Intertek Group Plc · LSE:ITRK
Intertek — Intertek Testing Services — H1 2002 Earnings Presentation
25 slides from Intertek's earnings presentation, Sep 2, 2002
Slide 1: Intertek Testing Services
Intertek Testing Services An International Leader in Testing, Inspection & Certification Interim Results Presentation: 2 September 2002 Richard Nelson, Chief Executive Officer Bill Spencer, Chief Financial Officer Draft 29/08/02 1
Slide 2: Overview – 2002 Interim Results
Overview – 2002 Interim Results Turnover up 3.5% to £229.6m Underlying Operating Profit1 up 16.7% to £37.7m Operating Profit1 margin up from 14.5% to 16.4% Profit before tax £23.3m Pro-forma EPS2 13.1p Operating cash flow up 31.7% to £34.1m 1) Before goodwill amortisation and exceptional items 2) Pr
Slide 3: Overview of Our Businesses
Overview of Our Businesses Textiles Consumer Footwear Goods Toys (Labtest) Hardlines Systems Certification Services Petroleum Oil & Chemical Chemicals Agricultural Products (Caleb Brett) Outsourcing Electrical Electronic Electrical Telecoms equipment (ETL SEMKO) Building Pr
Slide 4: Test, Inspect, Certify
Test, Inspect, Certify For Performance, Safety, Assay Half Year 2002 Turnover Half Year 2002 Operating Profit Foreign Trade Foreign Trade Standards 13% Standards 13% Consumer Goods 25% Consumer Electrical Goods Electrical 20% 47% 25% Oil & Oil & Chemicals Chemicals 37% 20% * Stated before goodwill a
Slide 5: Operating Performance
Richard Nelson Chief Executive Officer Operating Performance @ constant exchange rates Interim Results Presentation - 2 September 2002 5
Slide 6: Labtest (Consumer Goods)
Labtest (Consumer Goods) £m @ constant 2002 exchange rates Half Year June 2002 2001 % Turnover 57.2 51.0 12% Operating Profit * 19.0 14.7 29% Margin 33.2% 28.8% * Before goodwill amortisation and exceptional items 6
Slide 7: Labtest Drivers
Labtest (Consumer Goods) Drivers • Widening ranges of products • Increasing quality and safety requirements • Expansion in China with lower prices and costs • Strong growth in Turkey (textiles & COC) • USA improved textile and toy testing 7
Slide 8: Caleb Brett (Oil & Chemical)
Caleb Brett (Oil & Chemical) £m @ constant 2002 exchange rates Half Year June 2002 2001 % Turnover 85.6 86.0 (1)% Operating Profit * 8.3 8.5 (2)% Margin 9.7% 9.9% * Before goodwill amortisation and exceptional items 8
Slide 9: Caleb Brett Drivers
Caleb Brett (Oil & Chemical) Drivers • Conventional (70%) – Warm winter, low LNG prices – Competitive – Reduced costs in USA, but restructuring costs • Outsourcing (23% up from 21% previous year) – Growth in EBITA, but constrained by client cost cutbacks – Prospects increased 9
Slide 10: ETL SEMKO (Electrical)
ETL SEMKO (Electrical) £m @ constant 2002 exchange rates Half Year June 2002 2001 % Turnover 56.1 55.1 2% Operating Profit * 8.2 8.0 3% Margin 14.6% 14.5% * Before goodwill amortisation and exceptional items 10
Slide 11: ETL SEMKO Drivers
ETL SEMKO (Electrical) Drivers • Cost reductions USA • Telecoms (10% of business) downturn started mid 2001 and stabilised end 2001 • Growth in safety testing and HVAC • Continued growth in Asia • Consumers Association outsourced lab in UK 11
Slide 12: FTS (Foreign Trade Standards)
FTS (Foreign Trade Standards) £m @ constant 2002 exchange rates Half Year June 2002 2001 % Turnover 30.7 26.5 16% Operating Profit * 5.1 2.9 76% Margin 16.6% 10.9% * Before goodwill amortisation and exceptional items 12
