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WELL POSITIONED TO NAVIGATE AN UNPRECEDENTED PANDEMIC
MAY 2020 TRADING STATEMENT21 May 2020
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.
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.
Nothing in this presentation should be construed as a profit forecast.
21 May 2020
2
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INDUSTRY LEADER WITH HIGH QUALITY EARNINGS MODEL
• Global network of state-of-the-art operations in 100 + countries with subject matter experts
• Scale and with market-leadership positions across the Product, Trade and Resources
• Depth and breadth of mission-critical ATIC solutions
• High-performance, passionate organisation
• High-margin and strongly cash generative earnings model and disciplined capital allocation policy
High margin, strongly cash
generative earnings model
TRACK RECORD OF CONSISTENT VALUE CREATION
5
132.1
211.7
FY14 FY19
Adjusted EPS (p)
+60%
185
380
FY14 FY19
Free Cash Flow (£m)
+106%
16.3%
22.8%
FY14 FY19
ROIC - Actual (%)
+650bps
15.5%
17.2%
FY14 FY19
Adj. Operating Margin (%)
+170 bps
54,845
66,425
FY14 FY19
Revenue per employee (£)
+21%
2,093
2,987
FY14 FY19
Revenue (£m)
+43%
STRONG BALANCE SHEET
• Group net debt of £629m*, 1.0 x net debt:EBITDA, down from 1.4x in prior year, reflecting continued strong cash generation
• Debt has a long duration maturity profile, with Company having recently refinanced and extended its Revolving Credit Facility to US$850m with a syndicate of 8 banks in January 2020 for a 5-year term
• Company had undrawn committed borrowing facilities of c.£325m* and confirmed that it is in a position to draw down on the Bank of England’s CCFF facility, should it need to do so.
*At December 31, 2019 at IAS 17
PROGRESSIVE DIVIDEND POLICY
• Group operates progressive dividend policy with targeted payout ratio of c.50%
• Intertek ranks 2nd highest in the FTSE100 in-terms of dividend progression since 2002 IPO
• FY 2019 dividend of £170m
• 105.8p per share, up 6.8% YoY
• Final dividend paid on 11 June
DIVIDEND (P)
14-19 CAGR: +16.6%
+6.8%
49.1 52.362.4
71.3
99.1 105.8
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
BRINGING QUALITY, SAFETY AND SUSTAINABILITY TO LIFE
• Total Quality Assurance superior customer service
• Powerful portfolio
• High-quality compounder earnings model
• Passionate customer-centric organisation
• Disciplined performance management
AGILE AND FAST TO ACT
• Adapted to new operating environment with agility and speed
• Comprehensive policy and processes to protect our people’s health and safety
• Helped our clients resume operations
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THE SITUATION EVOLVED RAPIDLY…
FIVE OPERATIONAL PRIORITIES
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Employee Health and
Safety
Customer Service
Margin Cash Engagement
HEALTH & SAFETY COMES FIRST
1. The use of personal protective equipment, including face masks
2. Hygiene, control and prevention measures3. Social distancing and restrictions on
gatherings4. The sanitisation of facilities5. Guidance for visitors to our facilities6. Guidance for those of our employees who
work at client premises or locations in the field
7. Restrictions on international travel; and 8. Guidance on what to do if you feel unwell.9. Working from home for non-billable
employees10. Health monitoring for employees who are
unwell
INTERTEK COVID 19 HSE POLICY
MISSION-CRITICAL ROLE IN THE ECONOMY
• Committed to providing uninterrupted service to our clients to make sure their supply chains operate safely
• Keeping our operations open 24/7 to provide maximum support to our clients during these very difficult times
• Increased client communication frequency to make sure we understand their needs quickly
SUPPORTING OUR CLIENTS WITH INNOVATIVE SOLUTIONS
IMMEDIATELY RESPONDING TO OUR CUSTOMERS’ NEEDS
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Curbside pick-up, innovative sample pick-up solution to ensure social distancing and safety of
customers
Food and Chemical & Pharma labs provided 24/7
testing and inspection services
Design, development, testing and certification of
Healthcare and Medical Lighting to aid diagnostics
and healing
Increased productivity and shift working hours,
offering 24/7 hotlines
Intertek remote solutions, enabling mission-critical business continuity
Turnkey remote audit and inspection solutions, reducing turnaround times while providing
transparency and peace of mind that work is performed to the highest Intertek standards
Remote inspection and audit solutions using Inview, ensuring the safety of our employees and customers
Remote testing solutions using live video streaming
Remote report review and certification services to ensure business continuity
BETTER, FASTER AND MORE SUSTAINABLE ACCESS TO INTERTEK’S TEAM OF QUALIFIED
AUDITORS, INSPECTORS AND EXPERTS
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REMOTE VIDEO INSPECTION AND AUDIT
PRIORITY TESTING SERVICE FOR LIFE-SAVING MEDICAL EQUIPMENT
