Intertek Group plc · LSE:ITRK
Intertek — FY2013 Earnings Presentation
41 slides from Intertek's earnings presentation, Mar 3, 2014
Slide 1: 2013 Full Year Results Presentation
2013 Full Year Results Presentation 3 March 2014 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 Full 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 • Solid growth in mixed market conditions • Organic growth H1: 6.3%; H2: 2.4% • Strong cash conversion • Investing for the future; organically and acquisitions • EPS up by 6% and dividend up by 12% 4 www.intertek.com
Slide 5: Financial Highlights
Financial Highlights For the twelve months to 31 December 2013 Revenue £2,184m + 6.3% at actual + 4.3% at constant organic(2) Operating profit(1) £343m + 2.2% at actual - 1.2% at constant organic(2) Operating profit margin(1) 15.7% - 60bps at actual - 80bps at constant organic(2) Profit before tax(1
Slide 6: Revenue Growth
Revenue Growth + 6.3% £m actual rates £m 2,200 32 10 2,200 14 20 88 38 2,184 2,184 44 14 2,100 2,100 2,054 + 4.3% 2,054 2,000 Constant 2,000 rates 1,900 1,900 1,800 1,800 1,700 1,700 1,600 1,600 1,500 1,500 I&A Commodities CG C&E C&P 2012 2013 Organic Acquisitions 2012 2013 FX & Disposals 2012 reven
Slide 7: Operating Margin
Operating Margin (60)bps % 16.5 (30)bps 16.3% (30)bps 16.0 (30)bps +10bps +20bps 15.7% 15.5 15.6 15.7% 15.0 14.5 14.0 2012 Minerals Europe Investment Acquisitions Other 2013 including & FX Tradegood 7 www.intertek.com
Slide 8: Cash Flow, Financing and Investment
Cash Flow, Financing and Investment Adjusted Cash flow from Operations £m 400 +14% • Adjusted cash flow from operations up 14% to £394m 300 +10% • Organic capex £145m; 6.6% of 200 revenue 100 2011 2012 2013 • 7 acquisitions for £122m Group’s Facilities and Borrowings • Pro forma net debt: EBITDA of
Slide 9: Acquisitions Supporting Growth
Acquisitions Supporting Growth Other CG E-TEST 2013 Melbourn C&P £122m spent on 7 acquisitions £122m GXT I&A 2014 Strong pipeline ATI C&E 2013 9 www.intertek.com
Slide 10: Separately Disclosed Items
Separately Disclosed Items £m @ actual exchange rates 2013 2012 Adjusted operating profit (1) 342.6 335.1 +2.2% Separately disclosed items: Amortisation of acquisition intangibles (22.5) (29.3) Acquisition and integration costs (1.5) (5.5) Business Process Outsourcing costs - (2.8) Restructuring cos
Slide 11: Tax
Tax Adjusted Group Effective Tax Rate % • 2013 rate of 23% 30 28.2% • 2013 rate includes 1.7% 27 deferred tax benefit 26.0% 24 • Emerging market growth 23.0% 21 providing mix benefit 18 15 2011 2012 2013 11 www.intertek.com
Slide 12: Five Year Performance 2009 to 2013
Five Year Performance 2009 to 2013 Revenue Adjusted Operating Profit(1) Adjusted Diluted EPS(1) 15% CAGR 13% CAGR Pence 14% CAGR £m £m 350 140 2,200 138.6 343 2,184 335 131.2 120 2,054 1,925 300 281 1,650 1,749 107.2 250 100 1,375 227 89.4 200 80 1,374 209 81.5 1,237 1,100 150 60 825 100 40 550 275
Slide 13: Dividend Increased by 12%
Dividend Increased by 12% Full Year Dividend Per Share Pence 16% CAGR • Full year dividend 46.0p, up 12.2% 50 45 • 2013 full year pay-out of £74m 46.0 40 41.0 35 • Reflects confidence in strong long 33.7 30 term structural growth 28.1 25 • Dividend cover of 3.0x on adjusted 25.5 20 15 EPS 10 5 0 200
Slide 14: Summary
Summary • Solid growth delivery • Strength of portfolio mitigating certain cyclical headwinds • End 2013 / early 2014 weak; improving through the year • Reviewing options to further focus portfolio • Acquisition progress • Structural growth drivers through the cycle 14 www.intertek.com
Slide 15: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2013 Full Year Results Presentation 15 www.intertek.com
Slide 16: Divisional Revenue Mix
