Intertek Group Plc · LSE:ITRK
Intertek — FY2011 Earnings Presentation
40 slides from Intertek's earnings presentation, Mar 5, 2012
Slide 1: 2011 Full Year Results Presentation
2011 Full Year Results Presentation 5 March 2012 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 1 www.intertek.com
Slide 2: Financial Performance
Lloyd Pitchford Financial Performance 2011 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 • Strong results; delivering material growth • Total revenue up 27.3%; Organic growth of 8.3% • Operating margin 16.1%; Organic margin +20bps • Adjusted EPS up 20% • Full year dividend increased by 20% • Moody acquisition delivering ahead of plan 4 www.intertek.com
Slide 5: Financial Highlights
Financial Highlights For the twelve months to 31 December 2011 Revenue £1,749m + 27% at actual + 8.3% at constant organic(2) Operating profit(1) £281.1m + 24% at actual + 9.6% at constant organic(2) Operating profit margin(1) 16.1% – 50bps at actual + 20bps at constant organic(2) Profit before tax(1
Slide 6: Profit Before Tax & Separately Disclosed Items
Profit Before Tax & Separately Disclosed Items £m @ actual exchange rates 2011 2010 Adjusted operating profit (1) 281.1 227.5 Separately disclosed items: Amortisation of acquisition intangibles (25.3) (12.9) Acquisition transaction and integration costs (14.1) (5.3) Restructuring costs – Business Pr
Slide 7: Revenue Growth
Revenue Growth + 27.3% £m Actual rates £m 1,800 268 (5) 1,749 1,800 1,749 12 7 1,750 1,750 57 22 1,700 1,700 277 1,650 + 8.3% 1,650 1,600 Constant 1,600 rates 1,550 1,550 112 1,500 1,500 1,450 1,450 1,400 1,374 1,400 1,374 1,350 1,350 1,300 1,300 1,250 1,250 1,200 1,200 Organic FX 2010 Acquisitions
Slide 8: Revenue by Region
Revenue by Region EMEA 32% Americas 32% Asia Pacific 36% Emerging Markets 34% 8 www.intertek.com
Slide 9: Moody Acquisition
Moody Acquisition • Large and complex acquisition • Management structures integrated £450m acquisition • Good cultural fit 2,500+ People • Key staff retained 60 Countries, 80 Offices • Locations consolidating Industry Services System Certification 87% Revenue 13% Revenue 9 www.intertek.com
Slide 10: Moody Acquisition Performance
Moody Acquisition Performance Revenue History £m + 15% • Performing ahead of expectations Organic 400 • Organic annualised growth 15% 300 • Margin up 70bps to 12% 200 • Strategic growth platform created • Strong global customer demand 100 Pre- Acquisition 0 2008 2009 2010 2011 Margin % 14.3 14.4 11.
