Slide 1: 2019 Full Year Results Presentation
2019 FULL YEAR RESULTS PRESENTATION REVENUE ACCELERATION, ROBUST EPS GROWTH, STRONG CASH AND HIGHER ROIC 3 March 2020
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: Agenda: Performance Highlights
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
Slide 4: Continuous Progress on Revenue, EPS, Cash and Dividend
CONTINUOUS PROGRESS ON REVENUE, EPS, CASH AND DIVIDEND Revenue (£m) Adjusted Operating Profit (£m) Adjusted Operating Margin 14-19 CAGR: 7.4% 14-19 CAGR: 9.6% 14-19: +170BPS 2,987 513 2,769 2,801 468 482 16.9% 17.2% 17.2% 2,567 410 343 15.9% 16.0% 2,093 2,166 324 15.5% FY14 FY15 FY16 FY17 FY18 FY19
Slide 5: Improved Organic Revenue Growth Momentum in H2
IMPROVED ORGANIC REVENUE GROWTH MOMENTUM IN H2 Organic growth at constant currency FY19 organic growth by division1 Organic revenue growth1 (%) 7.0% 6.0% Resources: +5.7% 5.0% Trade: +4.1% []% of earnings 4.0% 4.0% 3.4% 3.6% 3.0% 3.0% Products: +2.3% 2.5% 78% of 1.7% 17% earnings 2.0% of earnings 1.
Slide 6: 5th Consecutive Year of Margin Progression at CCR
5TH CONSECUTIVE YEAR OF MARGIN PROGRESSION AT CCR Operating Margin, Actuals Margin Accretion, CCR1 17.2% 17.2% 110 16.9% 15.9% 16.0% 15.5% 40 20 30 10 FY14 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Productivity management Portfolio strategy Portfolio review • Monthly performance reviews for
Slide 7: Strong Cash Performance
STRONG CASH PERFORMANCE Adjusted EBITDA Cash Generated from Operations Free Cash Flow £637m £380m 14-19 CAGR: 9.0% £617m 14-19 CAGR: 10.5% 14-19 CAGR: 15.5% £342m £351m £563m £571m £543m £579m £581m £318m £499m £442m £401m £429m £387m £235m £185m FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16
Slide 8: 2019 Financial Results
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
Slide 9: Key P&L Financials
KEY P&L FINANCIALS YoY % 2019 Actual Rates Constant Rates 2019 Δ versus IAS 17 IAS 17 IAS 17 IFRS 16 IAS 17 Revenue £2,987.0m 6.6% 4.8% £2,987.0m - Organic revenue1 £2,925.6m 5.1% 3.3% £2,925.6m - Operating profit2 £513.3m 6.5% 5.2% £524.2m +£10.9m Operating profit margin2 17.2% 0bps 10bps 17.5% +30
Slide 10: Operating Margin Bridge
OPERATING MARGIN BRIDGE 18.0% 0bps (10bps) 10bps 0bps 10bps (10bps) 17.0% 17.2% 17.2% 17.2% 16.0% 0bps organic at constant rates 15.0% 14.0% 13.0% Resources Excluding FX and Products Divisional mix Acquisitions FX FY 2018 Trade FY 2019 & Disposals Acquisitions & Disposals 10 Note: Organic excludes t
Slide 11: Cash Flow & Net Debt
CASH FLOW & NET DEBT 2019 2019 Δ versus £m @ actual exchange rates 2018 IAS 17 IFRS 16 IAS 17 Adjusted operating profit1 481.8 513.3 524.2 10.9 Depreciation/amortisation 88.7 103.2 171.5 68.3 Change in working capital 13.1 16.3 15.9 (0.4) Other2 19.3 19.0 19.0 - Adjusted cash flow from 602.9 651.8 7
Slide 12: Financial Guidance, Prior to the Coronavirus Outbreak
FINANCIAL GUIDANCE, PRIOR TO THE CORONAVIRUS OUTBREAK FY 2020 Guidance (IFRS16) Net finance cost (pre-fx) £35 – 38m Effective tax rate 25.5 – 26.0% Minority interest £21 – 23m Diluted shares (as at 31 December 2019) 162.6m Capex £130 – 140m Financial Net Debt £520 – 550m 12 Note: Net debt guidance b
Slide 13: 5+5 Strategy Review
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
Slide 14: 5 Years Ago, This Is What We Said We Will Do
5 YEARS AGO, THIS IS WHAT WE SAID WE WILL DO… 14
Slide 15: Strong Progress on Our 5 Strategic Priorities
