Slide 1: 2016 Half Year Results Presentation
2016 Half Year Results Presentation Double Digit Revenue and Earnings Growth 1 August 2016 www.intertek.com
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
Agenda 01 Performance Highlights 02 Financial Results 03 Business Update www.intertek.com
Slide 4: Performance Highlights
Performance Highlights André Lacroix Chief Executive Officer
Slide 5: Double digit revenue and earnings growth
Double digit revenue and earnings growth Revenue Organic Revenue Revenue from Acquisitions £1,204m £113m £1,058m £1,091m £1,060m £13m H1 15 H1 16 H1 15 H1 16 H1 15 H1 16 +13.6% +3.1% +£100m +10.6% CCR +0.5% CCR Adjusted Operating Profit Adjusted EPS Interim Dividend £186m 74.5p 19.4p £164m 65.3p 17.
Slide 6: Portfolio shift towards attractive growth and margin opportunities
Portfolio shift towards attractive growth and margin opportunities H1 15 H1 16 Products 25% 21% Trade Resources Revenue 50% 56% 23% 25% 11% 8% 20% Adjusted 22% Operating Profit 67% 72% H1 Products profit grew by 22% 6
Slide 7: Continuous cost and margin discipline
Continuous cost and margin discipline Organic operating margin improvement1 +60bps +40bps +20bps H1 14 H1 15 H1 16 Cost reduction activities Productivity management Continuous margin discipline Headcount Savings2 • Monthly performance reviews for Top • Portfolio review 30 countries/16 Business Lines
Slide 8: Financial results
Financial results Edward Leigh Chief Financial Officer www.intertek.com 8
Slide 9: Double digit revenue, profit and EPS growth
Double digit revenue, profit and EPS growth YoY % Actual Constant H1 16 Rates Rates Revenue £1,204m 13.6% 10.6% Organic revenue1 £1,091m 3.1% 0.5% Operating profit2 £186m 13.1% 11.3% Operating profit margin2 15.4% (10)bps 10bps Adjusted Diluted EPS2 74.5p 14.1% 11.4% Note: (1) Organic revenue growth
Slide 10: H1 2016 Divisional Performance
H1 2016 Divisional Performance Change at Change at £m H1 16 actual constant Revenue 677.9 27.5% 22.3% Products Organic revenue1 585.2 10.1% 5.6% Operating profit2 133.6 21.6% 18.0% Margin 19.7% (100)bps (70)bps Change at Change at £m H1 16 actual constant Revenue 272.5 1.9% 1.1% Trade Organic revenu
Slide 11: Operating Margin Bridge
Operating Margin Bridge 40bps (50)bps 16% 30bps 0bps (10)bps (20)bps 16.1% 15.5% 15.4% 15% 14% 60bps at organic constant rates 15.4% 13% 12% 11% Products Trade Resources Divisional mix Acquisitions & Disposals Acquisitions & Disposals H1 2015 H1 2016 FX Excluding FX and 11
Slide 12: Cash flow
Cash flow £m @ actual exchange rates H1 16 H1 15 Adjusted operating profit1 185.9 164.4 Depreciation/amortisation +3%42.4 41.6 • Working capital down 5% YoY Working capital (76.7) (40.5) @ CCR, excl. PSI Other2 4.3 4.0 Adjusted cash flow from operations 155.9 169.5 Net capex (47.6) (42.0) • Investme
Slide 13: Financial guidance
Financial guidance FY 2016 Guidance Net finance cost c.£30m Minority interest £15-16m Capex £110-120m1 Net Debt £770-820m2 Effective tax rate 25-26% Diluted shares (as at 30 June 2016) 162.5m Note: (1) Before any material change in FX rates; (2) Before any material change in FX rates and any additio
Slide 14: Business update
Business update André Lacroix Chief Executive Officer
Slide 15: Attractive Growth Opportunities
Attractive Growth Opportunities Quality Assurance market worth c.$250bn 01 Structural Growth Drivers 02 Existing Customers • Continued growth in Testing, • Increase account penetration Inspection and Certification • Assurance, Testing, Inspection and • Increased demand for Assurance Certification cr
Slide 16: Corporate Medium to Long Term Goals
Corporate Medium to Long Term Goals Fully engaged employees in a safe 01 working environment 02 Deliver superior customer service Margin accretive organic revenue growth 03 based on GDP + organic growth 04 Strong cash conversion from operations Accretive disciplined capital allocation policy 05 for
Slide 17: 5x5 Strategy for Growth
5x5 Strategy for Growth Purpose Bringing Quality and Safety to Life Vision The world’s most trusted partner for Quality Assurance Customer Our Innovative Assurance, Testing, Inspection and Certification solutions delivered Promise 24/7 with precision, pace and passion enabling you to power ahead saf
Slide 18: Intertek Total Quality Assurance Value Proposition
Intertek Total Quality Assurance Value Proposition Research and Development Consumer Raw Materials Management Sourcing Intertek Total Quality Assurance (Assurance, Testing, Inspection and Distribution Certification) Component and Retail Suppliers Channels Transportation Manufacturing Systemic Approa
