Intertek Group plc · LSE:ITRK
Intertek — FY2014 Earnings Presentation
39 slides from Intertek's earnings presentation, Mar 2, 2015
Slide 1: 2014 Full Year Results Presentation
2014 Full Year Results Presentation 2 March 2015 Wolfhart Hauser Edward Leigh Chief Executive Officer Chief Financial Officer 1 www.intertek.com
Slide 2: Financial Performance
Edward Leigh Chief Financial Officer Financial Performance 2014 Full Year Results Presentation 2 www.intertek.com
Slide 3: 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 4: Results Overview
Results Overview • Good growth across most businesses and geographies • Specific revenue headwinds • Focus on cash management and profitability • Dividend up 6.7% 4 www.intertek.com
Slide 5: Financial highlights
Financial highlights Revenue £2,093m + 2.3% at constant (4.2)% at actual Organic revenue at constant(2) (0.6)% + 1.4% excluding low-value contract exits Operating profit(1) £324m + 1.2% at constant (5.3)% at actual (1.4)% at constant organic(2) Operating profit margin(1) 15.5% (20)bps at constant (2
Slide 6: Revenue year on year bridge
Revenue year on year bridge £m (6.5)% FX 2.3% growth at constant rates impact 2,300 60 (138) 2,200 (51) 17 7 2,231 (2) 16 (4.2)% 2,184 TOTAL 2,100 2,093 2,000 (0.6)% at organic constant rates 1,900 1,800 1,700 1,600 1,500 Consumer Assurance Commodities Excluding FX 2013 2014 FX Commercial & Chems &
Slide 7: Organic Revenue year on year bridge
Organic Revenue year on year bridge £m 2,100 (0.6)% at constant organic (2.0)% 3.9% 2,029 (1.2)% 2,000 2,016 (0.8)% (0.5)% 1,900 1,800 1,700 1,600 FY 2013 I&A low-value I&A capex Minerals Europe Cargo & Rest of FY 2014 contract exits projects Chems Business 7 www.intertek.com
Slide 8: Operating Margin bridge
Operating Margin bridge % (20)bps at actual 16.0% (40)bps 50bps 15.7% (20)bps (10)bps 15.5% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% FY 2013 I&A Minerals Acquisitions Restructuring FY 2014 8 www.intertek.com
Slide 9: Currency analysis: Revenue
Currency analysis: Revenue Local currency to GBP FY 2014 FY 2013 USD 5.8% 1.65 1.56 ~30% CNY 4.9% 10.15 9.68 EUR 5.1% 1.24 1.18 HKD 5.6% 12.80 12.12 ~55% ~10% AUD 13.0% 1.83 1.62 CAD 13.0% 1.82 1.61 ~5% BRE 14.9% 3.86 3.36 INR 9.5% 100.76 91.99 USD, CNY & HKD GBP Group 6.5% EUR Oth
Slide 10: Separately disclosed items
Separately disclosed items £m @ actual exchange rates 2014 2013 Adjusted operating profit(1) 324.4 342.6 Separately disclosed items: Amortisation of acquisition intangibles (20.8) (22.5) Acquisition and disposal costs (3.5) (1.3) Restructuring costs (23.5) (8.8) Separately disclosed items sub-total
Slide 11: Restructuring
Restructuring £23.5m £23.5m Asia • Restructuring cost of £23.5m Central & Middle Overheads East & • 70% people related Africa • Headcount reduction of 1,100 C&P • Re-shaping the portfolio C&E & CG Europe • Europe/USA: C&P and Cargo • Global: Industry Services • Minerals Comms • Targeted businesses A
Slide 12: Cash flow, tax and investment
Cash flow, tax and investment £m @ actual exchange rates 2014 2013 Cash Flow Adjusted operating profit(1) 324 343 +3% • Free cash flow up 41% Depreciation/amortisation 76 71 Working capital (5) (31) • Capex £109m; 5.2% of revenue Net capex (109) (140) Other** (101) (112) • 3 acquisitions for £43m Fr
Slide 13: Financing
Financing Drawn debt • $110m bond debt Bank Debt £188m • Bank facility refinanced and expanded in July 2014 Bond Debt £565m • Gross debt £753m; Cash £120m; Net debt £633m • Strong maturity profile Debt duration • Pro forma net debt: EBITDA of 1.5x 12% 11% • Net interest charge of £24m, down £3.5m 50
Slide 14: Dividend Increased by 6.7%
