Slide 1: Strategy Update: Portfolio Focus on Attractive Growth and Margin Opportunities
Strategy Update Portfolio Focus on Attractive Growth and Margin Opportunities André Lacroix Chief Executive Officer 2 March 2016 www.intertek.com
Slide 2: Disclaimer
Disclaimer 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
Slide 3: Agenda
Agenda 01 Intertek 5 Fundamental Strengths 02 Attractive Growth Opportunities 03 Intertek Quality Assurance Proposition 04 Strategy for Sustainable Growth 05 Short Term Priorities in 2016 www.intertek.com
Slide 4: Intertek 5 Fundamental Strengths
01 Intertek 5 Fundamental Strengths Video: Looking Back at Our History www.intertek.com
Slide 5: Track Record of Sustainable Growth
Track Record of Sustainable Growth 2002 2015 Change Employees 11,192 41,434 +30,242 Revenue £461m £2,166m +£1,705m Operating Profit £77m £343m +£266m Market Cap £0.6bn¹ £4.5bn +£3.9bn TSR 864%² 1 As at IPO 29 May 2002 ² TSR since IPO to 31 December 2015 5
Slide 6: Fundamental Strengths
5 Fundamental Strengths Global Network of State of the 01 Art Facilities Powerful Portfolio with Leadership 02 Positions 03 Depth and Breadth of Quality Assurance Solutions 04 Passionate and Entrepreneurial Culture 05 High Margin and Strongly Cash Generative Earnings Model 6
Slide 7: Powerful Portfolio with Leadership Positions
Powerful Portfolio with Leadership Positions 8 Global Business Lines (GBLs) 8 Regional Business Lines (RBLs) • Softlines • Transportation Technologies • Hardlines • Building Products • Electrical and Wireless • Food • Business Assurance • Product Assurance • Government and Trade Services • Minerals
Slide 8: Scale Positions in Top 30 Countries
Scale Positions in Top 30 Countries Top 30 Countries 92% 80% 76% 91% of Intertek Revenue of Global GDP of Global Trade of Global Production Americas EMEA Asia Pacific (Europe, Middle East & Africa) Brazil Belgium Australia France Bangladesh Canada China Germany Hong Kong Italy India Mexico Netherlan
Slide 9: Strong Portfolio at Local Business Unit Level
Strong Portfolio at Local Business Unit Level 8 Global Business Lines 8 Regional Business Lines Softlines Hardlines Electrical & Business GTS Cargo Agriculture Industry Food Building Trans. Product Minerals HERS C&P E&P Wireless Assurance & AA Services Products Tech Assurance Australia Bangladesh Be
Slide 10: High Quality Earnings Model
High Quality Earnings Model ¹ Revenue £2bn+ EBITDA Margin c. 20% Cash Conversion² 140% Capex 5% of Revenue Dividend Payout c. 40% FCF³ £150m Balance Sheet 1.7x Net Debt to EBITDA 1 Based on 2015 Actuals ² Cash from operations 10 ³ After Capex and Dividends
Slide 11: Attractive Growth Opportunities
02 Attractive Growth Opportunities
Slide 12: Attractive Testing, Inspection and Certification Structural Growth Drivers
Attractive Testing, Inspection and Certification Structural Growth Drivers Corporations investments in quality and innovation Higher regulatory standards Global and regional trade flow Increased demand for energy to support GDP and population growth 12
Slide 13: Attractive Assurance Structural Growth Drivers
Attractive Assurance Structural Growth Drivers Assurance Structural Growth Drivers • Increasingly complex operations with decentralised supply chains • Greater customer focus on risk management to manage systemic operational risk • Customers require Quality Assurance solutions beyond TIC Customers E
Slide 14: Global Intertek Network Strongly Positioned for ATIC Growth
Global Intertek Network Strongly Positioned for ATIC Growth Global Market Leader in Global Market Assurance Leader in TIC 3,000 1,000+ auditors lab and offices 90,000+ 100+ audits countries Global ATIC Business with 41,434 Employees 14
Slide 15: Portfolio Geared for GDP+ Organic Growth
Portfolio Geared for GDP+ Organic Growth Mid-Long Term Profit Mix1 Economic Sectors Structural Growth Drivers Growth Quality solutions for end-products, their Products components, processes and R&D CG, C&E, C&P, Food & Product variety, brand and supply chain Continuing growth Business Assurance
Slide 16: Intertek Quality Assurance Proposition
03 Intertek Quality Assurance Proposition
Slide 17: Our Purpose, Vision and Mission
Our Purpose, Vision and Mission Bringing The world’s most Quality and trusted partner for Safety to Life. Quality Assurance Exceed our customers’ expectations with innovative and bespoke Assurance, Testing, Inspection and Certification solutions for their operations and supply chain. Globally. 24/7.
