Intertek Group plc · LSE:ITRK
Intertek — H1 2013 Earnings Presentation
34 slides from Intertek's earnings presentation, Jul 29, 2013
Slide 1: 2013 Half Year Results Presentation
2013 Half Year Results Presentation 29 July 2013 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 1 www.intertek.com
Slide 2: Financial Performance
Lloyd Pitchford Chief Financial Officer Financial Performance 2013 Half 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 against challenging comparatives • Weak conditions in Minerals and Europe • Total revenue up 9.5%; Organic* growth of 6.3% • Operating margin 14.6% • EPS up 6.4%; Interim dividend up 15.4% * at constant exchange rates 4 www.intertek.com
Slide 5: Financial Highlights
Financial Highlights For the six months to 30 June 2013 Revenue £1,085m + 9.5% at actual + 6.3% at constant organic(2) Operating profit(1) £158.3m + 4.0% at actual - 0.4% at constant organic(2) Operating profit margin(1) 14.6% - 80bps at actual - 100bps at constant organic(2) Profit before tax(1) £1
Slide 6: H1 Revenue Growth
H1 Revenue Growth £m £m 1,200 + 9.5% Actual rates 1,200 1,100 14 17 10.1 8.4 63 1,100 17.2 20.1 37.9 1,000 1,000 900 900 800 800 + 6.3% 1,084.7 1,084.7 700 991.0 Constant 700 991.0 organic 600 rates 600 500 500 400 400 Organic Acquisitions / FX H1 2012 H1 2013 I&A Commodities H1 2012 CG H1 2013 C&E
Slide 7: Operating Profit & Separately Disclosed Items
Operating Profit & Separately Disclosed Items £m @ actual exchange rates H1 2013 H1 2012 Adjusted operating profit (1) 158.3 152.2 +4.0% Separately disclosed items: Amortisation of acquisition intangibles (12.7) (15.0) Acquisition and Project Costs (0.8) (2.9) Restructuring costs (4.1) - Profit on d
Slide 8: Cash Flow, Tax & Investment
Cash Flow, Tax & Investment EBITDA Cash Conversion* % • Adjusted cash generated from 140 H1 operations £123.7m; up 4.7% 120 H2 100 • Cash holding reduced to £123.8m (2012: £160.2m) 80 60 • Net interest charge £13.0m 40 • Adjusted effective tax rate at 25.0% 20 • Capex £61.0m; 5.6% of revenue 0 2011
Slide 9: Five Year Performance 2009 to 2013
Five Year Performance 2009 to 2013 Revenue Adjusted Operating Profit* Adjusted Diluted EPS* £m 11% CAGR Pence £m 15% CAGR 11% CAGR 200 80 1,200 1,084.7 158.3 61.9 150 60 1,000 100 40 800 600 50 20 400 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 H1 H1 H1 * Before se
Slide 10: Interim dividend increased by 15.4%
Interim dividend increased by 15.4% Interim Dividend Per Share Pence • Interim dividend of 15.0p, up 15.4% 20 • Interim pay-out of £24.2m 15 • Strong and consistent record of dividend growth 10 5 0 2009 2010 2011 2012 2013 10 www.intertek.com
Slide 11: Summary
Summary • Good growth against very strong comparatives • Minerals and Europe markets impacting performance and outlook • Strong performance across Asia • Strong acquisition pipeline 11 www.intertek.com
Slide 12: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2013 Half Year Results Presentation 12 www.intertek.com
Slide 13: Mixed Market Conditions
Mixed Market Conditions Market Weakness Market Strength • Minerals • China • Europe, particularly Chemicals • Technical Inspection Services and Electrical • Cargo and Analytical (US) One off issues • Softlines (Asia) • Health & Safety Training (US) • Electric Vehicles Restructuring Investment 13 www
Slide 14: Minerals H1 Decline
Minerals H1 Decline Gold US$ Iron 160 US$ 1,700 150 140 1,600 130 120 1,500 110 Jan 31/12/12 Mar 28/02/13 30/04/13 Jun 30/06/13 US$ Nickel 19,000 1,400 18,000 17,000 1,300 16,000 15,000 14,000 1,200 Jan 31/12/12 Mar 28/02/13 30/04/13 Jun 30/06/13 13,000 Jan 31/12/12 Mar 28/02/13 30/04/13 Jun 30/06/1
Slide 15: Divisional Mix – H1
Divisional Mix – H1 % of Group % of Group H1 Revenue H1 Profit Industry & Assurance Chemicals 33% 24% & Pharma Commodities 27% 19% Commercial Industry & & Electrical Assurance Consumer Goods 17% 37% Consumer Goods Commercial & 16% 16% Electrical Commodities Chemicals & Pharma 7% 4% 15 www.intertek.c
Slide 16: Industry & Assurance
Industry & Assurance H1 13 Performance Outlook £m @ constant Organic exchange H1 13 Change change Technical Inspection: Revenue 356.4 10.4% 8.5% • Conventional energy sector strong, alternative slowing Operating profit 38.1 11.7% 7.7% • Increasing the opex part, NDT Margin 10.7% 10bps (10)bps Food:
Slide 17: Commodities
Commodities H1 13 Performance Outlook £m @ constant Organic exchange H1 13 Change change • Expand services, labs and Revenue 295.4 5.0% 3.8% locations in key US areas for shale oil and gas Operating profit 30.7 (11.5)% (13.9)% • Additives, blending and other Margin 10.4% (190)bps (210)bps value-add