Slide 19: 5 Strategic Priorities
5 Strategic Priorities Strategic Priorities Action Plans KPIs Position Intertek as leading Quality Assurance provider Revenue growth Improve brand awareness across sectors and geographies New leads Strong Brand 01 Customer acquisitions Proposition Compelling Total Quality Assurance Brand
Slide 20: 5 Enablers
5 Enablers Enablers Action Plans KPIs Strong entrepreneurial culture Revenue and profit Living Our Decentralised organisation growth 01 Customer NPS Customer centric culture Organisation engagement Centric Culture Employee turnover Performance management with financial and EBIT mar
Slide 21: Disciplined Allocation of Capital
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 03 M&A focused on strong growth and margin prospects in businesses with leading market pos
Slide 22: Structural organic growth drivers
Structural organic growth drivers Mid-Long Term Profit Mix1 Economic Sectors Structural Growth Drivers Growth Products Quality solutions for end-products, their components, processes and R&D Softlines, Hardlines, Electrical & Wireless, Product variety, brand and supply chain Continuing growth Bu
Slide 23: Brexit update
Brexit update • We had prepared ourselves for a Brexit scenario − we do not believe that Brexit will impact the future growth opportunities of Intertek • Corporations will continue to invest in quality and safety improvements − the fundamental strengths of our business model remain unchanged in a Wo
Slide 24: Group Outlook in 2016
Group Outlook in 2016 Robust constant currency performance • Solid organic growth momentum Continued robust growth in product related businesses Solid growth in Trade related activities Resource businesses will remain challenging • Benefits from acquisitions • Broadly stable margin • Capex £11
Slide 25: Products – Excellent revenue performance up 28% YoY
Products – Excellent revenue performance up 28% YoY H1 Trading H2 Outlook Continued robust organic 5.6%organic growth revenue 1 19.7% operating margin growth expected in H2 2016 • Softlines delivered robust growth from supply chain expansion • Softlines: Supply chain inspection in Vietnam, Cambodia
Slide 26: Trade – Solid revenue performance
Trade – Solid revenue performance H1 Trading H2 Outlook Solid growth expected 1.1% organic growth revenue 1 13.6% operating margin in H2 2016 • Cargo/AA delivered solid growth benefiting from Cargo/AA: New lab openings in Australia, PNG, Texas; structural growth drivers Increased shipment of refined
Slide 27: Resources – Challenging industry conditions
Resources – Challenging industry conditions H1 Trading H2 Outlook Challenging trading conditions (11.0)% organic growth revenue 1 6.0% operating margin expected in H2 2016 • Capex inspection services were impacted by lower • Capex inspection services: Focus on cost and capacity investment and reduce
Slide 28: Strategic expansion in US growth markets with PSI
Strategic expansion in US growth markets with PSI • Integration plans on track • Good revenue momentum • Cost synergies year 1 delivered • Operating margin up • Strong pipeline of activity for H2 − Significant wins in large projects − Attractive growth opportunities Recent Large PSI Project Wins I77
Slide 29: Conclusion
Conclusion • Double digit revenue and earnings growth • Strong cash generation and disciplined capital allocation • Attractive growth prospects • High quality earnings model • Strong balance sheet 29
Slide 30: Appendix
Appendix 2016 Half Year Results Presentation www.intertek.com 30
Slide 31: H1 2016 Performance
H1 2016 Performance Revenue1 (£m) Adjusted Operating Profit1 (£m) Growth Growth 1,204 13.6% 186 13.1% 1,060 164 678 27.5% 21.6% 532 134 110 267 273 1.9% 0.3% 37 37 261 254 (2.9)% (13.1)% 18 15 H1 15 H1 16 H1 15 H1 16 Margin Key Metrics H1 152 H1 16 % Group % Group Organic Revenue Profit Revenue Grow
Slide 32: 2015 Performance
2015 Performance Revenue1 (£m) Adjusted Operating Profit1 (£m) Growth Growth 2,093 2,166 3.5% 5.9% 324 343 1,008 1,111 10.2% 208 234 12.5% 514 537 4.4% 65 15.9% 76 572 519 (9.2)% (33.9)% 51 34 2014 2015 2014 2015 Resources Trade Products Resources Trade Products Margin Key Metrics 20142 2015 % Group
Slide 33: Adjusted EPS
Adjusted EPS £m @ actual exchange rates H1 16 H1 15 Adjusted operating profit 185.9 164.4 13.1% Net interest expense (13.4) (14.6) Profit before tax 172.5 149.8 Tax 25.3% (24.7%) (43.6) (37.0) Profit after tax 128.9 112.8 Non-controlling interest (7.9) (7.2) Net Profit 121.0 105.6 Fully diluted shar