Slide 1: 2015 Half Year Results Presentation
2015 Half Year Results Presentation 3 AUGUST 2015 André Lacroix Edward Leigh Chief Executive Officer Chief Financial Officer 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 André Lacroix | Chief Executive 02 Financial results Edward Leigh | Finance Director 03 Business update André Lacroix | Chief Executive 3 www.intertek.com
Slide 4: Performance Highlights
André Lacroix Chief Executive Performance Highlights 2015 Half Year Results Presentation www.intertek.com
Slide 5: Improved performance
Improved performance Total revenue up 3.5% at actual rates, up 1.4% at constant currency Organic revenue up 0.9% at constant currency, up 170bps sequentially Operating Profit1 up 7.9% at actual rates, up 3.4% at constant currency Operating Margin1 15.5%, up 30bps at constant currency Dilut
Slide 6: Good growth in Products & Trade divisions
Good growth in Products & Trade divisions Organic revenue growth1 Revenue growth1 1,090 12 (26) Group 1,080 +0.9% reported 3 1,070 10 1,055 5 1,060 11 £m 1,055 1,050 Group ex Industry 1,046 +2.5% 1,040 1,060 contract exits 1,030 1,020 H1 2014 Consumer Goods Commerical & Chems & Pharma Commodities As
Slide 7: Improved momentum in Products and Trade divisions
Improved momentum in Products and Trade divisions Organic revenue growth1 5% 4.1% 4% 2.8% 3% 2.5% 2.2% 2% 2.4% 1% 0.9% 0% -1% (0.5%) (0.8%) -2% H2 13 H1 14 H2 14 H1 15 Group Group Ex Industry Services 7 1. At constant exchange rates www.intertek.com
Slide 8: Well diversified portfolio
Well diversified portfolio H1 Revenue 20151 H1 Operating Profit 20151 15% 19% 29% 38% 18% 23% 26% 8% 6% 18% Consumer Goods Commerical & Electrical Chems & Pharma Commodities Industry & Assurance 8 1. Revenue & Adjusted Operating Profit at constant exchange rates www.intertek.com
Slide 9: Margin discipline
Margin discipline Group margin Divisional margin +30bps1 increase in operating margin Variance to H1’15 H1’14 Consumer Goods 32.0% 0bps Cost discipline Commerical & Electrical 15.3% 0bps H1 organic cost flat Chems & Pharma 11.5% 280bps Restructuring on track for FY +20bps contribution to Group
Slide 10: Sustained growth in cash and dividend
Sustained growth in cash and dividend Free cash flow Cash conversion Dividend 100 100% 20 17.0 78.8 79% 16.0 80 80% 15.0 15 64% 13.0 £m 60 60% 10.7 51% (pence) 47.1 48% 10 40% 40 40% 22.4 17.3 5 20 20% 9.4 0 0% 0 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2011 2012 2013 2014 2015 2011 2012 2013 20
Slide 11: Financial results
Edward Leigh Chief Financial Officer Financial results 2015 Half Year Results Presentation www.intertek.com
Slide 12: Key Financials
Key Financials YoY % Actual Constant Constant 2015 Rates Rates Organic2 Revenue £1,060m 3.5% 1.4% 0.9% - excluding low-value contract exits 2.5% Operating profit1 £164m 7.9% 3.4% 3.0% Operating profit margin1 15.5% 60bps 30bps 40bps Adjusted Diluted EPS1 65.3p 6.7% Adjusted cash generated from £170m
Slide 13: Operating Margin bridge
% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 13 H1 2014 14.9% Consumer Goods 0bps Commercial & Electrical 0bps Chems & Pharma 20bps Commodities Operating Margin bridge Industry & Assurance 80bps (80)bps 40bps at organic constant rates Divisional mix 20bps Excluding FX and Acqns & Disposals 15.3% Acquisitio
Slide 14: H1 2015 performance: Products
H1 2015 performance Products Organic Change at Change at change at £m H1 15 actual constant constant Consumer Goods Revenue 196.2 11.4% 5.7% 5.7% Operating Profit 62.8 12.9% 5.5% 5.5% Margin 32.0% 40bps 0bps 0bps Organic Change at Change at change at £m H1 15 actual constant constant Commercial & El