• TQA expertise to support our non-medical clients in developing and manufacturing medical equipment
• Prioritisation, and increasing services for critical care and life sustaining products
• Suite of ATIC services for germicidal lighting products to sanitise hospitals, homes and workplaces
• Partnering with US FDA and UK MHRA to deploy programs for emergency use
• Center of excellence in Americas, Europe and Central Asia, and Asia Pacific
End-to-End Services for Medical DevicesStrong Intertek Medical Devices Services Platform
Surgical Lights
Patient Monitors
Defibrillators
Surgical beds
Anaesthesia
Ventilators
Imaging equipment
Electrosurgical units
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GLOBAL SOLUTIONS FOR PERSONAL PROTECTIVE EQUIPMENT
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• Bacterial filtration
• Fluid penetration
• Particle filtration
• Breathability
• PPE performance tests
• Blood resistance
• Pathogen resistance
• Dry microbial penetration
• Resistance to wet microbial penetration tests
• Sterility and performance test covering latex single use gloves and reusable vinyl / rubber gloves
• Transmittance tests
• Optical tests
• Mechanicals tests
Masks GlovesProtective GownsSafety Goggles and
Face Shields
Supporting PPE manufacturers to meet heightened demand from governments, medical organisations and consumers…
EXPRESS SERVICE FOR HAND SANITISERS
Intertek is providing services to test sanitisers according to WHO guidelines
Label claim testing for hand sanitizers
Complete set of tests to evaluate best-in-class Ethanol Suppliers for hand sanitizers
End-to-end efficacy testing of hand sanitizers to fight COVID-19
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SUPPORTING THE PHARMA INDUSTRY
Vaccine development support,
repurposing and reformulation of drug products to combat
COVID-19
Diagnostic support to help with testing of suspected patient and developing testing kits for efficacy
Therapeutic development support for screening and
re-deployment of existing medicines which are
considered as potential COVID-19 treatments
Contingency and risk mitigation services to
maintain medicine supply chains. Supplier, and quality systems audits to support continuous improvement
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TOTAL QUALITY ASSURANCE FOR SOME OF THE WORLD’S LARGEST AND MOST INNOVATIVE PHARMACEUTICAL COMPANIES
LEADING INNOVATIONS IN THE ENERGY SECTOR
Our 130+ years of experience in Oil & Gas industry, and our remote inspections, data analytics, and e-reporting
solutions across the world are ensuring continuity of Oil & Gas supply chains
Remote video inspections and e-reporting tools for real-time reports are enabling seamless supply chains of our customers
Solutions to mitigate risks associate with storage shortages –predictive blending, fuel stability solutions and stock
monitoring activities for offshore floating storage
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Robotic sampling in Minerals testing labs, enabling our TQA experts to adhere to social distancing recommendations while
being able to process increased sample volumes
RiskAware, innovative data analytics solution, enabling customers to focus their quality assurance and quality control
spending on higher criticality equipment
With our comprehensive cyber-security portfolio, Intertek is perfectly positioned to support our
customers to manage the cyber risks arising as their employees' transition to home working
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CYBERSECURITY ASSURANCE SUPPORTING REMOTE WORKING
Mass remote working network security penetration testing
Critical network and infrastructure testing, and network resilience testing
Increased requirement for higher bandwidth fixed and wireless infrastructure
Audit and on-site inspections of remote working practicesin-home
Security support for acceleration of 5G demand
COMPLETE CYBER SECURITY CERTIFICATION, ASSURANCE, TESTING AND INSPECTION SERVICES ASSURING NETWORKS AND PRODUCTS ARE CYBER SECURE
HELPING GOVERNMENTS IN FIGHT AGAINST COVID
• Ensuring consumer-facing establishments maintain highest hygiene and safety standards
• Helping governments in setting-up emergency medical facilities and safe PPE supply chains
• Collaborating with trade associations to ensure safe manufacturing and supply of PPEs and Medical devices
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INTERTEK PROPRIETARY RESEARCHRELEASED 1 MAY 2020
71% of employees do not want to return to
their workplace unless authenticated health
and safety practices are in place
54% of senior managers believe that ‘they will struggle
to provide an acceptable H&S
standard for employees when they do return
76% said they were ‘scared’ or
‘nervous’ about visiting a bar or restaurant once restrictions are lifted
56% do not trust cinema and theatre operators to have
sufficient H&S practices in place to
prevent the spread of Covid-19
This number rises to 57% for airlines
…and 59% for public
transport
95% would find it reassuring if there was a
