Intertek Group plc · LSE:ITRK
Intertek — H1 2006 Earnings Presentation
33 slides from Intertek's earnings presentation, Sep 4, 2006
Slide 1: 2006 Interim Results Presentation
2006 Interim Results Presentation 4 September 2006 Wolfhart Hauser, Chief Executive Officer Bill Spencer, Chief Financial Officer www.intertek.com Tel: +44 20 7396 3400
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements Certain matters discussed in this presentation may constitute forward-looking statements. These statements involve inherent risks and uncertainties. A number of important factors could therefore cause actual future results to differ materiall
Slide 3: Financial Performance
Bill Spencer Group Chief Financial Officer Financial Performance 2006 Interim Results Presentation 4 September 2006
Slide 4: Financial Highlights
Financial Highlights For the six months to 30 June 2006 Revenue £327.1m Up 20.1% at actual Up 15.1% at constant (organic 7.4%) 1 Operating profit £50.7m Up 16.6% at actual Up 10.0% at constant (organic 2.0%) 1 Operating margin 15.5% Down 50bp Operating cash flow £47.3m Up 57.7% Profit before tax £45
Slide 5: GBP/USD Exchange Rates
GBP/USD Exchange Rates £/$ 1.95 June ytd 2005 Average = $1.88 1.90 1.85 1.80 1.75 June ytd 2006 Average = $1.78 1.70 1.65 1.60 Jan Feb M ar Apr M ay June US$ Actual Rate 2005 US$ Actual 2006 5
Slide 6: Profit Before Tax
Profit Before Tax Half Year - £m 2006 2005 Adjusted operating profit 50.7 43.5 Goodwill amortisation & impairment (2.0) (2.8) Statutory operating profit 48.7 40.7 Net Interest cost (3.5) (2.6) Share of profits of associates ─ 0.4 Profit before tax (up 17.4%) 45.2 38.5 Interest cover 13.9 15.7 6
Slide 7: Taxation
Taxation Half Year - £m 2006 2005 Profit before tax 45.2 38.5 Tax (11.2) (10.4) Profit after tax (up 21%) 34.0 28.1 Reported tax rate 24.8% 27.0% Normalised tax rate 24.0% 25.2% Normalised tax rate before impairment of goodwill and amortisation of intangible assets 7
Slide 8: Earnings & Dividends
Earnings & Dividends Half Year – pence 2006 2005 Adjusted EPS 21.3p 18.7p Up 13.9% Interim dividend per share 4.6p 3.9p Up 17.9% Adjusted earnings per share is fully diluted and based on profit before amortisation of intangibles and goodwill impairment 8
Slide 9: Operating Cash Flow
Operating Cash Flow Half Year - £m 2006 2005 Operating profit 48.7 40.7 Add back depreciation and other non cash items 16.3 13.7 Change in working capital (17.7) (24.4) Operating cash flow (up 57.7%) 47.3 30.0 Operating working capital to LTM sales 9.5% 10.1% Working capital is business debtors plus
Slide 10: Free Cash Flow
Free Cash Flow Half Year - £m 2006 2005 Operating cash flow 47.3 30.0 Net Interest (3.3) (2.7) Taxation (12.2) (7.1) Capital expenditure (20.2) (11.6) Free cash flow (up 34.9%) 11.6 8.6 Capital expenditure to LTM sales % 6.3% 6.0% 10
Slide 11: Balance Sheet
Balance Sheet Half Year - £m 2006 2005 Property and lab equipment 123.1 93.1 Goodwill & intangible assets 68.7 36.8 Other assets & liabilities 30.5 25.1 222.3 155.0 Shareholder funds 70.7 27.1 Minority interests 8.6 6.7 Net borrowings 143.0 121.2 222.3 155.0 11
Slide 12: Acquisitions
Acquisitions • Completed two acquisitions in H1 2006, costing £9.8m (H1 05: £2.2m) • Looking at many other opportunities 12
Slide 13: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance at constant exchange rates Interim Results Presentation 4 September 2006
Slide 14: We support our customers in their global trade
We support our customers in their global trade Toys IT Minerals Standards Food Medical Oil & Gas Fiscal Support Retail Building Chemicals Cargo Scanning Industries Textiles Telecom Agriculture Footwear Industrial Pharmaceutical Hardlines Automotive Home Appliances Consumer Commercial Oil, Chemical G
Slide 15: Group results
Group results Organic Half Year June 2006 Change Change £m @ constant exchange rates Revenue 327.1 15.1% 7.4% Operating profit 50.7 10.0% 2.0% Margin 15.5% -70 bps -80 bps Operating profit excludes amortisation of intangible assets of £2.0m (H1 05: £0.8m) and goodwill impairment of £nil (H1 05: £2.0
Slide 16: The three larger divisions account for 91% of revenues
The three larger divisions which account for 91% of revenues grew by 21% % of HY Revenue Profit Revenues Growth Growth Consumer Goods (Labtest) 23% 12.5% 11.1% Commercial & Electrical (ETL SEMKO) 27% 16.6% 12.4% Oil, Chemical & Agri (Caleb Brett) 41% 28.7% 45.2% Sub total 91% 20.6% 20.5% Government
Slide 17: We support our customers in their global trade
We support our customers in their global trade Toys IT Minerals Standards Food Medical Oil & Gas Fiscal Support Building Chemicals Cargo Scanning Retail Telecom Agriculture Industries Textiles Industrial Pharmaceutical Footwear Automotive Hardlines Home Appliances Consumer Commercial Oil, Chemical &
Slide 18: Consumer Goods
