Slide 1: Ever Better, Ever Stronger: 2018 Full Year Results Presentation
EVER BETTER, EVER STRONGER 2018 FULL YEAR RESULTS PRESENTATION 5 March 2019
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 2018 Financial Results 03 5x5 Strategy Update 04 2019 Outlook by Division 05 Conclusion
Slide 4: Performance Highlights
01 PERFORMANCE HIGHLIGHTS
Slide 5: 7.7% EPS Growth… 1.6x Revenue Growth
7.7% EPS GROWTH… 1.6X REVENUE GROWTH Revenue (£m) Adjusted Operating Profit (£m) Adjusted Operating Margin 482 17.2% 2,769 2,801 468 16.9% 2,567 410 15.5% 15.9% 16.0% 2,166 324 343 2,093 FY14 FY15 FY16 FY17 FY18 FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY 17 FY 18 14-18 CAGR: 7.6% +1.2% 14-18
Slide 6: Continuous Organic Revenue Growth Acceleration
CONTINUOUS ORGANIC REVENUE GROWTH ACCELERATION Organic growth at constant currency FY18 organic growth by division Organic revenue growth1 (%) 4.0% 10% 3.4% Products: +5.2% 2.5% 77% 1.7% of earnings 17% of Trade: +2.2% earnings Revenue (5%) 6% 10% growth1 (%) Resources: 0.3% H1 17 H2 17 H1 18 H2 18
Slide 7: 17.2% Operating Profit Margin… +40bps YoY, +170bps Since 2014
17.2% OPERATING PROFIT MARGIN… +40BPS YOY, +170 BPS SINCE 2014 Margin improvement1 110bps +40bps +30bps +20bps FY 15 FY 16 FY 17 FY 18 Cost reduction activities Productivity management Portfolio strategy Headcount Savings2 • Monthly performance reviews for Top • Organic growth in Products and Trade
Slide 8: Strong Cash Performance
STRONG CASH PERFORMANCE Adjusted EBITDA Cash Generated from Operations Free Cash Flow £563m £571m £499m £579m £581m £342m £351m £543m £318m £401m £429m £442m £387m £235m £185m FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY17 FY18 FY 14 FY 15 FY 16 FY 17 FY 18 14-18 CAGR: 9.2% 14-18 CAGR: 10.7% 1
Slide 9: M&A in Attractive Growth and Margin Sectors
M&A IN ATTRACTIVE GROWTH AND MARGIN SECTORS A leading provider of SaaS-based People Assurance solutions A leading network security and assurance services provider FY18 A leading provider of quality and quantity cargo inspection services Leading provider of product security certification solutions A
Slide 10: 2018 Financial Results
02 2018 FINANCIAL RESULTS 10
Slide 11: Key Financials
KEY FINANCIALS YoY % Actual Constant FY 18 Rates Rates Revenue £2,801m 1.2% 4.7% Organic revenue1 £2,770m 0.2% 3.7% Operating profit2 £482m 3.0% 6.9% Operating profit margin2 17.2% 30bps 40bps Adjusted Diluted EPS2 198.3p 3.5% 7.7% Free cash flow £351m 2.6% Notes: (1) Organic revenue excludes the im
Slide 12: Operating Margin Bridge
OPERATING MARGIN BRIDGE 18.0% 40bps (20bps) 10bps 10bps (10bps) 0bps 17.0% 17.2% 17.2% 16.9% 16.0% +30bps organic at constant rates 15.0% 14.0% 13.0% FY 2017 FX FY 2018 Products Excluding FX and Acquisitions Resources Trade Divisional mix & Disposals Acquisitions & Disposals 12 Note: Organic exclude
Slide 13: Cash Flow & Net Debt
CASH FLOW & NET DEBT £m @ actual exchange rates FY 17 FY 18 Adjusted operating profit1 467.7 481.8 • 3.0% at actual rates Depreciation/amortisation 94.8 88.7 Change in working capital 19.7 13.1 Other2 16.7 21.3 Cash flow for cash conversion 598.9 604.9 Cash conversion % 128% 126% • 126% cash convers
Slide 14: Financial Guidance
FINANCIAL GUIDANCE FY 2019 Guidance Net finance cost £31 – 33m Effective tax rate 24.5 – 25.5% Minority interest £21 – 23m Diluted shares (as at 31 December 2018) 162.8m Capex £130 – 140m Net Debt £670 – 700m 14 Note: Net debt guidance before any material change in FX rates, any additional M&A and i
Slide 15: 5x5 Strategy Update
03 5X5 STRATEGY UPDATE 15
Slide 16: 5x5 Differentiated Strategy for Growth
5X5 DIFFERENTIATED STRATEGY FOR GROWTH 5x5 Strategic Goals 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in a service in Assurance, growth based on GDP+ from operations capital allocation safe environment Testing, I
Slide 17: The 21st Century Has Created a Truly Global Market
THE 21ST CENTURY HAS CREATED A TRULY GLOBAL MARKET 69% 47% 61% 64% 87% 62% 26% 49% 63% 63% 31% 45% 38% 78% 24% 56% Global trade as a % of global GDP 123% 72% 34% 26% 51% 41% 39% 47% 75% 24% 52% 25% 58% 42% 1960 1980 2000 2017 Demand has become truly global, reflected in global supply Today Global Tr