Dividend Increased by 6.7% Full year dividend per share • Full year dividend 49.1p, up 6.7% £m 14% CAGR 50 • 2014 full year pay-out of £79m 49.1 • Reflects confidence in strong long-term 46.0 40 structural growth 41.0 • Dividend cover of 2.7x on adjusted EPS 33.7 30 28.1 25.5 20 10 0 2009 2010 2011
Slide 15: Key financial assumptions
Key financial assumptions 2015 Assumptions Interest charge c£24-26m Effective tax rate 24.5-25.5% Minority interest c£14-15m Diluted shares (as at 31 December 2014) 162.1m Capex as a percentage of revenue ~5-6% Based on adjusted results, management estimates and FX rates as at 2 March 2015. 15 www.i
Slide 16: Financial priorities
Financial priorities • Invest for growth • Cost management and efficiency • Margin development 16 www.intertek.com
Slide 17: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2014 Full Year Results Presentation 17 www.intertek.com
Slide 18: Divisional Overview – FY 2014
Divisional Overview – FY 2014 FY Organic % of Group Revenue mix revenue growth FY Profit Industry Chemicals (7.8)% 20% & Pharma & Assurance 8% Commercial & Commodities (0.3)% 20% Electrical Industry & Assurance 17% 31% Consumer 4.5% 38% Goods Consumer Goods Commercial 18% 5.4% 16% Commodities & Elec
Slide 19: Industry & Assurance
Industry & Assurance FY 14 Performance FY 14 Trading £m @ constant Organic • Industry Services: Technical Inspection (TI) down -9% on oil exchange FY 14 Change change and gas capex. Growth in opex Revenue 642.9 (2.8)% (7.8)% • £40m low-value contracts exited • Food & Agri: Strong growth in EU & Asia
Slide 20: Commodities
Commodities FY 14 Performance FY 14 Trading £m @ constant Organic • Minerals: 15% decline, Indonesian trade bans exchange FY 14 Change change • Cargo: Continuing growth, led by Asia and Middle East. Revenue 542.4 (0.5)% (0.3)% Europe weak • Government Services (GTS): Good growth resumed Operating in
Slide 21: Oil & Gas business mix
Oil & Gas business mix Approx. % of Activity Group Revenue1 Demand Drivers Key Services Oil & Gas 13% Capital • Technical inspection Expenditure • Technical staffing Capex (Capex) Industry & Assurance Oil & Gas 7% Operational • Asset integrity management Expenditure • Non-destructive testing Opex (O
Slide 22: Consumer Goods
Consumer Goods FY 14 Performance FY 14 Trading £m @ constant Organic • Softlines: Strong growth driven by retailer sourcing in exchange FY 14 Change change emerging markets, fashion diversity, chemical testing Revenue 375.3 4.4% 4.5% • Toys & Hardlines: Flat after strong growth in prior year (EU reg
Slide 23: Commercial & Electrical
Commercial & Electrical FY 14 Performance FY 14 Trading £m @ constant Organic • Transport: Very high growth, investments coming online exchange FY 14 Change change • Electrical: Good growth, new designs & technologies Revenue 359.6 13.9% 5.4% • Wireless: Completion of 2-year high-margin app contract
Slide 24: Chemicals & Pharma
Chemicals & Pharma FY 14 Performance FY 14 Trading £m @ constant Organic • Chemicals & Materials: EU weak, continued exchange FY 14 Change change restructuring Revenue 173.1 5.7% 4.5% • Fuel and lubricants strong from new standards, engines and environmental concerns Operating • Health & Beauty: Chi
Slide 25: Our strategic portfolio
Our strategic portfolio Chemicals & Pharma Minerals Consumers RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS INDUSTRY ASSETS Energy Food & Agri Business Assurance 26 www.intertek.com
Slide 26: Market drivers in product industries
Market drivers in product industries 2014 Highlights Business Assurance, USA +14% Electrical, Taiwan Vietnam +13% End-User quality +24% expectations and diversity Consumers demanding safe and quality brands Transport Colombia New Supply chain +22% technologies changes +18% Innovation and Shifting cy