Slide 11: Margin Enhancement Programme
Margin Enhancement Programme • Underlying margin increase of 20bps in 2011 • Moody integration cost savings; £6m per annum from 2012 • Finance and IT outsourcing; £10m per annum from 2014 • Operational margin improvement and Intertek as One • Economies of Scale 11 www.intertek.com
Slide 12: Financing, Tax & Investment
Financing, Tax & Investment Funding Maturity Profile • Adjusted cash flow from operations £315m 2012-15 13% • Capex £81m, 4.6% of revenue • 5 acquisitions for £460m 2016+ • Net debt: EBITDA of 1.6 87% • Interest charge £21m • Adjusted effective tax rate at 28% • £0.9bn facilities • 50% Bond: 50% Ban
Slide 13: Five Year Performance 2007 to 2011
Five Year Performance 2007 to 2011 Revenue Adjusted Operating Profit(1) Adjusted Diluted EPS(1) £m Pence £m 23% CAGR 23% CAGR 22% CAGR 300 120 2,000 281 107 1,749 250 1,700 90 200 1,400 150 60 1,100 100 30 800 50 500 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 (1)
Slide 14: Dividend Increased by 20%
Dividend Increased by 20% Full Year Dividend Per Share • Full year dividend of 33.7p, up 20% • Full year pay-out of £54m • Strong and consistent record of dividend growth • Dividend cover of 3.2 14 www.intertek.com
Slide 15: Summary
Summary • Strong results; delivering material growth • Moody acquisition delivering ahead of plan • Margin enhancement programme progressing • Strong financial position 15 www.intertek.com
Slide 16: Wolfhart Hauser, Chief Executive Officer
Wolfhart Hauser Chief Executive Officer 2011 Full Year Results Presentation 16 www.intertek.com
Slide 17: A decade of consistent revenue growth
10 years from IPO A decade of consistent revenue growth Revenue £m 2,000 OUR STRATEGY 1,000 OUR GROWTH OUR PLATFORM DRIVERS 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 The Future 2019 2020 2021 2022 17 www.intertek.com
Slide 18: Enduring Growth Drivers
Enduring Growth Drivers 1 Global Trade & Emerging Market Trade Growth 2 Market Drivers in our Industries 3 Network & Service Expansion 4 Outsourcing & Consulting Services 5 Industry Consolidation 18 www.intertek.com
Slide 19: Global Trade: The Future?
Global Trade: The Future? Forecast Shipped Container Volumes (million TEUs) Asia-Europe USA-Asia 6 6 26 32 Intra- 7 Asia-USA 7 North America USA-Europe 27 3 EUROPE 25 18 USA Intra-Europe Europe-Asia ASIA 130 3 USA-LATAM 3 10 Asia - LATAM Rate of growth in TEU Australasia Intra-Asia Volume from 2010-
Slide 20: End-User Quality Demand in 2020
End-User Quality Demand in 2020 $1 trillion on $5 innovations for the next big thing 1.3 trillion by ‘soft’ innovators on billion new product variety consumers $10 trillion extra consumer spend from growth markets Source: Bain & Company 20 www.intertek.com
Slide 21: Market Drivers in our Industries
Market Drivers in our Industries End-User Quality Expectations & Diversity Developed and emerging economies Supply Chain New Changes Technologies Shifting cycles, Innovation and Market sourcing and product variety Drivers complexity What Energy Growth & Regulation Diversity Quality, Safety and Capex
Slide 22: Quality Expectations
Quality Expectations Established and emerging brands use quality as a foundation 22 www.intertek.com
Slide 23: What is Quality?
Our Strategy: Quality What is Quality? 23 www.intertek.com
Slide 24: Divisional Mix
Divisional Mix % of Group % of Group Revenue Profit Chemicals & Pharma Commodities 30% 24% Commodities Industry & Assurance 27% 18% Commercial & Electrical Consumer Goods 18% 38% Consumer Goods Commercial & 17% 16% Electrical Industry & Assurance Chemicals & Pharma 8% 4% 24 www.intertek.com
Slide 25: Commodities
Commodities FY 11 Performance Developments £m @ constant Organic exchange FY 11 Change change • £24m invested in laboratories, equipment and network expansion Revenue 530.2 12.0% 11.9% • Expansion of additive services, Minerals Operating profit 67.0 22.8% 22.9% facilities in Asia and Africa Margin 1
