Slide 1: Intertek expands its global Assurance business with the acquisition of Alchemy
INTERTEK EXPANDS ITS GLOBAL ASSURANCE BUSINESS WITH THE ACQUISITION OF ALCHEMY A LEADING PROVIDER OF SAAS-BASED PEOPLE ASSURANCE SOLUTIONS 3 August 2018
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
Slide 3: Alchemy is a leading technology enabled people assurance solution
ALCHEMY IS A LEADING TECHNOLOGY ENABLED PEOPLE ASSURANCE SOLUTION “With the acquisition of Alchemy, we are continuing to strengthen our TQA value proposition with the expansion of our global Assurance business into People Assurance, helping our clients operate with a higher level of quality assuranc
Slide 4: Attractive assurance growth opportunities
ATTRACTIVE ASSURANCE GROWTH OPPORTUNITIES ALCHEMY FINANCIAL HIGHLIGHTS • Founded in 2003 • Transaction consideration: US$480m • Headquartered in Austin, Texas • 2018E Billings of US$66m and 2018E adjusted Billings EBITDA of US$22m • Employs c.270 people at four locations across the U.S. and Canada •
Slide 5: A strong top management team joining Intertek
A STRONG TOP MANAGEMENT TEAM JOINING INTERTEK 5
Slide 6: Agenda
AGENDA 1 ALCHEMY OVERVIEW 2 MARKET GROWTH OPPORTUNITY 3 STRATEGIC AND FINANCIAL CONSIDERATIONS 4 CONCLUSION 5 Q&A 6
Slide 7: Alchemy overview
1 ALCHEMY OVERVIEW
Slide 8: Alchemy solutions help assess, monitor and improve employee skills
ALCHEMY SOLUTIONS HELP ASSESS, MONITOR AND IMPROVE EMPLOYEE SKILLS 1 Alchemy provides people assurance solutions at the front end of the food supply chain 2 Combines innovative technology and proprietary, industry focused, content 3 Business model that is complementary to Intertek as it brings a new
Slide 9: Focus on Safety & Compliance
FOCUS ON SAFETY & COMPLIANCE SAFETY & COMPLIANCE BUSINESS UNIT OVERVIEW • Market Leader: The leading platform for frontline workers Alchemy’s solutions are unique and enhance existing systems due to: • Efficient solutions that allow for rapid group-based training, minimizing • Regulatory Compliance
Slide 10: Focus on Operations & Engagement
FOCUS ON OPERATIONS & ENGAGEMENT BUSINESS UNIT OVERVIEW – ONTRACK & WISETAIL HOW CUSTOMERS USE ALCHEMY’S O&E SOLUTIONS • Holistic Solution: Content based on operating skills Operations- Ontrack Engagement- Wisetail audit/diagnosis, training, communication, performance • The platform includes: • Cust
Slide 11: A blue chip customer base with recurring, subscription based revenue model
A BLUE CHIP CUSTOMER BASE WITH RECURRING, SUBSCRIPTION BASED REVENUE MODEL • Diversified range of clients throughout the entire food supply chain: BLUE CHIP • Upstream/Midstream: Growers, manufacturers and distributors 1 CUSTOMER • Downstream: Consumer and retail PORTFOLIO… • c.1,100 customer accoun
Slide 12: Depth and breadth of content library covering over 400 courses
DEPTH AND BREADTH OF CONTENT LIBRARY COVERING OVER 400 COURSES TRAINING CONTENT TRAINING DASHBOARD AND REPORTING • SaaS offering includes an innovative LMS and access to 400+ proprietary courses, Training by topic (Food Safety, Workplace Safety, etc.) to High level indicators – training passed, • Wi
Slide 13: Alchemy's value proposition addresses the front end of supply chain
ALCHEMY'S VALUE PROPOSITION ADDRESSES THE FRONT END OF SUPPLY OFFICE WORKER CHARACTERISTICS • Limited direct impact on safety, quality, yield and productivity • Low risk environment • English fluent • Computer skills • Low turnover FRONTLINE WORKER CHARACTERISTICS ALCHEMY SOLUTIONS High Direct Impac
Slide 14: Market growth opportunity
2 MARKET GROWTH OPPORTUNITY
Slide 15: Alchemy: excellent assurance growth opportunities ahead
ALCHEMY EXCELLENT ASSURANCE GROWTH OPPORTUNITIES AHEAD • People Assurance is mission critical at the front end of the supply chain across all industries where skills gaps can lead to significant health & safety and related financial risk • Food quality and safety a high growth market with increasing
Slide 16: The quality assurance industry is evolving further
THE QUALITY ASSURANCE INDUSTRY IS EVOLVING FURTHER CUSTOMERS EXPECT MORE THAN TIC(1) TO MANAGE THE RISK IN THEIR COMPLEX SOURCING AND DISTRIBUTION OPERATIONS Assurance ensures our customers identify A and mitigate the intrinsic risk in their operations, supply chain and quality management systems Te
Slide 17: Assurance is the fastest growing service at Intertek
ASSURANCE IS THE FASTEST GROWING SERVICE AT INTERTEK REFLECTING THE INCREASED FOCUS OF CORPORATIONS ON RISK £2,769m 14% £2,166m 2015-17 CAGR Revenues 10% growth % pa % 54% Group +28% +13% 52% Assurance +79% +34% 30% 24% 8% 8% FY 15 FY 17 = + + + Intertek TQA Assurance Testing Inspection Certificatio
