Intertek Group plc · LSE:ITRK
Intertek — H1 2007 Earnings Presentation
35 slides from Intertek's earnings presentation, Sep 3, 2007
Slide 1: 2007 Interim Results Presentation
2007 Interim Results Presentation 3 September 2007 Wolfhart Hauser, Chief Executive Officer Bill Spencer, Chief Financial Officer
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: Financial Performance - Bill Spencer, Chief Financial Officer
Bill Spencer Chief Financial Officer Financial Performance 2007 Interim Results Presentation
Slide 4: Financial highlights
Financial highlights For the six months to 30 June 2007 Revenue £360.8m Up 10.3% at actual Up 18.6% at constant (organic 10.5%) 1 Operating profit £54.5m Up 7.5% at actual Up 18.5% at constant (organic 10.1%) 1 Operating margin 15.1% Down 40bp at actual Unchanged at constant Operating cash flow £43.
Slide 5: Revenue growth bridge
Revenue growth bridge 370 11.7% 10.3% 360 350 340 £360.8m 330 (8.3)% 8.1% (1.2)% £m 320 310 300 £327.1m 290 280 Revenue H1 Currency Acquisitions Contract Organic Revenue H1 06 translation cessation 07 (Nigeria) 5
Slide 6: Currency
Currency Approximately 80% earnings are USD, HKD, RMB and other related currencies Continued dollar weakness: adverse translation effect Average GBP/USD rate H1 H1 FY 2007 2006 2006 1.97 1.78 1.84 11% weaker than H1 2006 7% weaker than FY 2006 6
Slide 7: Profit before tax
Profit before tax Half Year - £m 2007 2006 Adjusted operating profit 54.5 50.7 1 Amortisation (1.9) (2.0) Statutory operating profit 52.6 48.7 Net interest cost (4.2) (3.5) Profit before tax (up 7.1%) 48.4 45.2 Interest cover 12.5 13.9 1)Amortisation of intangible assets arising on acquisitions 7
Slide 8: Taxation
Taxation Half Year - £m 2007 2006 Profit before tax 48.4 45.2 Tax (up 9.8%) (12.3) (11.2) Profit after tax (up 6.1%) 36.1 34.0 Reported tax rate 25.4% 24.8% 8
Slide 9: Earnings and dividends
Earnings and dividends Half Year – pence 2007 2006 Basic EPS 21.5p 20.1p Up 7.0% 1 Adjusted EPS 22.5p 21.3p Up 5.6% Interim dividend per share 5.8p 4.6p Up 26.1% 1) Adjusted earnings per share is fully diluted and based on profit before amortisation of intangible assets arising from acquisitions 9
Slide 10: Operating cash flow
Operating cash flow Half Year - £m 2007 2006 Operating profit 52.6 48.7 Add back depreciation and other non cash items 17.7 16.3 Change in working capital (27.3) (17.7) Operating cash flow (down 9.1%) 43.0 47.3 Operating working capital to LTM sales 11.1% 9.6% Debtor days 75 71 10
Slide 11: Free cash flow
Free cash flow Half Year - £m 2007 2006 Operating cash flow 43.0 47.3 Net interest (4.0) (3.3) Taxation (10.6) (12.2) Capital expenditure (17.8) (20.2) Free cash flow 10.6 11.6 Capital expenditure to LTM sales % 5.8% 6.3% 11
Slide 12: Acquisition investment is accelerating
Acquisition investment is accelerating In 2005 and 2006 spent an average of £41m p.a. 6 acquisitions in H1 2007, consideration £58m (H1 2006, £9m), of which £14m is deferred payment. Including: Genalysis £28m Umitek £10m QTI £13m ASTA BEAB £5m Further 4 acquisitions in July and August, brings total
Slide 13: Additional debt facilities
Additional debt facilities £300m 7 year facility, placed 2004, amortised to £265m Added £100m in August 2007 £m 250 Gross Debt Drawn Down 200 150 100 50 0 June 05 June 06 June 07 13
Slide 14: Financial summary
Financial summary Good half year Double digit growth Increasing investment in acquisitions Increased debt capacity Progressive dividend payout 14
Slide 15: Operating Performance - Wolfhart Hauser, Chief Executive Officer
Wolfhart Hauser Chief Executive Officer Operating Performance at constant exchange rates 2007 Interim Results Presentation
Slide 16: Quality and safety growth drivers strengthened
Quality and safety growth drivers strengthened Expansion of services, regions, Acquisitions industries Quality, safety, Outsourcing safety Gaining environmental market share Increasing variety 6% plus Inter- regional trade ~40% GLOBAL DRIVING THE EXTERNAL TRADE DRIVERS EXPANSION INDUSTRY GROWTH 16
Slide 17: Group results
Group results Organic Half Year June 2007 Change change £m @ constant exchange rates Revenue 360.8 18.6% 10.5% Operating profit1 54.5 18.5% 10.1% Margin 15.1% - -10 bp 1) Operating profit excludes amortisation of intangible assets arising on acquisitions £1.9m (H1 06: £2.0m) 17
Slide 18: The three larger divisions account for 93% of revenues
The three larger divisions which account for 93% of revenues grew by 21% Organic % of Revenue @ constant exchange rates revenue revenues growth growth Oil, Chemical & Agri 47% 33.7% 15.2% Commercial & Electrical 24% 9.4% 7.9% Consumer Goods 22% 12.7% 12.7% Sub total 93% 21.3% 12.5% Government Servic
