Intertek Group plc · LSE:ITRK
Intertek — H1 2014 Earnings Presentation
32 slides from Intertek's earnings presentation, Aug 4, 2014
Slide 1: 2014 Half Year Results Presentation
2014 Half Year Results Presentation 4 August 2014 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 1 www.intertek.com
Slide 2: Financial Performance
Lloyd Pitchford Chief Financial Officer Financial Performance 2014 Half Year Results Presentation 2 www.intertek.com
Slide 3: Cautionary statement regarding forward-looking statements
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
Slide 4: Results Overview
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 4 www.intertek.com
Slide 5: Financial Highlights
Financial Highlights 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
Slide 6: H1 Revenue Growth
H1 Revenue Growth £m + 2.9% + 2.9% £m Constant rates Constant rates 1,200 1,200 5.9 (89.4) (3.3) (4.5) 8.5 22.4 33.9 (89.4) 1,100 1,100 (4.9) 1,000 1,000 900 900 800 800 1,084.7 1,084.7 1,024.3 700 1,024.3 700 - 0.5% Constant 600 organic 600 rates 500 500 400 400 I&A CG C&E C&P FX H1 2013 H1 2014 H1
Slide 7: Organic Revenue Growth -0.5%
Organic Revenue Growth -0.5% £m 1,100 (1.5%) 1,000 (0.8%) 4.3% (1.2%) (0.7%) (0.6%) 900 800 992.2 987.3 700 600 H1 2013 Industry Minerals Industry Contract Europe Cargo Other H1 2014 Contract Exits Energy Changes & Chems Projects 7 www.intertek.com
Slide 8: Currency Analysis
Currency Analysis Local currency H1 H1 H2 FY to GBP 2014 2013 2013 2013 Revenue By Currency 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 Other ~ 25% HKD -7.7% 12.94 11.94 12.36 12.12 USD, CNY EUR & HKD AUD -16.9% 1.83 1.52 1.74 1.62 ~ 55% ~ 10% CAD -14.2
Slide 9: Divisional Operating Margin
Divisional Operating Margin 40.0% H1 14 31.6% 31.3% H1 13* 30.0% 20.0% 15.1% 15.1% 14.9% 14.6% 11.1% 10.8% 10.2% 10.4% 10.0% 8.6% 7.8% 0.0% I&A Commodities Consumer C&E C&P Group Goods *H1 13 at constant exchange rates 9 www.intertek.com
Slide 10: Operating Profit & Separately Disclosed Items
Operating Profit & Separately Disclosed Items £m @ actual exchange rates H1 2014 H1 2013 Adjusted operating profit (1) 152.3 158.3 (3.8)% 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
Slide 11: Cash Flow, Tax & Investment
Cash Flow, Tax & Investment Adjusted Cash Generated from Operations H1 2011 2012 2013 2014 • Strong focus on cash management Cash from Operations £m 91.1 118.1 123.7 148.2 • Adjusted cash from ops up 20% % Change - 29.6% 4.7% 19.8% • Adjusted effective tax rate 24.5% Cash Conversion* • Capex £52.1m;
Slide 12: Financing
Financing Drawn debt • $110m new bond debt £310m £452m Bank Debt • Bank facility refinanced and Bond Debt expanded • Strong maturity profile Debt duration(1) • Interest charge H1 2014 £11.4m (2013: £13.0m) 11% • Net debt EBITDA of 1.6 19% 70% Less than one year Between one and four years Five years
Slide 13: Interim dividend increased by 6.7%
Interim dividend increased by 6.7% Interim Dividend Per Share Pence • Interim dividend of 16.0p, up 6.7% 20 • Interim pay-out of £26.0m 15 • Reflects good underlying earnings progression 10 5 0 2010 2011 2012 2013 2014 13 www.intertek.com
Slide 14: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2014 Half Year Results Presentation 14 www.intertek.com
Slide 15: Divisional Overview – H1 2014
Divisional Overview – H1 2014 H1 Organic % of Group revenue growth H1 Profit Chemicals & Pharma Industry & Assurance (6.7)% 24% 8% Commercial & Electrical Commodities (1.6)% 18% Industry & 17% Assurance 32% Consumer Goods 5.0% 36% Consumer Goods 17% Commercial & 6.3% 17% Electrical Commodities 26% C
Slide 16: Industry & Assurance
Industry & Assurance H1 14 Performance H1 14 Trading £m @ constant Organic • Industry Services: Revenue down on low-margin exchange H1 14 Change change contract exits, capital project phasing delays Revenue 325.3 (1.0)% (6.7)% • £15m low-margin contracts exited YTD • Food & Agri: Strong Agri trade f
Slide 17: Commodities
Commodities H1 14 Performance H1 14 Trading £m @ constant Organic • Minerals: Strong decline continued (-16%). Indonesian exchange H1 14 Change change trade bans affecting entire region Revenue 262.8 (1.7)% (1.6)% • Cargo: Improving growth. Good demand from US shale oil transit testing, Asia and Mid
Slide 18: Consumer Goods
Consumer Goods H1 14 Performance H1 14 Trading £m @ constant Organic • Textiles: Good growth; market expansion in Turkey, exchange H1 14 Change change India, Vietnam Revenue 176.1 5.1% 5.0% >20% growth in new sourcing markets • Toys: Growth moderated by prior year regulatory Operating profit 55.6 5.
