Intertek Group plc · LSE:ITRK
Intertek — FY2006 Earnings Presentation
35 slides from Intertek's earnings presentation, Mar 5, 2007
Slide 1: 2006 Results Presentation
2006 Results Presentation 5 March 2007 Wolfhart Hauser, Chief Executive Officer Bill Spencer, Chief Financial Officer
Slide 2: 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 3: Financial Performance
Bill Spencer Chief Financial Officer Financial Performance 2006 Results Presentation – 5 March 2007
Slide 4: Financial Highlights
Financial Highlights For the twelve months to 31 December 2006 Revenue £664.5m Up 14.5% at actual Up 14.8% at constant (organic 8.1%) 1 Operating profit £102.2m Up 17.3% at actual Up 17.2% at constant (organic 10.5%) 1 Operating profit margin 15.4% Up 40 bps Operating cash flow £124.6m Up 28.9% Prof
Slide 5: Revenue Growth Bridge
Revenue Growth Bridge 680 12.2% (0.3)% 14.5% 660 £664.5m 640 620 £m 6.7% 600 (4.1)% 580 £580.1m 560 540 Revenue Loss of PSI Acquisitions Organic Foreign Revenue 2005 contracts Exchange 2006 5
Slide 6: Currency
Currency • Approximately 80% earnings are USD, HKD, RMB and other related currencies • Average GBP/USD rate 2006 2005 1.84 1.82 • Spot GBP/USD rate 31/12/06 31/12/05 1.96 1.73 • Continued dollar weakness – Adverse translation effect 6
Slide 7: Margin by division
Margin by division Margin % Operating Margin % after Profit 2006 allocation Consumer Goods (Labtest) 49.5 31.9% 30.2% Commercial & Electrical (ETL SEMKO) 26.7 15.3% 13.7% Oil, Chemical & Agri (Caleb Brett) 30.0 10.7% 9.1% Government Services (FTS) 6.6 12.4% 11.0% Central Costs (10.6) 102.2 15.4% 15.
Slide 8: Profit Before Tax
Profit Before Tax £m @ actual exchange rates 2006 2005 Adjusted operating profit (up 17.3%) 102.2 87.1 Goodwill impairment & amortisation of business (4.1) (4.1) combination intangibles Statutory operating profit (up 18.2%) 98.1 83.0 Net finance cost (7.0) (5.9) Share of profits of associates 0.3 0.
Slide 9: Taxation
Taxation £m @ actual exchange rates 2006 2005 Profit before tax 91.4 79.4 Tax (22.5) (18.7) Profit after tax (up 13.5%) 68.9 60.7 Tax rate % 24.6% 23.6% 9
Slide 10: Earnings & Dividends
Earnings & Dividends £m @ actual exchange rates 2006 2005 Basic earnings per share 40.9p 36.8p +11.1% 1 Diluted adjusted earnings per share 43.2p 39.1p +10.5% Dividend per share 14.8p 12.0p +23.3% Dividend cover on diluted adjusted EPS 2.9x 3.3x Excluding non operating profit of £1.6m on disposals i
Slide 11: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates 2006 2005 1 EBITDA 130.6 111.1 Change in working capital & provisions (6.0) (14.4) Operating cash flow (up 28.9%) 124.6 96.7 Days receivables outstanding 70 73 Operating working capital to sales 7.4% 8.0% 1. EBITDA is operating profit adding back non ca
Slide 12: Free Cash Flow
Free Cash Flow £m @ actual exchange rates 2006 2005 Operating cash flow 124.6 96.7 Net interest paid (6.6) (5.9) Tax paid (24.6) (17.8) Capital expenditure (43.2) (31.3) Free cash flow (up 20.4%) 50.2 41.7 Capital expenditure to revenue % 6.5% 5.4% 12
Slide 13: Acquisitions
Acquisitions • 7 acquisitions in 2006, net consideration £36.9m • Further acquisition announced in January 2007 – Umitek £12.9m • Last 3 years spent £120m on 27 acquisitions • If all acquisitions had been made by 1 January 2006 – Group revenue would have been £690.3m • Strong pipeline for 2007 13
Slide 14: Financial Summary
Financial Summary Another good year Double digit growth Strong cash flow Many investment opportunities Increase in dividends 14
Slide 15: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance at constant exchange rates 2006 Results Presentation – 5 March 2007
Slide 16: The factors that make up growth
The factors that make up growth Expansion of Acquisitions services, regions, industries Outsourcing Quality, safety, Gaining environmental market share Increasing variety 6% plus Inter- regional trade ~40% GLOBAL DRIVING THE EXTERNAL TRADE DRIVERS EXPANSION INDUSTRY GROWTH 16
Slide 17: The three larger divisions which account for 92% of revenues grew by 21%
The three larger divisions which account for 92% of revenues grew by 21% Organic % of Revenue @ constant exchange rates Revenue Revenues Growth Growth Consumer Goods 23% 13.7% 12.0% Commercial & Electrical 26% 15.6% 8.8% Oil, Chemical & Agri 43% 29.2% 17.6% Sub total 92% 20.9% 13.3% Government Servi
Slide 18: Consumer Goods: We support our customers in their global trade
Consumer Goods We support our customers in their global trade INDUSTRIES Textiles Medical Oil Fiscal Support Toys Building Chemical Standards Hardlines Industrial/HVAC Agriculture Cargo Scanning Footwear IT/Telecom Minerals Technical Food Automotive Pharmaceutical Inspection Home Appliances DIVISION
Slide 19: Consumer Goods: Continued stable margins and growth
Consumer Goods Continued stable margins and growth Organic £m @ constant exchange rates 2006 Change Change Revenue 155.2 13.7% 12.0% Operating profit 49.5 11.5% 11.3% Margin 31.9% -60 bps -20 bps 19