Divisional Revenue Mix Total FY Organic FY Total £m @ constant exchange rates Revenue Revenue FY Revenue Growth Growth Chemicals Industry & Assurance £709m 7% 4% & Pharma Commodities £587m 3% 2% Commercial Industry & & Electrical Assurance Consumer Goods £381m 9% 8% Consumer Goods Commercial £338m 5
Slide 17: Industry & Assurance Revenue Split
Industry & Assurance Revenue Split Business Food & Agri Assurance 13% 10% C&T Legacy low margin contracts 4% E&P, AIM 15% KEY - Definitions Technical C&T Consulting & Training Inspection 58% AIM Asset Integrity Management E&P Exploration & Production Industry Services 17 www.intertek.com
Slide 18: Capex in Energy Sector
Capex in Energy Sector Intertek Revenue Split Oil majors 30% Upstream National Oil Companies Pipelines and distribution networks Ongoing investment into the energy sector 40% Midstream 30% Downstream 18 www.intertek.com
Slide 19: Industry & Assurance
Industry & Assurance FY 13 Performance Outlook £m @ constant Organic • BA further growth opportunities in exchange rates FY 13 Change change major emerging countries Revenue 709.3 6.8% 4.2% Operating profit 82.2 6.9% 2.9% • Food expansion to continue vigorously with strong drivers Margin 11.6% 0bps
Slide 20: Commodities
Commodities FY 13 Performance Outlook £m @ constant Organic • Shale growth – extraction and rail exchange rates FY 13 Change change car transportation Revenue 586.6 3.1% 2.1% • Asia continued strong growth Operating profit 70.0 (9.0)% (11.4)% • Minerals will stay weak in 2014 Margin 11.9% (160)bps (
Slide 21: Consumer Goods
Consumer Goods FY 13 Performance Outlook £m @ constant Organic • Continued expansion of laboratory exchange rates FY 13 Change change network into new countries Revenue 381.3 8.9% 8.5% • Cross-selling of services amongst Operating profit 124.5 8.0% 6.7% large global retail clients; further Margin 32
Slide 22: Connecting Responsible Buyers with Trusted Suppliers
Connecting Responsible Buyers with Trusted Suppliers • Investing in information based value added services • Positive reception; slower ramp up • 100,000 live customer profiles • Investment to reduce; break even in 2015 www.intertek.com
Slide 23: Commercial & Electrical
Commercial & Electrical FY 13 Performance Outlook £m @ constant Organic • Synergies from ATI acquisition exchange rates FY 13 Change change Revenue 338.4 4.8% 4.8% • Good growth expected in Asia Operating profit 49.3 (4.6)% (4.6)% • New technology drivers expect to be stronger in 2014 – eg transport
Slide 24: Chemicals & Pharma
Chemicals & Pharma FY 13 Performance Outlook £m @ constant Organic • Expect continued good growth in exchange rates FY 13 Change change Fuel and Lubricants Revenue 168.8 6.9% 2.0% • Business will be more focused and Operating profit 16.6 (4.6)% (15.7)% streamlined Margin 9.8% (120)bps (200)bps • Dis
Slide 25: Our Growth Platform
Our Growth Platform Commodities Products Industry 25 www.intertek.com
Slide 26: Total number of households with annual income of at least USD 9,000
Total number of households (billions) with annual income of at least USD 9,000 5.0 1 Changes in Global Trade 4.5 2 Market Drivers for Quality Services 4.0 3 Network & Service Expansion 3.5 4 Outsourcing Additional energy sources New infrastructure 3.0 5 Consolidation Changing trade patterns Product
Slide 27: Commodities: Spending Patterns of Markets
Spending Patterns of Markets International Tourism Domestic Tourism Services Insurance United States Ad Spending UK Luxury Cars Dishwashers Durables Cars Washing machines Copper Energy 2.5bn consumers driving new Commodities Meat demand for commodities, Wheat infrastructure, consumer products and se
Slide 28: Commodities: Spending Patterns of Markets – The Future