Slide 18: Alchemy expands Intertek's value proposition with people assurance
ALCHEMY EXPANDS INTERTEK’S VALUE PROPOSITION WITH THE ADDITION OF PEOPLE ASSURANCE T I C T I C A STANDARD PRODUCT OR SERVICE SKILLS AND EQUIPMENT AND 4 1 2 3 OPERATING OUTPUT OF INTERTEK BEHAVIOUR ASSETS T PROCEDURES CUSTOMERS People I ASSURANCE Operating Systems ASSURANCE C A A SUPERIOR END-TO-END
Slide 19: Strong growth drivers in the food supply chain
STRONG GROWTH DRIVERS IN THE FOOD SUPPLY CHAIN Trends in the food supply chain are driving significant demand for assurance and operations improvement solutions % of Consumers Rating Health Attributes as Very Important in Food Purchases(1) • Focus on food safety, authenticity, transparency, fresh fo
Slide 20: Opportunities for significant further food market penetration
OPPORTUNITIES FOR SIGNIFICANT FURTHER FOOD MARKET PENETRATION US Food & Beverage Manufacturing/Processing US Quick Service Restaurants • c.25,000 companies in food & beverage processing • c.900 companies Brands Outlets/ • Over 30,000 plants • Over 270,000 restaurants Sites • Employing over 1.5 milli
Slide 21: Scalable platform: new services, new industries, new markets
SCALABLE PLATFORM: NEW SERVICES, NEW INDUSTRIES, NEW MARKETS SERVICES INDUSTRIES GEOGRAPHIES Professional Job Equipment Franchises Non-Food France UK Germany Training Training Manufacturing Supervisor Training Entertainment & Leisure Brazil Chile Today Today Today • Workers Skills Audit & Training F
Slide 22: Strategic & financial considerations
3 STRATEGIC & FINANCIAL CONSIDERATIONS
Slide 23: Acquisition of scalable leading SaaS people assurance platform in line with M&A strategy
ACQUISITION OF SCALABLE LEADING SAAS PEOPLE ASSURANCE PLATFORM 43,000+ 100+ employees countries Global Market Global Market Leader in Leader in TIC Assurance 3,000 1,000+ auditors labs and offices 100,000+ 80+ audits languages IN LINE WITH OUR M&A STRATEGY FOCUSED ON ACQUISITION OF LEADING AND INNOV
Slide 24: Intertek + Alchemy: strategic fit
STRATEGIC FIT WITH INTERTEK ALCHEMY CHARACTERISTICS BENEFITS TO INTERTEK Presence in growing and highly • Food quality and safety is a high growth market with increasing regulation and end regulated end market customer quality expectations Blue chip client base • Strengthen QSR food / retail markets
Slide 25: Significant opportunities for revenue growth
SIGNIFICANT OPPORTUNITIES FOR REVENUE GROWTH • Further penetrate North American food market with existing services 1 MARKET PENETRATION • Leverage Intertek customers in North America 2 ADD ADDITIONAL SERVICES • Create additional digital solutions to the platforms/product enhancements • Leverage Inte
Slide 26: Attractive business model: high growth, high margin, capital light and scalable
ATTRACTIVE BUSINESS MODEL HIGH GROWTH, HIGH MARGIN, CAPITAL LIGHT AND SCALABLE STRONG BILLINGS MOMENTUM FY2018 Billings c.$66m FY16-18 CAGR 17% Good Billings visibility with typically 1-3 year contracts HIGHLY CASH GENERATIVE AND ATTRACTIVE MARGIN CAPITAL LIGHT 2018 Billings EBITDA* margin c.30% Str
Slide 27: A value accretive transaction
A VALUE ACCRETIVE TRANSACTION • $480m on cash and debt free basis • Represents 7.2x 2018E Billings DEAL METRICS • Valuation compares favourably with comparable companies that are trading on median 2018 EV/Revenue of 9.3x with an average expected 2018-19 growth rate of 20%** DELIVERING • High growth,
Slide 28: Attractive revenue, margin, cash opportunities
ATTRACTIVE REVENUE, MARGIN, CASH OPPORTUNITIES 5 YEAR GUIDANCE Billings / Revenue High growth of c.20% p.a. IFRS EBITDA margin >30% by year 5 IFRS EBIT margin >25% by year 5 Working capital Negative Capex Low intensity of < 5% Billings Free Cash Flow Strong cash conversion Tax c.25% EPS Billings EPS
Slide 29: Illustrative IFRS adjustments
ILLUSTRATIVE IFRS ADJUSTMENTS ILLUSTRATIVE £100M EXAMPLE BILLINGS BASIS IFRS BASIS IFRS BASIS PLUS FAIR VALUE ADJUSTMENT Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 £’m Billings 100 115 132 152 175 Revenue 94 110 127 146 168 Revenue 79 105
Slide 30: Conclusion
4 CONCLUSION
Slide 31: High quality business with strong growth opportunities
HIGH QUALITY BUSINESS WITH STRONG GROWTH OPPORTUNITIES ALCHEMY OVERVIEW COMMERCIAL SYNERGIES • Founded in 2003, headquartered in Austin Texas, employs c.270 • Opportunity to expand our global Assurance business into the highly people at four locations across the U.S. and Canada. Delivers attractive
Slide 32: Intertek: Total Quality. Assured.
intertek Total Quality. Assured.