Slide 18: Corporations Are Increasing Their Focus on Systemic Operational Risk
CORPORATIONS ARE INCREASING THEIR FOCUS ON SYSTEMIC OPERATIONAL RISK SUPPLY PRODUCTION DISTRIBUTION RETAIL TIER 3 TIER 2 TIER 1 3RD PARTY OWNED TRANSPORTATION DISTRIBUTION CENTRES IN-STORE ONLINE CONSUMER Global multi-tier sourcing Global manufacturing Multi-country distribution Multi-channel routes
Slide 19: ATIC Solutions Helping Our Clients Manage Greater Complexity
ATIC SOLUTIONS HELPING OUR CLIENTS MANAGE GREATER COMPLEXITY TIC PROVIDES QUALITY & SAFETY CONTROLS IN HIGH RISK AREAS TIER 3 SUPPLY TIER 2 TIER 1 PRODUCTION 3RD PARTY OWNED DISTRIBUTION TRANSPORTATION DISTRIBUTION CENTRES IN-STORE RETAIL ONLINE CONSUMER A T T I I C C ASSURANCE PROVIDES AN END-TO-EN
Slide 20: Superior Customer Service with Our TQA Value Proposition
SUPERIOR CUSTOMER SERVICE WITH OUR TQA VALUE PROPOSITION Assurance Assurance ensures our customers identify and mitigate the intrinsic risk in their operations, supply chain and quality management systems RESEARCH & DEVELOPMENT Testing Our Customer RAW CONSUMER MATERIALS Testing is evaluating how pr
Slide 21: Group Centre of Gravity Moving Towards High Growth and High Margin Sectors
GROUP CENTRE OF GRAVITY MOVING TOWARDS HIGH GROWTH AND HIGH MARGIN SECTORS Divisional Revenue Split (£m) ATIC Revenue Split (£m) £2,801m £2,801m £2,801m 16% £2,166m £2,166m 16% £2,166m 60% 10% 10% 51% 53% 52% 53% 52% 25% 23% 22% 30% 30% 22% 24% 17% 8%8% 9%9% FY 15 FY18 FYFY 15 15 FY18 FY18 Products
Slide 22: Consistent Progress on Revenue, Margin, Cash and ROIC
CONSISTENT PROGRESS ON REVENUE, MARGIN, CASH AND ROIC Capex M&A Revenue Profit Margin EPS WC% Revenue Free Cash Flow DPS ROIC Investment Investment +34% +49% +170bps +51% (540)bps +90% +102% £2,093m £2,801m £691m £482m £324m £185m £351m £444m 17.2% 22.7% 15.5% 99.1p 198p 132p 9.3% 3.9% 49.1p 14 18 1
Slide 23: Ever Better… Ever Stronger
EVER BETTER…EVER STRONGER EVER BETTER EVER STRONGER GROWTH PERFORMANCE Service Offering / Innovations Sales Management Operational Excellence Margin Management Cash Management 23
Slide 24: The Pace of Change Is Accelerating in Multiple Directions
THE PACE OF CHANGE IS ACCELERATING IN MULTIPLE DIRECTIONS “Growth in Emerging Markets “AI forecasted to increase “The global blockchain “By 2025, the car market for “Global solar power capacity to drive an increase in the USA economic growth by market is expected to be partially autonomous vehicles
Slide 25: Ever Growing Complexity Means Ever Greater Levels of Risk for Corporations
EVER GROWING COMPLEXITY MEANS EVER GREATER LEVELS OF RISK FOR CORPORATIONS Growing Food and Drink Recalls Hacking is Driving Increases in Data Breaches Hacking Breaches Food and Drink Recalls Other Breaches 1,579 1,091 783 780 614 421 471 2006 2008 2010 2012 2014 2016 2018 2011 2012 2013 2014 2015 2
Slide 26: Innovative Solutions to Accelerate Growth
INNOVATIVE SOLUTIONS TO ACCELERATE GROWTH BREAKTHROUGH INNOVATION Technology that enable solutions BREAKTHROUGH to create new markets INNOVATION INNOVATION IN ADJACENT ADJACENT Develop new INNOVATION products and Enter adjacent markets, serving Breakthrough SEGMENTS services adjacent customers Techn
Slide 27: Innovation from the Core to Strengthen Existing Services
INNOVATION FROM THE CORE TO STRENGTHEN EXISTING SERVICES Strengthened our differentiated oil and gas testing offering by Intertek’s innovative Mobile Laboratories gives ExxonMobil the leveraging the heritage of our founder Caleb Brett flexibility required to test fuel quality across their fast growi
Slide 28: Innovation in High Growth and High Margin Adjacent Segments
INNOVATION IN HIGH GROWTH AND HIGH MARGIN ADJACENT SEGMENTS With our Working Conditions Assessments, we Hardlines and Softlines Chemical Testing, safeguarding Intertek KJ Tech offers road testing, allowing auto support our customers in their goal of providing a safe consumers in an environment of ra