Slide 18: Strong Business Model to Seize Growth Opportunities
Strong Business Model to Seize Growth Opportunities Which Economic What We Do Everyday Where Sectors Assurance Products Testing Trade Inspection 100+ countries 1,000+ laboratories Resources Certification 41,434 people 18
Slide 19: Well Diversified Revenue Streams Across Sectors, Geographies and Services
Well Diversified Revenue Streams Across Sectors, Geographies and Services Revenue Split¹ Sector Geographic Service 8% 10% 24% 29% 35% 30% 51% 25% 52% 36% Products Trade Resources Americas Asia Pacific EMEA Assurance Testing Inspection Certification Strength in Products Excellent exposure to fast Bre
Slide 20: Depth and Breadth of ATIC Solutions
Depth and Breadth of ATIC Solutions Assurance Testing Inspection Certification • Management Systems • Softlines • Agriculture • Appliance & Electronic • Benchmarking in • Hardlines • Asset Integrity Quality & Performance • Aerospace & • Automotive • Building Product Automotive • Sustainability & env
Slide 21: Aligned Organisational Structure
Aligned Organisational Structure Intertek Organisational Structure Business Lines Geographic Areas Functional Areas Americas, Pacific and ATIC Operational Products North East Asia Excellence Softlines, Hardlines, Electrical & Wireless, Business Assurance, Building Products, Transportation Technologi
Slide 22: Intertek Total Quality Assurance Value Proposition
Intertek Total Quality Assurance Value Proposition Research and Development Consumer Raw Materials Management Sourcing Intertek Total Quality Assurance (Assurance, Testing, Inspection and Distribution Certification) Component and Retail Suppliers Channels Transportation Manufacturing Systemic Approa
Slide 23: Strategy for Sustainable Growth
04 Strategy for Sustainable Growth
Slide 24: Attractive Growth Opportunities
Attractive Growth Opportunities Quality Assurance market worth c.$250bn 01 Structural Growth Drivers 02 Existing Customers • Continued growth in Testing, • Increase account penetration Inspection and Certification • Assurance, Testing, Inspection and • Increased demand for Assurance Certification cr
Slide 25: Corporate Medium to Long Term Goals
Corporate Medium to Long Term Goals Fully engaged employees in a safe 01 working environment 02 Deliver superior customer service Margin accretive organic revenue growth 03 based on GDP + organic growth 04 Strong cash conversion from operations Accretive disciplined capital allocation policy 05 for
Slide 26: 5 Strategic Priorities
5 Strategic Priorities Strategic Priorities Action Plans KPIs Position Intertek as leading Quality Assurance provider Revenue growth Improve brand awareness across sectors and geographies New leads Strong Brand 01 Customer acquisitions Proposition Compelling Total Quality Assurance Brand
Slide 27: 5 Enablers
5 Enablers Enablers Action Plans KPIs Strong entrepreneurial culture Revenue and profit Living Our Decentralised organisation growth 01 Customer NPS Customer centric culture Organisation engagement Centric Culture Employee turnover Performance management with financial and EBIT mar
Slide 28: 5x5 Strategy for Growth
5x5 Strategy for Growth Purpose Bringing Quality and Safety to Life Vision The world’s most trusted partner for Quality Assurance Customer Our Innovative Assurance, Testing, Inspection and Certification solutions delivered Promise 24/7 with precision, pace and passion enabling you to power ahead saf
Slide 29: Three Tier Portfolio Strategy
Three Tier Portfolio Strategy 01 02 03 Grow Scale Invest in Fast Growing Improve Performance Businesses Businesses • Softlines • Business Assurance • Industry Services • Hardlines • Agriculture • Minerals • Electrical & Wireless • Building Products GBL • Cargo & Analytical • Transportation Assessmen
