVICE

OUTSOURCING & CONSULTING

INDUSTRY CONSOLIDATION

QUALITY

COMMODITIES& MATERIALS

RETAIL & MANUFACTURED

PRODUCTS

INDUSTRY ASSETS

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2014 Half Year Results PresentationAppendix

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Taxation


Profit before tax 119.8 127.9

Tax (29.5) (32.5)

Profit after tax 90.3 95.4

Reported tax rate 24.6% 25.4%

Effective tax rate on adjusted profit before tax

24.5% 25.0%

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19.8%

Operating Cash Flow


Operating Profit before changes in working capital and provisions

184.0 195.4

Changes in working capital:

Inventory (1.5) (2.1)

Debtors and prepayments (14.2) (61.4)

Creditors and accruals (24.9) (12.7)

Special contributions into pension schemes (0.9) -

Cash generated from operations 142.5 119.2

Separately disclosed items – cash flow 5.7 4.5

Adjusted cash generated from operations 148.2 123.7

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401%

Free Cash Flow


Cash generated from operations 142.5 119.2

Net interest (12.6) (12.1)

Taxation (30.8) (37.7)

Net capital expenditure (52.0) (60.0)

Free cash flow 47.1 9.4

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Net Debt

£m @ actual exchange rates H1 2014 H1 2013 FY 2013

Borrowings 761.3 757.3 734.6

Cash (100.5) (123.8) (116.4)

Net debt 660.8 633.5 618.2

Net debt to EBITDA 1.55x 1.51x 1.44x

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Liquidity Position at 30 June 2014


Debt facilities 902.3 976.0

Borrowings (761.3) (757.3)

Undrawn committed borrowing facilities 141.0 218.7

Cash 100.5 123.8

Liquid funds 241.5 342.5

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Divisional Performance Summary

£m @ constant exchange

Revenue Margin

H1 14 ChangeOrganic change H1 14 Change

Organic change

Industry & Assurance 325.3 (1.0)% (6.7)% 11.1% 30bps 10bps

Commodities 262.8 (1.7)% (1.6)% 10.2% (20)bps (20)bps

Consumer Goods 176.1 5.1% 5.0% 31.6% 30bps 30bps

Commercial & Electrical 176.0 14.6% 6.3% 15.1% 0bps (40)bps

Chemicals & Pharma 84.1 7.5% 4.5% 8.6% 80bps (10)bps

Group Total 1,024.3 2.9% (0.5)% 14.9% 30bps 20bps

H1 2014

Documents

2014 Half Year Results Presentation FINAL (2) [Read-Only] · 2014 Half Year Results Presentation. 2 Lloyd Pitchford Chief Financial Officer ... Acquisition and Project Costs (1.1)