Slide 13: FTS Drivers
FTS (Foreign Trade Standards) Drivers • FTS accounted for 13% of group turnover • High shipments to Nigeria (oil industry) • Additional products, SASO programme • Kenya/Mozambique performing well • No cancellation of contracts • Further prospects 13
Slide 14: Financial Performance
Bill Spencer Chief Financial Officer Financial Performance @ actual exchange rates Interim Results Presentation - 2 September 2002 14
Slide 15: Operating Profit
Operating Profit* Half Year to June £m CAGR = 14.2% 50 40 30 20 10 0 '98 '99 '00 '01 '02 Labtest ETL SEMKO Caleb Brett FTS * Before goodwill amortisation and exceptional items @ actual exchange rates, before central costs 15
Slide 16: % of Full Year Operating Profit in the First 6 Months
% of Full Year Operating Profit* in the First 6 Months of the Year 1999 2000 2001 Labtest 50% 46% 44% ETL SEMKO 52% 51% 57% Caleb Brett 46% 47% 49% 49% 48% 48% FTS 97% 28% 31% * Before goodwill amortisation and exceptional items 16
Slide 17: £/$ Exchange Rates
£/$ Exchange Rates £/$ 1.6 1.55 1.5 1.45 1.4 1.35 1.3 Jan Feb Mar Apr May June Jul Aug US$ Actual Rate US$ Cumulative Average 17
Slide 18: Profitability
Profitability Half Year 2002 - £m Reported Pro-forma Operating profit 37.2 37.2 Exceptional items 6.7 ─ Exceptional bank fees (3.5) ─ Interest (17.1) (5.5) Profit before tax 23.3 31.7 18
Slide 19: Taxation
Taxation Half Year 2002 - £m Reported Pro-forma Profit before tax 23.3 23.3 Less exceptional net income & interest ─ (3.2) Profit before tax 23.3 20.1 Tax 6.3 6.3 Effective tax rate 27.0% 31.3% 19
Slide 20: Pro-forma Earnings per Share
Pro-forma Earnings per Share Half Year 2002 - £m Pro-forma* Pro-forma profit before tax* 31.7 Taxation @ 31.3% (9.9) Less minorities (1.7) Pro-forma shareholders earnings 20.1 Divided by:- Shares in issue post flotation - millions 153.4 Pro-forma EPS – pence 13.1 •Before exceptional items, after pro
Slide 21: Operating Cash Flow
Operating Cash Flow Half year 2002 - £m 2002 2001 Change% Operating cash flow before exceptional cash flow 35.9 29.3 23% Exceptional cash flow (1.8) (3.4) ─ Operating cash flow 34.1 25.9 32% Operating cash flow to profit % * 78% 82% * After exceptional items 21
Slide 22: Cash Generation
Cash Generation Half Year June (£) 2002 2001 Operating cash flow 34.1 25.9 Servicing of finance (16.8)* (13.2) Taxation (6.1) (6.2) Capital expenditure (8.6) (10.7) Acquisitions (1.1) (0.5) LBO fee (2.8) ─ Free cash flow (1.3) (4.7) * Includes £4.2m in fees for new bank facilities 22
Slide 23: Underlying Cash Balance
Underlying Cash Balance £m Cash balance at 30 June 261.6 Draw remaining new debt facilities 143.3 Repay High Yield Bond, interest & premium (142.6) Repay PIK debentures and interest (112.3) Repay preference shares (105.5) Pay remaining IPO & debt arrangement fees (10.5) Underlying cash balance 30 Ju
Slide 24: Underlying Capital Structure
Underlying Capital Structure £m Post IPO debt1 246.8 Underlying cash balance (34.0) Underlying net debt 212.8 Underlying shareholders equity2 182.7 Shareholders equity to net debt % 86% 1 Debt facility of £250m, plus other borrowings, less fees 2 Excludes preference shares repaid in July and goodwil
Slide 25: Summary
Summary • Business going well • Infill acquisitions being pursued – Caleb Brett outsourcing – ETL SEMKO expansion – Systems certification • Organic growth prospects 25
Intertek Testing Services — H1 2002 Earnings Presentation on 6ix