Spending Patterns of Markets – The Future International Tourism Domestic Tourism Services Insurance Ad Spending Luxury Cars Dishwashers Durables Cars Washing machines China 2030 Copper Energy 2.5bn consumers driving new Commodities Meat demand for commodities, Wheat infrastructure, consumer India 20
Slide 29: Major Emerging Countries
Major Emerging Countries China India • Population 1.3bn • Population 1.2bn • GDP per capita $6,200 • GDP per capita $1,500 • ~9,000 employees • ~1,800 employees • Local managers • Local managers Intertek • 120 labs and offices • 38 labs and offices • 43 cities • 28 cities • Since 1989 • Since 1993 •
Slide 30: Outlook
Outlook • Strong drivers • Energy infrastructure • Changing trade patterns • Technology and product development • Domestic consumers and new brands • Acquisitions • Delivering structural growth 30 www.intertek.com
Slide 31: Appendix
Appendix 2013 Full Year Results Presentation 31 www.intertek.com
Slide 32: Market Drivers in our Industries
Market Drivers in our Industries End-User Quality Expectations & Diversity Developed and emerging economies Supply Chain New Needs Technologies Shifting cycles, Innovation and Market sourcing and product variety Drivers complexity What Energy Growth & Regulation Diversity Quality, Safety and Capex a
Slide 33: Adjusted EPS
Adjusted EPS £m @ actual exchange rates 2013 2012 Adjusted operating profit 342.6 335.1 +2% Net interest expense (27.7) (26.7) Profit before tax 314.9 308.4 Tax 23.0% (26.0%) (72.4) (80.3) Profit after tax 242.5 228.1 Non-controlling interest (16.5) (14.4) Net Profit 226.0 213.7 FD Shares 163.1 162.
Slide 34: Taxation
Taxation £m @ actual exchange rates 2013 2012 Reported profit before tax 281.8 256.6 Reported tax (64.8) (68.4) Reported profit after tax 217.0 188.2 Reported tax rate 23.0% 26.7% Effective tax rate 23.0% 26.0% on adjusted operating profit 34 www.intertek.com
Slide 35: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates 2013 2012 Operating Profit before changes in working 414.9 389.9 capital and provisions Changes in working capital (36.3) (57.3) Cash generated from operations 378.6 332.6 Separately disclosed items – cash flow 15.5 12.8 Adjusted cash generated from ope
Slide 36: Free Cash Flow
Free Cash Flow £m @ actual exchange rates 2013 2012 Adjusted cash generated from operations 394.1 345.4 +14% Net interest (26.9) (24.2) Taxation (80.9) (72.6) Net capital expenditure (140.2) (113.3) Adjusted Free Cash Flow 146.1 135.3 +8% 36 www.intertek.com
Slide 37: Net Debt
Net Debt £m @ actual exchange rates 2013 2012 Borrowings 734.6 717.2 Cash (116.4) (166.5) Net debt 618.2 550.7 Pro forma net debt to EBITDA 1.4x 1.3x 37 www.intertek.com
Slide 38: Liquidity Position
Liquidity Position £m @ actual exchange rates 2013 2012 Debt facilities 909.6 881.4 Borrowings (734.6) (717.2) Undrawn committed borrowing facilities 175.0 164.2 Cash 116.4 166.5 Liquid funds 291.4 330.7 Average debt facility maturity of five years 38 www.intertek.com
Slide 39: Divisional Performance Summary
Divisional Performance Summary FY 2013 Revenue Margin £m @ constant Organic Organic exchange rates FY 13 Change change FY 13 Change change Industry & Assurance 709.3 6.8% 4.2% 11.6% 0bps (20)bps Commodities 586.6 3.1% 2.1% 11.9% (160)bps (180)bps Consumer Goods 381.3 8.9% 8.5% 32.7% (20)bps (50)bps
Slide 40: Divisional Performance Summary
Divisional Performance Summary FY 2013 Organic Revenue Growth £m @ constant exchange rates H1 H2 FY Industry & Assurance 8.5% 0.2% 4.2% Commodities 3.8% 0.5% 2.1% Consumer Goods 8.6% 8.3% 8.5% Commercial & Electrical 3.9% 5.7% 4.8% Chemicals & Pharma 5.6% (1.2)% 2.0% Group Total 6.3% 2.4% 4.3% 40 ww
Slide 41: Currency Analysis - Revenue
Currency Analysis - Revenue Local currency to GBP 2013 2012 ~25% USD 2% 1.56 1.59 CNY 3% 9.68 10.01 ~55% EUR 4% 1.18 1.23 ~20% HKD 2% 12.12 12.31 AUD 6% 1.62 1.53 USD, CNY & HKD GBP & EUR Other 41 www.intertek.com