Intertek Group plc · LSE:ITRK
Intertek — H1 2010 Earnings Presentation
38 slides from Intertek's earnings presentation, Aug 2, 2010
Slide 1: 2010 Half Year Results Presentation
2010 Half Year Results Presentation 2 August 2010 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer
Slide 2: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements This presentation contains certain for forward-looking ard 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
Slide 3: Financial Performance
Lloyd Pitchford Chief Financial Officer Financial Performance 2010 Half Year Results Presentation
Slide 4: Results overview
Results overview • Good G d and d iimproving i revenue growth th • Resilient profitability • Cash conversion in line with first half trend • Three acquisitions for £30m; good pipeline • Strong financial position: 0.9 net debt/EBITDA • Interim dividend increased by 13% 4
Slide 5: 1H Financial highlights
1H Financial highlights 1H Revenue 1H Operating profit (adjusted) £m £m 725 125 650 100 575 75 500 425 50 350 25 275 200 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 5
Slide 6: 1H Revenue growth
1H Revenue growth Constant rates £m £m + 5.2% 660 660 3.8 (1.7) 4.0 (1.7) 1.8 28 0 28.0 650 6.3 650 11.9 640 640 5.6 630 630 2.6 620 620 610 610 600 600 590 590 580 580 al 09 10 l s G &A ic E s FX 09 10 FX ria tic al n & C an 20 20 20 20 tio er C st C ly O rg du in 1H 1H na i 1H 1H is M O In A u cq
Slide 7: Financial highlights
Financial highlights For the six months to 30 June 2010 + 4.9% at actual Revenue £652.6m + 4.6% at constant organic +0 0.2% 2% at actual Operating profit 1 £103.7m + 1.5% at constant organic - 70bps at actual Operating profit margin 1 15 9% 15.9% - 50bps at constant organic Profit before tax 1 £97.3
Slide 8: Adjusted operating margin
Adjusted operating margin % O tl k Outlook Broadly similar 18 Full Year margin 17 Inventory Inventory Inventory testing testing t ti testing 16 15 14 1H 2008 1H 2009 1H 2010 FY 2008 FY 2009 FY 2010 8
Slide 9: Interest, tax and other
Interest, tax and other • Interest I t t charge h off £6 £6.4m, 4 d down £2 £2.9m 9 • Effective tax rate of 27.0% • Net debt of £240m, net debt/EBITDA of 0.9x • Dec 2011 facilities of £365m to be refinanced • Separately disclosed items • £6.4m amortisation of acquisition q intangibles g • £6.4m acqu
Slide 10: Cash flow
Cash flow Cash conversion % 1H 2H £m @ actual exchange rates 1H 2010 1H 2009 140 EBITDA 128.7 132.4 120 Cash flow from 100 87.7 117.1 operations 80 Cash Conversion % 68 88 60 40 Debtor days 68 62 20 Capex £24.8m £23.5m 0 2006 2007 2008 2009 2010 1H 71 75 71 62 68 2H 72 70 69 62 - Days Sales Outstand
Slide 11: Currency analysis
Currency analysis Revenue by currency Cumulative average exchange rates Other Value of £1 1H 2010 1H 2009 FY 2009 ~25% USD 1.53 1.49 1.56 CNY 10.45 10.15 10.63 EUR 11 1.15 1 11 1.11 1 12 1.12 GBP & HKD 11.89 11.51 12.06 EUR ~15% USD, USD CNY & AUD 1.72 2.10 1.99 HKD ~60% CAD 1.59 1.78 1.77 11
Slide 12: Interim dividend
Interim dividend Interim dividend per share Pence • Interim I t i dividend di id d off 9 9.3p, 3 10.0 up 13.4% 9.0 8.0 • Interim payout of £15m 7.0 • Strong and consistent record 6.0 of dividend growth 5.0 4.0 3.0 2.0 1.0 0.0 2006 2007 2008 2009 2010 12
Slide 13: Results overview
Results overview • Good G d resultslt • Strong financial position • Investment to grow the business 13
Slide 14: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2010 Half Year Results Presentation
Slide 15: Our industries and organisation
Our industries Our organisation g Industries we operate p in What we do Supporting our customers in their global trade Our organisation The The industries industries we we operate operate in in What Whatwe wedodo Aerospace & Automotive Testing Consumer Goods Building Products Chemical I Inspection t
Slide 16: Global trade market drivers
Intertek 4 GLOBAL TRADE 2 MARKET DRIVERS 3, EXPANSION & MARKET SHARE 4 OUTSOURCING Be) ACQUISITIONS 16
Slide 17: Market drivers in an industry
Market drivers in an industry New Supply Chain CO2 Quality issues Regulations Technologies Costs CSR Publicity Prosecutions Changing Supply Chain & Enforcement Product Complexity Health effects Awareness Lifecycles Global access Desire for Environmental Brand Technical Supply Chain impacts Competiti
Slide 18: Trending of industry growth
Trending of industry growth Regulatory Industry Awareness & changes Recalls Revenue Social-environmental New Generation Product launched Time 18
Slide 19: Acquisitions: Our Strategy
Acquisitions Our Strategy 2005 to Acquisition Track Record 1H 2010 R&D Number Completed 55 • New expertise Total Spent £328m Widen the Portfolio Average Purchase 6.4x EBIT p Multiple • Complementary services Average Margin >18% Scale • Service S i lilines/industries /i d t i Average Annual Expenditu
Slide 20: Consumer Goods