Slide 19: Government Services
Government Services INDUSTRIES Fiscal H1 2007 H1 2007 Support Revenue Profit INDUSTRIES Standards £25.2m £3.4m Cargo 7% 6% Scanning Industrial Services SERVICES TESTING │ CERTIFICATION │ AUDITING │ SAFETY │ INSPECTION ENVIRONMENTAL │ QUALITY ASSURANCE │ ADVISORY │ ANALYTICAL TRAINING │ OUTSOURCING │
Slide 20: Government Services
Government Services Half year Organic £m @ constant exchange rates Change 2007 change Revenue 25.2 (9.0)% (9.0)% Operating profit 3.4 (8.1)% (8.1)% Margin 13.5% +10 bp +10 bp 20
Slide 21: Government Services: continued growth excluding Nigeria
Government Services Continued growth excluding Nigeria, with improved business mix Excluding Nigeria (H1 06 £3.8m), revenue up 5.4% 64% of business now non fiscal related Container Scanning (Guinea & Sierra Leone) performing well, further prospects 21
Slide 22: Commercial & Electrical
Commercial & Electrical INDUSTRIES Medical H1 2007 H1 2007 Building Revenue Profit Industrial £86.0m £13.2m IT/Telecom Automotive Home Appliances Lighting Electronics 24% 21% SERVICES TESTING │ CERTIFICATION │ AUDITING │ SAFETY │ INSPECTION ENVIRONMENTAL │ QUALITY ASSURANCE │ ADVISORY │ ANALYTICAL T
Slide 23: Commercial & Electrical
Commercial & Electrical Half year Organic £m @ constant exchange rates Change 2007 change Revenue 86.0 9.4% 7.9% Operating profit 13.2 11.9% 10.5% Margin 15.3% +30 bp +30 bp 23
Slide 24: Portfolio of service lines performing well
Commercial & Electrical Portfolio of service lines performing well Good performance in Electrical and Building Products Prospects in Energy Efficiency and other Environmental testing Automotive Systems Certification declined in USA but offset by growth in Automotive Components testing in China Acqui
Slide 25: Oil, Chemical & Agri
Oil, Chemical & Agri INDUSTRIES Oil & Gas H1 2007 H1 2007 Chemicals Revenue Profit Agriculture £168.1m £20.1m Minerals Pharmaceutical 47% 33% SERVICES TESTING │ CERTIFICATION │ AUDITING │ SAFETY │ INSPECTION ENVIRONMENTAL │ QUALITY ASSURANCE │ ADVISORY │ ANALYTICAL TRAINING │ OUTSOURCING │ CSR │SUPP
Slide 26: Oil, Chemical & Agri
Oil, Chemical & Agri Half year Organic £m @ constant exchange rates Change 2007 change Revenue 168.1 33.7% 15.2% Operating profit 20.1 63.4% 33.3% Margin 12.0% +220 bp +150 bp 26
Slide 27: Strong growth and margin progression
Oil, Chemical & Agri Strong growth and margin progression Strong market Trade in oil cargoes strong in USA and Asia Analytical Services now half of division Alternative fuels Environmental regulations Two new outsourcing wins (Aug 07) with ICI and Kodak Increased utilisation of assets pushing margin
Slide 28: Acquisitions widening the industry range
Oil, Chemical & Agri Acquisitions widening the industry range Analytical Services Chemicals/Fuels Free Standing Upstream Minerals Pharmaceutical Testing PARC Kelley Genalysis ASG Automotive Research Westport Chalon Polychem Umitek Alta ICI Geotech QTI Businesses added in the last few years 28
Slide 29: Consumer Goods
Consumer Goods INDUSTRIES Textile H1 2007 H1 2007 Toys Revenue Profit Hardlines £81.5m £24.9m Footwear Food 22% Retail 40% SERVICES TESTING │ CERTIFICATION │ AUDITING │ SAFETY │ INSPECTION ENVIRONMENTAL │ QUALITY ASSURANCE │ ADVISORY │ ANALYTICAL TRAINING │ OUTSOURCING │ CSR │SUPPLY CHAIN 29
Slide 30: Consumer Goods
Consumer Goods Half year Organic £m @ constant exchange rates Change 2007 change Revenue 81.5 12.7% 12.7% Operating profit 24.9 8.7% 8.7% Margin 30.6% -110 bp -110 bp 30
Slide 31: Continuing to lead the market, while developing new services
Consumer Goods Continuing to lead the market, while developing new services Strong growth in China - Textiles and Toys testing Reduced revenue from RoHS due to lower volumes and prices Increased public awareness of consumer product quality Business mix changing: CSR, Consultancy, Food, Supply Chain
Slide 32: A successful half year
A successful half year Good organic growth Value adding acquisition strategy Attractive valuations Additional industries and services Integration into global network 32
Slide 33: Quality and safety services
Quality and safety services Intertek’s involvement Basic testing and inspection services Partner to retail brands, manufacturers, suppliers Global network for quality services in supply chain Product recalls Higher quality and safety awareness Routine testing and inspection = short term lift Increas
Slide 34: Outlook
Outlook Strong H2 performance Good acquisition pipeline Quality and safety growth drivers strengthened 34
Slide 35: Intertek
Intertek Creating value through expertise