STRONG PROGRESS ON OUR 5 STRATEGIC PRIORITIES DIFFERENTIATED TQA SUPERIOR EFFECTIVE SALES GROWTH AND MARGIN OPERATIONAL BRAND PROPOSITION CUSTOMER SERVICE STRATEGY ACCRETIVE PORTFOLIO EXCELLENCE • Positioned Intertek as • Focused on delivering • Introduced disciplined • Moving Intertek's • Ever Bett
Slide 16: Strong Progress on Performance Delivery
STRONG PROGRESS ON PERFORMANCE DELIVERY Revenue (£m) Adj. Operating Margin (%) Adjusted EPS (p) +43% 2,987 +170 17.2% bps +60% 211.7 15.5% 2,093 132.1 FY14 FY19 FY14 FY19 FY14 FY19 Free Cash Flow (£m) ROIC - Actual (%) Revenue per employee (£) 380 +650 22.8% 66,425 +106% +21% bps 54,845 16.3% 185 FY
Slide 17: Disciplined Investments in Attractive Growth and Margin Sectors
DISCIPLINED INVESTMENTS IN ATTRACTIVE GROWTH AND MARGIN SECTORS CONNECTED WORLD GEOGRAPHIC EXPANSION SAAS PLATFORMS SUSTAINABILITY FOOD & HOSPITALITY LAB EXPANSION £560m in CAPEX and £710m in M&A invested in 2015-2019 17
Slide 18: 5x5 Differentiated Strategy for Growth
5X5 DIFFERENTIATED STRATEGY FOR GROWTH 5x5 Mid-to Long-Term Goals 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in service in Assurance, growth based on GDP+ from operations capital allocation a safe environment Tes
Slide 19: GDP+ Organic Revenue Growth in Real Terms
GDP+ ORGANIC REVENUE GROWTH IN REAL TERMS ATTRACTIVE QUALITY ASSURANCE GROWTH PROSPECTS Untapped Potential PRODUCTS TRADE RESOURCES 60% of Revenue 23% of Revenue 17% of Revenue 78% of Profit 16% of Profit 6% of Profit Increased Faster Long term Population Development of Investment in number of innov
Slide 20: Well Positioned to Seize These Growth Opportunities
WELL POSITIONED TO SEIZE THESE GROWTH OPPORTUNITIES CAPITALISING ON OUR STRONG OPERATING PLATFORM Untapped Potential TQA SUPERIOR POWERFUL HIGH QUALITY PASSIONATE EVER BETTER CUSTOMER SERVICE PORTFOLIO COMPOUNDER CUSTOMER-CENTRIC PERFORMANCE EARNINGS MODEL ORGANISATION MANAGEMENT • Global network •
Slide 21: Innovations for a Better, Safer and More Sustainable World
INNOVATIONS FOR A BETTER, SAFER AND MORE SUSTAINABLE WORLD • Untapped growth opportunities in a more Customer Insights Based Innovations complex world 0-1 and 1-100 Margin-Accretive Innovations • Leading subject matter expertise • Innovative solutions in attractive growth and margin sectors 21
Slide 22: Intertek High Quality Earnings Model
INTERTEK HIGH QUALITY EARNINGS MODEL 20193 Revenue £3.0bn EBITDA margin 23% Cash Conversion 1 126% Capex £117m Dividend Payout 50% FCF £380m Balance Sheet 2 0.9x ROIC 23.7% Intertek’s Virtuous Economics Driving Sustainable Value Creation 22 Notes: (1) Cash flow for cash conversion (includes IFRS 16
Slide 23: 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 based on a target payout ratio of c.50% M&A focused on strong growth and margin
Slide 24: Ever Better Performance Management
EVER BETTER PERFORMANCE MANAGEMENT DISCIPLINED PERFORMANCE MANAGEMENT SUPERIOR CUSTOMER SERVICE 7,000+ Monthly Customer Interviews Weekly, Monthly, Quarterly, Yearly, 5 Yearly Performance Continuous improvement based on our frequent Management across Financial and Operational Metrics customer feedba
Slide 25: Driving Sustainable Performance for All Stakeholders
DRIVING SUSTAINABLE PERFORMANCE FOR ALL STAKEHOLDERS ANCHORED IN OUR TOTAL SUSTAINABILITY APPROACH DOING BUSINESS THE RIGHT WAY INTERTEK CORPORATE GOALS 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in service in As
Slide 26: 2020 Outlook
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
Slide 27: Coronavirus: Caring for Our People and Our Clients