of Group Consumer Goods 25% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 161.9 1.6% 1.6% Operating profit 51.2 (2.3)% (2.3)% Margin 31 6% 31.6% (130)bps (130)bps Review of 1H 2010 • Strong textiles testing • Toys y revenue and margin g down • Growth in inspection
Slide 21: Consumer Goods Outlook
Consumer Goods Outlook • Textiles strong growth expected to continue • Good G d growth th in i ffood d • Toys could benefit from further safety concerns and regulations g 21
Slide 22: Commercial & Electrical
of Group Commercial & Electrical 20% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 129.6 4.5% 4.5% Operating profit 17.5 (1.1)% (1.1)% Margin 13 5% 13.5% (80)bps (80)bps Review of 1H 2010 • Strong growth from China • Renewable energygy and auto components developi
Slide 23: Commercial & Electrical Outlook
Commercial & Electrical Outlook • China and US expected to drive growth • Building B ildi products d t stabilising t bili i • Continued investment in renewable energy 23
Slide 24: Oil, Chemical & Agri
of Group Oil, Chemical & Agri 34% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 218.4 5.8% 5.8% Operating profit 23.7 14.5% 14.5% Margin 10 9% 10.9% 90bps 90bps Review of 1H 2010 • Inspection resilient • Signs g of improvement p in testing g • Asia, Middle East an
Slide 25: Oil, Chemical & Agri Outlook
Oil, Chemical & Agri Outlook • Increasing growth from emerging markets • USA expectt tto stabilise t bili • Margin to improve from higher utilisation rates 25
Slide 26: Analytical Services
of Group Analytical Services 11% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 72.3 9.5% 5.8% Operating profit 7.0 6.1% 3.0% Margin 9 7% 9.7% (30)bps (30)bps Review of 1H 2010 • Materials services improving • New standards in US auto fuel and lubes Andrew Swift Up
Slide 27: Analytical Services Outlook
Analytical Services Outlook • Recovery in materials services set to continue • New N outsourcing t i contracts: t t • Air Products, £6m pa • CIBA Expert p Services from BASF,, £20m £ p pa • Upstream increased safety regulations expected 27
Slide 28: Industrial Services
of Group Industrial Services 6% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 41.8 4.5% 1.1% Operating profit 2.3 (30.3)% (33.3)% Margin 5 5% 5.5% (280)bps (180)bps Review of 1H 2010 • Delayed infrastructure projects • Systems y certification g growing g well • De
Slide 29: Industrial Services Outlook
Industrial Services Outlook • Infrastructure order books filling • HSE picking i ki up, especially i ll REACH • Further acquisitions to come • New services 29
Slide 30: Minerals
of Group Minerals 4% Revenue Half Year Organic £m @ constant exchange rates Change 2010 change Revenue 28.6 15.3% 15.3% Operating profit 2.0 11.1% 11.1% Margin 7 0% 7.0% (30)bps (30)bps Review of 1H 2010 • Strong end to 1H • Exploration p and p production sample volumes increase Marc Hoffer Mining;
Slide 31: Minerals Outlook
Minerals Outlook • Expect continuation of good market conditions • Margin M i tto improve i as volumes l restore t 31
Slide 32: Summary and outlook
Summary and outlook • Good results – 2010 outlook improved • Overall ggrowth drivers remain strongg • Expect organic revenue growth of mid single digits • Broadly similar margin to 2009 • As markets recover further,, high g single g digits g organic growth will return 32
Slide 33: Q&A
2010 Half Year Results P Presentation t ti Q&A
Slide 34: Profit before tax
Profit before tax £m @ actual exchange rates 1H 2010 1H 2009 Adjusted operating profit 1 103.7 103.5 Amortisation of acquisition intangibles (6.4) (6.5) Acquisition and integration costs (3.6) - Claims and settlements (2.8) - Statutory operating profit 90.9 97.0 N t interest Net i t t expense (6 4)
Slide 35: Taxation
Taxation £m @ actual exchange rates 1H 2010 1H 2009 Profit before tax 84.5 87.7 Tax (23.1) (23.9) P fit after Profit ft tax t 61 4 61.4 63 8 63.8 Reported tax rate 27.3% 27.3% Effective tax rate 27.0% 26.6% on adjusted operating profit 35
Slide 36: Free cash flow
Free cash flow £m @ actual exchange rates 1H 2010 1H 2009 p g cash flow Operating 87.7 117.1 Net interest (7.6) (5.7) Taxation (30 7) (30.7) (35 5) (35.5) Capital expenditure (24.8) (23.5) F Free cash h flow fl 24 6 24.6 52.4 24 Capital expenditure to revenue % (6M) 3.8% 3.8% Capital expenditure to
Slide 37: Net debt at 30 June 2010
Net debt at 30 June 2010 £m @ actual exchange rates 1H 2010 1H 2009 Borrowings 379.9 394.7 Cash (139.8) (116.1) N td Net debt bt 240 1 240.1 278 6 278.6 Net debt to EBITDA (LTM) 0.9x 1.2x 37
Slide 38: Liquidity position at 30 June 2010
Liquidity position at 30 June 2010 £m @ actual exchange rates 1H 2010 1H 2009 Debt facilities 650.9 600.1 Repayments to 30 June (110.0) (103.9) Borrowings (379 9) (379.9) (394 7) (394.7) Letters of credit (5.6) (7.9) U d Undrawn committed i db borrowing i ffacilities ili i 1 4 155.4 93 6 93.6 Cash 1