Slide 18: Consumer Goods
Consumer Goods H1 13 Performance Outlook £m @ constant Organic exchange H1 13 Change change • Acquisition of E-TEST in Brazil Revenue 184.0 9.1% 8.6% provides global network for Toy testing Operating profit 58.0 9.0% 8.1% • Continued benefit of EU Toy Safety Margin 31.5% (10)bps (20)bps Directive an
Slide 19: Commercial & Electrical
Commercial & Electrical H1 13 Performance Outlook £m @ constant Organic exchange H1 13 Change change • Good growth in Telecoms (LTE) via Revenue 168.0 3.9% 3.9% network carriers in new markets Operating profit 25.3 (6.3)% (6.3)% • Steady growth from North America Margin 15.1% (160)bps (160)bps • New
Slide 20: Chemicals & Pharma
Chemicals & Pharma H1 13 Performance Outlook £m @ constant Organic exchange H1 13 Change change • Chemical and some Pharma Revenue 80.9 9.3% 5.6% Consultancy Services in Europe continue to be weak Operating profit 6.2 (7.5)% (15.9)% • Benefits of new cosmetics directive Margin 7.7% (140)bps (190)bps
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: China Strength
China Strength • Over 8,000 people • 100 labs and offices • Early mover advantage – from 1989 • 35 cities • All industries present • Local leadership teams • Export → Import → Domestic • Investment led growth shifting to consumption based growth • Middle class demanding Quality and Safety 2004 2013
Slide 23: Other Regional Growth Drivers
Other Regional Growth Drivers MIDDLE EAST INDIA SUBCONTINENT >50% >20% AFRICA 3% 2% >40% LATIN AMERICA 3% >20% 5% KEY Intertek x% 2007-2012 CAGR revenue growth 2012 Revenue x% % of Group www.intertek.com
Slide 24: Outlook
Outlook • Long term Quality and Safety drivers unchanged and fuelling growth • China and North America will have greatest positive impact on growth • Additional strong growth coming from several emerging markets • Acquisitions expected to ramp up • Margin progression will resume in 2014 24 www.inter
Slide 25: Resilient Growth Platform
Resilient Growth Platform RETAIL & COMMODITIES MANUFACTURED & MATERIALS PRODUCTS GLOBAL TRADE MARKET DRIVERS QUALITY NETWORK & SERVICE OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION INDUSTRY ASSETS 25 www.intertek.com
Slide 26: Appendix
Appendix 2013 Half Year Results Presentation 26 www.intertek.com
Slide 27: Restructuring Programme
Restructuring Programme • £22m restructuring programme announced with 2012 results, European focus • £14m charged in 2012, a further £4m charged in H1 2013 • Progress • Two business disposals • Nine business closures completed, six planned • Lost revenue of £2m in first half, £5m second half • Savin
Slide 28: Taxation
Taxation £m @ actual exchange rates H1 2013 H1 2012 Profit before tax 127.9 122.1 Tax (32.5) (33.1) Profit after tax 95.4 89.0 Reported tax rate 25.4% 27.1% Effective tax rate 25.0% 27.7% on adjusted operating profit 28 www.intertek.com
Slide 29: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates H1 2013 H1 2012 Operating Profit before changes in working 195.4 186.1 capital and provisions Changes in working capital: Inventory (2.1) (1.3) Debtors and prepayments (61.4) (65.8) Creditors and accruals (12.7) (5.9) Cash generated from operations 119.
Slide 30: Free Cash Flow
Free Cash Flow £m @ actual exchange rates H1 2013 H1 2012 Cash generated from operations 119.2 113.1 Net interest (12.1) (10.6) Taxation (37.7) (35.2) Net capital expenditure (60.0) (44.9) Free cash flow 9.4 22.4 30 www.intertek.com
Slide 31: Net Debt
Net Debt £m @ actual exchange rates H1 2013 H1 2012 Borrowings 757.3 778.7 Cash (123.8) (160.2) Net debt 633.5 618.5 Net debt to EBITDA 1.5x 1.6x 31 www.intertek.com
Slide 32: Liquidity Position at June 2013
Liquidity Position at 30 June 2013 £m @ actual exchange rates H1 2013 H1 2012 Debt facilities 976.0 925.0 Borrowings (757.3) (778.7) Undrawn committed borrowing facilities 218.7 146.3 Cash 123.8 160.2 Liquid funds 342.5 306.5 32 www.intertek.com
Slide 33: Currency Analysis
Currency Analysis Revenue By Currency Local currency H1 2013 H1 2012 FY 2012 to GBP USD 2.6% 1.54 1.58 1.59 CNY 3.5% 9.62 9.96 10.01 Other ~ 30% USD, CNY EUR 2.5% 1.18 1.21 1.23 & HKD ~ 52% HKD 2.7% 11.94 12.26 12.31 GBP & EUR AUD 0.7% 1.52 1.53 1.53 ~ 18% CAD 1.3% 1.57 1.59 1.59 33 www.intertek.com
Slide 34: Divisional Performance Summary
Divisional Performance Summary H1 2013 Revenue Margin Organic Organic £m @ constant exchange H1 13 Change change H1 13 Change change Industry & Assurance 356.4 10.4% 8.5% 10.7% 10bps (10)bps Commodities 295.4 5.0% 3.8% 10.4% (190)bps (210)bps Consumer Goods 184.0 9.1% 8.6% 31.5% (10)bps (20)bps Comm