Slide 15: H1 2015 performance: Commodities and Industry & Assurance
H1 2015 performance Commodities and Industry & Assurance Organic Change at Change at change at £m H1 15 actual constant constant Commodities Revenue 277.2 5.5% 4.4% 4.6% Operating Profit 36.8 37.3% 33.3% 32.3% Margin 13.3% 310bps 290bps 280bps Organic Change at Change at change at Industry & £m H1 1
Slide 16: Currency analysis: Revenue
Currency analysis: Revenue Local currency to GBP H1 15 H1 14 USD 8.4% 1.53 1.67 ~25% CNY 7.0% 9.53 10.25 EUR 12.3% 1.37 1.22 HKD 8.3% 11.87 12.94 ~5% ~60% AUD 6.6% 1.95 1.83 ~10% CAD 3.3% 1.89 1.83 BRE 17.4% 4.51 3.84 INR 5.4% 96.19 101.70 USD, CNY & HKD GBP Group 2.1% EUR Other GBP Depreciated GBP
Slide 17: Cash flow, tax and investment
Cash flow, tax and investment £m @ actual exchange rates H1 2015 H1 2014 Cash Flow Adjusted operating profit(1) 164.4 152.3 Depreciation/amortisation +3% 41.6 37.3 • Free cash flow up 67.3% Working capital (43.3) (46.6) • Net capex £42.0m; 4.0% of Net capex (42.0) (52.0) revenue Other** (41.9) (43.9
Slide 18: Financial guidance
Financial guidance FY2015 guidance Interest charge £27-29m Effective tax rate 24.5-25.5% Minority interest £14-15m Diluted shares (as at 30 June 2015) 161.8m Capex £90-100m Net Debt £580-£600m 18 Based on adjusted results, management estimates and FX rates as at 30 June 2015. www.intertek.com
Slide 19: Business update
André Lacroix Chief Executive Business update 2015 Half Year Results Presentation www.intertek.com
Slide 20: Initial impressions
Initial impressions A growth company in a growth market, organically and by acquisition Essential quality assurance for customers Strong market positions and attractive portfolio A high-margin, strongly cash generative financial model Highly skilled and entrepreneurial people, depth and br
Slide 21: Structural organic growth drivers
Structural organic growth drivers Group Operating Profit1 Products 67% CG, C&E and C&P Food & Business Assurance Mid-long term 51% of Group revenue TIC organic revenue growth Trade 23% Cargo & Analytical ‘Global Government Services & Agri GDP Plus’ 25% of Group revenue Resources 10% Industry Service
Slide 22: Structural organic growth drivers
Structural organic growth drivers Group Operating Mid-Long term TIC Profit 1 Structural Growth Drivers organic revenue growth Quality solutions for end-products, their components, processes and R&D Continuing growth from Product variety, brand and supply chain expansion, innovation and regulatio
Slide 23: Resources: Insight from 2008-09
Resources: Insight from 2008-09 OIL PRICE TIS (OIL & GAS INFRASTRUCTURE) TIS Peak ORGANIC REVENUE Oil Price Peak 140 110 TIS Oil Price 100 TIS Organic Revenue – indexed to 100 120 Trough Trough 90 100 Brent Oil Price – $/bbl 80 80 70 60 60 50 5 Quarters 40 3 Quarters 40 20 30 0 20 Q2 '08 Q3 '08 Q4 '
Slide 24: Group Outlook
Group Outlook 2015 2015 Mid-long term FY organic revenue growth rate Continuing growth from expanding improved on prior year quality demands, regulation and innovation in Products − Continuing good growth in products-related and trade-related Trade flow growth from global and divisions regiona
Slide 25: Consumer Goods: Good growth with stable margin
Consumer Goods Good growth with stable margin H1 Trading H2 Outlook & Strategic Highlights 5.7% Organic Revenue Growth Continued good growth expected in H2 32.0% Margin Continuous network investment, aligning to customers global supply chain trends Softlines: strong growth in New labs in Sou
Slide 26: Commercial & Electrical: Good growth with stable margin