Slide 27: Outlook
Outlook 2015 • Continuing good growth in product-related industries • Capex spending in oil and gas sector uncertain • Organic revenue growth rate to improve gradually during the year • Broadly similar margin Mid-term • Quality demand will drive growth in product-related industries • Re-balance of e
Slide 28: Our Growth Platform
Our Growth Platform RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS GLOBAL TRADE MARKET DRIVERS QUALITY NETWORK & SERVICE OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION INDUSTRY ASSETS 29 www.intertek.com
Slide 29: Appendix
Appendix 2014 Full Year Results Presentation 30 www.intertek.com
Slide 30: Acquisitions 2013-14
Acquisitions 2013-14 Contributing 3% to 2014 revenue growth Toys & Hardlines Pharma Building Products E-Test Melbourn ATI Scientific 10 acquisitions for £165m Contributing 3% to revenue growth in 2014 QPS GXT ScanBi INSPEC SunWest Labs AV Cape Food Safety Assessment Food & Agri Industry Services 31
Slide 31: Regional revenue
Regional revenue 35% 34% Emerging markets make up 2014 38% of Group revenue £2,093m 31% Americas EMEA Asia 32 www.intertek.com
Slide 32: Adjusted EPS
Adjusted EPS £m @ actual exchange rates 2014 2013 Adjusted operating profit 324.4 342.6 (5.3)% Net interest expense (24.2) (27.7) Profit before tax 300.2 314.9 Tax 24.0% (23.0%) (72.0) (72.4) Profit after tax 228.2 242.5 Non-controlling interest (14.1) (16.5) Net Profit 214.1 226.0 FD Shares 162.1 1
Slide 33: Taxation
Taxation £m @ actual exchange rates 2014 2013 Reported profit before tax 252.2 281.8 Reported tax (61.8) (64.8) Reported profit after tax 190.4 217.0 Reported tax rate 24.5% 23.0% Effective tax rate 24.0% 23.0% on adjusted operating profit 34 www.intertek.com
Slide 34: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates 2014 2013 Cash generated from operations 386.8 378.6 Separately disclosed items – cash flow 16.9 15.5 Adjusted cash generated from operations 403.7 394.1 + 2.4% 35 www.intertek.com
Slide 35: Free Cash Flow
Free Cash Flow £m @ actual exchange rates 2014 2013 Adjusted operating profit(1) 324.4 342.6 (5.3%) Depreciation/amortisation 76.3 70.9 Working capital (5.0) (30.9) Net capex (108.5) (140.2) Other* (102.4) (111.8) Free Cash Flow 184.8 130.6 + 41.5% (1) Before separately disclosed items *Comprises: S
Slide 36: Net Debt
Net Debt £m @ actual exchange rates 2014 2013 Borrowings 753.0 734.6 Cash (119.5) (116.4) Net debt 633.5 618.2 Pro forma net debt: EBITDA 1.5x 1.4x 37 www.intertek.com
Slide 37: Liquidity Position
Liquidity Position £m @ actual exchange rates 2014 2013 Debt facilities 1,144.5 909.6 Borrowings (753.0) (734.6) Undrawn committed borrowing facilities 391.5 175.0 Cash 119.5 116.4 Liquid funds 511.0 291.4 50% of the debt facility has a maturity profile of greater than five years 38 www.intertek.com
Slide 38: Divisional Performance Summary
Divisional Performance Summary FY 2014 Revenue Margin £m @ constant Organic Organic exchange rates FY 14 Change change FY 14 Change change Industry & Assurance 642.9 (2.8)% (7.8)% 10.0% (140)bps (130)bps Commodities 542.4 (0.5)% (0.3)% 12.1% 10bps 0bps Consumer Goods 375.3 4.4% 4.5% 33.3% 60bps 60bp
Slide 39: Divisional Performance Summary
Divisional Performance Summary FY 2014 Organic Revenue Growth £m @ constant exchange rates H1 H2 FY Industry & Assurance (6.7)% (9.0)% (7.8)% Commodities (1.6)% 0.9% (0.3)% Consumer Goods 5.0% 4.0% 4.5% Commercial & Electrical 6.3% 4.6% 5.4% Chemicals & Pharma 4.5% 4.4% 4.5% Group Total (0.5)% (0.8)