Slide 20: Consumer Goods: Continued stable margins and growth
Consumer Goods Continued stable margins and growth • Margin stable and over 30% as guided • Strong growth in hazardous substances testing • Strong growth in China • Investment in new laboratories – China (Wuxi, Tianjin, Hangzhou) – Vietnam, Taiwan, Guatemala, Romania 20
Slide 21: Consumer Goods: Outlook remains positive
Consumer Goods Outlook remains positive • Favourable underlying markets – Textile testing drivers remain (quality, variety) – Health, safety and environmental focus on products • Well placed to help clients face increasing supply chain complexity and challenges • Services extended – Supply chain ser
Slide 22: Commercial & Electrical: We support our customers in their global trade
Commercial & Electrical We support our customers in their global trade INDUSTRIES Textiles Medical Oil Fiscal Support Toys Building Chemical Standards Hardlines Industrial/HVAC Agriculture Cargo Scanning Footwear IT/Telecom Minerals Technical Food Automotive Pharmaceutical Inspection Home Appliances
Slide 23: Commercial & Electrical: Good growth and continuing opportunities
Commercial & Electrical Good growth and continuing opportunities Organic £m @ constant exchange rates 2006 Change Change Revenue 174.4 15.6% 8.8% Operating profit 26.7 18.1% 6.8% Margin 15.3% +30 bps -30 bps 23
Slide 24: Commercial & Electrical: Good growth and continuing opportunities
Commercial & Electrical Good growth and continuing opportunities • Strong growth in building products and HVAC/R • Strong growth in Asia • 4 new laboratories in China • Acquisitions increasing reach • Expanding product certification, brand recognition 24
Slide 25: Commercial & Electrical: Strong Outlook
Commercial & Electrical Strong Outlook • Increasing concerns for safety and reliability of products • Increased testing from environmental concerns e.g. EU energy usage directive • Continued migration to Asia – Globalisation of industries, eg. Building, HVAC/R • E&E inspection transferred to Consume
Slide 26: Oil, Chemical & Agri: We support our customers in their global trade
Oil, Chemical & Agri We support our customers in their global trade INDUSTRIES Textiles Medical Oil Fiscal Support Toys Building Chemical Standards Hardlines Industrial/HVAC Agriculture Cargo Scanning Footwear IT/Telecom Minerals Technical Food Automotive Pharmaceutical Inspection Home Appliances DI
Slide 27: Oil, Chemical & Agri: Profitability and prospects increasing
Oil, Chemical & Agri Profitability and prospects increasing Organic £m @ constant exchange rates 2006 Change Change Revenue 281.5 29.2% 17.6% 1 Operating profit 30.0 68.5% 53.5% Margin 10.7% +250 bps +240 bps 1. Excluding the one off effect of hurricanes Katrina and Rita in 2005, growth would have b
Slide 28: Oil, Chemical & Agri: Profitability increasing
Oil, Chemical & Agri Profitability increasing • Margin target exceeded • Cargo inspection performed well in USA • Strong performance from outsourced labs • Analytical Services now 43% of the division (41% Dec 05) • Environmental regulations benefiting the business – Ultra low sulphur diesel (ULSD) –
Slide 29: Oil, Chemical & Agri: Many growth opportunities
Oil, Chemical & Agri Many growth opportunities • Chemical – DSM outsourcing contract performing well, Sep 06 • Pharmaceutical – Alta Analytical labs acquired for £14.0m, Nov 06 • Upstream – Umitek acquired for £12.9m, Jan 07 • Regional expansion – CB Iberica acquired for £5.2m, Dec 06 • Opportunitie
Slide 30: Government Services: We support our customers in their global trade
Government Services We support our customers in their global trade INDUSTRIES Textiles Medical Oil Fiscal Support Toys Building Chemical Standards Hardlines Industrial/HVAC Agriculture Cargo Scanning Footwear IT/Telecom Minerals Technical Food Automotive Pharmaceutical Inspection Home Appliances DIV
Slide 31: Government Services: Less dependent on PSI
Government Services Less dependent on PSI Organic £m @ constant exchange rates 2006 Change Change Revenue 53.4 (27.4)% (27.5)% Operating profit 6.6 (59.5)% (59.5)% Margin 12.4% -980 bps -980 bps 31
Slide 32: Government Services: Improved business mix
Government Services Improved business mix • Pre-shipment inspection (PSI) now 1/3 of division – Venezuela and Nigeria terminated • Excluding terminated contracts, revenue grew by 7.9% • Standards now biggest section of division – Saudi Arabia, Kuwait, Kenya, Nigeria • Technical inspection volumes in
Slide 33: A Successful Year
A Successful Year Strong organic growth Margin increase Good results 33
Slide 34: Outlook
Outlook Market position continuously strengthening through investment in people, assets and branding Strong acquisition pipeline Growth drivers positive GLOBAL DRIVING THE EXTERNAL TRADE DRIVERS EXPANSION INDUSTRY GROWTH 34
Slide 35: Intertek
Intertek Driving our service industry to a new level and delivering growth