Slide 30: Accretive Disciplined Allocation of Capital
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 02 dividends 03 M&A focused on strong growth and margin prospects in businesses with leading
Slide 31: Organisation and Reward Alignment
Organisation and Reward Alignment Group Leadership Team André Lacroix CEO Global Business Lines Geographic Areas Functional Areas Products Americas, Pacific and North ATIC Operational Excellence East Asia Calvin Yam Softlines Nimer Al-Hafi Gregg Tiemann John Qin Hardlines China Corporate Development
Slide 32: Short Term Priorities in 2016
05 Short Term Priorities in 2016 www.intertek.com
Slide 33: Internal Alignment to Execute Our 5x5 Strategy
Internal Alignment to Execute Our 5x5 Strategy What we have done • Implemented organisational structure to support our business model • Strategy communicated to top 200 leaders • New short-term incentive system and 2016 targets communicated to all What we will do • Cascade 5x5 strategy throughout th
Slide 34: Focused 2016 Plans to Deliver Revenue Growth
Focused 2016 Plans to Deliver Revenue Growth Business Line and Country Initiatives SOFTLINES ELECTRICAL & CHEMICALS & GTS FOOD • Growth in WIRELESS PHARMA • Increased scope • Integration of FIT footwear and • EMC expansion in • New pharma in Saudi Arabia • Development of footwear S.Korea and Mexico
Slide 35: Disciplined Margin and Cash Management
Disciplined Margin and Cash Management Cost Management Benchmarking/Productivity • Q4 2015 cost restructuring • Drive best-in-class performance management − Headcount reduction of 207 − Site span of performance reduction with − Full year cost reduction of £4m Best in Class tool • Manage capacity and
Slide 36: 2015 Performance Based on Future Disclosures
2015 Performance Based on Future Disclosures Revenue (£m) Adjusted Operating Profit (£m) Growth Growth 2,093 2,166 3.5% 5.9% 324 343 1,008 1,111 10.2% 208 234 12.5% 514 537 4.4% 65 15.9% 76 572 519 (9.2)% (33.9)% 51 34 2014 2015 2014 2015 Resources Trade Products Resources Trade Products Margin Key
Slide 37: Summary
Summary • Track record of sustainable growth and shareholder value creation • High margin and strongly cash generative earnings model • Attractive growth prospects in the Quality Assurance market • Portfolio focus on attractive growth and margin opportunities • Disciplined approach to performance ma
Slide 38: Appendix
Appendix Strategy Update Presentation www.intertek.com 38
Slide 39: Financial Performance by Sector in 2015 and 2014
Financial Performance by Sector in 2015 and 2014 2015 2014 Change at Change at Organic1 £m £m actual rates constant change at rates constant rates Products Revenue 1,110.6 1,007.9 10.2% 7.7% 6.0% Adjusted operating profit 233.8 207.9 12.5% 8.4% Adjusted operating margin 21.1% 20.6% 50bps 10bps Trade
Slide 40: Financial Performance by Sector in 2015, H1 and H2
Financial Performance by Sector in 2015, H1 and H2 H1 H2 FY £m £m £m Products Revenue 531.7 578.9 1,110.6 Adjusted operating profit 109.9 123.9 233.8 Adjusted operating margin 20.7% 21.4% 21.1% Trade Revenue 267.3 269.3 536.6 Adjusted operating profit 36.9 38.8 75.7 Adjusted operating margin 13.8% 1
Slide 41: Broad Based ATIC Services to Deliver Total Quality Assurance
Broad Based ATIC Services to Deliver Total Quality Assurance Assurance ensures our customers identify and mitigate A the intrinsic risk in their operations, supply chain and quality management systems Testing is evaluating how products and services meet and T exceed quality, safety, sustainability a