Slide 19: Commercial & Electrical
Commercial & Electrical H1 14 Performance H1 14 Trading £m @ constant Organic • Transport Technologies: Very high growth exchange H1 14 Change change • Electrical: Strong growth, particularly in UAE, Taiwan, Revenue 176.0 14.6% 6.3% Korea, Thailand, Vietnam Operating profit 26.6 14.7% 3.4% • Wireles
Slide 20: Chemicals & Pharma
Chemicals & Pharma H1 14 Performance H1 14 Trading £m @ constant Organic • Chemicals & Materials: Good growth in Middle East exchange H1 14 Change change • EU weak, continued restructuring and site closure Revenue 84.1 7.5% 4.5% • Margin focus Operating profit 7.2 18.0% 3.3% Margin 8.6% 80bps (10)bp
Slide 21: Our strategic portfolio
Our strategic portfolio Chemicals & Pharma Minerals Consumers RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS Energy INDUSTRY ASSETS Food & Agri Business Assurance 21 www.intertek.com
Slide 22: Long term energy demand
Long term energy demand 18 16 14 Billion tonnes of oil equivalent 12 10 8 6 4 2 0 1990 1995 2000 2005 2010 2012 2015 2020 2025 2030 2035 Oil Gas Coal Nuclear Hydroelectric Renewables 22 Source: BP Energy Outlook 2030 www.intertek.com
Slide 23: Market drivers in product industries
Market drivers in product industries End-User Quality Expectations & Diversity Consumers demanding safe & quality brands Supply Chain New Changes Technologies Shifting cycles, Innovation and Market sourcing and product variety Drivers complexity What Developing Economies Regulation Markets developin
Slide 24: Outlook
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 24 www.intertek.com
Slide 25: Our Growth Platform
Our Growth Platform RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS GLOBAL TRADE MARKET DRIVERS QUALITY NETWORK & SERVICE OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION INDUSTRY ASSETS 25 www.intertek.com
Slide 26: Appendix
Appendix 2014 Half Year Results Presentation 26 www.intertek.com
Slide 27: Taxation
Taxation £m @ actual exchange rates H1 2014 H1 2013 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 24.5% 25.0% on adjusted profit before tax 27 www.intertek.com
Slide 28: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates H1 2014 H1 2013 Operating Profit before changes in working 184.0 195.4 capital and provisions 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
Slide 29: Free Cash Flow
Free Cash Flow £m @ actual exchange rates H1 2014 H1 2013 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 9.4 401% 29 www.intertek.com
Slide 30: Net Debt
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 30 www.intertek.com
Slide 31: Liquidity Position at 30 June 2014
Liquidity Position at 30 June 2014 £m @ actual exchange rates H1 2014 H1 2013 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 31 www.intertek.com
Slide 32: Divisional Performance Summary
Divisional Performance Summary H1 2014 Revenue Margin Organic Organic £m @ constant exchange H1 14 Change change H1 14 Change 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 Comme