Slide 29: Technology Based Innovation Offering Breakthrough Services
TECHNOLOGY BASED INNOVATION OFFERING BREAKTHROUGH SERVICES Inlight is a SaaS platform delivering the bespoke Alchemy offers SaaS solutions delivering training to Interpret uses near infrared spectrum analysis to mapping of risks across the supply chain ensure employee consistency and compliance in t
Slide 30: 2019 Outlook by Division
04 2019 OUTLOOK BY DIVISION
Slide 31: Group Outlook 2019
GROUP OUTLOOK 2019 • Good organic revenue growth at constant currency − Good growth expected in Products − Good growth expected in Trade − Solid growth expected in Resources • Moderate Group margin progression − Portfolio strategy − Continuous cost discipline − Performance management • Strong cash c
Slide 32: Excellent Performance in Products with 9.5% Profit Growth
EXCELLENT PERFORMANCE IN PRODUCTS WITH 9.5% PROFIT GROWTH Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 371 21.6% 22.1% 1,626 1,680 1,654 351 1,621 FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 +3.4% +2.1% +5.8% +50bps +6.6% CCR +5.2% CCR +9.5% CCR +60bps CCR FY18 Ac
Slide 33: Excellent Performance in Products with 9.5% Profit Growth
EXCELLENT PERFORMANCE IN PRODUCTS WITH 9.5% PROFIT GROWTH FY18 Actual Growth Drivers FY19 Outlook Increased focus of ISO Increased consumer and Strong organic Robust organic Business Assurance corporations on supply standards government focus on ethical growth growth chain and risk management upgrad
Slide 34: Solid Momentum in Trade with 2.2% Organic Growth
SOLID MOMENTUM IN TRADE WITH 2.2% ORGANIC GROWTH Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 648 642 648 637 89 83 13.7% 13.0% FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 (0.9)% (1.7)% (6.0)% (70)bps +3.1% CCR +2.2% CCR (1.3)% CCR (60)bps CCR FY18 Actual Growth D
Slide 35: Improved Trading Conditions in Resources with Stable Revenue and Margin
IMPROVED TRADING CONDITIONS IN RESOURCES WITH STABLE REVENUE AND MARGIN Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 496 479 496 479 29 5.7% 5.7% 27 FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 FY 17 FY 18 (3.4)% (3.4)% (3.9)% 0bps +0.3% CCR +0.3% CCR (0.4)% CCR (10)bps CCR FY
Slide 36: Conclusion
05 CONCLUSION
Slide 37: Intertek High Quality Earnings Model
INTERTEK HIGH QUALITY EARNINGS MODEL Our Services Assurance Testing Inspection Certification Products Trade Resources Our Sectors GDP+ GDP growth Long-term growth Intertek Virtuous Economics Our Mid- to Long-Term GDP+ Organic revenue growth Value Creation Margin accretive Investments in attractive r
Slide 38: Attractive Structural Growth Drivers
ATTRACTIVE STRUCTURAL GROWTH DRIVERS Products Trade Resources 60% of Revenue 77% of Profit 23% of Revenue 17% of Profit 17% of Revenue 6% of Profit Increased number Faster innovation Long term demand Investment in Population growth GDP growth of Brands & SKUs cycle for energy infrastructure Increase
Slide 39: Intertek Is Going from Strength to Strength
INTERTEK IS GOING FROM STRENGTH TO STRENGTH • Industry leader in a growing global $250bn ATIC market • Scale positions in attractive end-markets in 100+ countries • Unique Total Quality Assurance value proposition offering superior customer service • High quality compounder earnings model • Ever gro
Slide 40: Intertek: Total Quality. Assured.
intertek Total Quality. Assured.
Slide 41: Group Performance (2015 – 2018)
GROUP PERFORMANCE (2015 – 2018) Revenue (£m) Adjusted Operating Profit (£m) Adjusted Margin (%) £468m £482m 16.9% 17.2% £2,769m £2,801m £2,567m £410m £2,166m £343m 59% 60% 75% 77% 57% 73% 16.0% 51% 15.9% 68% 25% 23% 23% 23% 22% 20% 19% 17% 24% 20% 18% 17% 10% 7% 6% 6% FY 15 FY 16 FY 17 FY 18 FY 15 F
Slide 42: Adjusted EPS
ADJUSTED EPS £m @ actual exchange rates FY 17 FY 18 Adjusted operating profit1 467.7 481.8 +3.0% Net interest expense (28.9) (25.3) Profit before tax 438.8 456.5 Tax 24.7% (24.5%) (107.5) (112.8) Profit after tax 331.3 343.7 Non-controlling interest (19.0) (20.8) Net profit 312.3 322.9 Fully diluted