Consumer Goods Good growth and stable margins Half Year Organic £m @ constant exchange rates Change 2006 Change Revenue 74.9 12.5% 8.9% Operating profit 24.1 11.1% 10.6% Margin 32.2% -40 bps +50 bps 18
Slide 19: Consumer Goods: Good growth and stable margins
Consumer Goods Good growth and stable margins… • Strong growth in Toys and RoHS • Textiles market stabilised – New quota systems in place – Tough comparables 1H on 1H • Margin stable and over 30% as guided – Inspection margins stabilised – Textile and toys margins stable 19
Slide 20: Consumer Goods: strong prospects
Consumer Goods ….with strong prospects • Favourable underlying markets – Quota systems stabilised – Textiles testing drivers remain (quality, variety) – Environmental focus on products • Continue to benefit from RoHS services • Investment in new labs and staff – India, Vietnam, Guatemala, three new
Slide 21: We support our customers in their global trade
We support our customers in their global trade Toys IT Minerals Standards Food Medical Oil & Gas Fiscal Support Retail Chemicals Cargo Scanning Building Textiles Agriculture Industries Footwear Telecom Pharmaceutical Hardlines Industrial Automotive Home Appliances Consumer Goods Commercial Oil, Chem
Slide 22: Commercial & Electrical
Commercial & Electrical Good growth, continued investment Half Year Organic £m @ constant exchange rates Change 2006 Change Revenue 88.3 16.6% 9.3% Operating profit 13.6 12.4% 0.8% Margin 15.4% -60 bps -130 bps 22
Slide 23: Commercial & Electrical: Good growth and continuing build out
Commercial & Electrical Good growth and continuing the build out … • Strong growth in electrical, building and HVAC • Strong growth in Asia and America. European testing migrating to Asia • Margin off in 1H – Expansion of network in China, India - temporary margin effect – Slow down in US auto compo
Slide 24: Commercial & Electrical: to ensure future returns
Commercial & Electrical … to ensure future returns • Benefit from Asian investments • Further opportunities to improve operational efficiencies • Ongoing acquisitions to strengthen regions and services – February 2006 acquisition of EMC business of Akzo Nobel in Japan to give critical mass in key ta
Slide 25: We support our customers in their global trade
We support our customers in their global trade Toys IT Minerals Standards Food Medical Oil & Gas Fiscal Support Retail Building Cargo Scanning Chemicals Textiles Telecom Industries Footwear Industrial Agriculture Hardlines Automotive Pharmaceutical Home Appliances Consumer Goods Commercial Oil, Chem
Slide 26: Oil, Chemical & Agri
Oil, Chemical & Agri Excellent growth, 10% margin achieved Half Year Organic £m @ constant exchange rates Change 2006 Change Revenue 134.8 28.7% 15.7% Operating profit 13.5 45.2% 21.5% Margin 10.0% +110 bps +40 bps 26
Slide 27: Oil, Chemical & Agri: Excellent growth, 10% margin achieved
Oil, Chemical & Agri Excellent growth, 10% margin achieved • All sectors and regions performing well • Analytical services now 41% of the division (36% Dec 05) • Acquisitions integrated well and adding value • Environmental regulations driving business – USA for ultra low sulphur diesel (ULSD)…early
Slide 28: Oil, Chemical & Agri: Market conditions remain favourable
Oil, Chemical & Agri Market conditions remain favourable • High volumes of shipments of crude continue • Bio-fuels will increase testing requirements • New oil and minerals testing labs in China and Asia • 1 September – DSM outsourcing contract 170 people 28
Slide 29: We support our customers in their global trade
We support our customers in their global trade Toys IT Minerals Standards Food Medical Oil & Gas Fiscal Support Retail Building Chemicals Cargo Scanning Textiles Telecom Agriculture Industries Footwear Industrial Pharmaceutical Hardlines Automotive Home Appliances Consumer Goods Commercial Oil, Chem
Slide 30: Government Services
Government Services Reduced size, opportunities Half Year Organic £m @ constant exchange rates Change 2006 Change Revenue 29.1 (22.0)% (22.0)% Operating profit 4.2 (44.0)% (44.0)% Margin 14.4% -570 bps -570 bps 30
Slide 31: Government Services: Reduced size, opportunities
Government Services Reduced size, opportunities • Terminated contracts in Venezuela and Nigeria have reduced revenue by £10m 1H on 1H – Business immediately restructured with cost taken in 2005 • Excluding terminated contracts, revenue grew by 9% • Further prospects in Standards and Scanning 31
Slide 32: Summary & Outlook
Summary & Outlook ¾ The three main divisions are growing well, with many new opportunities ¾ We expect the good progress to continue in the second half 32
Slide 33: Investor Day
Investor Day • 11 October 2006 in our Sunbury laboratory, Surrey • Operational management to present strategies and take questions – Paul Yao, CEO Consumer Goods – Rob Dilworth, CEO Commercial & Electrical, Government Services – Mark Loughead, CEO Oil, Chemical & Agri • Laboratory tour and demonstra