universal quality standard adopted by
companies to ensure the highest H&S standards
to prevent infection
Research with UK companies was conducted online from 29 – 30 April 2020 with n=2,201 respondents
73% said they were ‘scared’ or ‘nervous’ about visiting a hotel once restrictions are
lifted
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FULL SUITE OF OPERATIONAL PROTEK SOLUTIONS – ACROSS ALL INDUSTRIES
State of the art training and certification programmes for employees
End-to-end solutions designed to help identify and mitigate intrinsic risk in our customers’ operations, supply chains and business processes
Total assurance solutions for all types of facilities, from hotels/restaurants & retail outlets where consumers will look for visible safety verification, to schools, transportation hubs & manufacturing sites
Complete audit / testing / inspection solutions to ensure spaces, materials and surfaces are safe for employees and customers in the work place and public places
Protek Product solutions deliver the assurance to clients that a product was made with quality, safety, and sustainability in mind. Solutions cover products through the entire lifecycle
PROTEK
People AssuranceOperating Systems &
Processes Facilities Materials & Surfaces Products
HELPING OUR COMMUNITIES
• Donation campaigns to support Wuhan in the fight against the coronavirus
• Bigane Qalma crowdfunding program to provide relief packages across Central Asia
• Building & Construction team in Denver urgently designed and constructed a tank farm for large oxygen tanks, vaporisers, and ancillary equipment.
• Intertek Taiwan volunteers collaborated with the Farglory Foundation to donate blood following a ‘red alert’
• Health & Safety assurance and testing programs to ensure communities remain safe
• ‘First in Queue Priority for critical medical devices to ensure seamless supply of life saving equipment
DISCIPLINED MARGIN MANAGEMENT
• Disciplined margin process
• Monthly performance management progress reviews for Top 30 Countries / 16 Business Lines
• Country and Business Line benchmarking
• Sire span of performance management
• Strict controls on pricing and cost discipline
• Pause on all recruitment
• Delay of the 2020 annual salary increase,
• Furlough in the UK, France and Italy
OPERATING MARGIN
+0bps+10bps CCR
17.2%
DISCIPLINED CASH MANAGEMENT
£185m
£235m
£318m£342m £351m
£380m
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
FREE CASH FLOW
• Disciplined cash collection • Capex review to delay those investments not time critical,
reducing planned 2020 expenditure by a third• Voluntary salary-deferral scheme for management, running
from March to October 2020:• 50% deferral for EVPs• 30% for our SVPs• 20% for Management• c.1200 individuals supported
• Benefiting from local authorities’ tax payment deferrals
NEVER BEEN MORE IMPORTANT TO STAY CONNECTED EVERY DAY
• World-class digital communication platform
• Reaching out frequently to everybody in the organisation
• Intertek Hero featured daily in a recognition video
• Strong business model, geographic and business line diversity and disciplined approach to performance management
• Global pandemic has unfolded at great speed with broad-based lockdown initiatives in every country
• We will provide an update on our full year guidance once we have more visibility on when and how the lockdown restrictions will be lifted around the world
WE HAVE DELIVERED A RESILIENT TRADING PERFORMANCE
JANUARY – APRIL REVENUE £881.6M, 4.6% BELOW YOY
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Revenue Performance
4 months – January to April
2020 £m
2019 £m
Change at actual
Change at constant
Like-for-Like at constant 1
Products 519.9 549.7 (5.4%) (6.1%) (6.6%)
Trade 200.8 216.0 (7.0%) (5.9%) (5.9%)
Resources 160.9 158.6 1.5% 2.4% 2.4%
Group 881.6 924.3 (4.6%) (4.6%) (4.9%)
Note 1: Like-for-Like revenue includes acquisitions following their 12 month anniversary of ownership and excludes the historical contribution of any business disposals and closures.
FINANCIAL GUIDANCE
• On an IFRS 16 basis, we expect:
• Net Finance Costs will be c.£37-40m
• The effective tax rate to be in the 25.5– 26.0% range
• Minority interests between £19-21m
• We are investing in growth and expect our full year Capex investments to be c.£ 90-100m
• In terms of financial net debt, we expect to close the year between £650m and £700m before any M&A and any material movements in FX
• FX: Neutral both at the revenue and at the earnings level¹
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¹ Based on the YTD performance, and the average FX rate in the last three months applied for the remainder of the year
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WE ARE CONFIDENT MOVING FORWARD
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• Intertek is strong, agile, responsive, resilient and responsible
• Intertek is well positioned to navigate an unprecedented pandemic
• Intertek will benefit from additional attractive growth opportunities post Covid 19.