Commercial & Electrical Good growth with stable margin H1 Trading H2 Outlook & Strategic Highlights 5.4% Organic Revenue Growth Continuation of H1 growth trend 15.3% Margin Continued brand investment in quality, performance testing for high growth areas eg Electrical & Wireless: Strong IoT gro
Slide 27: Chemicals & Pharma: Margin accretive growth
Chemicals & Pharma Margin accretive growth H1 Trading H2 Outlook & Strategic Highlights 3.2% Organic Revenue Growth Good growth expected in line with H1 11.5% Margin, up 280bps performance Leading positions in helping clients to develop Health & Beauty expanding in innovative new formulations
Slide 28: Commodities: Margin accretive growth
Commodities Margin accretive growth H1 Trading H2 Outlook & Strategic Highlights 4.6% Organic Revenue Growth Continuous good growth in H2 13.3% Margin, up 290bps Measuring the quality of commodities being explored, produced and traded. Help clients Solid growth driven by global and protect the
Slide 29: Industry & Assurance: Mixed performance
Industry & Assurance Mixed performance H1 Trading H2 Outlook & Strategic Highlights Organic Revenue (8.2)% Continuing good growth in BA, Food and Agri; 8.2% Margin, (300)bps Oil & gas capex to remain challenging Margin self-help with cost discipline Continuing strong growth in BA, Diversifyi
Slide 30: Performance management priorities
Performance management priorities Engaged and empowered organisation driven by a 01 common purpose Outstanding client relationships, based on operational 02 excellence and superior customer service Financial discipline to deliver margin accretive growth 03 with good cost and cash controls M&A to str
Slide 31: Capital allocation priorities
Capital allocation priorities 01 Investing for organic growth: capex and working capital Sustainable returns to shareholders: Progressive 02 dividend policy with circa 40% pay-out ratio 03 M&A in growing sectors with good margin prospects 04 Efficient balance sheet 31 www.intertek.com
Slide 32: Summary
Summary A growth company in a growth market, organically and by acquisition High margin, strongly cash generative financial model Highly skilled and passionate organisation, strong customer relationships, deep local understanding Well-positioned to deliver sustainable returns to shareholders
Slide 33: Half Year Results Presentation
2015 Half Year Results Presentation 3 AUGUST 2015 André Lacroix Edward Leigh Chief Executive Officer Chief Financial Officer www.intertek.com
Slide 34: Appendix
Appendix 2015 Half Year Results Presentation www.intertek.com
Slide 35: Separately disclosed items
Separately disclosed items £m @ actual exchange rates H1 2015 H1 2014 Adjusted operating profit(1) 164.4 152.3 Separately disclosed items: Amortisation of acquisition intangibles (10.5) (10.3) Acquisition and disposal costs (0.2) (1.1) Restructuring costs - (9.7) Separately disclosed items sub-total
Slide 36: Adjusted EPS
Adjusted EPS £m @ actual exchange rates H1 2015 H1 2014 Adjusted operating profit 164.4 152.3 7.9% Net interest expense (14.6) (11.4) Profit before tax 149.8 140.9 Tax 24.7% (24.5%) (37.0) (34.5) Profit after tax 112.8 106.4 Non-controlling interest (7.2) (6.8) Net Profit 105.6 99.6 Fully diluted sh
Slide 37: Divisional Performance Summary
Divisional Performance Summary H1 2015 Revenue Margin £m @ constant Organic Organic exchange rates H1 15 Change change H1 15 Change change Consumer Goods 196.2 5.7% 5.7% 32.0% 0bps 0bps Commercial & Electrical 194.6 5.4% 5.4% 15.3% 0bps 0bps Chemicals & Pharma 87.5 3.2% 3.2% 11.5% 280bps 280bps Comm