Slide 26: Industry & Assurance
Industry & Assurance FY 11 Performance Developments £m @ constant Organic exchange FY 11 Change change • Acquisitions in UK & Chile Revenue 468.6 145.5% 7.5% • New global client contracts in Industry & Business Assurance Operating profit 50.9 208.5% (0.6)% Margin 10.9% 230bps (60)bps • New growth pl
Slide 27: Consumer Goods
Consumer Goods FY 11 Performance Developments £m @ constant Organic exchange FY 11 Change change • New service innovations and network expansion: Guatemala, Bangladesh, Revenue 315.7 5.0% 4.8% Vietnam, Cambodia, Turkey Operating profit 106.3 1.1% 1.2% • Acquisition: Product lifecycle analysis in Mar
Slide 28: Commercial & Electrical
Commercial & Electrical FY 11 Performance Developments £m @ constant Organic exchange FY 11 Change change • Organic capital investment of >£20m and business development to drive Revenue 291.0 8.7% 8.7% growth Operating profit 44.1 15.7% 15.7% • Value-adding services Margin 15.2% 100bps 100bps • Good
Slide 29: Chemicals & Pharma
Chemicals & Pharma FY 11 Performance Developments £m @ constant Organic exchange FY 11 Change change • Acquisition: Oil and lubricants in UK Revenue 143.9 5.5% 3.9% • Increased expertise in counterfeit drugs and biologics Operating profit 12.8 9.4% 16.5% Margin 8.9% 30bps 120bps • Good growth in Che
Slide 30: Outlook
Outlook • Resilient business model • Full year Moody in 2012 (8 months 2011) • High single digit organic growth average • Margin progression • Industry consolidation 30 www.intertek.com
Slide 31: Summary
Summary RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS GLOBAL TRADE MARKET DRIVERS QUALITY NETWORK & SERVICE OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION INDUSTRY ASSETS 31 www.intertek.com
Slide 32: Wolfhart Hauser, Chief Executive Officer
Wolfhart Hauser Chief Executive Officer 2011 Full Year Results Presentation 32 www.intertek.com
Slide 33: Appendix
Appendix 2011 Full Year Results Presentation 33 www.intertek.com
Slide 34: Taxation
Taxation £m @ actual exchange rates 2011 2010 Profit before tax 213.0 189.9 Tax (61.9) (50.9) Profit after tax 151.1 139.0 Reported tax rate 29.1% 26.8% Effective tax rate 28.2% 26.7% on adjusted operating profit 34 www.intertek.com
Slide 35: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates 2011 2010 Operating Profit before changes in working 329.1 282.3 capital and provisions Changes in working capital: Inventory (2.1) (1.3) Debtors and prepayments (34.8) (32.5) Creditors and accruals (3.5) 22.9 Cash generated from operations 288.7 271.4
Slide 36: Free Cash Flow
Free Cash Flow £m @ actual exchange rates 2011 2010 Operating cash flow 288.7 271.4 Net interest (20.3) (14.5) Taxation (53.4) (61.7) Net capital expenditure (79.0) (65.1) Free cash flow 136.0 130.1 Separately disclosed items – cash flow 26.1 5.3 Adjusted free cash flow 162.1 135.4 +20% 36 www.inter
Slide 37: Net Debt
Net Debt £m @ actual exchange rates 2011 2010 Borrowings 762.6 386.7 Cash (181.9) (217.0) Net debt 580.7 169.7 Net debt to EBITDA (Proforma 12mths Moody) 1.6x 0.6x 37 www.intertek.com
Slide 38: Liquidity Position
Liquidity Position £m @ actual exchange rates 2011 2010 Debt facilities 911.2 722.9 Borrowings (762.6) (386.7) Undrawn committed borrowing facilities 148.6 336.2 Cash 181.9 217.0 Liquid funds 330.5 553.2 38 www.intertek.com
Slide 39: Currency Analysis
Currency Analysis Revenue By Currency Local currency 2011 2010 to GBP USD 3.5% 1.60 1.55 CNY 1.1% 10.35 10.47 Other ~ 26% EUR 1.7% 1.15 1.17 USD, CNY & GBP & HKD HKD 3.7% 12.47 12.00 EUR ~ 55% ~ 19% AUD 9.0% 1.55 1.69 CAD 1.0% 1.59 1.60 39 www.intertek.com
Slide 40: Divisional Performance Summary
Divisional Performance Summary FY 2011 Revenue Margin Organic Organic £m @ constant exchange FY 11 Change change FY 11 Change change Commodities 530.2 12.0% 11.9% 12.6% 110bps 110bps Industry & Assurance 468.6 145.5% 7.5% 10.9% 230bps (60)bps Consumer Goods 315.7 5.0% 4.8% 33.7% (130)bps (120)bps Co