CORONAVIRUS CARING FOR OUR PEOPLE AND OUR CLIENTS • Measures Intertek is taking in Greater China: Focused on the health and safety of our employees and the mitigation of any disruption of our service to our clients • Our Health, Safety, Well-being measures in Greater China: Hygiene and protection me
Slide 28: Group Outlook 2020, Prior to the Coronavirus Outbreak
GROUP OUTLOOK 2020, PRIOR TO THE CORONAVIRUS OUTBREAK • Good organic revenue growth at constant currency − Good growth expected in Products − Good growth expected in Trade − Robust growth expected in Resources • Moderate Group margin progression − Portfolio strategy − Continuous cost discipline − Pe
Slide 29: Continuous Margin Accretive Revenue Growth in Products
CONTINUOUS MARGIN ACCRETIVE REVENUE GROWTH IN PRODUCTS Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 1,797 1,743 22.1% 22.2% 1,680 1,668 371 399 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 +6.9% +4.6% +7.4% +10bps +4.6% CCR +2.3% CCR +5.7% CCR +20bps CCR FY19 Actua
Slide 30: Continuous Margin Accretive Revenue Growth in Products
CONTINUOUS MARGIN ACCRETIVE REVENUE GROWTH IN PRODUCTS FY19 Actuals Growth Drivers Increased focus of ISO Increased consumer and Good organic Business Assurance corporations on supply chain standards government focus on ethical growth and risk management upgrades and sustainable supply Building & Go
Slide 31: Revenue Acceleration in Trade
REVENUE ACCELERATION IN TRADE Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 642 679 637 671 83 84 13.0% 12.3% FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 +5.8% +5.5% +0.1% (70)bps +4.5% CCR +4.1% CCR (0.2)% CCR (60)bps CCR FY19 Actuals Growth Drivers Good organic G
Slide 32: Improved Revenue Momentum and Margin Accretion in Resources
IMPROVED REVENUE MOMENTUM AND MARGIN ACCRETION IN RESOURCES Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 479 511 479 511 31 5.7% 6.1% 27 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 +6.7% +6.7% +13.9% +40bps +5.7% CCR +5.7% CCR +16.0% CCR +50bps CCR FY19 Actuals Gr
Slide 33: Conclusion
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
Slide 34: Ever Better… Everyday... Everywhere
EVER BETTER… EVERYDAY... EVERYWHERE • 5 years of continuous and consistent progress on Revenues, EPS, Cash and Dividends • Attractive structural growth prospects combined with our superior ATIC customer Service and industry- leading innovations, pave the way for exciting growth ahead • Ever Better,
Slide 35: Intertek: Total Quality. Assured.
intertek Total Quality. Assured.
Slide 36: Group Performance (2015 – 2019)
GROUP PERFORMANCE (2015 – 2019) Revenue (£m) Adjusted Operating Profit (£m) Adjusted Margin (%) 17.2% 17.2% £482m £513m £468m 16.9% £2,769m £2,801m £2,987m £410m £2,567m £343m £2,166m 75% 77% 78% 59% 60% 60% 57% 73% 16.0% 51% 68% 15.9% 25% 23% 23% 23% 23% 22% 20% 19% 17% 16% 24% 20% 18% 17% 17% 10%
Slide 37: Adjusted EPS
ADJUSTED EPS £m @ actual exchange FY 18 FY 19 IFRS 16 rates Adjusted operating profit 481.8 513.3 +6.5% 524.2 Net interest expense (25.3) (30.3) (39.4) Profit before tax 456.5 483.0 484.8 Tax (112.8) (118.4) (118.8) Profit after tax 343.7 364.6 366.0 Non-controlling interest (20.8) (20.4) (20.5) Net
Slide 38: Track Record of Shareholder Value Creation
TRACK RECORD OF SHAREHOLDER VALUE CREATION Revenue (£m) Adjusted EPS (p) 11y CAGR 10.4% 11y CAGR 11.0% IAS 17 basis 2,987 2,987 211.7 212.5 2,769 2,801 198.3 2,567 191.6 2,184 167.7 2,054 2,093 2,166 131.2 138.6 132.1 140.7 1,749 107.2 1,237 1,374 81.5 89.4 1,004 67.1 FY 08 FY 09 FY 10 FY 11 FY 12 F